RusHydro Bolstering Payout as Dividends Trail: Russia Overnight

OAO RusHydro (RSHYY), Russia’s state-run hydropower producer, is seeking to exceed a government target for shareholder payouts in the next five years, more than tripling dividend yields that are among the lowest of its peers.

“We expect a steady growth in dividends starting from 2012,” George Rizhinashvili, a deputy chairman at RusHydro, said in a phone interview from Moscow yesterday. “Our annual dividend payment ratio may be even higher than 25 percent of net income,” based on Russian accounting standards, in the next five years, he said.

RusHydro rallied 2.6 percent yesterday in New York, driving a 1 percent jump in the Bloomberg Russia-US Equity Index. (RUS14BN) State companies should “in most cases” pay 25 percent of profit as dividends, Deputy Prime Minister Arkady Dvorkovich said in September. RusHydro’s Moscow-listed stock has a 12-month dividend yield of 1.1 percent, the second-lowest after China’s Hubei Energy Energy Group Co. among 15 power producers with market values of more than $1.2 billion, data compiled by Bloomberg show.

Futures expiring in March on Russia’s RTS stock index rallied 0.6 percent in U.S. trading hours to 152,200 as crude oil, the nation’s biggest export earner, climbed for a third day. The Bloomberg Russia-US gauge, which tracks the most-traded Russian companies in the U.S., gained to 98.66 in New York yesterday, the highest level since Oct. 22.

‘Differentiate Itself’

Dividends equal to 25 percent of net income would push RusHydro’s yield to about 3.5 percent, according to Dmitry Bulgakov, an analyst at Deutsche Bank AG in Moscow who rates the company’s Moscow shares a buy. The Krasnoyarsk-based company, which posted profit of 31.1 billion rubles ($1.03 billion) last year and is the world’s fifth-biggest power producer by market value, currently pays out about 10 percent of profit in dividends, Bulgakov said by phone yesterday.

“RusHydro needs to differentiate itself from the rest of the sector,” he said. “The market likes it and its logic is simple, the higher the company’s dividends are, the lower the risk of ineffective spending. Investors like predictability and a promise of higher dividends gives them that.”

The dividend yield for Wuhan, China-based Hubei Energy (000883) was 0.6 percent over the past 12 months, while OAO EON Russia, a power producer controlled by Germany’s largest utility, had a yield of 2.3 percent. The dividend yield for Fortum Oyj (FUM1V), Finland’s biggest utility that has slumped 13 percent this year, was 7 percent, the highest among the 15 electricity producers, data compiled by Bloomberg show.

‘Very Optimistic’

American depositary receipts of RusHydro surged to $2.40 in New York yesterday. The stock gained 1.8 percent to 75.09 kopecks, or 2.42 U.S. cents, in Moscow yesterday.

“The market is very optimistic on higher dividend payments by RusHydro,” Elina Kulieva, an analyst at Alfa Bank who has a buy rating on the shares, said by phone yesterday from Moscow. “Those expectations are the main driver for the stock.”

The government’s share in RusHydro will increase to as much as 66 percent from the current 60.5 percent, after the company completes an additional share issue, Rizhinashvili said. RusHydro began issuing 110 billion shares at 1 ruble each on Dec. 19 and expects to finish the offering within 30 days, according to a Dec. 13 regulatory filing. The government has injected 50.2 billion rubles into the company this month in exchange for the new shares.

Electricity prices are projected to rise between 12 percent and 14 percent next year, helping RusHydro boost revenue, Rizhinashvili said.

Rostelecom Rises

OAO Rostelecom (ROSYY), Russia’s biggest fixed-line telephone company, advanced 2.8 percent to $23.45 in New York, the highest level since Nov. 6. Trading volume was almost three times the daily average in the past three months, data compiled by Bloomberg show. The company’s stock in Moscow increased 2.4 percent to 119.47 rubles, or $3.89.

Konstantin Malofeev, Rostelecom’s largest owner after the Russian state, has urged the Moscow-based company to buy the local unit of Sweden’s Tele2 AB (TEL2B) to form a fourth nationwide wireless carrier.

Polyus Gold International Ltd. (PGIL) added 1.8 percent to $3.42 in New York, the highest level since Oct. 22. The shares increased 0.9 percent to 214 pence, or $3.48. The London-based company plans to sell its assets in Kazakhstan and Kyrgyzstan, according to a statement yesterday

Oil Rises

The Market Vectors Russia ETF (RSX), the largest dedicated Russian exchange-traded fund, added 1.4 percent to $29.85, the highest close since Sept. 18. The RTS Volatility Index, which measures expected swings in futures, fell 2 percent to 20.03.

Crude oil for January delivery advanced 0.8 percent to $87.93 a barrel on the New York Mercantile Exchange, the highest level since Dec. 4. The January contract expires today. Brent oil for February settlement rose 1.1 percent to $108.84 a barrel on the London-based ICE Futures Europe exchange. Urals crude, the country’s main export blend, climbed 0.8 percent to $108.40 a barrel yesterday.

Futures expiring in March on the ruble showed the currency strengthening 0.3 percent to 31.202 per dollar after the currency gained 0.3 percent to 30.8545 yesterday.

United Co. Rusal, the world’s largest aluminum producer, rose 1.2 percent to HK$4.90 in Hong Kong trading as of 10:34 a.m. local time. The MSCI Asia Pacific Index climbed 0.7 percent.

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

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

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