RusHydro increased its net profit for 2023 by 1.7 times, to 32 billion rubles.

RusHydro (MOEX: HYDR) increased net profit for 2023 by 1.7 times, to 32 billion rubles. The indicator was increased due to the flood in Siberia: the production of the group’s hydroelectric and pumped storage power plants increased by 3.5%. Another factor is an increase in tariffs for electricity and capacity in the Far East by almost 50% against the backdrop of increased demand within the region. Analysts expect further growth in financial indicators, recalling that the energy market in the Far East may launch in 2024. Liberalization of prices will make the operation of hydroelectric power stations and coal-fired power plants more profitable.

The RusHydro Group increased its net profit at the end of 2023 by 1.7 times, to 32.1 billion rubles, follows from company report under IFRS. During this period, the holding’s revenue increased by 21.9%, to 510.33 billion rubles. EBITDA increased by 43.5%, to RUB 131.5 billion. The growth in financial indicators is due to an increase in revenue due to the restoration of water levels and hydroelectric power generation in Siberia compared to the record lows of 2022, according to a message from RusHydro. The production of the group’s hydroelectric and pumped storage power plants over the past year increased by 3.5%, to 110.9 billion kWh, mainly due to the restoration of the average long-term level of water inflow into the Sayano-Shushenskoye reservoir in the second half of 2023.

In addition, in 2023, the group “received compensation for lost income for previous periods in tariffs for electrical and thermal energy in the Far East,” RusHydro said in a statement. Tariffs in the region last year increased by an average of 50%, as the government allowed them to include compensation for losses of thermal power plants in the region from the purchase of coal in previous years. Over the past year, the production of the company’s thermal power plants in the Far East increased by 5.1%, to 29.5 billion kWh.

It was assumed that from January 1, 2024, the energy market would begin to be launched in the Far East and regulated prices would be abolished. However, the launch of market mechanisms was later postponed to July 1, 2024.

However, Kommersant’s interlocutors doubt that regulators will have time to agree on positions by the summer. One of the reasons is criticism from Deputy Prime Minister Yuri Trutnev, who fears a surge in electricity prices for businesses in the region.

Matvey Taits from the Sinara investment bank expects continued growth in RusHydro’s financial indicators in 2024: “Increasing gas prices will support wholesale electricity prices, which will be a positive factor for the company.” According to the analyst’s estimates, EBITDA by the end of 2024 could grow to 147 billion rubles, and adjusted net profit could amount to 63 billion rubles. In these forecasts, Matvey Taits does not take into account the possible effect of the launch of the market in the Far East, since he considers the most likely postponement of liberalization to 2025.

RusHydro is interested in working on market principles in the Far East, says Sergei Sasim, director of the Center for Electric Power Research at the Higher School of Economics. Taking into account the marginality of hydroelectric power generation, market conditions are more attractive for the company than regulated pricing, the analyst recalls. In addition, the construction of several large hydroelectric power plants is planned in the region, which in the current regulatory model will lead either to an increase in tariffs for domestic consumers or to the attraction of budgetary funds. If the construction of new generation takes place within the framework of the market, this will avoid such consequences, says Mr. Sasim. He notes that within the framework of market mechanisms, it will be much easier for the company division responsible for the operation of coal-fired thermal power plants to compensate for fuel costs, since their justification today is a complex and unpredictable procedure, depending on the will of the tariff regulator.

Polina Smertina