RusHydro Considering Renewables Fund IPO With PowerChina

Sept. 11 (Bloomberg) — RusHydro JSC, Russia’s biggest
hydropower company, is considering selling shares in a clean-energy fund it plans to create with Power Construction Corp. of
China Ltd.
to gain from a new subsidy program.

The state-controlled generator plans to register companies
this year as part of plans to build small hydro plants eligible
for renewables subsidies, Deputy Chief Executive George Rizhinashvili said in an interview. The company is eyeing
investments of as much as 65 billion rubles ($1.7 billion) by
2020 in more than 30 projects being discussed with PowerChina.

“In the event that we go ahead with a long-term project
with our Asian partners, part of the venture investing in
building capacity could be sold in an initial public offering or
private placement,” Rizhinashvili said. “It will allow us to
recoup investment in the early phase of the project.”

RusHydro and PowerChina, the country’s biggest builder of
hydroelectric dams, signed an agreement in May to build small
plants in Russia. Developers are seeking to benefit from
Russia’s new subsidy program to boost renewable energy
generation, approved in May 2013. The country is targeting as
much as 6,200 megawatts of new capacity from wind, solar and
small hydro by 2020.

Clean-energy facilities with more than 5 megawatts can bid
to get fixed capacity payments over 15 years. Thirty-nine
projects won support in the first auction last September and
another 37 in June.

Overseas Projects

The RusHydro plan includes its three 5- to 10-megawatt
hydro projects that won support in the June tender, which need
to be completed by 2017. Subsidized rates guarantee a 14 percent
internal rate of return on renewable-energy projects, a
“breakthrough” for long-term investments, according to
Rizhinashvili.

The partnership with PowerChina, which may grow to include
projects outside Russia, would comprise investment, construction
and loans, according to Rizhinashvili. The fund may borrow in
yuan depending on the equipment that China may provide, he said.

The project is still at a preliminary stage and a clear
plan is anticipated before the end of October, said Du Chunguo,
vice general manager of the Chinese company’s overseas business
department.

“An offering would come after we are able to show deal
flow or cash flow,” Rizhinashvili said. “It would be three to
five years as we have an aggressive strategy for development and
growth.”

The slated investment venture and its potential share
offering will not deter RusHydro from pledges to continue
boosting its dividend. Next year’s payout will show similar
growth as this year’s, Rizhinashvili said.

The company paid 5.2 billion rubles in dividends this year
on 2013 earnings, a 40.5 percent increase from 3.7 billion
rubles the previous year.

To contact the reporters on this story:
Stephen Bierman in Moscow at
sbierman1@bloomberg.net;
Marc Roca in London at
mroca6@bloomberg.net

To contact the editors responsible for this story:
Will Kennedy at
wkennedy3@bloomberg.net
Randall Hackley, Dylan Griffiths

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