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RusHydro Swings Abate as Kremlin Pledges Funds: Russia Overnight

November 05, 2012

RusHydro Swings Abate as Kremlin Pledges Funds

The new turbine hall is seen at the Sayano-Shushenskaya hydropower station, operated by OAO Rushydro, near Sayanogorsk, Russia. The Kremlin will give cash to Moscow-based RusHydro from the federal budget, Deputy Prime Minister Arkady Dvorkovich told reporters in Laos yesterday. Photographer: Andrey Rudakov/Bloomberg

OAO RusHydro (RSHYY:US) is posting the smallest price swings in two years after Russia’s government said it will inject cash into the biggest renewable energy producer to fund the construction of new power plants.

RusHydro (HYDR) depositary receipts traded in London climbed 0.3 percent yesterday, with 10-day volatility on the U.K.-traded shares falling to 14.6, the lowest since October 2010. The stock’s volatility reading was 85 percent above that for the MSCI Emerging Markets Utilities Index (MXEF0UT), the smallest gap in more than two weeks. With markets in Moscow closed for a holiday, the Bloomberg Russia-US Equity Index (RUS14BN) of the most-traded Russian companies in the U.S. slipped 0.3 percent to 94.40.

The Kremlin will give cash to Moscow-based RusHydro from the federal budget, Deputy Prime Minister Arkady Dvorkovich told reporters in Laos yesterday. The company, which is seeking money to fund its $12.3 billion expansion program over the next four years, should receive 50 billion rubles ($1.6 billion) from the government, Dvorkovich said on Aug. 23. RusHydro’s cash flow stalled as President Vladimir Putin delayed electricity tariff increases ahead of the March 4 election.

“This ends the uncertainty and solves the problem,” Sergey Beiden, an analyst at Otkritie Financial Corp., which has a hold rating on RusHydro, said by phone from Moscow yesterday. “This means the company will receive 50 billion rubles from the budget and close a gap in its investment program. The market’s reaction to the news is clearly positive.”

ETF Gains

The Market Vectors Russia ETF (RSX:US), the biggest U.S.-traded exchange-traded fund that holds Russian shares, rose 0.8 percent to $28.18 in New York yesterday, the highest level since Oct. 25.

RusHydro rose to $2.35 in London yesterday, the biggest advance in a week. The company’s American depositary receipts (RSHYY:US) traded in New York fell 0.4 percent to $2.34, after earlier gaining as much as 1.3 percent.

Shares on Russia’s Micex (INDEXCF) Index added 0.5 percent when they last traded on Nov. 2 and are down 21 percent this year. The Micex has climbed 2.7 percent in 2012.

RusHydro needs a cash injection to expand its production facilities throughout the country and upgrade aging hydroelectricity plants. The company plans to invest 98.3 billion rubles ($3.2 billion) to develop its sites in 2012, according to its website. RusHydro plans to invest a total of 381.8 billion rubles through 2016.

Oil Rebounds

The government owned 60.5 percent of the company as of June 30 according to its website. Russia will inject funds by increasing its stake in RusHydro, Otkritie’s Beiden said yesterday.

Oil, which together with natural gas accounted for half of state budget revenue in 2011, rose from the lowest level in almost four months as refineries restored production after Hurricane Sandy tightened fuel supplies in the U.S.

Crude rose 0.9 percent to $85.65 a barrel on the New York Mercantile Exchange yesterday. The contract settled at $84.86 a barrel on Nov. 2, the lowest level since July 10. Prices have dropped 13 percent this year.

Brent oil for November settlement climbed 1.9 percent to $107.73 on the London-based ICE Futures Europe exchange, while Urals crude, Russia’s chief export blend, gained 1.7 percent to $107.50 a barrel yesterday.

U.S. Election

The decline in the Russia-US gauge -- which tracks ADRs of companies including world’s biggest natural gas producer OAO Gazprom and Nasdaq Stock Exchange-traded shares of Internet company Yandex NV (YNDX:US) -- can be attributed to hesitation by investors to buy and sell before today’s U.S. presidential election, Chris Weafer, chief strategist at Sberbank-CIB, the investment banking arm of Russia’s largest lender, said by e- mail from Toronto yesterday.

“For investors in Russia and emerging markets generally, the outcome of the U.S. election is particularly important because who forms the next administration is likely to have an impact on where the dollar trades,” Weafer said. “Given that a weaker dollar is much better for the oil price and investor flows into emerging market assets, an Obama victory would be better for Russia investors.”

The dollar gained against all but six of the 16 major world currencies tracked by Bloomberg yesterday, strengthening 0.3 percent versus the euro. The ruble slid 0.7 percent to 31.47 per dollar when it last traded in Moscow on Nov. 2.

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

To contact the editors responsible for this story: Emma O’Brien at eobrien6@bloomberg.net


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Companies Mentioned

  • RSHYY
    (RusHydro JSC)
    • $1.51 USD
    • 0.05
    • 3.25%
  • RSX
    (Market Vectors Russia ETF)
    • $23.99 USD
    • 1.37
    • 5.71%
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