May 20, 2015, 00:30 / Business

VTB may become a shareholder of RusHydro

The company wants to sell its shares to the state bank for up to 85 billion rubles, which will allow it to solve problems with debts Alina Fadeeva D. Abramov / Vedomosti

Vedomosti was told about this by a relevant federal official and two people close to one of the parties to the negotiations. RusHydro has long been discussing with the government options for refinancing the debt of its subsidiary, RAO ES of the East, which was formed due to tariff restrictions in the Far East. At the end of 2014, together with interest, it reached 80 billion rubles. The government instructed the Ministry of Finance, the Ministry of Economic Development and the Ministry of Energy to ensure debt refinancing by June 1, “including the provision of state guarantees to RusHydro to state banks, subject to the banks’ participation in the authorized capital of RusHydro.” Representatives of VTB and RusHydro declined to comment.

RusHydro would like to attract 85 billion rubles, but the amount may be less, two interlocutors say. The structure and terms of the deal are being discussed, but theoretically RusHydro could issue an additional issue and sell treasury shares (5.6%) to the bank, one of them clarifies. The company already has 54 billion authorized shares (12.3% of the capital if the entire package is placed).

Yesterday, RusHydro shares on the Moscow Exchange cost 59 kopecks, the company's capitalization amounted to 229.6 billion rubles. The Law on Joint Stock Companies prohibits the placement of shares below the nominal price, and for the company’s securities it is 1 ruble. Thus, RusHydro can receive 54 billion rubles for new shares, says Raiffeisenbank analyst Fedor Kornachev. And the sale of the treasury stake will bring another 12.8 billion rubles. The total amount of the transaction will be 66.8 billion rubles, the share of the Federal Property Management Agency will be reduced from 66.8 to 58.6%, and VTB will receive about 17% of RusHydro, Kornachev calculated.

VTB is not against participating in the transaction, but wants to fix favorable conditions for exiting capital, two Vedomosti interlocutors say. According to them, the bank would like to receive an option to sell RusHydro shares to the company itself at a higher price in about five years. VTB is not a financial investor, but a bank, and the profitability of the transaction will be correctly compared with the profitability of lending, but due to a complex transaction it can increase, says an interlocutor in one of the banks.

Where does the debt come from?

Accounts payable for 40 billion rubles. went to RAO ES of the East in 2008 as an inheritance from RAO UES of Russia, 20 billion rubles. the company raised 5.9 billion rubles for the implementation of unpaid projects on behalf of the state. – to replenish working capital, RusHydro disclosed.

If the bank wants to exercise the option, the buyout could be costly for the company, says Kornachev. But RusHydro shares may rise in price. In addition, the company is on a privatization plan until 2016 (the state's share should be reduced to 50% plus 1 share). This means that in the event of a significant increase in quotes, the VTB stake may be sold to a third-party investor, says an interlocutor at one of the banks. And RusHydro has an incentive to increase capitalization; the easiest way is to reduce the investment program and increase dividend payments, concludes Deutsche Bank analyst Dmitry Bulgakov.

However, attracting VTB to the capital of RusHydro will solve the problem only in the short term. If systemic problems in the region are not resolved, the issue of RAO ES of the East debt will arise again in a few years, Bulgakov is sure. One solution could be a change in tariff regulation in the region, he clarifies. In April, the government already instructed ministries to work on this issue.

The Ministry of Economic Development has already proposed its own version of solving the debt problem of RAO ES of the East. The company could be divided into a conditional “RusHydro A”, where profitable assets would go, and “RusHydro B” with “RAO ES of the East” and unprofitable projects on the balance sheet. Moreover, even before the reorganization, RusHydro could issue bonds for a certain amount in favor of an investor who would receive an option to convert the debt into shares of RusHydro A. In this case, RusHydro A would receive RusHydro B under management. But this option has not yet been discussed in detail with the company, says one of Vedomosti’s interlocutors. Yesterday, a representative of the Ministry of Economic Development said that the issue was being studied. A representative of the Ministry of Energy did not answer questions.