The Russian electricity market in 2015: limited

The Russian electricity market in 2015: limited


The cost of power companies exceed the government-set tariffs for electricity and heat, it is, according to specialists, the main stumbling block in the development of the industry.

MOSCOW, 16 Dec. Among the major and most significant events that have occurred in the domestic power industry in 2015, according to industry experts, is to provide a tightening of payment discipline and the new rules of competitive selection of power (CLOD). Unfortunately, the electricity sector in Russia remains overly regulated, which severely restricts its growth.

A stumbling block that restricts the development of the industry, consider energy tariffs. Economically justified costs of energy companies, especially taking into account inflation, exceed the government-set tariffs for electricity and heat. And while the situation continues to develop not in favor of energy companies.

Two years ago on the initiative of the Ministry of construction, a law was passed limiting index of growth of payment of the population for utilities in every region of Russia. In 2016, the restrictions would be substantial. “Aggregate payment for utility services to 2016 will grow on the average not more than 4%, which is actually two times lower than in the current year when the growth of tariffs for utilities services amounted to 8.3%”, — said the head of Ministry of construction, Mikhail Men.

The contract of granting of capacity (DPM) that guarantee utilities a certain return on investment in the construction of power plants, maintain stable cash flow genkompanii. The situation is different with network business. “RAB-regulation (long-term investary – ed.) was introduced in 2011 and the main parameters of this regulation were set at 2012-2017. However, the tariffs are reviewed annually, are quite chaotic and difficult to predict. This is the main difference of the Russian electricity market from Western Europe. We have seen a decrease in the difference in business risk between genkompanijam and network companies in Russia”, — said senior Director of analytical group Fitch Ratings on energy and transport sector EMEA angelina Valavina.

COM new

Power plants receive income through the sale of two commodities: electricity and capacity. Income from sale of power at an average of about 30% of the income of the station. Capacity price determined for the year ahead especially during the competitive process — competitive capacity selection (KOM).

In 2015 KOM was held on the new model. It implies that more power will be selected, the cheaper the cost. Were introduced a lower and an upper price levels beyond which the price of power could come of it. This year’s KOM is held twice. The first competition was held in 2016, the second (the results will be announced in the next few days) will determine the capacity price in years 2017-2019.

Results of KOM for 2016 the market is met with suspicion. The price of power in the European part of Russia and Ural fell by 12% on average and was close to the minimum level that, according to the head of “Gazprom energoholding” Denis Fedorov, negatively with inflation, and the crisis phenomena in the economy, and threatens the power companies reduced the volumes of investment programs.

On the other hand, the new rules of power must result in a reduction of inefficient capacity and to increase the efficiency of the market, says Valavina. Also, the new rules will help to improve the predictability and stability of cash flows of the companies, because you can set parameters for four years, and not one, as before, the expert believes.

Cease to accrue debts

According to the Ministry of energy of the Russian Federation, in 2015 the non-payment to energy for energy has reached alarming proportions. Considering all of debts for gas, heat, water and electricity a sum of close to a trillion roubles.

In the autumn the government passed a law providing a complex of measures for combating debtors — from increased penalties for late payments prior to the introduction of financial guarantees and terminations of lease agreements in the case of debt by the lessee. “Took, finally, the long-awaited regulations on the payment discipline, which was waiting for years for energy and which should improve the situation for the collection of payments, primarily on the retail”, — said the Director of energy development Fund Sergey Pikin. According to the expert, the law will allow to stabilize the situation and not to accumulate new debt. But to knock out old debts from defaulters, the power company may not succeed.

The Crimea with the light and without

In recent weeks, the main theme in the industry was the Crimea, at the time found themselves without supplies of electricity from Ukraine after the night of November 22, the result of blowing up of transmission towers in the South of Ukraine completely stopped the supply of electricity to the Peninsula. Crimea switched to the supply from own sources and backup. On the Peninsula were introduced a state of emergency, schedules of emergency outages.

The efforts of Russian power engineers in the evening of 2 December, several weeks ahead of schedule, Crimea has received the first electricity on the energy bridge from mainland Russia. With the launch of the second leg of the power bridge, which took place on 15 December, the Crimea will be able to get about 1050 MW. It will close 80-100% of energy consumption in the Crimea, depending on the time of day, explained the Minister of energy of Russia Alexander Novak. The second phase of power bridge – up to 400 MW will be commissioned in may 2016.

After almost a week after the launch of the Russian energy bridge Ukraine partially resumed electricity supplies to Crimea, starting to transfer 160 MW of electricity. With increasing power flow on the energy bridge from the Kuban to the Crimea the volume of purchases of Ukrainian electricity will decrease. The President of Russia Vladimir Putin said that at the time of the full launch of the energy bridge Russia should not have existing contracts with Ukraine for the supply of electricity to Crimea.

Large-scale additional issue

One of the most important corporate events in the past year were the decision on carrying out of additional issues of state companies “Russian grids” and “RusHydro”. Both took a few dozen billion rubles to rescue their “daughters”.

Rosseti on 3 November began the placement of additional 42.8 billion rubles. Of these, 32 billion rubles will be borrowed through Federal loan bonds to help troubled “daughter” — “Lenenergo”. Part of the funds obtained under the additional issue needed to Finance the preparations for the world Cup.

Problem “a daughter” “RusGidro” became the far East, the holding JSC “RAO ES of the East”. To solve the problem of his debts, which at the start of November 2015 has reached to 99.8 billion rubles in September, RusHydro and VTB Bank have signed an agreement that provides for the possibility of Bank participation in the additional issue of RusHydro by 85 billion rubles, with the simultaneous conclusion of the forward contract for a term of five years.

Loud event in the industry was the resignation from a post of the head of “RusHydro” Eugene doda, the place which was appointed Nikolai Shulginov, a former first Deputy Chairman of the Board “the System operator”. Experts do not expect major impacts from personnel changes. “The task Shulginov – maintaining the company stable, reliable operation of power plants and heating plants in the far East, stable financial status and solutions to the financial problems in the far East. These questions were facing the DoD, now before Shulginov” — says Pikin.

To clear favorite in the industry can be attributed to “E. HE. Russia”, which this year completed its program of capacity commissioning under CSA, says analyst IK “Veles Capital” Alexander Kostyukov. “It is possible to expect a dividend yield below 10%,” he predicts.

Also, according to analysts, a rather attractive look of the action “inter RAO UES” will benefit from not only introduced in the last years of capacity under CSA, but quite a satisfactory outcome for WHOM-2016, as well as export operations.