RusHydro completes consolidation, '07 results jump

10 July 2008

Earnings before interest, taxes, depreciation and amortisation (Ebitda), adjusted for losses on disposals, almost tripled to US$784M. Revenues increased by almost double to US$2B, the majority coming from electricity sales, more than doubling to US$1.95B.

Costs in the period increased by 60% to US$1.6B compared to 2006 due to higher costs of meeting power supply commitments, increased depreciation costs following asset revaluations plus repair and maintenance.

RusHydro, the largest power generator in Russia with a total installed capacity of 25GW, has now also embarked on a strategic review of its operations with the introduction of continuous improvement systems, such as total quality management. It plans through investment currently underway to increase this capacity by approximately 4.1GW before 2010.

The hydro conglomerate - known before as Hydro OGK - has been in the midst of a restructuring process over the past couple of years to consolidate the diverse hydro holdings in many company's running plants across the country, thereby making them wholly-owned subsidiaries. In addition, the group's ownership structure was changed to extract the state electricity conglomerate RAO UES as the prime conduit for the shares of the government and minority stakeholders.

The model for the new structure was adopted by RAO UES in September 2005, and an accelerated restructure of the holdings was authorised in April 2007. A General Meeting of RusHydro shareholders, in May last year, approved an increase in its share capital to enable an additional share issue as part of a refinancing plan for the group, which saw funds authorised by both the state and RAO UES.

At the beginning of this year a major step forwad was taken in the ownership adjustments to bring in many of the holdings to be fully-held subsidiaries, and that process has just been completed. The next stage of expansion will also see more share issued to the state

The consolidation process makes RusHydro the largest successor to RAO UES, and the company's capitalisation is approximately US$16B. In total, up to 40% of the stock will be in free float following the consolidation, according to KIT Finance Investment Bank which acted in consortium with many other local and international banks on the restructuring and refinancing process. Other advisers include BNP Paribas and Metropol.

Separately, the appraisers included Deloitte & Touche, ABM Partner, The Institute for Enterprise Issues Co, ZAO Professional Appraisal centre and ZAO Russian Appraisal.

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