05 July 2018
“Russian utilities: Difficult choice, but value still there”

Renaissance Capital transfers Russian utility sector coverage to Sergey Beiden; sees potential value in selected generating companies

Moscow, 5 July 2018 - Renaissance Capital, a leading emerging and frontier markets investment bank, announces that it has transferred coverage of the Russian utility companies to Sergey Beiden, who was appointed as Director, Utilities Analyst in May 2018. Sergey is based at its Moscow office.

Sergey joined Renaissance Capital from Quadra Power Generation and will cover the utilities sector across Russia, emerging Europe and Africa reporting to Daniel Salter, Head of Research, Eurasia.

According to the report Russian utilities: Difficult choice, but value still there, Russian utility companies are entering a new capex cycle and Sergey sees potential value in selected generating companies as earnings momentum remains positive and strong cash-flow generation appears here to stay, which he expects to result in higher dividends.

Sergey believes the coming modernisation cycle differs from the previous one, which was related to the construction of new units, and should support increased capacity prices while not severely affecting electricity market price dynamics.

Sergey likes generating companies with exposure to growth, strong FCF generation and potential dividend upside risk. InterRAO is his top pick in the space given its exposure to growth in profitability as well as benefitting from modernisation. He also likes Mosenergo and TGKA.

Modernisation is likely to increase capacity prices, the report says, while the spread between electricity market prices and gas tariffs should turn positive. It should help substitute the shortfall from the capacity supply agreement mechanism as the latter has expired. Sergey is particularly interested in companies that could potentially deliver higher dividend growth, i.e., companies not only exposed to growth but also having a relatively low dividend payout ratio.

Renaissance Capital has recently been recognised by the world’s leading industry surveys, such as Institutional Investor's 2018 All-EMEA Research Team survey and the Extel Survey 2018, in addition to the Global Finance magazine 2018 award, in which Renaissance Capital was named the Best Bank in Frontier Markets.