Rusal goes out on the water // The company bought a 4.35% stake in RusHydro for 17 billion rubles.

Rusal became a shareholder of the RusHydro energy holding. The aluminum company acquired a 4.35% stake in the holding from the titanium corporation VSMPO-Avisma, which decided to get rid of the non-core asset due to financial difficulties. The stake was valued at RUB 17.4 billion, which was 11% higher than the market value at the time of the transaction. Rusal says they are investing in the company in the hope that the share price will rise. The purchase of the stake will allow Rusal to transfer a large share of electricity consumption to carbon-free sources to reduce the carbon footprint of export products, analysts believe.

The titanium corporation VSMPO-Avisma announced today that the aluminum producer Rusal has become the buyer of its block of shares in the energy holding RusHydro. The agreement for the sale of a 4.35% stake (19.12 billion shares) was signed on April 22. The transaction value is 17.4 billion rubles. As follows from the message, Rusal acquired the stake at a premium to the market: the price per share was 0.91 rubles, although the market value of the security at the time of the deal was 11% lower (0.82 rubles).

VSMPO-Avisma began looking for buyers for its stake in RusHydro since last summer due to financial difficulties (see Kommersant dated June 29, 2020). The titanium giant actively bought up RusHydro shares in 2017 and 2018, when the price of the paper was 0.75 rubles. In total, the company spent $ 336 million on the acquisition of 5.95%. By early March, the corporation reduced its stake to 4.95%.

As a result of the deal, Rusal became the third largest shareholder of RusHydro after the Federal Property Management Agency (61.73%) and VTB (12.95%). Rusal called the purchase a portfolio investment. They noted that they are counting on long-term growth in the value of shares and dividend yield.

In addition, Rusal has joint projects with RusHydro. Since 2006, the companies have become partners in the project of the Boguchansky Energy Metallurgical Association (BEMO). The association includes the Boguchanskaya HPP (3 GW) and the Boguchansk aluminum smelter (the first series was launched in March 2019). Rusal said they are satisfied with the level of cooperation with RusHydro and the acquisition of a stake in the generating company is not intended to influence the established relationship.

In the current green energy transition, RusHydro looks like the most attractive story in the sector: the company has a fairly low carbon footprint, and the Far Eastern capacities are rapidly switching to gas, says Vladimir Sklyar of VTB Capital.

“With the appearance of a premium for green electricity in the wake of decarbonization of exporters, RusHydro can significantly improve its financial indicators. The second option for increasing the cost of investments for Rusal may be an attempt to exchange the stake for RusHydro’s share in the BEMO project. This will not only allow Rusal to consolidate 28 billion rubles. EBITDA of the enterprise, but also to transfer an even larger share of the group’s own electricity consumption to carbon-free sources, increasing the competitiveness of its own product, ”the analyst believes.

Polina Smertina

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