GPB_Russian Utilities Initiation_231118_watermark

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NOVEMBER 23, 2018 RUSSIA > EQUITY RESEARCH > UTILITIES

Table 9. Mosenergo forecast (IFRS based) and valuation, RUB bln or RUB per share

P&L (IFRS), RUB bln: Mosenergo	2013	2014	2015	2016	2017	2018E	2019E	2020E	2021E	2022E	2023E	2024E	2025E	2026E	TV'2027
Revenue electricity: old	62.8	63.9	60.9	63.8	64.9	64.9	66.6	68.9	72.7	74.9	77.1	79.2	81.3	84.0
Revenue electicity: new	19.1	19.6	24.4	37.0	44.0	38.6	29.9	32.9	31.9	32.4	33.0	27.8	25.3	26.1
Revenue electricity	82.0	83.5	85.2	100.7	108.9	103.5	96.5	101.7	104.6	107.4	110.1	107.1	106.6	110.1
Heat revenue	61.2	65.5	69.9	77.9	75.2	79.3	79.9	80.4	80.9	81.3	81.6	81.7	81.6	82.3
Revenue other (incl. reselling)	12.8	15.0	16.0	12.0	12.0	12.4	10.0	8.2	6.8	5.7	4.8	4.1	3.5	3.1
Revenue (before subsidies)	155.9	164.0	171.2	190.7	196.1	195.2	186.4	190.3	192.3	194.3	196.5	192.8	191.7	195.5
Subsidies	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0
Revenue	155.9	164.0	171.2	190.7	196.1	195.2	186.4	190.3	192.3	194.3	196.5	192.8	191.7	195.5
Fuel costs electricity, old	(53.8)	(57.4)	(56.2)	(62.6)	(61.1)	(64.5)	(65.2)	(65.7)	(66.8)	(68.0)	(69.1)	(70.1)	(71.1)	(72.9)
Fuel costs heat, old	(28.0)	(29.9)	(29.2)	(32.6)	(31.8)	(33.6)	(33.9)	(34.2)	(34.8)	(35.4)	(35.9)	(36.5)	(37.0)	(37.9)
Fuel costs, new	(7.6)	(8.4)	(10.9)	(15.1)	(15.0)	(16.1)	(16.4)	(16.8)	(17.3)	(17.8)	(18.3)	(18.8)	(19.3)	(19.8)
Fuel costs,old and new	(89.4)	(95.7)	(96.3)	(110.2)	(107.8)	(114.2)	(115.5)	(116.7)	(118.8)	(121.1)	(123.3)	(125.4)	(127.4)	(130.6)
Purchased power & Re-selling	(9.4)	(8.6)	(8.8)	(9.6)	(10.0)	(10.5)	(8.7)	(7.3)	(6.1)	(5.2)	(4.5)	(3.9)	(3.3)	(2.9)
Heat transportation	(7.6)	(7.3)	(6.5)	(4.0)	(1.9)	(0.9)	(0.9)	(0.9)	(0.9)	(1.0)	(1.0)	(1.0)	(1.0)	(1.0)
Water payment	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0
Gross profit	49.5	52.4	59.5	66.9	76.3	69.6	61.3	65.4	66.4	67.1	67.7	62.6	60.0	61.0
Non-fuel Opex: Old plants	(21.0)	(24.6)	(25.3)	(23.4)	(23.1)	(23.9)	(25.0)	(26.1)	(27.1)	(28.1)	(29.0)	(29.8)	(30.5)	(31.1)
Non-fuel Opex: new plants	(2.6)	(2.8)	(3.8)	(5.0)	(5.2)	(5.5)	(5.8)	(6.0)	(6.3)	(6.5)	(6.7)	(6.9)	(7.1)	(7.5)
Cost of subsidies	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0
Non-fuel Opex	(23.5)	(27.4)	(29.2)	(28.3)	(28.4)	(29.4)	(30.8)	(32.1)	(33.4)	(34.6)	(35.8)	(36.8)	(37.6)	(38.7)
EBITDA, old plants	13.5	10.2	13.5	19.2	22.3	21.3	21.5	22.3	24.0	23.9	23.7	23.5	23.3	23.5
EBITDA, new plants	9.0	8.5	9.6	16.9	23.8	17.0	7.7	10.1	8.3	8.1	7.9	2.1	(1.1)	(1.2)
EBITDA, reselling / other	3.5	6.4	7.3	2.5	1.9	1.9	1.3	0.9	0.6	0.5	0.3	0.2	0.2	0.1
EBITDA	26.0	25.1	30.3	38.6	48.0	40.2	30.5	33.3	32.9	32.4	32.0	25.9	22.4	22.3
Depreciation: Old plants	(11.5)	(12.1)	(14.5)	(10.7)	(10.7)	(10.9)	(10.9)	(10.9)	(10.9)	(10.9)	(10.9)	(10.9)	(10.9)	(10.9)
Depreciation: New plants	(2.5)	(3.4)	(4.1)	(4.4)	(4.4)	(4.4)	(4.4)	(4.4)	(4.4)	(4.4)	(4.4)	(4.4)	(4.4)	(4.4)
Depreciation	(14.0)	(15.5)	(18.6)	(15.1)	(15.1)	(15.2)	(15.2)	(15.2)	(15.2)	(15.2)	(15.2)	(15.2)	(15.2)	(15.2)
EBIT	12.0	9.6	11.7	23.5	32.9	25.0	15.3	18.1	17.7	17.2	16.8	10.6	7.1	7.1
Finance (costs) / income	0.5	1.4	(1.9)	4.4	1.3	1.1	1.6	2.4	3.4	4.2	4.8	5.2	5.3	5.2
One-offs (cash)	0.0	0.0	0.0	(0.0)	1.2	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0
One-offs (non-cash): operational	(2.2)	(8.0)	(12.2)	(6.9)	(4.9)	(3.7)	(1.8)	(0.9)	(0.5)	(0.2)	(0.1)	(0.1)	(0.0)	(0.0)
One-offs (non-cash): financial	(1.2)	(6.3)	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0
EBT	9.2	(3.3)	(2.4)	20.9	30.5	22.5	15.1	19.6	20.6	21.2	21.4	15.8	12.4	12.3
Income tax	(1.7)	0.2	0.6	(7.4)	(5.7)	(4.7)	(3.2)	(4.1)	(4.3)	(4.4)	(4.5)	(3.3)	(2.6)	(2.6)
Net profit (pre-minorities)	7.5	(3.1)	(1.8)	13.5	24.8	17.7	11.9	15.5	16.3	16.7	16.9	12.5	9.8	9.7
Minority	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0
Net profit (reported)	7.5	(3.1)	(1.8)	13.5	24.8	17.7	11.9	15.5	16.3	16.7	16.9	12.5	9.8	9.7
Net profit (adj)	10.2	10.2	7.7	22.0	27.0	20.6	13.3	16.2	16.7	16.9	17.0	12.5	9.8	9.7
Leverage, RUB bn															TV'2027
Net (Debt) / Cash (year end)	(24)	(39)	(43)	(18)	(3)	19	29	41	51	58	64	64	64	65	(45)
Net Debt or (Cash) / EBITDA (year end)	0.9	1.6	1.4	0.5	0.1	(0.5)	(1.0)	(1.2)	(1.5)	(1.8)	(2.0)	(2.5)	(2.8)	(2.9)	2.0
Multiples			`
FCF Yield	-13%	10%	-4%	37%	39%	32%	21%	24%	23%	23%	22%	14%	9%	8%
DY	2%	2%	3%	5%	10%	7%	5%	9%	10%	12%	12%	9%	7%	7%
EV/EBITDA	3.5	4.0	3.6	2.6	1.6	1.6	1.7	1.3	1.1	1.0	0.9	1.0	1.1	1.1
PE (adj)	6.7	6.6	8.8	3.1	2.5	3.3	5.1	4.2	4.1	4.0	4.0	5.4	6.9	7.0
Dividend, RUB / s															TV'2027
DPS: regular	0.04	0.03	0.06	0.08	0.17	0.11	0.09	0.15	0.18	0.21	0.21	0.16	0.12	0.12	0.98
DPS: special (leverage optimization)															2.75
DPS: special (non-core assets sale)															-
DPS: total	0.04	0.03	0.06	0.08	0.17	0.11	0.09	0.15	0.18	0.21	0.21	0.16	0.12	0.12	3.73
Dividend / Net profit (nominal)	21%	0%	0%	25%	27%	25%	31%	37%	44%	50%	50%	50%	50%	50%
Dividend / Net profit (adj)	16%	12%	29%	15%	24%	22%	28%	36%	43%	49%	50%	50%	50%	50%
Dividend / FCF	neg	18%	neg	13%	25%	21%	26%	35%	45%	55%	57%	66%	83%	86%
Cash Flow, RUB bn															TV'2027
NOPAT: old plants	1.7	(1.9)	(1.0)	6.7	9.1	8.3	8.4	9.1	10.4	10.3	10.2	10.0	9.8	9.9
NOPAT: new	5.3	4.7	4.4	9.9	15.3	10.0	2.7	4.5	3.1	3.0	2.8	(2.3)	(5.5)	(5.6)
NOPAT: reselling / other	2.8	6.0	5.7	1.9	1.5	1.5	1.0	0.7	0.5	0.4	0.3	0.2	0.1	0.1
NOPAT	9.8	8.8	9.1	18.6	26.0	19.8	12.1	14.3	14.0	13.6	13.2	7.9	4.5	4.4
CapEx: Maintenance	0.0	0.0	(7.7)	(8.2)	(11.0)	(13.5)	(13.0)	(13.2)	(13.3)	(13.5)	(13.6)	(13.8)	(13.9)	(14.0)
CapEx: New	(27.8)	(17.8)	(15.4)	0.0	(4.2)	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0
CapEx	(27.8)	(17.8)	(23.1)	(8.2)	(15.2)	(13.5)	(13.0)	(13.2)	(13.3)	(13.5)	(13.6)	(13.8)	(13.9)	(14.0)
Working Capital Red./ (Incr.)	(5.0)	0.0	(7.1)	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0
FCF; old plants	8.2	10.2	(1.4)	9.2	8.8	5.6	6.3	6.8	7.9	7.6	7.4	7.1	6.8	6.8	58.8
FCF; new plants	(20.0)	(9.7)	(7.0)	14.3	15.5	14.3	7.0	8.9	7.5	7.3	7.2	2.1	(1.1)	(1.2)	35.5
FCF: reselling / other	2.8	6.0	5.7	1.9	1.5	1.5	1.0	0.7	0.5	0.4	0.3	0.2	0.1	0.1	0.7
FCF: cash one-offs	0.0	0.0	0.0	(0.0)	1.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0
FCF (to EV)	(9.0)	6.5	(2.6)	25.4	26.8	21.5	14.3	16.4	15.9	15.3	14.8	9.4	5.9	5.7	95.0
Interest (CF)	0.3	0.3	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0
FCF (to Equity)	(8.7)	6.7	(2.6)	25.5	26.8	21.5	14.3	16.4	15.9	15.3	14.8	9.4	5.9	5.7
Discounting parameters
Period for discounting, years	DCF					(1.4)	(0.4)	0.6	1.6	2.6	3.6	4.6	5.6	6.6	0.6
	DDM					(0.4)	0.6	1.6	2.6	3.6	4.6	5.6	6.6	7.6	1.6
Discounting factor	DCF						1.03	0.93	0.81	0.72	0.63	0.56	0.49	0.43	0.38
	DDM					1.03	0.91	0.79	0.68	0.59	0.50	0.44	0.38	0.32	0.28
DCF
DCF: Old plants							6.4	6.3	6.4	5.5	4.7	4.0	3.3	2.9	22.3
DCF: New plants							7.2	8.2	6.1	5.3	4.5	1.2	(0.5)	(0.5)	13.5
DCF: Reselling / other							1.1	0.7	0.4	0.3	0.2	0.1	0.1	0.0	0.3
DCF: total							14.7	15.1	12.9	11.0	9.4	5.2	2.9	2.4	36.1
TP (DCF), RUB bln or RUB/s			TP (w-average, rounded), RUB/s							Valuation parameters			DDM	DCF	Other
EV, RUB bln	110		TP		RUB/s	Weight				CoE			16.0%
Non-core assets	-		DDM		1.90	60%		DDM is a floor for PT		WACC				13.6%
Net (debt) / Cash (discounted), end 2018	13		DCF		3.10	40%				TG (Dividends)			3.5%
Equity, RUB bln	123		Result (rounded)		2.40	100%				TG (FCF): "old" assets				2.0%	0.0%
# of shares: current	40									TG (FCF): "new" assets				2.0%
# of shares: Ord: New	-
# of shares: Ord	40
# of shares: Ord: treasury	-
# of shares: Pref	-
# of shares: effective, total	40
TP (DCF), RUB	3.08

Source: company data, Gazprombank estimates

41

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NOVEMBER 23, 2018	RUSSIA > EQUITY RESEARCH > UTILITIES

INITIATION OF COVERAGE

TGK-1

RU

SSI

FCFY-to-CoE premium is sustainable until 2022, but the need to upgrade heat network adds uncertainty

TGK-1 should deliver a FCFY-to-CoE premium until 2022 with a decline in 2023 due to CSA expirations. Potential capex needs for St. Petersburg Heat network is a source of additional uncertainty.

Operations

Key regional provider of electrical and heat energy in St. Petersburg and surrounding regions (electrical capacity ~7 GW) with a high (>40%) proportion of hydro capacity.

Positives

High share of hydro generation within total capacity (~3 GW out of ~7 GW).

FCF-to-CoE premium in 2018-22, partially on the back of the start of CSA uplift for selected units.

Potential increase in dividend payout (from ~25% of 2017 IFRS net income) on the back of premium FCF starting from 2018 and no net debt starting from end 2019.

Presence of Fortum as a blocking shareholder reduces corporate governance risks.

Possible sale of St. Petersburg Heat Network could limit upside risk to capex.

Potential beneficiary of the change in heat regulation ("alternative boiler shop").

Negatives

Modest historical dividend payout, e.g. ~25% of 2017 IFRS net income paid as dividends.

FCFY to decline after 2020 with the expiration of CSAs at South CHP (Dec. 2020), Pervomai CHP (June 2020, Dec. 2021) and Pravoberezh CHP (Dec. 2022).

Uncertaintly to medium-term capex due to the potential needs to upgrade St. Petersburg Heat Network.

Uncertain progress in the attempted sale of St. Petersburg Heat Network.

Valuation (2018-2026)

FCFY-to-CoE premium: 2018-22.

DY-to-CoD premium: 2019-20, 2022.

Note: Share prices as of closure 20-Nov-2018

TICKER	TGKA RX
Currency	RUB
Target price	0.010
Upside	16%
Recommendation	Neutral
MCap, bln	33
Share price	0.009
52-week high	0.013
52-week low	0.009

Source: Bloomberg, Gazprombank estimates

	SHAREHOLDERS
		Gazprom		51.8%
		Energoholding
		Fortum		29.5%
		Free-float		19.7%

Source: company data

12M PRICE PERFORMANCE
140%
120%
100%
80%
60%		MOEX INDEX
		TGKA
40%	Jan-18	Mar-18	May-18	Jul-18
Nov-17					Sep-18

Source: Bloomberg

Chart 53. TGK-1: FCF profile	Chart 54. TGK-1: FCFY and DY profile
EBITDA (lhs), capex (lhs), FCFY (rhs)	FCFY (lhs), DY (lhs) and dividend payout vs IFRS net profit (rhs)

30	EBITDA, Capex									FCFY	30%	30%
	RUB bln									(line)
15											15%	15%
0											0%	0%
-15											-15%	-15%
	2016	2017	2018E	2019E	2020E	2021E	2022E	2023E	2024E	2025E	2026E
		EBITDA ("NEW")				EBITDA ("OLD")			CAPEX		FCFY

FCFY and DY

Dividend

100%

(columns)

payout (line)

50%

0%

2016

2017

2018E

2019E

2020E

2021E

2022E

2023E

2024E

2025E

2026E

-50%

FCF YIELD (LHS)

DIVIDEND YIELD (LHS)

DIVIDEND PAYOUT (RHS)

Source: company data, Gazprombank estimates

Source: company data, Gazprombank estimates

42

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NOVEMBER 23, 2018 RUSSIA > EQUITY RESEARCH > UTILITIES

Table 10. TGK-1 forecast (IFRS-based) and valuation, RUB bln or RUB per share

P&L (IFRS), RUB bln: TGK-1	2013	2014	2015	2016	2017	2018E	2019E	2020E	2021E	2022E	2023E	2024E	2025E	2026E	TV'2027
Revenue electricity: old	21.8	20.7	19.7	22.4	23.3	25.3	26.1	27.2	28.8	30.0	31.2	32.4	33.6	34.9
Revenue electicity: new	15.6	14.0	13.1	15.4	20.3	22.6	24.5	23.3	17.9	18.2	14.2	14.7	15.2	14.7
Revenue electricity	37.4	34.7	32.9	37.8	43.6	47.9	50.6	50.6	46.8	48.1	45.5	47.1	48.8	49.6
Heat revenue	26.0	27.7	29.6	33.7	35.3	35.5	35.8	36.2	36.5	36.8	37.0	37.2	37.3	37.7
Revenue other (incl. reselling)	6.1	6.1	6.0	7.1	8.4	8.7	6.7	5.2	4.1	3.3	2.6	2.1	1.8	1.5
Revenue (before subsidies)	69.4	68.4	68.5	78.6	87.3	92.1	93.1	91.9	87.4	88.2	85.1	86.5	87.8	88.8
Subsidies	0.4	0.6	0.9	0.3	0.1	0.1	0.1	0.1	0.1	0.1	0.1	0.1	0.1	0.1
Revenue	69.9	69.0	69.4	78.9	87.4	92.1	93.2	92.0	87.4	88.3	85.2	86.6	87.9	88.9
Fuel costs electricity, old	(10.8)	(10.4)	(9.6)	(10.7)	(11.4)	(12.5)	(12.7)	(12.8)	(13.1)	(13.3)	(13.6)	(13.8)	(14.1)	(14.4)
Fuel costs heat, old	(12.8)	(12.4)	(11.4)	(12.7)	(13.5)	(14.8)	(15.0)	(15.1)	(15.4)	(15.7)	(16.0)	(16.2)	(16.5)	(16.9)
Fuel costs, new	(5.9)	(5.8)	(5.4)	(6.1)	(7.1)	(7.9)	(8.1)	(8.3)	(8.6)	(8.9)	(9.2)	(9.5)	(9.7)	(10.0)
Fuel costs,old and new	(29.5)	(28.5)	(26.4)	(29.5)	(31.9)	(35.2)	(35.8)	(36.3)	(37.1)	(37.9)	(38.7)	(39.5)	(40.3)	(41.4)
Purchased power & Re-selling	(5.4)	(5.5)	(5.8)	(6.2)	(7.1)	(7.3)	(5.7)	(4.6)	(3.7)	(3.0)	(2.4)	(2.0)	(1.7)	(1.4)
Heat transportation	(0.6)	(1.2)	(2.0)	(2.1)	(2.6)	(2.7)	(2.7)	(2.8)	(2.8)	(2.8)	(2.8)	(2.8)	(2.9)	(2.9)
Water payment	(2.2)	(2.3)	(2.4)	(2.6)	(2.7)	(2.9)	(3.0)	(3.1)	(3.2)	(3.4)	(3.5)	(3.6)	(3.7)	(3.7)
Gross profit	32.0	31.4	32.8	38.5	43.1	44.1	46.0	45.3	40.6	41.2	37.7	38.6	39.5	39.5
Non-fuel Opex: Old plants	(12.5)	(13.4)	(13.0)	(16.5)	(17.4)	(17.9)	(18.7)	(19.5)	(20.3)	(21.1)	(21.7)	(22.3)	(22.9)	(23.3)
Non-fuel Opex: new plants	(2.3)	(2.4)	(2.5)	(2.7)	(3.0)	(3.1)	(3.3)	(3.4)	(3.6)	(3.7)	(3.9)	(4.0)	(4.1)	(4.3)
Cost of subsidies	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0
Non-fuel Opex	(14.8)	(15.8)	(15.5)	(19.1)	(20.4)	(21.0)	(22.0)	(23.0)	(23.9)	(24.8)	(25.6)	(26.3)	(26.9)	(27.6)
EBITDA, old plants	8.8	8.7	11.0	11.6	11.1	10.0	9.9	10.0	10.5	10.5	10.6	10.8	10.9	11.3
EBITDA, new plants	7.4	5.9	5.2	6.6	10.2	11.5	13.0	11.6	5.7	5.5	1.2	1.3	1.4	0.4
EBITDA, reselling / other	1.1	1.1	1.1	1.2	1.4	1.5	1.0	0.7	0.5	0.4	0.3	0.2	0.2	0.1
EBITDA	17.2	15.6	17.3	19.4	22.7	23.1	23.9	22.3	16.7	16.4	12.1	12.3	12.5	11.9
Depreciation: Old plants	(3.9)	(4.1)	(4.6)	(5.1)	(5.9)	(5.4)	(5.4)	(5.4)	(5.4)	(5.4)	(5.4)	(5.4)	(5.4)	(5.4)
Depreciation: New plants	(2.3)	(2.5)	(2.6)	(2.6)	(2.6)	(2.6)	(2.6)	(2.6)	(2.6)	(2.6)	(2.6)	(2.6)	(2.6)	(2.6)
Depreciation	(6.2)	(6.6)	(7.2)	(7.7)	(8.4)	(8.0)	(8.0)	(8.0)	(8.0)	(8.0)	(8.0)	(8.0)	(8.0)	(8.0)
EBIT	11.0	9.1	10.1	11.7	14.3	15.1	15.9	14.3	8.7	8.4	4.1	4.3	4.5	3.9
Finance (costs) / income	(2.0)	(2.6)	(2.6)	(2.1)	(1.5)	(0.7)	(0.5)	0.1	0.6	0.8	1.0	0.9	0.9	0.9
One-offs (cash)	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0
One-offs (non-cash): operational	(1.1)	(2.6)	(0.1)	(3.1)	(2.2)	(1.6)	(0.8)	(0.4)	(0.2)	(0.1)	(0.1)	(0.0)	(0.0)	(0.0)
One-offs (non-cash): financial	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0
EBT	7.9	3.9	7.5	6.5	10.6	12.7	14.5	14.0	9.1	9.0	5.0	5.1	5.4	4.7
Income tax	(0.7)	0.8	(0.8)	(0.9)	(2.6)	(2.8)	(3.0)	(2.9)	(1.9)	(1.9)	(1.0)	(1.1)	(1.1)	(1.0)
Net profit (pre-minorities)	7.2	4.7	6.7	5.6	8.0	10.0	11.5	11.1	7.2	7.2	4.0	4.1	4.3	3.7
Minority	0.0	(0.3)	0.2	0.1	(0.3)	0.0	(0.1)	(0.2)	(0.1)	(0.1)	(0.0)	(0.0)	(0.0)	(0.0)
Net profit (reported)	7.2	4.5	6.9	5.7	7.7	10.0	11.4	10.9	7.1	7.1	3.9	4.0	4.2	3.7
Net profit (adj)	7.3	6.3	5.3	7.4	10.1	11.3	12.1	11.3	7.3	7.2	4.0	4.0	4.2	3.7
Leverage, RUB bn															TV'2027
Net (Debt) / Cash (year end)	(33)	(28)	(28)	(24)	(18)	(7)	1	8	9	12	11	11	11	10	(24)
Net Debt or (Cash) / EBITDA (year end)	1.9	1.8	1.6	1.2	0.8	0.3	(0.1)	(0.3)	(0.6)	(0.7)	(0.9)	(0.9)	(0.9)	(0.8)	2.0
Multiples			`
FCF Yield	7%	11%	4%	8%	24%	21%	31%	29%	17%	18%	6%	6%	6%	3%
DY	2%	1%	3%	4%	6%	7%	11%	12%	9%	11%	6%	6%	6%	5%
EV/EBITDA	3.8	4.0	3.5	3.0	2.4	2.0	1.5	1.4	1.6	1.6	2.1	2.1	2.1	2.2
PE (adj)	4.5	5.3	6.3	4.5	3.3	2.9	2.7	2.9	4.5	4.6	8.4	8.3	7.9	9.0
Dividend, RUB / s															TV'2027
DPS: regular	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00
DPS: special (leverage optimization)															0.01
DPS: special (non-core assets sale)															-
DPS: total	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.01
Dividend / Net profit (nominal)	9%	11%	13%	24%	25%	25%	31%	37%	43%	49%	49%	49%	49%	49%
Dividend / Net profit (adj)	9%	7%	18%	18%	19%	22%	29%	36%	42%	49%	49%	49%	49%	49%
Dividend / FCF	26%	13%	77%	47%	24%	35%	34%	42%	54%	59%	92%	100%	108%	193%
Cash Flow, RUB bn															TV'2027
NOPAT: old plants	4.1	4.6	5.0	5.1	4.1	3.6	3.5	3.6	4.0	4.0	4.1	4.2	4.3	4.7
NOPAT: new	4.4	3.4	2.1	3.2	6.0	7.1	8.3	7.1	2.5	2.3	(1.4)	(1.3)	(1.2)	(2.2)
NOPAT: reselling / other	0.6	0.5	0.2	0.8	1.1	1.2	0.7	0.5	0.3	0.2	0.2	0.1	0.1	0.1
NOPAT	9.0	8.5	7.3	9.0	11.2	11.8	12.5	11.2	6.8	6.6	2.9	3.1	3.3	2.5
CapEx: Maintenance	0.0	(8.3)	(9.5)	(9.2)	(8.0)	(11.5)	(10.0)	(9.7)	(9.3)	(9.0)	(9.3)	(9.5)	(9.8)	(10.0)
CapEx: New	(7.1)	0.0	(0.3)	0.0	(1.4)	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0
CapEx	(7.1)	(8.3)	(9.8)	(9.2)	(9.4)	(11.5)	(10.0)	(9.7)	(9.3)	(9.0)	(9.3)	(9.5)	(9.8)	(10.0)
Working Capital Red./ (Incr.)	(2.9)	(0.6)	(0.6)	(2.1)	(1.5)	(0.7)	0.0	0.0	(0.0)	(0.0)	0.0	0.0	0.0	0.0
FCF; old plants	5.2	(0.2)	(0.4)	(1.0)	0.5	(3.1)	(1.1)	(0.6)	0.1	0.4	0.3	0.1	0.0	0.1	31.4
FCF; new plants	(0.4)	5.9	4.3	5.7	7.2	9.6	10.8	9.7	5.1	4.9	1.2	1.3	1.4	0.4	21.2
FCF: reselling / other	0.6	0.5	0.2	0.8	1.1	1.2	0.7	0.5	0.3	0.2	0.2	0.1	0.1	0.1	0.4
FCF: cash one-offs	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0
FCF (to EV)	5.3	6.2	4.1	5.5	8.8	7.7	10.5	9.6	5.5	5.6	1.7	1.6	1.5	0.5	53.0
Interest (CF)	(2.9)	(2.5)	(2.9)	(2.7)	(0.9)	(0.7)	(0.2)	0.1	0.3	0.3	0.4	0.4	0.4	0.4
FCF (to Equity)	2.4	3.7	1.2	2.8	7.9	7.0	10.3	9.6	5.8	5.9	2.1	2.0	1.9	0.9
Discounting parameters
Period for discounting, years	DCF					(1.4)	(0.4)	0.6	1.6	2.6	3.6	4.6	5.6	6.6	0.6
	DDM					(0.4)	0.6	1.6	2.6	3.6	4.6	5.6	6.6	7.6	1.6
Discounting factor	DCF						1.03	0.93	0.82	0.72	0.64	0.57	0.50	0.44	0.39
	DDM					1.03	0.92	0.79	0.69	0.60	0.52	0.45	0.39	0.34	0.29
DCF
DCF: Old plants							(1.1)	(0.6)	0.1	0.3	0.2	0.1	0.0	0.0	12.3
DCF: New plants							11.1	9.0	4.2	3.6	0.8	0.7	0.7	0.2	8.3
DCF: Reselling / other							0.8	0.5	0.3	0.2	0.1	0.1	0.0	0.0	0.2
DCF: total							10.8	8.9	4.5	4.0	1.1	0.9	0.8	0.2	20.7
TP (DCF), RUB bln or RUB/s			TP (w-average, rounded), RUB/s							Valuation parameters			DDM	DCF	Other
EV, RUB bln	52		TP		RUB/s	Weight				CoE			15.4%
Non-core assets	-		DDM		0.008	60%		DDM is a floor for PT		WACC				13.2%
Net (debt) / Cash (discounted), end 2018	(7)		DCF		0.012	40%				TG (Dividends)			3.5%
Equity, RUB bln	45		Result (rounded)		0.010	100%				TG (FCF): "old" assets				3.0%	0.0%
# of shares: current	3,854									TG (FCF): "new" assets				3.0%
# of shares: Ord: New	-
# of shares: Ord	3,854
# of shares: Ord: treasury	-
# of shares: Pref	-
# of shares: effective, total	3,854
TP (DCF), RUB	0.012

Source: company data, Gazprombank estimates

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NOVEMBER 23, 2018	RUSSIA > EQUITY RESEARCH > UTILITIES

INITIATION OF COVERAGE

OGK-2

RU

SSI

Major FCFY-to-CoE premium until 2024 despite substantial decline thereafter

OGK-2 should preserve a major FCFY-to-CoE premium until 2024, followed by a substantial FCFY decline in 2025 on the back of expiration of CSAs.

Operations

OGK-2 is a major inter-regional thermal generator (electrical capacity ~19 GW) with belowaverage efficiency of "old" capacity but a substantial EBITDA contribution from "new" CSAsupported capacity.

Positives

FCFY-to-CoE premium from 2017 following completion of the CSA program in mid2016 should last until 2024.

Potential increase in dividend payout (from ~25% of 2017 IFRS net income) on the back of positive FCF and reduced leverage.

High share of core shareholder (Gazprom Energoholding) in the capital of OGK-2 (~73%) should raise its propensity to pay dividends.

Negatives

Modest historical dividend payout: e.g. ~25% of 2017 IFRS net income paid as dividends.

FCF to decline after 2024 due to expiration of CHPs at Ryazan TPP (Nov. 2024), Serov TPP (Nov. 2024), Troitsk TPP (Nov. 2024) and Novocherkassk TPP (Nov. 2024).

Leverage is above the industry average: Net debt/EBITDA’18=~1.4x.

Below-average efficiency of "old" power plants triggering a sharp decline in EBITDA after CSA expirations.

Note: Share prices as of closure 20-Nov-2018

TICKER	OGKB RX
Currency	RUB
Target price	0.44
Upside	31%
Recommendation	Overweight
MCap, bln	37
Share price	0.34
52-week high	0.54
52-week low	0.33

Source: Bloomberg, Gazprombank estimates

SHAREHOLDERS

Gazprom

EnergoHolding 73.4% (via Centerenergy-

holding)

Free-float	26.6%

Source: company data

12M PRICE PERFORMANCE

140%
120%
100%
80%
60%		MOEX INDEX
40%		OGKB
	Jan-18	Mar-18	May-18	Jul-18
Nov-17					Sep-18

Source: Bloomberg

Valuation (2018-26)

FCFY-to-CoE premium: 2018-24.

DY-to-CoD premium: 2021-24.

Chart 55. OGK-2: FCF profile

EBITDA (lhs), capex (lhs), FCFY (rhs)

40	EBITDA, Capex	30%
		FCFY
	RUB bln	(line)
20		15%

0

0%

-20

-15%

2016

2017

2018E

2019E

2020E

2021E

2022E

2023E

2024E

2025E

2026E

EBITDA ("NEW")

CAPEX

EBITDA ("OLD")

FCFY

Chart 56. OGK-2: FCFY and DY profile

FCFY (lhs), DY (lhs) and dividend payout vs IFRS net profit (rhs)

30%

FCFY and DY

Dividend

100%

(columns)

payout (line)

15%

50%

0%

0%

-15%

2018E

2019E

2020E

2021E

2022E

2023E

2024E

2025E

2026E

-50%

2016

2017

FCF YIELD (LHS)

DIVIDEND YIELD (LHS)

DIVIDEND PAYOUT (RHS)

Source: company data, Gazprombank estimates

Source: company data, Gazprombank estimates

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NOVEMBER 23, 2018 RUSSIA > EQUITY RESEARCH > UTILITIES

Table 11. OGK-2 forecast (IFRS-based) and valuation, RUB bln or RUB per share

P&L (IFRS), RUB bln: OGK-2	2013	2014	2015	2016	2017	2018E	2019E	2020E	2021E	2022E	2023E	2024E	2025E	2026E	TV'2027
Revenue electricity: old	81.6	82.6	75.0	78.1	73.4	71.8	73.6	76.1	80.8	82.9	85.0	86.9	88.7	91.9
Revenue electicity: new	15.7	16.4	20.9	38.5	46.9	48.3	51.0	51.6	57.3	54.2	53.6	52.4	29.9	31.0
Revenue electricity	97.3	99.0	95.9	116.6	120.4	120.1	124.6	127.7	138.1	137.1	138.6	139.3	118.6	122.9
Heat revenue	4.2	4.6	4.5	5.0	5.0	5.3	5.4	5.4	5.4	5.4	5.4	5.4	5.4	5.4
Revenue other (incl. reselling)	10.5	12.4	11.8	12.7	15.9	18.2	12.9	9.3	6.8	5.1	3.9	3.0	2.3	1.9
Revenue (before subsidies)	112.0	116.0	112.2	134.4	141.3	143.7	142.8	142.3	150.3	147.6	147.9	147.7	126.3	130.2
Subsidies	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0
Revenue	112.0	116.0	112.2	134.4	141.3	143.7	142.8	142.3	150.3	147.6	147.9	147.7	126.3	130.2
Fuel costs electricity, old	(54.5)	(55.1)	(51.9)	(53.8)	(50.7)	(47.5)	(48.2)	(48.8)	(49.6)	(50.5)	(51.3)	(52.0)	(52.5)	(54.4)
Fuel costs heat, old	(2.6)	(2.6)	(2.5)	(2.6)	(2.4)	(2.3)	(2.3)	(2.3)	(2.4)	(2.4)	(2.4)	(2.5)	(2.5)	(2.6)
Fuel costs, new	(7.3)	(7.7)	(8.4)	(12.5)	(13.2)	(12.7)	(13.3)	(13.8)	(14.4)	(15.0)	(15.6)	(16.2)	(16.7)	(17.3)
Fuel costs,old and new	(64.3)	(65.4)	(62.8)	(68.9)	(66.3)	(62.5)	(63.7)	(64.9)	(66.4)	(67.9)	(69.3)	(70.6)	(71.8)	(74.2)
Purchased power & Re-selling	(9.3)	(11.3)	(10.7)	(11.6)	(13.0)	(13.2)	(9.8)	(7.4)	(5.7)	(4.4)	(3.4)	(2.7)	(2.1)	(1.7)
Heat transportation	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0
Water payment	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0
Gross profit	38.4	39.3	38.7	53.9	62.0	68.1	69.3	70.0	78.3	75.4	75.2	74.4	52.4	54.3
Non-fuel Opex: Old plants	(23.4)	(23.3)	(23.9)	(26.0)	(25.0)	(31.2)	(32.7)	(34.1)	(35.5)	(36.8)	(37.9)	(39.0)	(39.9)	(40.7)
Non-fuel Opex: new plants	(2.3)	(2.5)	(3.6)	(6.8)	(8.4)	(8.8)	(9.3)	(9.7)	(10.1)	(10.5)	(10.8)	(11.1)	(11.4)	(12.1)
Cost of subsidies	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0
Non-fuel Opex	(25.7)	(25.9)	(27.6)	(32.8)	(33.4)	(40.0)	(42.0)	(43.8)	(45.6)	(47.2)	(48.8)	(50.1)	(51.3)	(52.8)
EBITDA, old plants	5.3	6.2	1.2	0.8	0.4	(3.8)	(4.2)	(3.7)	(1.3)	(1.3)	(1.3)	(1.1)	(0.9)	(0.3)
EBITDA, new plants	6.2	6.2	8.9	19.2	25.4	26.8	28.4	28.1	32.8	28.7	27.2	25.1	1.8	1.6
EBITDA, reselling / other	1.2	1.1	1.0	1.1	2.9	5.1	3.0	1.9	1.2	0.7	0.5	0.3	0.2	0.1
EBITDA	12.7	13.4	11.1	21.1	28.7	28.0	27.3	26.3	32.7	28.1	26.4	24.3	1.1	1.4
Depreciation: Old plants	(2.1)	(1.8)	(2.1)	(4.7)	(6.1)	(7.6)	(7.6)	(7.6)	(7.6)	(7.6)	(7.6)	(7.6)	(7.6)	(7.6)
Depreciation: New plants	(2.5)	(3.2)	(4.1)	(4.8)	(5.1)	(5.2)	(5.2)	(5.2)	(5.2)	(5.2)	(5.2)	(5.2)	(5.2)	(5.2)
Depreciation	(4.6)	(5.0)	(6.2)	(9.5)	(11.3)	(12.8)	(12.8)	(12.8)	(12.8)	(12.8)	(12.8)	(12.8)	(12.8)	(12.8)
EBIT	8.1	8.5	4.9	11.5	17.4	15.2	14.5	13.4	19.9	15.3	13.6	11.5	(11.7)	(11.4)
Finance (costs) / income	(1.4)	0.3	(0.5)	(4.4)	(5.4)	(4.4)	(3.1)	(2.0)	(1.1)	0.3	1.2	2.1	2.9	2.1
One-offs (cash)	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0
One-offs (non-cash): operational	(1.2)	(9.3)	(1.0)	(2.1)	(1.9)	(1.4)	(0.7)	(0.3)	(0.2)	(0.1)	(0.0)	(0.0)	(0.0)	(0.0)
One-offs (non-cash): financial	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0
EBT	5.4	(0.5)	3.4	5.0	10.1	9.4	10.7	11.0	18.7	15.5	14.8	13.6	(8.8)	(9.3)
Income tax	(1.2)	(0.9)	(0.8)	(1.9)	(2.9)	(2.0)	(2.2)	(2.3)	(3.9)	(3.3)	(3.1)	(2.8)	0.0	0.0
Net profit (pre-minorities)	4.2	(1.4)	2.6	3.1	7.2	7.4	8.4	8.7	14.7	12.2	11.7	10.7	(8.8)	(9.3)
Minority	0.0	(0.1)	(0.8)	(0.1)	0.0	0.0	(0.1)	(0.0)	(0.1)	(0.1)	(0.1)	(0.1)	0.1	0.1
Net profit (reported)	4.2	(1.6)	1.8	2.9	7.2	7.4	8.3	8.7	14.7	12.1	11.6	10.6	(8.8)	(9.2)
Net profit (adj)	5.2	25.8	3.5	5.6	9.5	8.5	9.0	9.0	14.9	12.3	11.7	10.7	(7.0)	(7.3)
Leverage, RUB bn															TV'2027
Net (Debt) / Cash (year end)	(29)	(34)	(65)	(63)	(54)	(38)	(25)	(13)	4	15	26	36	26	21	(3)
Net Debt or (Cash) / EBITDA (year end)	2.3	2.5	5.8	3.0	1.9	1.4	0.9	0.5	(0.1)	(0.5)	(1.0)	(1.5)	(23.4)	(14.8)	2.0
Multiples			`
FCF Yield	-20%	-20%	-64%	-9%	22%	28%	31%	32%	48%	43%	41%	38%	-11%	-13%
DY	0%	1%	2%	2%	5%	5%	7%	9%	17%	16%	16%	14%	0%	0%
EV/EBITDA	5.2	5.1	7.8	4.8	3.3	3.0	2.5	2.1	1.3	1.1	0.9	0.7	14.9	14.8
PE (adj)	7.2	1.4	10.7	6.6	3.9	4.4	4.1	4.1	2.5	3.0	3.2	3.5	neg	neg
Dividend, RUB / s															TV'2027
DPS: regular	0.00	0.00	0.01	0.01	0.02	0.02	0.02	0.03	0.06	0.06	0.05	0.05	0.00	0.00	0.00
DPS: special (leverage optimization)															0.22
DPS: special (non-core assets sale)															-
DPS: total	0.00	0.00	0.01	0.01	0.02	0.02	0.02	0.03	0.06	0.06	0.05	0.05	0.00	0.00	0.22
Dividend / Net profit (nominal)	0%	0%	34%	31%	25%	25%	31%	38%	44%	50%	50%	50%	0%	0%
Dividend / Net profit (adj)	0%	2%	18%	16%	19%	22%	29%	36%	43%	49%	50%	50%	0%	0%
Dividend / FCF	neg	neg	neg	neg	22%	17%	22%	28%	36%	38%	38%	37%	neg	neg
Cash Flow, RUB bn															TV'2027
NOPAT: old plants	2.5	4.4	(0.9)	(3.9)	(5.8)	(11.4)	(11.8)	(11.3)	(8.9)	(8.9)	(8.9)	(8.7)	(8.5)	(7.9)
NOPAT: new	2.9	3.0	3.8	11.3	16.0	17.0	18.3	18.1	21.8	18.5	17.4	15.7	(3.4)	(3.6)
NOPAT: reselling / other	0.9	1.1	0.8	0.9	2.3	4.0	2.4	1.5	0.9	0.6	0.4	0.2	0.2	0.1
NOPAT	6.3	8.5	3.7	8.3	12.5	9.6	9.0	8.2	13.8	10.2	8.9	7.2	(11.8)	(11.4)
CapEx: Maintenance	0.0	0.0	(2.5)	(3.4)	(5.0)	(7.0)	(7.1)	(7.3)	(7.4)	(7.5)	(7.6)	(7.8)	(7.9)	(8.0)
CapEx: New	(17.0)	(19.0)	(24.3)	(11.4)	(5.1)	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0
CapEx	(17.0)	(19.0)	(26.8)	(14.8)	(10.1)	(7.0)	(7.1)	(7.3)	(7.4)	(7.5)	(7.6)	(7.8)	(7.9)	(8.0)
Working Capital Red./ (Incr.)	0.0	0.0	(2.9)	(0.4)	0.0	(0.2)	0.0	0.0	(0.6)	0.0	0.0	0.0	0.0	0.0
FCF; old plants	4.6	6.2	(4.1)	(3.0)	(4.6)	(11.0)	(11.3)	(11.0)	(9.2)	(8.8)	(8.9)	(8.9)	(8.8)	(8.3)	88.7
FCF; new plants	(11.6)	(12.8)	(16.5)	4.7	16.0	22.2	23.6	23.3	27.0	23.8	22.6	20.9	1.8	1.6	46.8
FCF: reselling / other	0.9	1.1	0.8	0.9	2.3	4.0	2.4	1.5	0.9	0.6	0.4	0.2	0.2	0.1	0.8
FCF: cash one-offs	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0
FCF (to EV)	(6.1)	(5.6)	(19.8)	2.6	13.7	15.2	14.7	13.8	18.8	15.5	14.1	12.3	(6.8)	(6.6)	136.3
Interest (CF)	(1.5)	(2.1)	(3.9)	(5.9)	(5.7)	(4.7)	(3.1)	(2.0)	(1.0)	0.3	1.1	1.9	2.6	1.8
FCF (to Equity)	(7.6)	(7.6)	(23.7)	(3.3)	8.1	10.6	11.6	11.8	17.7	15.8	15.2	14.2	(4.2)	(4.8)
Discounting parameters
Period for discounting, years	DCF					(1.4)	(0.4)	0.6	1.6	2.6	3.6	4.6	5.6	6.6	0.6
	DDM					(0.4)	0.6	1.6	2.6	3.6	4.6	5.6	6.6	7.6	1.6
Discounting factor	DCF						1.03	0.93	0.82	0.72	0.64	0.56	0.50	0.44	0.39
	DDM					1.03	0.92	0.79	0.69	0.59	0.51	0.45	0.39	0.33	0.29
DCF
DCF: Old plants							(11.6)	(10.2)	(7.5)	(6.4)	(5.7)	(5.0)	(4.4)	(3.7)	34.5
DCF: New plants							24.2	21.6	22.1	17.2	14.4	11.8	0.9	0.7	18.2
DCF: Reselling / other							2.5	1.4	0.8	0.4	0.2	0.1	0.1	0.0	0.3
DCF: total							15.1	12.8	15.4	11.2	9.0	6.9	(3.4)	(2.9)	53.0
TP (DCF), RUB bln or RUB/s			TP (w-average, rounded), RUB/s							Valuation parameters			DDM	DCF	Other
EV, RUB bln	117		TP		RUB/s	Weight				CoE			15.5%
Non-core assets	-		DDM		0.25	60%		DDM is a floor for PT		WACC				13.2%
Net (debt) / Cash (discounted), end 2018	(38)		DCF		0.72	40%				TG (Dividends)			3.5%
Equity, RUB bln	79		Result (rounded)		0.44	100%				TG (FCF): "old" assets				2.0%	0.0%
# of shares: current	110									TG (FCF): "new" assets				2.0%
# of shares: Ord: New	-
# of shares: Ord	110
# of shares: Ord: treasury	-
# of shares: Pref	-
# of shares: effective, total	110
TP (DCF), RUB	0.72

Source: company data, Gazprombank estimates

45

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NOVEMBER 23, 2018	RUSSIA > EQUITY RESEARCH > UTILITIES

INITIATION OF COVERAGE

ROSSETI (Russian Grids)

RU

SSI

Potentially solid dividends are currently muted by cross-financing within the group

ROSSETI (Russian Grids) enjoys major dividend inflow from subsidiaries and can potentially benefit from the government’s new regulatory initiatives. But the existing mechanism of cross-financing within the group prevents the translation of solid dividend inflow into a healthy dividend outflow.

Operations

ROSSETI (Russian Grids) is the key holding company in Russia’s power grid sector, owning controlling stakes in FSK (~80%) as well as mega-regional power distribution companies.

Positives

Modest P&L-based valuation: consolidated P/E'18 < 1.5x.

"Exclusive" channel for the government to collect dividends from the power grid sector.

Substantial dividend inflow from underlying grids: ~RUB 24 bln in 2018 (>15% of Russian Grids' MCap).

New dividend policy (2017) implies a more structural approach to calculation of dividends (50% of adjusted RAS or IFRS net income, whichever is larger).

Note: Share prices as of closure 20-Nov-2018

TICKER	RSTI RX
Currency	RUB
Target price	0.75
Upside	7%
Recommendation	Neutral
MCap, bln	139
Share price	0.70
52-week high	0.96
52-week low	0.66

Source: Bloomberg, Gazprombank estimates

SHAREHOLDERS (ORD.)

Russian Government	88.9%
Free-float	11.1%

Source: company data

Positive regulatory initiatives considered, including: a) long-term tariff agreements with regional authorities; b) restrictions on preferential connections, c) charges for excessive capacity, and d) limits ("social norm") for subsidized residenial supply.

Negatives

Modest medium-term growth in power transportation tariffs envisioned by the government (~3% p.a.).

Cross-financing within Russian Grids group as major part of the dividend inflow from underlying companies (e.g. FSK) is used for "financial support" of selected subsidiaries.

12M PRICE PERFORMANCE

140%
120%
100%
80%
		MOEX INDEX
60%		RSTI
40%	Jan-18	Mar-18	May-18	Jul-18
Nov-17					Sep-18

	Substantial subtractions from IFRS net profit before it becomes the basis for dividends,	Source: Bloomberg
	incl. : a) the difference between IFRS and RAS (sum for subsidiaries) depreciaton, b)
	the value of "financial support" to subsidiaries, c) portion of net profit used for CapEx.
	"Grids digitalization" program may trigger hikes in capex and opex on a mid-term horizon.

Valuation

PE'18<1.5x (IFRS), DY'18 = ~3-4%.

Our target price is based on a DDM approach, even though we run DCF as well.

Chart 57. Russian Grids: FCF profile	Chart 58. Russian Grids: FCFY and DY profile
EBITDA (lhs), capex (lhs), FCFY (rhs)	FCFY, DY (lhs) and dividend payout vs connection adjusted IFRS profit(rhs)

350	EBITDA, Capex					FCFY (line)		30%
	RUB bln
250								20%
150								10%
50								0%
(50)
(150)								-10%
(250)								-20%
(350)		2018E	2019E	2020E	2021E	2022E	2023E	-30%
2016	2017

30%

	CONNECTION
	(ONE-OFF):
	CASH	15%
	EBITDA:
	CONNECTION
	-ADJ
	CAPEX	0%
	FCF YIELD
		-15%

FCFY and DY (columns)

2016

2017

2018E

2019E

2020E

FCF YIELD (LHS)

DIVIDEND PAYOUT (RHS)

		100%
	Dividend payout
		(line)
		50%
		0%
		-50%
2021E	2022E	2023E

DIVIDEND YIELD (LHS)

Source: company data, Gazprombank estimates

Source: company data, Gazprombank estimates

46

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NOVEMBER 23, 2018 RUSSIA > EQUITY RESEARCH > UTILITIES

Table 12. Russian Grids forecast (IFRS-based) and valuation, RUB bln or RUB per share

P&L (IFRS), RUB bln: Russian Grids	2013	2014	2015	2016	2017	2018E	2019E	2020E	2021E	2022E	2023E	TV'2024E
Electricity transportation	643.3	620.0	650.4	721.9	784.2	862.5	892.8	924.1	956.6	990.3	1,025.1
Connection: regular	37.0	31.5	23.2	30.1	33.4	25.0	23.3	22.4	21.7	21.2	21.0
Connection: one-off	0.0	5.0	11.0	38.0	19.0	20.7	16.7	13.8	5.0	3.0	0.0
Reselling	64.4	86.5	55.9	78.3	75.7	90.9	81.8	73.6	66.3	59.6	53.7
Construction	0.0	0.0	7.0	21.3	19.1	7.0	4.0	3.0	2.0	1.0	0.0
Other	11.1	16.6	19.3	11.5	17.0	19.5	17.6	15.8	14.2	12.8	11.5
Revenue	755.8	759.6	766.8	901.0	948.3	1,025.6	1,036.1	1,052.7	1,065.8	1,087.9	1,111.3
Transmission Cash Opex: variable	(223.6)	(217.5)	(220.5)	(242.5)	(271.1)	(316.1)	(327.2)	(338.7)	(350.6)	(362.9)	(375.6)
Purchased power (reselling)	(60.2)	(46.8)	(30.7)	(46.0)	(42.2)	(50.7)	(45.6)	(41.0)	(36.9)	(33.2)	(29.9)
Cost of construction	0.0	(1.7)	(5.9)	(19.9)	(18.1)	(6.7)	(3.8)	(2.9)	(1.9)	(1.0)	0.0
Gross profit	472.1	493.5	509.7	592.6	617.0	652.2	659.5	670.1	676.4	690.9	705.7
Transmission Cash Opex: fixed	(246.6)	(247.6)	(252.0)	(274.3)	(298.4)	(338.6)	(350.7)	(363.0)	(375.3)	(387.6)	(400.0)
EBITDA	225.5	245.9	257.7	318.3	318.6	313.6	308.8	307.1	301.1	303.2	305.8
Depreciation	(115.9)	(125.9)	(100.5)	(113.8)	(109.3)	(113.8)	(123.8)	(132.0)	(140.1)	(148.0)	(155.9)
EBIT	109.5	120.0	157.2	204.5	209.3	199.7	184.9	175.1	161.0	155.2	149.8
Finance income / (costs), net	(41.6)	(32.2)	(22.6)	(23.6)	(18.3)	(14.9)	(13.3)	(13.3)	(13.4)	(13.6)	(13.7)
Share of results of associates	(0.0)	(0.0)	(0.0)	0.0	(0.3)	0.0	0.0	0.0	0.0	0.0	0.0
Non-cash and one-offs	(287.1)	(105.9)	(20.8)	(60.8)	(13.4)	(12.3)	(6.1)	(3.1)	(1.5)	(0.8)	(0.4)
EBT	(219.2)	(18.0)	113.7	120.2	177.3	172.5	165.5	158.8	146.1	140.9	135.7
Income tax	59.8	(6.2)	(32.1)	(21.8)	(40.1)	(36.2)	(34.7)	(33.3)	(30.7)	(29.6)	(28.5)
Net profit: pre-minorities	(159.4)	(24.3)	81.6	98.3	137.1	136.3	130.7	125.4	115.4	111.3	107.2
Minority	27.3	8.9	(17.6)	(23.7)	(34.8)	(30.0)	(31.5)	(30.3)	(27.8)	(26.8)	(25.9)
Net profit: post-minorities	(132.1)	(15.4)	64.0	74.6	102.3	106.3	99.2	95.2	87.6	84.4	81.4
EBITDA: connection-adj	225.5	240.9	246.7	280.3	299.6	292.9	292.1	293.4	296.1	300.2	305.8
Net profit: connection-adj (post-minorities)	61.3	42.5	76.6	85.7	101.2	101.1	92.9	88.8	85.5	83.1	81.6
Difference in depreciation (vs RAS)		(36.7)	(64.3)	(60.1)	(67.9)	(68.0)	(68.4)	(68.8)	(69.2)	(69.6)	(70.0)
Connection revenue: one-off, cash (post-tax)	0.0	0.4	1.3	4.4	6.1	8.1	9.9	11.6	12.7	13.7	14.5
Financial support of subsidiaries				(17.6)	(18.0)	(18.0)	(15.0)	(12.0)	(9.0)	(6.0)	(3.0)
Net profit: adj (for dividends)	61.3	6.3	13.5	12.4	21.4	23.3	19.4	19.6	20.0	21.2	23.1
Net Debt, RUB/s												TV'2024E
Net (debt) / cash, year end	(436.4)	(468.6)	(487.2)	(471.9)	(456.2)	(407.8)	(406.6)	(410.8)	(415.0)	(419.4)	(420.9)	(611.5)
Net debt / EBITDA (connection adjusted): year average	1.9	1.9	1.9	1.7	1.5	1.5	1.4	1.4	1.4	1.4	1.4	2.0
Dividend, RUB/s												TV'2024E
DPS: Ordinary	0.0	0.0	0.008	0.006	0.012	0.023	0.044	0.044	0.045	0.048	0.052	0.44
DPS: Special (leverage optimization)												0.72
DPS: Special (non-core assets sale)												0.10
DPS: Total	0.0	0.0	0.008	0.006	0.012	0.023	0.044	0.044	0.045	0.048	0.052	1.26
Dividend / Net profit (for dividends)	0%	0%	13%	16%	12%	22%	50%	50%	50%	50%	50%
Dividend / Net profit (connection-adj)	0%	0%	2%	1%	2%	5%	9%	10%	11%	11%	13%
Multiples
FCF Yield	-31%	-3%	-1%	-6%	-3%	-7%	3%	2%	2%	2%	4%
DY (Ords)	0%	0%	1%	1%	2%	3%	6%	6%	6%	7%	7%	179%
EV/EBITDA	2.9	2.8	2.7	2.1	2.1	2.0	2.0	2.0	2.1	2.1	2.1
EV/EBITDA (connection-adj)	2.9	2.8	2.8	2.4	2.2	2.1	2.1	2.1	2.1	2.1	2.1
PE (adjusted)	2.3	3.3	1.8	1.6	1.4	1.4	1.5	1.6	1.6	1.7	1.7
Cash Flow, RUB bn												TV'2024E
EBITDA: connection-adj	225.5	240.9	246.7	280.3	299.6	292.9	292.1	293.4	296.1	300.2	305.8
Connection (one-off): cash	0.0	0.5	1.6	5.5	7.8	10.3	12.6	14.7	16.1	17.4	18.4
(Tax)	0.0	(6.2)	(32.1)	(21.8)	(40.1)	(36.2)	(34.7)	(33.3)	(30.7)	(29.6)	(28.5)
Changes in working capital	0.0	0.0	0.0	(40.1)	(25.0)	0.0	0.0	0.0	0.0	0.0	0.0
Capex	(266.4)	(204.2)	(171.8)	(190.5)	(213.8)	(248.8)	(232.6)	(238.3)	(244.6)	(250.9)	(257.2)
FCF (to EV)	(40.9)	31.0	44.4	33.4	28.5	18.1	37.4	36.4	36.9	37.1	38.4	738.7
Interest : CF	(30.2)	(38.2)	(47.1)	(46.8)	(35.9)	(34.8)	(31.1)	(31.0)	(31.3)	(31.4)	(29.4)
FCF (to equity)	(71.1)	(7.1)	(2.7)	(13.4)	(7.5)	(16.6)	6.3	5.4	5.6	5.7	9.1
Discounting parameters												TV'2024E
Period for discounting, years
DCF						(1.4)	(0.4)	0.6	1.6	2.6	3.6	4.6
DDM						(0.4)	0.6	1.6	2.6	3.6	4.6	5.6
Discounting factor
DCF							1.04	0.93	0.82	0.72	0.64	0.56
DDM						1.04	0.92	0.79	0.69	0.59	0.51	0.45
TP (DCF), RUB/s				TP (w-average, rounded), RUB/s					Valuation		DDM	DCF
Value and share price	Fair value	Adj. %		TP		RUB/s	Weights		CoE		15.5%
EV of core assets	571			DDM		0.75	100%		WACC			13.2%
Net debt / (cash), end 2018	(408)			DCF		0.56	0%		TG (Dividends)		3.5%
Non-core assets	20			Result (rounded)		0.75	100%		TG (FCF)			3.0%
Equity (incl. minority share)	183
Minority share	(45)	-24%
Equity exl minority share)	139
Holding discount	(28)	-20%							Comment
Equity value (excl minority stake and holding discount)	111
# of shares (effective), bln	200
TP (DCF), RUB	0.56

Source: company data, Gazprombank estimates

47

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NOVEMBER 23, 2018	RUSSIA > EQUITY RESEARCH > UTILITIES

INITIATION OF COVERAGE

Federal Grid Company (FSK)

RU

SSI

Solid dividend stream stimulated by cash needs of core shareholder (Russian Grids) but not fully backed by FCF

Based on its new dividend policy, FSK should broadly sustain its solid dividend stream, which is currently partly used to finance other subsidiaries of its core shareholder (ROSSETI or Russian Grids), but this stream is not fully backed by FCF.

Operations

Dominant owner of Russia’s backbone high-voltage electricity grid (220 kV or higher) and key source of dividends for its ~80% parent ROSSETI (Russian Grids).

Positives

 Solid dividend payments on the back of 2015-17 results.

Note: Share prices as of closure 20-Nov-2018

TICKER	FEES RX
Currency	RUB
Target price	0.17
Upside	13%
Recommendation	Neutral
MCap, bln	192
Share price	0.15
52-week high	0.19
52-week low	0.15

Source: Bloomberg, Gazprombank estimates

New dividend policy (2018) provides a structural approach to calculation of dividends: 50% of adjusted net income under IFRS or RAS, whichever is largest.

Major revenues for connecting generators to the network in 2015-21 represent an additional source of cash flow, albeit paid in arrears (10 years with 6% interest).

Accelerated growth in electricity transportation tariffs for consumers directly connected to FSK is being considered by the government.

Negatives

To become the basis for dividend, net profit is reduced by a) the difference in RAS and IFRS depreciations, b) non-cash part of "connection" revenues, c) portion of net profit allocated to CapEx, c) revaluation of financial assets (e.g. InterRAO stake)

Modest medium-term growth in electricity transportation tariffs envisioned by the government (~3% p.a.).

Substantial leverage: Net Debt/EBITDA’18 (connection adjusted) = ~1.8x

Uncertainty over medium-term capex program, which undergoes regular adjustments.

Valuation

PE'18=~6x (RAS-based), DY'18=~10%.

Our TP is based on DDM, even though we run DCF as well. Our forecasts for FSK are based on RAS, which effectively has been driving dividends in recent years

	SHAREHOLDERS
		Russian Grids			80.1%
		(Rosseti)
		Federal Property				0.6%
		Management Agency
		Free-float			19.3%

Source: company data

12M PRICE PERFORMANCE

140%
120%
100%
80%		MOEX INDEX
60%		FEES (FSK)
40%	Jan-18	Mar-18	May-18	Jul-18
Nov-17					Sep-18

Source: Bloomberg

Chart 59. FSK: FCF profile	Chart 60. FSK: FCFY and DY profile
EBITDA (lhs), capex (lhs), FCFY (rhs)	FCFY (lhs), DY (lhs) and dividend payout vs connection-adj RAS profit (rhs)

200	EBITDA, Capex						30%
						FCFY (line)
	RUB bln
150							20%
100							10%
50
							0%
-
(50)							-10%
(100)							-20%
(150)							-30%
2016	2017	2018E	2019E	2020E	2021E	2022E	2023E

30%

CONNECTIO
N (ONE-
OFF): CASH	15%
EBITDA:
CONNECTIO
N-ADJ
CAPEX	0%
FCF YIELD	-15%

FCFY and DY (bars)

2016		2017		2018E	2019E	2020E		2021E
			FCF YIELD (LHS)

	100%
Dividend payout
	(line)
	50%
	0%
	-50%
2022E	2023E

DIVIDEND YIELD (LHS)

Source: company data, Gazprombank estimates

Source: company data, Gazprombank estimates

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NOVEMBER 23, 2018 RUSSIA > EQUITY RESEARCH > UTILITIES

Table 13. Federal Grid Company (FSK) forecast (RAS-based) and valuation, RUB bln or RUB per share

P&L (RAS), RUB bln: FSK	2013	2014	2015	2016	2017	2018E	2019E	2020E	2021E	2022E	2023E	TV'2024E
Electricity transportation	152.7	159.9	159.0	171.1	192.6	214.0	221.5	229.3	237.3	245.7	254.3
Connection: regular	1.0	2.0	1.4	7.5	2.4	2.2	2.0	1.9	1.9	1.9	1.8
Connection: one-off	0.0	5.0	11.0	38.0	19.0	20.7	16.7	13.8	5.0	3.0	0.0
Reselling	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0
Construction	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0
Other	1.6	2.0	1.9	1.7	2.0	2.4	2.2	2.0	1.8	1.6	1.4
Revenue	155.4	168.9	173.3	218.3	216.0	239.2	242.4	246.9	246.0	252.1	257.6
Transmission Cash Opex: variable	(13.7)	(13.3)	(14.3)	(14.7)	(24.2)	(39.6)	(40.9)	(42.4)	(43.9)	(45.4)	(47.0)
Purchased power (reselling)	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0
Cost of construction	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0
Gross profit	141.7	155.7	158.9	203.5	191.8	199.7	201.4	204.5	202.1	206.7	210.5
Transmission Cash Opex: fixed	(42.5)	(49.0)	(51.3)	(51.8)	(54.5)	(64.8)	(67.3)	(70.0)	(72.6)	(75.2)	(77.8)
EBITDA	99.1	106.7	107.7	151.8	137.3	134.9	134.1	134.6	129.5	131.5	132.7
Depreciation	(76.7)	(78.0)	(77.2)	(81.5)	(82.0)	(80.3)	(83.5)	(85.5)	(88.2)	(90.8)	(93.6)
EBIT	22.4	28.7	30.5	70.3	55.4	54.6	50.5	49.1	41.4	40.6	39.1
Finance income / (costs), net	3.6	0.5	(0.3)	1.6	4.7	4.6	(0.2)	(0.2)	(0.2)	(0.2)	(0.2)
Share of results of associates	0.0	0.0	0.0	0.3	1.9	2.3	1.9	1.5	1.2	1.0	0.8
Non-cash and one-offs	(43.7)	(15.1)	(2.4)	52.2	(1.4)	0.0	0.0	0.0	0.0	0.0	0.0
EBT	(17.8)	14.0	27.8	124.3	60.6	61.5	52.2	50.3	42.3	41.4	39.7
Income tax	(8.1)	(8.9)	(9.9)	(18.2)	(18.2)	(12.9)	(11.0)	(10.6)	(8.9)	(8.7)	(8.3)
Net profit: pre-minorities	(25.9)	5.1	17.9	106.1	42.4	48.6	41.2	39.8	33.5	32.7	31.3
Minority	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0
Net profit: post-minorities	(25.9)	5.1	17.9	106.1	42.4	48.6	41.2	39.8	33.5	32.7	31.3
EBITDA: connection-adj	99.1	101.7	96.7	113.8	118.3	114.3	117.4	120.8	124.5	128.5	132.7
Net profit: connection-adj (post-minorities)	20.5	19.1	15.2	27.0	33.9	32.3	28.1	28.9	29.5	30.3	31.3
Difference in depreciation (vs RAS)		0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0
Connection revenue: one-off, cash (post-tax)	0.0	0.4	1.3	4.4	6.1	8.1	9.9	11.6	12.7	13.7	14.5
Financial support of subsidiaries	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0
Net profit: adj (for dividends)	20.5	19.5	16.5	31.3	40.1	40.4	38.0	40.5	42.2	44.0	45.9
Net Debt, RUB/s												TV'2024E
Net (debt) / cash, year end	(229.5)	(220.1)	(220.2)	(227.8)	(221.1)	(179.4)	(186.0)	(194.3)	(200.4)	(205.0)	(207.8)	(265.4)
Net debt / EBITDA (connection adjusted): year average	2.3	2.2	2.3	2.0	1.9	1.8	1.6	1.6	1.6	1.6	1.6	2.0
Dividend, RUB/s												TV'2024E
DPS: Ordinary	0.000	0.001	0.013	0.015	0.015	0.016	0.015	0.016	0.017	0.017	0.018	0.15
DPS: Special (leverage optimization)												0.05
DPS: Special (non-core assets sale)												0.02
DPS: Total	0.000	0.001	0.013	0.015	0.015	0.016	0.015	0.016	0.017	0.017	0.018	0.21
Dividend / Net profit (for dividends)	2%	4%	103%	63%	47%	50%	50%	50%	50%	50%	50%
Dividend / Net profit (connection-adj)	2%	4%	112%	73%	56%	63%	68%	70%	72%	73%	73%
Multiples
FCF Yield	-26%	3%	-24%	-20%	5%	-2%	7%	6%	7%	9%	10%
DY (Ords)	0%	0%	9%	10%	10%	10%	10%	11%	11%	11%	12%	143%
EV/EBITDA	4.0	3.6	3.6	2.6	2.8	2.6	2.6	2.7	2.8	2.8	2.8
EV/EBITDA (connection-adj)	4.0	3.8	4.0	3.5	3.3	3.0	3.0	3.0	2.9	2.9	2.8
PE (adjusted)	9.4	10.1	12.6	7.1	5.7	5.9	6.8	6.6	6.5	6.3	6.1
Cash Flow, RUB bn												TV'2024E
EBITDA: connection-adj	99.1	101.7	96.7	113.8	118.3	114.3	117.4	120.8	124.5	128.5	132.7
Connection (one-off): cash	0.0	0.5	1.6	5.5	7.8	10.3	12.6	14.7	16.1	17.4	18.4
(Tax)	(8.1)	(8.9)	(9.9)	(18.2)	(18.2)	(12.9)	(11.0)	(10.6)	(8.9)	(8.7)	(8.3)
Changes in working capital	0.0	0.0	(36.7)	(43.2)	0.0	0.0	0.0	0.0	0.0	0.0	0.0
Capex	(122.1)	(74.2)	(74.6)	(74.9)	(86.5)	(103.6)	(95.8)	(104.4)	(107.1)	(109.9)	(112.6)
FCF (to EV)	(31.1)	19.1	(22.9)	(17.1)	21.3	8.0	23.2	20.6	24.6	27.3	30.2	364.1
Interest : CF	(19.2)	(12.9)	(23.1)	(21.2)	(12.2)	(11.8)	(9.6)	(10.0)	(10.4)	(10.7)	(11.0)
FCF (to equity)	(50.3)	6.2	(46.0)	(38.2)	9.1	(3.8)	13.6	10.6	14.2	16.5	19.2
Discounting parameters												TV'2024E
Period for discounting, years
DCF						(1.4)	(0.4)	0.6	1.6	2.6	3.6	4.6
DDM						(0.4)	0.6	1.6	2.6	3.6	4.6	5.6
Discounting factor
DCF							1.04	0.93	0.82	0.72	0.64	0.56
DDM						1.04	0.92	0.79	0.69	0.59	0.51	0.45
TP (DCF), RUB/s				TP (w-average, rounded), RUB/s					Valuation		DDM	DCF
Value and share price	Fair value	Adj. %		TP		RUB/s	Weights		CoE		15.5%
EV of core assets	308			DDM		0.17	100%		WACC			13.2%
Net debt / (cash), end 2018	(179)			DCF		0.13	0%		TG (Dividends)		3.5%
Non-core assets	25			Result (rounded)		0.17	100%		TG (FCF)			3.0%
Equity (incl. minority share)	153
Minority share	-	0%
Equity exl minority share)	153
Holding discount	-	0%							Comment
Equity value (excl minority stake and holding discount)	153
# of shares (effective), bln	1,275
TP (DCF), RUB	0.13

Source: company data, Gazprombank estimates

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APPENDIX 1: SENSITIVITY TO VALUATION PARAMETERS

Table 14. Sensitivity of DCF-based target price to WACC and terminal growth: RusHydro

WACC

			0.72			12.4%			12.9%				13.4%			13.9%				14.4%
			1.0%		0.74				0.72				0.68			0.65				0.62
	TG		1.5%		0.74				0.73				0.70			0.66				0.63
			2.0%		0.74				0.73				0.72			0.68				0.65
			2.5%		0.74				0.73				0.72			0.69				0.66
					0.74				0.73				0.72			0.70				0.67
			3.0%
																Source: Gazprombank estimates
	Table 15. Sensitivity of DCF-based target price to WACC and terminal growth: Inter RAO
										WACC
			8.4		12.4%					12.9%			13.4%			13.9%				14.4%
			1.0%		8.6				8.4				8.2			8.0				7.8
	TG				8.7				8.5				8.3			8.1				7.9
			1.5%
			2.0%		8.8				8.6				8.4			8.1				8.0
			2.5%		8.9				8.7				8.4			8.2				8.0
					9.1				8.8				8.5			8.3				8.1
			3.0%
																Source: Gazprombank estimates
	Table 16. Sensitivity of DCF-based target price to WACC and terminal growth (new assets): Unipro
										WACC
			2.9		11.5%				12.0%				12.5%			13.0%					13.5%
			2.5%		3.1				3.0				2.9			2.8				2.7
	TG		3.0%		3.1				3.0				2.9			2.8				2.7
	(new assets)		3.5%		3.1				3.0				2.9			2.8				2.8
			4.0%		3.2				3.1				3.0			2.9				2.8
					3.2				3.1				3.0			2.9				2.8
			4.5%
																Source: Gazprombank estimates
	Table 17. Sensitivity of DCF-based target price to WACC and terminal growth (new assets): Enel Russia
										WACC
			0.94		11.7%				12.2%				12.7%			13.2%					13.7%
			3.0%		1.04				0.95				0.87			0.80				0.73
	TG		3.5%		1.08				0.99				0.90			0.83				0.76
	(new assets)		4.0%		1.12				1.03				0.94			0.85				0.78
			4.5%		1.18				1.07				0.97			0.89				0.81
					1.24				1.12				1.02			0.92				0.84
			5.0%

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