Siberian Generating Company will take 50 billion rubles to expand

The structure of the oligarch Andrei Melnichenko simultaneously leads an active absorption of competitors and patches his own financial holes.
Siberian Generating Company (SGC) intends to raise up to 50 billion rubles. September 7 Moscow Stock Exchange registered a 10-year program of bonds with a maturity of 10 years, the exchange said. Previously, the company did not enter the bond market.

"This is a tool with which we are going to reduce the cost of borrowing, when the situation allows," - said the representative of the SGC. In October 2017, the general director of the SGC, Mikhail Kuznetsov, reported that the company plans to refinance in the next six months by 50-60 billion rubles.

The company does not disclose the total amount of debt. "SGS has a complex organizational structure. Debts are on different "daughters", - explains the analyst of ACRA Natalia Porokhova. - Now there is an increase in bond rates in conditions of financial instability (an increase of 1.5 pp in six months), and all have suspended the issues. Bond funding will most likely really become cheaper for the company than the current banking and project finance. "

The structure of the SGC includes 4 GRES, 1 GTES and 18 CHPPs with a total capacity of 10.9 GW. The company accounts for a quarter of the generation of heat and electricity in the energy system of Siberia.

SCC completed the PDM program and significantly improves its cash flow, like most energy companies, says Porokhova. Recently, the company has significantly increased its appetite for growth, said Vladimir Sklyar, an analyst with VTB Capital. So, in early 2018, SGC gained control over Sibeco, formerly owned by Ru-Com, which manages the assets of ex-minister of the open government, Mikhail Abyzov. SGC acquired control in the large power generating company of the Novosibirskenergo region, was mentioned among the applicants for the Reftinskaya GRES of the holding company Enel Russia. Also, SGC said that the company intends to participate in the modernization program of TPPs.

SCS belongs to businessman Andrei Melnichenko. Earlier, he owned 99.94% of the company through the Cyprus AIM Capital SE, but in August the whole package was transferred to the Siberian Coal and Energy Company, also controlled by Melnichenko. The change in ownership scheme gives SCC access to a significant cash flow of the coal company, and the issue of bonds should give a source of debt financing with an understandable rate and terms, says Vladimir Sklyar: "This creates sufficient financial reserves for both intensive organic growth through DPM-2 and through purchase of assets - while the assessment of the Russian electricity industry is under pressure and on average 50-70% below the world peers. "