Inter RAO profits slump after Irkutskenergo sale
Friday, Sep 01, 2017
Russian utility Inter RAO's net income for the first six months of 2017 has more than halved following its sale of regional subsidiary Irkutskenergo last year.

The state-owned firm released its half-year results on August 29, showing a 58% slump in net profits to 29.9 billion rubles (US$511.8 million). Revenues for the reporting period rose by 4% on the year to 437.3 billion rubles (US$7.5 billion), which was mainly driven by a slight rise in domestic electricity prices.

Inter RAO tied the heavy decline in income to its sale of regional power generator and supplier Irkutskenergo, which was closed in the previous reporting period of 2016. A 40.29% stake in the utility, which is located in Eastern Siberia, was bought by independent Russian utility EN+ for 70 billion rubles (US$1.2 billion). The EN+ group, which is controlled by Russian oligarch Oleg Deripaska, already held a 50.19% interest in the company.

Further downward pressure on net earnings in the first two quarters of 2017 was linked to lower foreign output after the sales of Electric Networks and the Hrazdan thermal power plant (TPP) in Armenia. The two assets were sold in December 2016. Total power generation across Inter RAO’s overseas portfolio fell by 12.6% on the year to 5.9 million MWh.

Another factor behind this decline was lower output at the company’s Trakya Elektrik combined cycle gas turbine (CCGT) plant in western Turkey. The facility underwent routine repair work during the first two quarters of 2017. A strengthening of the ruble against the Euro and US Dollar also dented ruble-denominated earnings at foreign assets.

Overall power generation for the reporting period, however, saw an uptick of 0.2% on the year to reach 64.7 million MWh, which helped to offset some of the negative pressure on earnings.

In a conference call after the results were released last week, Inter RAO’s CFO Yevgeny Miroshnichenko warned that annual dividend payouts could be affected by the weaker bottom line in the first half of 2017.

“Last year we paid special dividends for the deal with Irkutskenergo,” he said, adding: “In this sense, we expect some decrease in [full-year] net profit [for 2017] – it is likely to be in the range of 45-50 billion rubles (US$769-854 million).” In 2016, Inter RAO paid out 15.3 billion rubles (US$261.5 million) in dividends.

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