Consolidation of Inter RAO will start from afar

The company can buy back from RusHydro 5% of its shares.
10.05.2018
Kommersant
Origin source
RusHydro, which owns about 5% of Inter RAO, entered into negotiations to sell this stake to Inter RAO Capital. The asset worth up to 20 billion rubles. can be sold at a discount to the market, but the closing timing of the transaction, like its outlines, has not yet been determined. According to one possible scheme, after the transaction, quasi-treasury package of Inter RAO will be repaid, which will allow Rosneftegaz (the boards of directors of both companies headed by Igor Sechin) to resume increasing its stake in Inter RAO without issuing an obligatory offer to other shareholders.

Inter RAO Capital (which controls the quasi-treasury package of Inter RAO 18.37%) can buy back from RusHydro a company-owned package of 4.92% of the shares, Kommersant sources told the energy market. "There is a discussion, the transaction is not yet structured, its parameters have not been approved," one of the sources familiar with the negotiations said to Kommersant. RusHydro and Inter RAO refused to comment.

De facto control over the holding is now held by Inter RAO Capital and Rosneftegaz (owns a 27.63% stake). The boards of directors of Rosneftegaz and Inter RAO are headed by Igor Sechin. Another 18.57% of the Federal Grid Company (FGC, part of Rosseti), free-float - 30.52%.

Inter RAO was established on the basis of the export department of RAO UES of Russia (disbanded in 2008). After the reform of the energy market, the holding gradually consolidated its energy assets, for which it repeatedly issued additional shares. In 2010, the capital of the state holding during the additional issue included VEB and Rosatom. By the "big" additional issue in 2011, Inter RAO shares received state-owned energy assets of the Federal Property Management Agency, as well as FSK and RusHydro, which were not privatized. At that time, a private stake in Inter RAO (originally 14%, then diluted in the course of additional issues to 9.68%) was purchased by a private Norilsk Nickel Vladimir Potanin (got rid of a non-core asset at the end of 2015). In 2012, Russian President Vladimir Putin allowed Rosneftegaz to become an investor in the state-owned company of the fuel and energy sector. Collecting shares of "Inter RAO" holding company began in late 2013, consolidating the shares of the Federal Property Management Agency and Rosatom and becoming the largest shareholder of the company. Kommersant sources remind that Rosneftegaz wanted to buy the stake from Inter RAO Capital at the same time, but then the deal did not take place.

The price of RusHydro's stake in Inter RAO could reach 20 billion rubles, but, according to Kommersant sources, RusHydro plans to sell the shares at a discount to the market price. According to one of the options, Inter RAO Capital can buy shares owned by RusHydro, and then repay the whole quasi-treasury package. This design will help Rosneftegaz get out of the current stalemate: if the threshold is exceeded 30%, Rosneftegaz will be obliged to issue an offer to other shareholders. If the quasi-treasury package is repaid, Rosneftegaz's stake in Inter RAO will rise to 36.08%, FGC to 24.25%, and free-float to 39.68%, respectively.

However, it is still unclear whether Rosneftegaz is ready to further increase its stake in Inter RAO. In Rosneftegaz, Kommersant did not respond to the request, Kommersant was informed that the state's permission was needed to sell the stake in Inter RAO, but they did not hear about the discussion of this issue in the company. They also noted that the stake in Inter RAO brings good dividend yield to FGC.

RusHydro has a negative free cash flow (FCF), mainly due to high spending on new stations in the Far East (the state holding controls the entire energy sector of the region). RusHydro is building a Sakhalin SDPP-2, a TPP in Sovetskaya Gavan, a Yakutskaya GRES-2 and a Blagoveshchenskaya CHPP (a 4x4 program) in the region with a total cost of 118.4 billion rubles. About 50 billion rubles. for their financing was allocated from the federal budget, 24.5 billion rubles. - Reimbursed VAT from capex, another 43.9 billion rubles - funds of RusHydro. The sale of a non-core package will help RusHydro repay up to 12% of its total debt of 170 billion rubles, said Natalia Porokhova of ACRA.

Vladimir Sklyar of VTB Capital notes that since RusHydro entered RusHydro's capital, shares have risen in price three times, which is a good time to exit. "Especially since the company did not exert any special influence on the activities of Inter RAO (the head of RusHydro, Nikolai Shulginov was never a member of the company's board of directors." "Kommersant"), "he said. For Inter RAO, this transaction is an opportunity to apply the accumulated funds to 150 billion rubles. "All the same, shares of Inter RAO itself are the cheapest asset in the electric power industry, and the purchase looks logical," the analyst notes.

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