The released 2012 financial statements of the JSC INTER RAO UES, the major energy export and import operator in Russia, show sharp decline in the energy export to Finnish market due to unfavorable prices.
Finland that trades Russian energy at the Scandinavian energy market Nord Pool has traditionally been INTER RAO’s key market, bringing up to 50% of export revenues to the Russian Energy Holding. Last year the export volumes to Finland, as well as some other Western countries, were dramatically falling, partially due to the damping energy prices offered by local hydropower plants.
Minister of Economic Development Elvira Nabiullina provided details of the recent budget committee meeting, which shows that utility fees are to receive 11% tariff growth from July, 1 2012 (5.5% full-year average), followed by 9-10% in 2013 and 10-12% in 2014. Residential electricity prices are to rise by 6% from 1 July 2012.
MRSK Holding had earlier expected 10-12% tariff growth for 2012, while Federal Grid Company guided for 15%-17% growth. What had come as unexpected was the recent decision to move the tariff hike from January, 1 to July, 1, and we now see confirmation that the tariffs will see no upward adjustment for the 1H2012 shortfall in revenues.
Bloomberg has recently reported that Eurosibenergo sent an offer letter to Norilsk Nickel proposing to acquire the latter’s 79% stake in OGK-3 for approximately US$2 billion (subject to due diligence). The offer price is based on the current market price of OGK-3. Eurosibenergo plans to finance the deal through bank debt (according to russian newspaper Vedomosti, two banks have already expressed interest in the deal).
The news are definitely positive for OGK-3 and negative for Inter RAO. Earlier Inter RAO offered to acquire OGK-3 based on the market price, but paying with its own shares, which would likely come with a one-year selling freeze requirement. At the same time, Eurosibenergo’s proposal is based on cash payments and a similar valuation.
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