OREANDA-NEWS. August 13, 2010. Eurosibenergo, which controls electric utilities assets belonging to Oleg Deripaska, plans an IPO in September-October on the Hong-Kong stock exchange. The company values itself at USD8bn and plans to float a 25% (USD2bn) stake, reported the press-centre of OTKRITIE Financial Corporation.

View: Eurosibenergo assets include: controlling stakes in Irkutskenergo and the Krasnoyarsk HPP, a coal mining company Vostsibugol (through Irkutskenergo), the Avtozavodskaya TPP and a number of smaller electricity retail and engineering companies. In total, Eurosibenergo owns 15GW of hydro generation capacity, 4.5GW of thermal generation capacity and 1.2bn tons of coal reserves. The company’s consolidated debt is USD1.5bn.

The IPO proceeds will be used to lower leverage and finance the capex programs of its subsidiaries. The current MCap of Irkutskenergo and the Krasnoyarskaya HPP (comprising the main value of Eurosibenergo) amounts to USD3bn and USD1.3bn, respectively. Both stocks trade with a discount to Russian hydro generation peers on an EV/installed capacity multiple, mainly due to the long-term electricity supply contract with Rusal that limits future electricity prices. Rusal’s aluminum plants are the major consumer of electricity produced by Eurosibenergo.

Valuation: Irkutskenergo trades at an EV/installed capacity multiple of USD263/kW, while Krasnoyarsk HPP trades at USD220/kW. RusHydro now trades at USD588/kW.

Action: We view the news positively for the shares of Irkutskenergo and Kranoyarsk HPP.