Carlo Palasciano Villamagna, General Director of Enel Russia, said: “In 2019 we stayed in line with all of our strategic pillars which allowed us to confirm 2019 financial targets despite some relevant factors within this period. Over the next three years we plan to continue the diversification of our technology profile. The investments in renewables and modernization will lead to a significant change in EBITDA quality as well as ensure the company’s new sustainable asset profile and secure transition towards greener energy production. Despite earnings volatility expected in the planned period we have introduced fixed dividend in order to assure reliable shareholders renumeration. We expect that the generally stable power production of our gas units coupled with cost optimization initiatives will help the company successfully surpass a challenging period towards a sustainable business model”.
BUSINESS PROFILE TRANSFORMATION
From 2016 the Company has been steadily following the path of technology profile diversification as one of its strategic pillars, while a great progress was made over 2019 to enable this change:
•
Diversification of technology profile: the Company disposed 3.8 GW of coal generation from October 1st, 2019 This results in a complete phase out of coal capacity and production from 2020 The share of renewables on total capacity and net power output is to reach 5% by 2022, and to be enlarged beyond the plan period through additional 71 MW of wind capacity awarded in 2019 tender. Active construction works started on those 291 MW of wind capacity to be commissioned within the plan period
•
Focus on efficiency of gas power plants: awarded modernization projects for 370 MW in total contribute to selected gas units’ efficiency improvement in and beyond the plan as our gas generation remains a solid base especially during renewables construction
•
Operational efficiency: ongoing delivery and focus on efficiencies through long-term target on fixed costs growth below CPI, supports our margins during business profile transformation. The Company is on track in 2019 with fixed costs decreasing versus 2018 adjusted for perimeter change
•
Debt structure optimization: over 2019 the Company repaid its single remaining euro nominated facility and 12 billion RUB of debt were repaid from Reftinskaya sale proceeds
•
Shareholder remuneration: payout ratio upon 2018 result was increased from 60% to 65%. Enel Russia’s dividend policy is extended to further years with an updated dividend approach.
Our strategic pillars Diversification of technology profile towards lower carbon footprint as well as Focus on efficiency of gas power plants addresses the pursuit UN Sustainable Development Goals (SDGs): SDG 7 (Affordable and Clean Energy) and 13 (Climate Action). Enel Russia contributes to all other SDGs by promoting a sustainable business model and employing sustainable behaviors.
THE NEW 2020-2022 STRATEGIC PLAN
The main changes in installed capacity envisaged in the 2020-2022 Plan include:
•
In thermal capacity, 3.8 GW of coal capacity is disposed from October 1st, 2019 from the sale of Reftinskaya GRES. All remaining facilities are selected for 2020-2022 either at the Russian long- term capacity auction (KOM) or modernization program. Awarded modernization projects imply some capacity additions but beyond the period
; •
In renewables, 291 MW will be added following gradual commissioning of two wind farms. Another
71 MW to be launched beyond the plan period.
Throughout 2020-2022, generally stable production of gas units with some variation due to annual investment plan, as well as first megawatt-hours of renewable energy from 2021 will ensure the modest positive trend of power output. The Company is broadly on its previous scenario, the assumptions backed by current macroeconomic and utility sector trends like modest power demand growth, tariffs containment and power prices volatility in some regions.
Total capex for 2020-2022 amounts to 39.4 billion RUB, a 2% increase vs. the previous plan (38.7 billion
RUB for 2019-2021 net of Reftinskaya GRES). 2020-2022 investment plan is centered around projects with
guaranteed return while the increase vs. the old plan is mainly driven by new modernization and renewables
projects awarded in 2019 and will help Enel Russia seize the attractive opportunities available at the market.
More specifically:
•
Around 32.3 billion RUB will be devoted to Asset development largely addressing wind projects
and modernization of gas-fired units;
•
About 7.1 billion RUB will be invested in Asset management, mainly on Operational improvements
(4.2 billion RUB), Safety and other (2.1 billion RUB) and Environmental initiatives (0.8 billion RUB).
Around 80% (32.1 billion RUB) of its overall 2020-2022 investment plan will generate EBITDA within the
plan period while the remaining 20% (7.3 billion RUB) will yield EBITDA beyond 2022 As a result, the
existing portfolio of projects allows the Company to address the significant part of earnings falling out both
due to Reftinskaya sale and the end of thermal DPMs from 2021, with further recovery to come beyond
2022
On operational efficiency, Enel Russia plans to roll forward its cost optimization initiatives and keep the
growth of fixed costs well below inflation, or a 1% increase in the next three years3 in nominal terms.
Specifically, over the plan period Enel Russia’s EBITDA is expected to reach 13.8 billion RUB in 2022,
down 3% vs. 15.1 billion RUB estimated for 2019 On like-for-like basis or net of Reftinskaya GRES in 2019,
EBITDA is up 10% vs. 10.4 billion RUB for 2019 Enel Russia is staying the course of qualitative change of
gross margin and EBITDA structure in terms of more sustainable technology profile and lower risk, which
should create more value as per market assessment.
Net ordinary income is due to reach 4.5 billion RUB in 2022 from an estimated 7.4 billion RUB in 2019
On like-for-like basis or net of Reftinskaya GRES in 2019, net income in 2022 will be almost at the level of
2019, the dynamics negatively impacted by increasing financial expenses as of 2021 resulting from
renewable projects commissioning.
Net debt is expected to increase by 23.8 billion RUB over the plan period, to around 33.5 billion RUB in
2022 from an estimated 9.7 billion RUB in 2019, mainly driven by the acceleration of investments to support
business profile transformation. Meanwhile, due to a gradual commissioning of wind projects Enel Russia
expects to pass a one-year peak in financial metrics (2021) with Net debt/EBITDA ratio reaching 2.4 times
in 2022 from 0.6 estimated in 2019, that is a low base due to repayment of 12 billion RUB of debt from
Reftinskaya sale proceeds.
VALUE CREATION FOR SHAREHOLDERS
Enel Russia’s plan is designed to balance growth opportunities, financial solidity of the business and reliable
shareholders remuneration. Anticipating the period of strategic repositioning and earnings volatility in
medium term, the Company introduces a fixed dividend to assure a guaranteed return for its shareholders.
Upon 2019-2021 the Company is targeting to distribute 3 billion RUB per year.
DISCLAIMER
This press-release contains certain statements that are neither reported financial results nor other historical information
(“forward-looking statements”). These forward-looking statements are based on Enel Russia’s current expectations
and projections about future events. Because these forward-looking statements are subject to risks and uncertainties,
actual future results may differ materially from those expressed in or implied by these statements due to any number
of different factors, many of which are beyond the ability of Enel Russia to control or estimate precisely, including
changes in the regulatory environment, future market developments, fluctuations in the price and availability of fuel and
other risks. You are cautioned not to place undue reliance on the forward-looking statements contained herein, which
are made only as of the date of this press release. Enel Russia does not undertake any obligation to publicly release
any revisions to any forward-looking statements to reflect events or circumstances after the date of this press release.