24.11.2016
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Results of the Board of Directors on November 22, 2016

November 24, 2016. Moscow, Russia. PJSC RusHydro (ticker symbol: MOEX, LSE: HYDR; OTCQX: RSHYY) announces that the Company's Board of Directors held a meeting on November 22, 2016.

Key highlights:

  • BoD approved equity offering and sale of treasury shares to raise RUB 55 bn to refinance debt of RAO ES of the East Group;
  • New equity offering was approved in the total amount of 40,429,000,000 shares;
  • Sale of quasi-treasury shares was approved in the total amount of 15,000,000,000 shares;
  • The price of placement of RusHydro’s shares of additional issue was set at RUB 1 per share;
  • commissioned management to develop and submit to the BoD within one month terms and conditions of transfer of funds from RusHydro to the companies of RAO ES East Holding;
  • BoD approved the long-term development program of RusHydro Group for 2016-2020;
  • BoD approved costs optimization action plan based on findings of external independent audit.

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The Board of Directors approved the structure and sequence of transactions aimed at refinancing debt of RAO ES of the East Group, which envisages additional issue of shares and sale of treasury shares to raise funds to refinance loans of PJSC RAO ES East Group.

The placement price of RusHydro’s shares of additional issue is set at RUB 1 per share.

The Board of Directors resolved to increase RusHydro’s share capital through placement of additionally issued shares in the amount of 40,429,000,000 with par value of RUB 1 per share. The shares will be placed through open subscription.

The Board of Directors also approved the decision on additional issue of RusHydro’s shares and the securities Prospectus.

The Board of Directors approved sale of RusHydro’s shares, owned by the companies of RusHydro Group, in the total amount of 15 bn.

The Board of Directors reviewed the information on preliminary terms of non-deliverable forward contract between RusHydro and VTB Bank aimed to refinance RAO ES East Holding’s debt, and commissioned the Management Board of RusHydro to further review and agree on final terms of transactions.

The Board of Directors commissioned Management Board of RusHydro to submit to the Board of Directors within one month terms and conditions of transfer of funds from RusHydro to the companies of RAO ES East Holding.

The transaction provides for a 5-year non-deliverable forward contract between RusHydro and VTB Bank ("VTB" or "the Bank") allowing the Bank to sale the stake upon expiration of contract, including to a strategic investor. The sale price of stake will be deducted from the amount of the Company’s forward liability. In case the sale price is higher than forward price, RusHydro will receive revenue from sale of the stake; in case it’s lower –the company will have to compensate the bank the difference. Dividends paid to VTB Bank will also substantially decrease the Company’s liabilities under the forward contract.

The transactions do not imply usage of the government’s guarantee, and issue of bonds by PJSC RAO ES East, that should have been guaranteed by the government funds. Thus, the transaction will not involve budget funds.

Forward contract doesn’t provide for a put option: RusHydro will not be required to return total sum of financing upon expiration of forward contract, the Company will have to reimburse only the difference between the forward and sale price, in case the sale price is lower than forward price. Thus, the Company is not obliged to buy out its shares from VTB Bank in future.

The issues related to exit of VTB Bank from RusHydro’s equity and search for a strategic investor will be regulated by the shareholder agreement between the Bank and the Russian government represented by the Federal Agency for State Property Management. The sale of stake to other companies, including foreign investors, should be approved by the government.

RusHydro develops the long-term program, which should guarantee that the difference between the sale price of stake and estimated forward price to be reimbursed to the Bank will be minimal or zero. Thus, the Company will seek to mitigate risks related to usage of its own funds upon closing of the forward contract.

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The Board of Directors approved the report on implementation of innovative development program of RusHydro for 2011-2015 with an outlook for 2021 in 2015.

Funding of RusHydro’s innovative development projects in 2015 amounted to RUB 3.47 bn.

Financing of universities during the period totaled RUB 69.7 mn, including R&D.

The Board of Directors approved the innovative development program of RusHydro for 2016-2020 with an outlook for 2025.

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The Board of Directors reviewed the information on implementation of the long-term development Program of RusHydro Group in the 1st half of 2016.

The long-term development Program of RusHydro also includes the amended methodology for calculation and assessment of the integrated innovative KPI that determines the efficiency of the Company’s innovative activities. The weight of the innovative KPI is not less than 20%. The KPI is included in the innovative development program of RusHydro Group for 2016-2020 with an outlook for 2025.

The Board of Directors approved the long-term development Program of RusHydro Group for 2016-2020.

Key amendments to the program include:
  • alignment of the long-term development program’s targets with the Group’s development Strategy for 2020 with a view to 2025;
  • planned and estimated performance indicators updated in accordance with indicators of consolidated business-plan of RusHydro Group;
  • amendment of the program’s events in accordance with updated projects of the investment, operating and innovative programs;
  • the long-term development program includes new sections “Staffing system improvement” and “Main areas for restructuring of research and design complex”.

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The Board of Directors approved costs optimization action plan based on findings of external independent audit. The Board of Directors commissioned Nikolay Shulginov, Chairman of the Management Board, General Director of PJSC RusHydro, to develop business-plans of the Company and its subsidiaries for 2017-2021 period with incorporation of the measures, provided by the cost optimization action plan.

The audit of costs was conducted in three key areas, offering maximum potential for cost reduction: operating costs, governance model and reduction of administrative and management costs, and investment activity.
The information in this press release may contain projections or other forward-looking statements regarding future events or the future financial performance of RusHydro. You can identify forward looking statements by terms such as "expect," "believe," "anticipate," "estimate," "intend," "will," "could," "may" or "might," the negative of such terms or other similar expressions. We wish to caution you that these statements are only predictions and that actual events or results may differ materially from these statements. We do not intend to update these statements to reflect events and circumstances occurring after the date hereof or to reflect the occurrence of unanticipated events. Many factors could cause the actual results to differ materially from those contained in our projections or forward-looking statements, including, among others, general economic conditions, our competitive environment, risks associated with operating in Russia, rapid technological and market change in our industries, as well as many other risks specifically related to RusHydro and its operations.
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