EON Russia, a power producer controlled by Germany’s biggest utility, rose the most in 16 months in Moscow trading after announcing plans to pay out all of last year’s profit as dividends.
The shares jumped as much as 9.4 percent, the biggest intraday gain since January 2012. Trading volumes were almost triple the three-month daily average.
EON Russia recommended paying 29 kopeks a share for 2012, all of its net income as reported to international standards. It will pay out 40 percent to 60 percent of earnings in coming years, General Director Maxim Shirokov said today in Moscow.
“This is on par with the German controlling shareholder’s policy and is the most generous profit-distribution scheme we have seen among Russian utilities,” Vladimir Sklyar, an analyst at Renaissance Capital in Moscow, wrote in a note.
EON Russia, acquired by Dusseldorf-based EON SE in 2007 amid the breakup of national utility OAO Unified Energy System, is increasing dividends as it completes an investment program to upgrade power plants. The move contrasts with the current policies of domestic competitors OAO Enel OGK-5 and Inter RAO UES, whose boards have recommended not paying a 2012 dividend.
“We are impressed that EON Russia has not followed, and might have even broken, the Russian utilities-sector imperative of ‘invest now, forget about the dividends’,” Mikhail Rasstrigin and Alexander Seleznev, analysts at VTB Capital, said in a note.
EON Russia paid out about 24 percent of profit to Russian accounting standards for 2011. A year later, net income increased 25 percent as new generation capacity boosted revenue and cash flow. The planned 2012 dividend, due for a shareholder vote on June 27, translates to an 11.3 percent yield on the stock at yesterday’s close, RenCap’s Sklyar said.
EON Russia traded up 7.1 percent at 2.75 rubles as of 5:45 p.m. local time. The 10-day volatility rose to 55.09, the highest since last June.
The total payout will be 18.3 billion rubles ($583 million), Shirokov told reporters. The future dividend policy is a guide, with final percentages depending on financial results, the company said.
While the dividend news is “good,” EON Russia’s profit margins may fall in the next two years as the Russian government considers slowing the increase in domestic natural-gas prices, Matvei Taits, an analyst at UralSib Capital, said today by phone. Lower gas costs can drag down the price of electricity.
The completion of most power-plant investment and a “strong” cash balance allows for “significant” dividends for the first time, EON Russia said in a presentation. Its installed capacity has risen 20 percent from 2007 and its investment program will be completed by 2015, on time and within budget.
The company’s “$1 billion cash pile and ongoing operating cash flow is more than sufficient to complete the last investment project” at the Berezovskaya power plant, Sklyar said.