Bloomberg News

RusHydro Discount Widens on Kyrgyzstan Plants: Russia Overnight

September 20, 2012

OAO RusHydro (RSHYY:US) led declines in Russian shares traded in New York, swelling the discount versus the Moscow stock to the most in seven weeks, on concern its plan to build factories in Kyrgyzstan will erode profit.

American depositary receipts of Russia’s biggest renewable energy producer lost 2.5 percent to $2.70 yesterday, widening the discount versus the Moscow shares to 4.6 percent, the most since July 31. The Bloomberg Russia-US Equity Index (RUS14BN) of the most- traded Russian companies in New York dropped 0.4 percent to 100.24 yesterday, the lowest level since Sept. 12. RTS stock- index futures expiring in December rose 0.3 percent to 151,470.

Russia signed an agreement with the Kyrgyz government to build hydropower plants, Energy Minister Alexander Novak said yesterday. RusHydro, which is 58 percent state-owned, will probably report revenue fell for a second year, according to the mean estimate of 14 analysts surveyed by Bloomberg. The accord came as global slowdown concerns mounted after a Chinese manufacturing survey pointed to a contraction and a separate report showed euro-area services and manufacturing output fell.

“The Kyrgyzstan project means additional risks for the stock,” Dmitry Bulgakov, an analyst at Deutsche Bank AG, said by phone from Moscow yesterday. “It’s a political, rather than business project, and the concern is that the regulation and tariffs will not be able to provide returns on investments, while cash collection could also be a problem.”

The Market Vectors Russia ETF (RSX:US), the biggest U.S.-traded exchange-traded fund that holds Russian shares, rose 0.2 percent to $29.78. The RTS Volatility Index fell 3.6 percent to 30.13 yesterday.

‘Not Doing Well’

A composite index based on a survey of purchasing managers in both industries in the 17-nation euro area dropped to 45.9 from 46.3 in August, London-based Markit Economics said yesterday in an initial estimate. A reading below 50 indicates contraction. Russia is the world’s biggest energy exporter and the European Union is the country’s biggest trading partner.

The preliminary reading for a China purchasing managers’ index by HSBC Holdings Plc and Markit Economics was 47.8. If confirmed, the gauge will post its longest streak below the expansion-contraction dividing line of 50 in the survey’s eight- year history.

In the U.S., more Americans than forecast filed unemployment claims last week and a gauge of leading indicators fell in August. Manufacturing in the Philadelphia region shrank for a fifth straight month in September.

“People sell because risks are too high,” Vladimir Tikhomirov, chief economist at Otkritie Capital, said by phone yesterday from Moscow. “There are signs that the crisis may be already spreading to Europe’s most prosperous countries and the global economy from China to the U.S. is not doing well.”

Power Plants

RusHydro plans to construct four hydropower stations in Kyrgyzstan jointly with local group JSC Electric, the Russian company said in a statement yesterday. The cost of the project, which can be completed within five years, was estimated at as much as $425 million in 2009, according to the statement.

RusHydro and Kyrgyzstan’s JSC Electric will set up a joint venture to construct the stations, and each will control a 50 percent stake in the venture.

The stock fell 0.2 percent to 88.39 kopeks, or 2.8 U.S. cents, in Moscow yesterday. One ADR equals to 100 shares.

Crude oil for October delivery settled at $91.87 a barrel on the New York Mercantile Exchange, the fourth consecutive decline. Brent oil for November settlement rose 1.6 percent to $109.93 a barrel on the London-based ICE Futures Europe. Urals crude, Russia’s chief export blend, gained 2.3 percent to $109.08 per barrel yesterday.

To contact the reporter on this story: Halia Pavliva in New York at hpavliva@bloomberg.net

To contact the editor responsible for this story: Tal Barak Harif at tbarak@bloomberg.net


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Companies Mentioned

  • RSHYY
    (RusHydro JSC)
    • $0.98 USD
    • -0.01
    • -0.71%
  • RSX
    (Market Vectors Russia ETF)
    • $15.95 USD
    • 0.51
    • 3.2%
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