Italian energy multinational Enel is considering the sale of its Russian business, sources told Vedomosti last week, following a slump in earnings last year.
Three people with knowledge of the matter told the newspaper that the Milan-listed firm could decide to transfer its entire 56.4% stake in Enel Russia to Inter RAO, Russia’s biggest electricity supplier. Two of them added that an Inter RAO delegation was expected to visit Enel’s assets in Russia in the near future in order to evaluate them. One source noted that a deal could be finalised by mid-December.
The price of the transaction is unknown and representatives of both companies have declined to comment on the matter.
Enel acquired its share of Enel Russia, formerly OGK-5, in 2007 for 85 billion rubles (US$3.3 billion at the time). The deal established the Italian firm as the first foreign investor in Russia’s power industry. Enel Russia’s largest asset is the coal-fired Reftinskaya TPP, which can generate up to 3,800 MW of electricity and typically accounts for 40% of the company’s earnings. It also owns three gas-fired plants.
The company slipped into the red last year for the first time, posting a loss of 8.63 billion rubles (US$131 million) compared with a profit of 5.58 billion rubles (US$85 million) in 2015. This has fuelled speculation that Enel may be looking to withdraw from Russia as part of its plan to shed 6 billion euros (US$6.7 billion) in assets globally during the 2015-2019 period.
Earlier this year it was rumoured that Enel was discussing the sale of its Reftinskaya unit with Inter RAO, Siberian Generating and China Huadian. Officially, however, Enel has said the sale of the power plant is not certain.
If Enel divests its main Russian subsidiary, its only remaining interest in the country will be a stake in energy retail venture Rusenergosbyt, whose main customer is Russian Railways.
“It will definitely not be in the middle of December,” a source at Enel Russia told NewsBase this week.
“Enel group is trying to optimise its assets, but the process lasts for a while and there is no final decision yet.”
Russia’s Federal Antimonopoly Service (FAS) told Rambler News Agency last week that the watchdog had not yet received a request from Inter RAO to buy the share in Enel Russia.
Even so, experts say the sale may present a big opportunity to Inter RAO, which has been reducing its presence overseas to focus on its core operations in Russia.
Renaissance Capital analyst Vladimir Sklyar told Vedomosti that with Inter RAO as owner, Enel Russia would be able to access a 10% discount on gas supplies agreed with Russia’s top oil producer, Rosneft. The utility may also be able to secure cheaper supplies of coal for Reftinskaya from Kazakhstan’s Ekibastuz deposit, as Inter RAO also buys fuel from the field.