RusHydro and VTB signed agreements to raise equity financing in the amount of RUB 55 billion

VTB Bank and RusHydro have finalized a transaction unique for the Russian market, and increased its investments in electric power sector – one of the key industrial sectors in Russia, establishing conditions for accelerated development of the priority Far Eastern region. In the result of the transaction, the Bank has assumed ownership of approximately 13% shares in one of Russia’s largest utilities company. The deal will reduce debt of RusHydro Group, enabling improvement of its financial conditions and share price growth. The transaction is aimed at raising equity capital in order to reduce debt of RAO ES of the East Group and improve financial stability of the Far Eastern assets.

The agreement and forward contract have been signed by the President and Chairman of VTB Bank Management Board Andrey Kostin and Chairman of the Board – General Director of RusHydro Nikolay Shulginov.

VTB also signed a shareholder agreement with the Federal Agency for State Property Management (Rosimuschestvo) to cooperate on issues related to corporate governance of RusHydro and further potential sale of the purchased stake to third party investors. The agreement has been signed Andrey Kostin, President and Chairman of VTB Bank Management Board, and Dmitry Pristanskov, Head of the Federal Agency for State Property Management (Rosimuschestvo).

Andrey Kostin, President and Chairman of VTB Bank Management Board, noted that the transaction is unique for the Russian market and quite exceptional even by global standards. RusHydro raised RUB 55 bn from VTB on very competitive terms. As a financial investor the Bank is intends to sell the stake to strategic or portfolio investors in the mid-term perspective in close cooperation with both Rosimuschestvo and RusHydro. RusHydro is the long-term partner of VTB, and the Bank plans to further develop this partnership.

Nikolay Shulginov, Chairman of the Management Board – General Director of RusHydro, commented: “VTB Group is our strategic partner. We have already implemented a number of large-scale transactions. Today’s agreement aimed at refinancing debt of our Far Eastern subsidiary is one of the largest and major projects of RusHydro and VTB. We’ve done a great job to optimize RusHydro Group investment plan and the structure of the transaction, which allowed us to substantially reduce the amount of equity raising, as well as to improve transaction’s parameters for the Company and its shareholders. The agreed scheme of capital raising and debt redcution is much more efficient than the credit mechanisms currently available on the market and is unique from the point of view of its structure.”

The forward contract does not provide for a “put option”: RusHydro has no obligation to buy back own shares. The payment upon expiration of the forward contract will be calculated based on the difference between the forward price and a selling price of the stake to strategic or portfolio investors. RusHydro is developing a long-term shareholder value growth plan to ensure that the amount of funds to be reimbursed by the Company to VTB is zero or minimal.

The non-deliverable forward contract was concluded at terms approved by the Board of Directors of PJSC RusHydro on February 21, 2017.