Hydroelectric, Renewables

Chairman admits nerves as RusHydro lists on London Stock Exchange

6 July 2009 – The head of RusHydro, Russia’s biggest electricity producer, admitted to nerves while awaiting the first trades on his company’s Global Depositary Receipts (GDRs) on the London Stock Exchange today. Acting chairman of RusHydro Vasily Zubakin was in London to mark the launch and opened trading on the exchange this morning.

Zubakin was more relaxed in a meeting with press following the opening, saying that the first few trades had settled his nerves and that trading in the €0.38-0.39 range was in line with pricing on the two Russian exchanges on which it trades. He said that the decision to pursue a London listing reflected the company’s desire to tap into a large potential liquidity pool by making it easier for international investors to access RusHydro securities. “We think that this move will significantly boost the liquidity of our depository receipts and that the listing will help spur our development from a Russian blue chip company into a global emerging markets blue chip,” said Zubakin.

RusHydro is the world’s largest publicly traded hydropower company with installed capacity of 25.3 GW. It intends to grow its other renewable energy power generation activities and already has interests in wind, geothermal and tidal power plants. Zubakin indicated that, despite receiving many offers, the company had no ambitions to expand into fossil fuel generation activities and that RusHydro would remain a “clean energy” company.

The Russian government currently has a 61.93 per cent stake in RusHydro but Zubakin said that in his personal opinion he could see no problem with this being reduced to 50 per cent plus one share at some time. “This would not represent any sell off of Russian strategic assets but the $3-5bn created by such an IPO would be beneficial for future investment plans, such as expansion of the wind generation portfolio.”

RusHydro was established in December 2004 as part of the comprehensive reform of Russia’s power industry which led to the liquidation of former monopoly power company RAO UESR in 2008.It brought together the vast majority of Russia’s hydropower assets and now owns 53 hydropower plants and one pumped storage hydro plant. In 2008 the company’s total electricity generation amounted to 80.3 TWh with revenues amounting to RUB 107.7bn ($3.4bn).

RusHydro’s GDR programme was launched in June 2008 with the Bank of New York (now Bank of New York Mellon) acting as depository. The volume of GDR’s issued has increased from 2.13 per cent of the company’s charter capital to the present level of approximately 6.17 per cent. Russian market permission has been granted for this to be increased up top 14.7 per cent of capital.

RusHydro is involved across the entire electricity supply chain in Russia from plant design and construction through to supply of electricity to consumers. It has not been adversely affected by the deep economic crisis that has left Russians using six per cent less electricity, largely because power produced by RusHydro is among the cheapest available to the Russian System Operator and therefore production is generally required.

RusHydro is the first Russian company to come to the London market since the start of the economic crisis but Zubakin believes that the future prospects for the company and its shareholders are bright. “I believe we have a strong potential for growth and dependant on the outcome of the Copenhagen climate change talks in December this year, the prospects for building sustainable power plants could be enhanced,” said Zubakin. “As the environmental legislation becomes tougher, the risk for our shareholders is lowered.”

Zubakin noted the opposition that has existed from various quarters in the environmental lobby to large-scale hydropower plants, which he said RusHydro had been making efforts to counter. He said that the E8 group of energy producers had endorsed large hydro as environmentally friendly, at their recent meeting.