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Edited Transcript of IRAO.MZ earnings conference call or presentation 22-May-20 9:00am GMT

Q1 2020 Inter RAO EES PAO Earnings Call (IFRS)

Naberezhnaya, 12 Moscow May 22, 2020 (Thomson StreetEvents) -- Edited Transcript of Inter RAO YEES PAO earnings conference call or presentation Friday, May 22, 2020 at 9:00:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Alexandra Panina

Public Joint Stock Company Inter RAO UES - Interim Head of the Trading Block & Member of Management Board

* Evgeniy Nikolaevich Miroshnichenko

Public Joint Stock Company Inter RAO UES - CFO & Member of the Management Board

* Larisa Sadovnikova

Public Joint Stock Company Inter RAO UES - Head of IR

* Maslov Aleksey

Public Joint Stock Company Inter RAO UES - Member of the Management Board and Head of Strategy & Investment Division

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Conference Call Participants

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* Fedor Kornachev

Sberbank CIB Investment Research - Research Analyst

* Igor Goncharov

Gazprombank (Joint Stock Company), Research Division - Senior Analyst

* Matvey Tayts

Sova Capital Limited, Research Division - Research Analyst

* Roman Alexeevich Filkin

Prosperity Capital Management Ltd - Director

* Sergey Beiden

Renaissance Capital, Research Division - Research Analyst

* Sergey Garamita

Raiffeisen CENTROBANK AG, Research Division - Analyst

* Vladimir Sklyar

VTB Capital, Research Division - Equities Analyst

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Presentation

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Operator [1]

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Ladies and gentlemen, we are happy to welcome you at our call today to disclose Inter RAO Group IFRS financial and operating results for Q1 2020. This conference call is going to be recorded. Over to Ms. Larisa Sadovnikova, Head of Investor Relations Director. Larisa, over to you.

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Larisa Sadovnikova, Public Joint Stock Company Inter RAO UES - Head of IR [2]

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Good afternoon, colleagues. Inter RAO Group is happy to welcome you to its regular webcast service. We are going to disclose our consolidated operating and financial results for the first quarter 2020. We are going to have on our call, Mr. Aleksey Viktorovich Maslov, Head of Strategy and Investment Block, Member of the Management Committee; Mr. Evgeniy Miroshnichenko, Head of the Financial Incentive for Inter RAO. And we're going to have a Q&A session after all the speakers have finished their presentations. The questions will be answered, on top of the speakers, by Ms. Alexandra Panina, who is Acting Head of Trading Block and Member of the Management Committee as well as Adviser to Inter RAO Chairman.

Now over to Mr. Aleksey Maslov, Head of Strategy and Investments Block.

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Maslov Aleksey, Public Joint Stock Company Inter RAO UES - Member of the Management Board and Head of Strategy & Investment Division [3]

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Good afternoon colleagues. I hope that despite the challenging epidemiological environment, everyone stays in good health. So as usual, I would like to start with our key factors affecting the group's financial performance.

Over to Page 2 of the presentation, please. Now the Pregolskaya TPP, which is Kaliningrad generation leased facility, has affected generation in the Russian Federation. It has been operating in full contribution with 455 megawatts. Please be reminded that Block 4 with 115 megawatts capacity was launched on the 1st of April last year.

On top of that, another contributing driver was decommissioning of 900 megawatts of old inefficient generating capacity at Kashirskaya GRES and another 80 megawatts are to be decommissioned in the fourth quarter of 2020. Delta COA (sic) [CDA] payments as well as DAM coefficient growth for a number of Nizhnevartovskaya GRES starting 1st of October 2019, [Sochinskaya] TPP as of the 1st of November 2019, Yuzhnouralskaya GRES 2 and Block #2 of Cherepetskaya GRES, Block #8 of the Tomskaya TPP as of the 1st of January 2020 as well as discontinued DPA discontinued CDA contracts for a number of blocks such as Block #3 for Kashirskaya GRES as of May 2019 and Block #3 of Sochi TPP and Tomsk GRES II starting January 2020.

On top of that, the actual electricity consumption for UES of Russia decreased by 2.3% with the adjustment for the extra day in the year of 29th February.

And on top of that, the ambient room temperature has been increased.

Another driver was the negative pricing environment in the day-ahead market. For our plants, that was 7.6% in the first price zone. And in the second price zone, that was minus 6.7% year-on-year.

Generally speaking, the market situation is explained in the following slides. Let me comment now on the supply in the Russian Federation. We have observed electricity prices for end users, which have increased on average. And you can see that on the chart. We have also increased our regional expansion and increased the client base for guaranteed supply companies. And we have also actively been developing paid services segment.

Let's continue to Trading, both in Russia and Europe. Here, we have observed reduced volumes of exports of electric power to our key destinations, such as Finland, minus 58%; and Lithuania, minus 52%.

On top of that, we have seen a significant reduction in electric energy prices within the Nord Pool electricity exchange. This is explained by relatively higher ambient temperatures and also increased renewable generation.

Commenting on our foreign assets now. We have increased generation in Moldavia segment, and the project in Turkey has been completed. Trakya Elektrik with 478 megawatts of capacity was handed over to the Turkish side as the concession agreement expired.

Over to Page 4 of the presentation, let me explain the electricity price dynamics as well as capacity price dynamics for the first quarter of 2020 in comparison to the first quarter of 2019. Please direct your attention to the top left-hand chart. You can see 2.3% actual consumption decrease in the UES of Russia, mostly driven by electric power. You see that on the chart as well.

Please direct your attention to the following fact. Major impact was played by the increased power generation at hydropower plants, especially at (inaudible) HPP chain, which has affected TPPs in price zone 1. You can see that in the bottom right-hand side chart with average hourly HPP's generation.

DAM price dynamics across the market, as explained in the top right-hand corner, price zone 1 has seen a 6.4% decrease in pricing. So for our power plants, the actual number was 1 percentage points on top. And the second price zone, the dynamics is inversed. Our power plants were like 7% percentage points better performance as compared to the overall market and the second price zone.

Over to Page 5, electricity and heat generation for Inter RAO facilities. The total generation for electric power stood at 28.4 terawatt hours, which is 18.4% less than in the first quarter of 2019. I have already outlined some key drivers behind that. Pretty much all power plants of Inter RAO electricity generation group has demonstrated a decline. Mostly that is related to the high ambient temperature and high generation volumes at HPPs in the first price zone.

BGC Group has also seen a significant decline at 8.7%. That decrease in power generation is mostly driven by Karmanoskaya GRES branch, given that the wholesale market has seen a price form, while cogeneration power plants seem to have maintained their generation volumes flat.

You can see that at TGK-1 group, that is our plants in Tomsk and Omsk, they do cogeneration across the board and have maintained flat capacity numbers year-on-year.

Speaking on heat power, this change, that was pretty much driven by the ambient temperature, as I explained earlier.

Over to the following Page #6. Here, you see developments of electricity and heat generation segments. CDA units revenue for Inter RAO went down by 9% to come to RUB 21.8 billion. The decrease in electric power and capacity sales for CDA units is driven by a number of factors which I have explained earlier, such as expiration of some CDA contracts as well as the delta 10 to 15 payments, and that's an upward driver with an upside for a number of plants.

Now TGK-11 has seen reduced revenue for capacity, given the lower CDA prices, with the lower CDA rates, given the long-term state commitments, which are cheaper as at the end of 2019. On top of that, we have managed to reduce gas emissions by 5%, while per unit at our pro rata by 19%, which is mostly explained by the actual types of capacity that we utilize and the decommissioning of Ekubastuzskaya GRES-2 in December of 2019. Please mind that the average reference fuel consumption ratio stood at 289.4 grams per kilowatt hour, which is 1.9% less, representing one of the lowest numbers across the industry.

Now over to the retail segment. Inter RAO Group is slightly above 18%. And the total volume stood at 53 terawatt hours, 53.6 terawatt hours, which is 1.5 billion terawatt hours less than in the first quarter 2019. That's for guaranteed supplies mostly. And again, this is mostly explained by the ambient temperature. The independent supply companies have seen a slight increase in the sales. And for our guaranteed supplies, we have seen an increase of about 0.5 million of subscribers located in Moscow, St. Petersburg and the Bashkiria area of guaranteed supply.

In terms of additional paid services, we have seen some improvement here and commissioned a net profit margin of RUB 780 million. Please be reminded that collection, heat payment collection remains flat year-on-year by -- and thanks to a number of measures to improve payment discipline from our customers, we carry on in that -- to that end and reinforce some of the action taken given the negative regulatory environment in which we have to operate now.

Over to Trading business, Page 8. Here, we see the trading volume of 3.2 terawatt hours, which is 37% less than in the first quarter of 2019. Most of the downside comes from our 2 core destinations, Finland and Lithuania. The prices were less by 50%, please be reminded, year-on-year. While for Lithuania, that was 42.5% less.

Import stood at 295 million kilowatt hours, which is 12% less to the first quarter 2019, and that is mostly driven by Kazakhstan, given there is no commercial supply coming.

As always, we disclose the company's activity towards the end of sustainable development at Inter RAO, Page 9. In the first quarter 2020, the group maintained holistic efforts to implement sustainable development across its key business processes. I would like to mark a number of particular initiatives, to start with UN Global Compact. The group released communication on progress as part of its 2019 annual report. We have also ensured GRI standards verification of our annual report and launched development or drafting for a number of corporate policies in the field of sustainable development, such as human rights, HR policies, personnel diversification or diversity and communications with the local communities as well as the supplier code of ethics. All of these are to regulate the actual situation that is currently being carried over on the administrative side. And again, we have verified yet another time, direct greenhouse emissions, and you see the verification in our annual report for 2019. Better disclosure has enabled group to reinforce its rating position. For third year running, we maintained leadership with score A within the MSCI ESG rating. So currently, the highest among Russian peers.

And now over to Mr. Evgeniy Miroshnichenko for the financial performance. Mr. Miroshnichenko, over to you.

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Evgeniy Nikolaevich Miroshnichenko, Public Joint Stock Company Inter RAO UES - CFO & Member of the Management Board [4]

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Colleagues, good morning. Good afternoon. Let me present our performance in the first quarter 2019. These are IFRS -- the first quarter of 2020. These IFRS now -- IFRS standards.

Well, the year is going to be quite challenging. We all understand that today. Q1 performance have demonstrated quite well how the year is starting. I can tell you that the situation is not that bad as it could have been, and we see quite a few positives, which I would like to explain.

Our revenue in Q1 2020 is down by 5.2% to reach RUB 266.9 billion. The company's EBITDA is also down by 13% to come to RUB 41.4 billion.

Inter RAO's net profit in the first quarter 2020 stood at RUB 34.6 billion, which is 11% up year-on-year. Despite the EBITDA coming down, our net profit is up driven by the FX gains, which we had as the ruble got weaker vis-à-vis global currencies in the first quarter 2020.

You can see revenue and EBITDA bridges' more granular view on Page 12. Most of the revenue and EBITDA coming down as driven by generation and trading segments with nearly RUB 17 billion and RUB 6 billion for revenue and EBITDA, respectively. This has been offset slightly by Supply Segment with RUB 3 billion extra in revenue and extra RUB 1 billion of EBITDA to reach RUB 8 billion of EBITDA in Q1. And so the total EBITDA for the group is somewhat down standing at RUB 41.4 billion.

Now let's consider the key segments. With the Russian Federation generation and supply, Russian generation assets were down by RUB 7 billion or 11%. Most of the impact comes from electricity sales revenue. And Mr. Maslow has outlined the factors driving that in his part of the presentation. Ambient temperature are the same because of the warm winter lower power consumption. And the afflux in HPP's reservoir has more generation on hydropower plants. So TPPs are less loaded because of that.

On the capacity side, we see somewhat of a decline as well as CDA contracts have expired for a number of our assets, Kashira, Sochi and Tomsk GRES 2.

Now as a result, we've seen RUB 1.5 billion decline in EBITDA in Russia, mostly again within Inter RAO Electric Power Generation group. And we've seen increase of RUB 30 million for the heat generation. That is mostly explained by high CDA margin for the Tomskaya TPP, the new asset to those.

Now Supply revenue and EBITDA. So we see an increase by 1.7% on the revenue side. That's top right-hand corner. The EBITDA is driven by average realized price on the one hand and expanding the client base as well against the backdrop of general power consumption. So the EBITDA is up by RUB 1 billion or 14.2%, driven by the same drivers. Most Energas bid has improved their EBITDA by RUB 700 million, thanks to higher net margin because of high prices and client base expansion as well as additional paid services.

Slight decrease for PSK Group as explained by IFRS 15 and the high solvency of some of the counterparties, especially from the utilities sector. We had additional income in 2019. This is not the case for 2020, that's why optically, you will have a lower EBITDA for PSK Group. Only operationally, it was not the case.

On top of that, some effect for PSK Group, some negative effect of RUB 200 million is related to the fact we received the guaranteed supplier status in Omsk in the past that was Petersburg Power Supply Company acting as guaranteed supplier. Now we have plus RUB 0.9 billion for other supply companies.

And we can proceed to Page 14 to consider trading and foreign assets. As you can observe, a significant reduction comes from the trading side by 47% on the revenue and 71% on the EBITDA to hit RUB 1.9 billion in total. That's a bit down. That comes due to low volumes and low prices for Nord Pool electricity exchange Finland and Lithuania because the prices were abnormally low. And then again, because of low -- because of high ambient temperature and high power generation volumes, especially on the hydro side. As a result, Q1 demonstrated a significant oversupply. Well, looking at the situation, hope it would change in the future.

Foreign assets has demonstrated overall reduction, mostly coming from Turkey. So the project has been completed, hence Inter RAO is not going to be exposed to any financial result from Turkey looking forward.

In the meantime, let's continue to Page 15 to discuss consolidated operating expenses. Generally speaking, I would like to outline the following. With reduced generation volumes, we have lower amounts dedicated to purchased electricity and capacity and then we have seen higher electricity transmission fees. Some growth on the employee side is because we meet our social commitments by adjusting the payroll by the inflation demand and some of the other line has demonstrated reduction, mostly due to engineering contracts expiring after the Kaliningrad plant has been launched.

Page 16 explains debt and liquidity analysis. No change. Generally speaking, we have an insignificant debt of about RUB 3 billion from the banks and also EUR 59 billion for leasing. That's Kaliningrad generation leased assets. So the leverage is 0.5. And the net debt is negative minus RUB 223 million. So -- but you have a breakdown, but I'm not going to comment on that in detail given that the debt is not so significant.

I have concluded my section. Thank you for your attention now.

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Questions and Answers

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Larisa Sadovnikova, Public Joint Stock Company Inter RAO UES - Head of IR [1]

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Ladies and gentlemen, we are ready to proceed to the Q&A session. We're going to have some of the questions on the telephone and some in writing on the webcast. We're going to start with the Russian line, and we'll begin with those questions on the line. So we are waiting for questions from the Russian line. We're waiting for questions from the Russian line. And the first question comes from Mr. Vladimir Sklyar, VTB Capital.

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Vladimir Sklyar, VTB Capital, Research Division - Equities Analyst [2]

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Good afternoon. Thank you for this opportunity to ask a question. In fact, I have 3. Could you please give more details on the FX gain you had in the first quarter, which is nearly RUB 10 billion. Please explain, is that working capital of your foreign assets? Or did you convert some of your cash position in trade foreign currency?

Next comes my other question on the current operations. I think we passed the first due date, May 14, on cash collections. Now what do you see currently? Any particular worsening of the situation? Could you share some of your expectations across the year? And also, what do you think about the Ministry of Energy forecast of 11% of nonpayments across the year? Would the actual number be higher or low? What do you think?

And my third question is about your Arctic project explained in the press release last week. Obviously, we are interested to obtain more details on the role of Inter RAO in that project. The financing side of that, is that going to be CPC project? Would that somehow speed up your turbine business? Some more details, if I may, please.

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Evgeniy Nikolaevich Miroshnichenko, Public Joint Stock Company Inter RAO UES - CFO & Member of the Management Board [3]

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Thank you for your question, Vladimir. Let me handle the first couple of questions. The FX position, yes, in fact, the FX gain comes from cash balances. Throughout the year, we saw the ruble strengthening in 2019. So we did not sell the FX currency, the foreign currency, which we received in order to avoid the actual physical loss. Now we have used the situation and actually sold a significant portion of our FX position and thus registered the profit or the gain. The payments now, that's super sensitive issue. We monitor our assets pretty much on the daily basis. We see some worsening of the payment discipline, not the case in Q1, but we did see that in April, carries into May, and it is worsening. I wouldn't disclose the actual number because it varies from asset to asset. Well, they really hope to overcome the situation. You know there has been a decree of the government prohibiting Inter RAO from accruing fines and then some objective factors come into play such as the coronavirus, with small businesses shutting down. So we do the expect the payment discipline to come down, but we're actively working with the government to overcome that. We believe that support from the government must be targeted, not across the market, such as giving up the fines or penalties and only supporting the really affected entities, be it legal entities, individuals. A number of other propositions came up, and you all may have read the letter submitted by all energy companies' CEOs. I really hope that payment discipline is something we'll manage to overcome. So if we maintain the situation and control at the level of the supply companies, it would not expand elsewhere. Well, I think we'll have more clarity at the end of June. So once we report on Q2, we'll be able to have an outlook for the full year.

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Vladimir Sklyar, VTB Capital, Research Division - Equities Analyst [4]

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Can you just clarify? Given the situation you're looking at today, does Inter RAO have any plans to request beneficial subsidies, let's say, to inject liquidity to support your working capital? Or are you counting on your own working capital only?

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Evgeniy Nikolaevich Miroshnichenko, Public Joint Stock Company Inter RAO UES - CFO & Member of the Management Board [5]

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Well, we have enough liquidity cushion for a situation like today, it's nice to have. So we'll definitely pull through using our own funding. Liquidity injections are not available, as you know. The government's put forth a pretty strange proposition to support the energy sector. It's RUB 3 billion, no more than RUB 3 billion to a single company. And on top of that, the most recent order of the Ministry of Energy does not envisage support to power generation. They do support heat generation, for example, but not power generation. We are very much surprised to hear that, but as always, we count on our own efforts. Here's the discussion with Inter RAO. Please keep the regulatory side as it was early in the year and we'll manage to pull through on our own end. We wouldn't require any support, including support from the public funds. That's the story.

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Operator [6]

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And our next questions comes from Sergey Garamita, Raiffeisen Bank. And hold on, there was yet the third question from the previous speaker. Mr. Aleksey Maslov is going to answer on the Arctic project.

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Maslov Aleksey, Public Joint Stock Company Inter RAO UES - Member of the Management Board and Head of Strategy & Investment Division [7]

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Just very briefly, in a nutshell, the coming 3 to 6 months are required to decide on the actual generation and infrastructure facilities. And as we move closer into Q4, we'll start discussing, without that potential operation arrangements. Currently, it's too early to discuss as to what needs to be constructed. Responding to your question whether that is going to support our turbine business, and yes, it is possible to supply turbines from Rybinsk, but that's a possibility. The actual response will be coming once decisions have been discussed. And again, our press release says the focus will be on the equipment produced in Russia. So there is not much choice actually for the turbines to be produced in Russia.

Okay. We're done with the first set of questions, and we are ready to take the question from Sergey from Raiffeisen Bank.

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Sergey Garamita, Raiffeisen CENTROBANK AG, Research Division - Analyst [8]

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Let me follow up on the previous question. You're saying there will be more clarity in Q4. Is that why because you have pushed down the strategy day, we'll have more clarity on the strategy day? That is my first question.

And now the full year guidance, EBITDA and CapEx, I understand it's difficult to forecast EBITDA, but at least could you update the CapEx? I see a reduction in Q1. So are you going to have some CapEx optimization? That has been my second question.

And the third question, again, the pandemic effect, does this has an impact on your M&A strategy? Maybe the market is so much down, you could be active on the M&A field. Can you comment?

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Unidentified Company Representative, [9]

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Okay. Responding to questions 1 and 3, the push down of our strategy day is not related to the Arctic project. It's just that we want to add the stress test scenario into our strategy rather than the base case alone. We believe the current environment of today is going to affect not only the economics of 2020, but also that of 2021. Hence, we decided to review our models. On top of that, some sections within our strategy, mostly related to the external environment, has seen some changes. We have updated it to include the most recent trends given the current external developments. On top of that, we have reinforced it with our core ideas on regulation, the generation business on the Supply business, et cetera. We have reprioritized some activities in the new environment of today, and we see these [hercai] could be extended significantly into the midterm perspective. I really don't think the uncertainty with the Arctic project would require us to review the time line for the strategy day at all. I don't think it's going to have an impact.

And just to clarify, we -- you shouldn't expect any push down of the strategy day in relation to the project.

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Evgeniy Nikolaevich Miroshnichenko, Public Joint Stock Company Inter RAO UES - CFO & Member of the Management Board [10]

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Regarding the second question, second question, just very briefly, we are not going to review our CapEx program. That has been improved at RUB 32.7 billion. It's -- could vary more or less, but generally, it's there. Well, as far as the financial guidance for the year is concerned, I wouldn't make any forecast, but I can tell you, all of us would expect a reduction on the EBITDA side, and it could be material and significant, and that's all we can say at this point of the aim. We'll have more data looking forward.

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Maslov Aleksey, Public Joint Stock Company Inter RAO UES - Member of the Management Board and Head of Strategy & Investment Division [11]

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Regarding the third question, whether the pandemic is going to affect the M&A strategy. Well, obviously, the sellers have some inertia in their position, they still have old expectations. They still look up to old multiples. So it takes some time for them to get used to their new expectations. Well, that's true [ultimately] for Inter RAO, that's the case across every industry.

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Sergey Garamita, Raiffeisen CENTROBANK AG, Research Division - Analyst [12]

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It looks interesting. Obviously, you wouldn't be expecting anything -- any updates for Kaliningrad until before the end of the year for the stock oil, the Arctic project you have, saying it's end of year. And maybe you -- do you push down on the capital -- on the strategy day to incorporate all the aspects?

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Unidentified Company Representative, [13]

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Well, strategy is called strategy because it provides for some uncertainty and their response to that uncertainty. If we had any particular transaction on the table, it wouldn't be a strategy. It could be some kind of operating plan for the midterm in relation to particular assets or particular integration efforts into our business model. I believe that when it's a strategy, it's a little bit different. Strategy is our answer to what we're going to do with the investment resources available or which destinations represent the highest priority for us, the main focus where we see most of the value to be extracted and so on and so forth or how we respond to external trends and how we incorporate these into our business models and strategic plans. That's the response of the strategy rather than operating matters such as integration of new assets into the business model. Any further questions?

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Operator [14]

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The next question is coming from Fedor Kornachev, Sberbank CIB.

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Fedor Kornachev, Sberbank CIB Investment Research - Research Analyst [15]

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Just a few follow-up questions from my side. You say that your strategy day has been pushed down to Q3. Any further clarity on that? Early Q3? Late Q3? I would appreciate some more clarity on that.

And another follow-up concern is your cash position. If I'm not mistaken, 2019 full year number had 15% of your liquidity cushion was in foreign currency. If you consider the snapshot as at the end of Q1, what is the share of all your cash and cash equivalents is in foreign currency?

And one final question, a little bit more debatable maybe. We see that the situation was ambient temperature and the afflux of water in HPP's reservoirs affects not only Russia but elsewhere in the world, such as Northern Europe, which is a key market for your Trading business. So it would be exciting to learn your outlook. Would one expect further afflux in the second half of the year? We have seen some significant pressure on the prices in the fourth quarter last year and then the first quarter this year. So what would be your expectation in the second half of 2020? So would that be a reverse effect with too much afflux last year offset by low water this year, which is supposed to support heat generation or not? That's it from my side.

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Unidentified Company Representative, [16]

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Well, let me explain on the strategy. We look up to August, but quite a lot of factors come into play, such as further discussions within our committees under the Board of Directors and the Board of Directors proper, as well as approvals with the Ministry of Economic Development and the Ministry of Energy. We really wouldn't want to split that into 2 parts. Like first, we seek approval from the Board, then seek approval from the Ministry of Economic Development, Ministry of Energy and then reverse to the Board of Directors level. We would really like to do that [as we had this in] 2014. 2014, we approved our strategy -- March 2014. And we added a number of annexes and bylaws. And then we presented that in August without any particular change in the numbers of our economic development. I think we're going to repeat that story this year as well.

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Fedor Kornachev, Sberbank CIB Investment Research - Research Analyst [17]

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In which case you'll do that later than August because you'll need some different efforts, right?

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Unidentified Company Representative, [18]

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It could be later, but we are looking up to Q3. So August or September. We wish to do that in August because the strategy is ready. We have integrated the stress scenarios. And then we have discussed with our business units as to which elements we need to update. The document is ready. We need to have it approved by committees under the Board of Directors. That's it.

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Unidentified Company Representative, [19]

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And there was one further question on the afflux in the water level. We don't have that -- we don't have any model to forecast that. And I believe even RusHydro wouldn't have that model. Or if you ask that question to RusHydro, they would have a lot of ifs in their answers.

And then there was a question on the FX currency. I think it's about 10%, maybe less than 10% of our cash and cash equivalents that are in an FX position. And again, we're reducing that given the market environment and its dynamics.

And then you had a question to Ms. Panina as well. Maybe Ms. Panina would like to follow up on the water level. And then also, Ms. Panina, can you comment on the recovery of Nord Pool exchange prices?

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Alexandra Panina, Public Joint Stock Company Inter RAO UES - Interim Head of the Trading Block & Member of Management Board [20]

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Okay. Regarding Nord Pool and water levels, everyone looking up to Nord Pool prices may have noted that early this year, the high water levels in Northern Europe were at its -- their peak across the recent years, and there was a lot of decades. Hence, HPP generation was at the highest as well. If you're looking up to Q2 numbers, you see that the water levels are down. So power generation at HPPs are down and the prices at Nord Pool are starting to recover. To consider Q1, that they had historically lowest prices across their history. 30 or 32 had been historically visible in other Q1s, while in the first quarter 2020, that was below 30, which was record lowest because the water levels were abnormally high in Q1 2020. Now if we consider the situation in April and May, while it was rather challenging in April, still, however, in May, it is starting to improve. The lockdown measures in Europe are being used up and Nord Pool prices are getting normalized in Northern Europe. And then we look at daily, monthly and annual numbers. We see that in the second and third quarters, there would be 32% to 35% growth on Nord Pool prices. So it will be somewhat less than 30% in Finland and somewhat more than 30% in Lithuania. SKM, our market agency and adviser for Northern Europe, is looking up to these numbers. Obviously, that's still less than in 2019. However it's not that critical, it's not that of a problem.

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Sergey Garamita, Raiffeisen CENTROBANK AG, Research Division - Analyst [21]

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So generally speaking, you expect the situation to get back to normal, right? And the results of your Trading business in Q1 cannot be considered the base case scenario for your full year of 2020, right?

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Unidentified Company Representative, [22]

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Well, it's a challenging question. Well, Q1, January and February, so abnormally warm winter in Europe, hence, a high water level in HPP's reservoirs. I think we discussed that last time as well on the call. There was a lot -- a very strong wind on top of the high water. So that played into January and February with very high generation. And March lockdown measures hit, which further aggravated the situation. So what's going to happen in April? The pricing environment was still challenging. It was slightly better in May. Nord Pool prices are coming up day after day. So in a nutshell, it's very difficult to predict the full numbers for Q2 as well as Q3. The same factors come into play as is the case for Russia, such as recovery of the global economy, industrial production and the likes. So it's really difficult to say. I wouldn't -- I would only say that Q4 is going to be better than Q1. But it's too early. It's too difficult to predict. Maybe the winter's warm as well. Our forecast says that the situation will be difficult, challenging, but not critical.

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Operator [23]

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Matvey Tayts from Sova Capital.

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Matvey Tayts, Sova Capital Limited, Research Division - Research Analyst [24]

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Very happy to hear all of you. And that's very pleasant to have a call in the lockdown and hear your colleagues. I have several questions, frankly speaking. One question relates to the collection. You're saying you have wholesale as well as retail supply markets. Could you outline what's going to happen in that -- in those markets? You can have some predictions for the retail side, but what regulations are coming into play on the wholesale side? Like how much of the receivables can build up on the wholesale side? And then the city as well, they are the largest non-payer as far as I understand.

And one other question about your joint project with General Electric. Have you started running that actually? Or is that still a project? Any investments towards that end or not? And what's the plan for such investments? Could you outline that for sometime like midterm, long term, depending on the way you see it? I think I have more questions, but let me hold it -- yes, I do have more questions. Regarding your strategy day. On generally speaking, your strategy, can one expect the new strategy would impact the dividend policy provisions?

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Unidentified Company Representative, [25]

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Well, the first question was about collections on the wholesale and the retail markets. Ms. Panina taking the floor to comment on the wholesale market.

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Alexandra Panina, Public Joint Stock Company Inter RAO UES - Interim Head of the Trading Block & Member of Management Board [26]

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Here's the situation. If you have been following the solvency situation, you may have noted that the wholesale market has not been deteriorating. So it's more than 99%, similarly, end of Q4 and April this year. The same non-payers remain, as was the case in 2019. It's Northern Caucasus, Volgograd, Energosbyt and the traditional non-payers. So we have not observed any significant deterioration on the wholesale market.

Let me explain how payment works. The market council approves the date of payments and the financial guarantees. The financial guarantees work as follows. Let's consider a normal situation. If there is a payment delay of 5% vis-à-vis the date, so if there is a payment delay by more than 3 days and by more than 5% of the amount, then they have to come up with a bank guarantee. In order not to bring in any bank guarantees, they try to pay timely. Given that payment discipline risk is there for May, the market council has decided to ease up the regulation. Now they are entitled not to pay 10% before the end of May, so we are considering end of April, end of May time span. And frankly, not a single market participant has used this possibility. I was late for this call because I was attending the market council meeting and turns out none has used it. We considered extending it into May or June. But while we see there must be a decision of the market council to enable that nonpayment without a bank guarantee, otherwise, there would be a dedicated high tariff apply and the market council would consider that and decide whether to maintain that marketplace status on the wholesale market or not. So the situation is very rigid on the wholesale market. And if the regulator is ready to ease up the regulations, they will do so. Otherwise, it will be up to the market council to decide regarding a particular nonpayment company. So that's not a problem. And I think Mr. Miroshnichenko can comment on the retail market's nonpayment.

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Evgeniy Nikolaevich Miroshnichenko, Public Joint Stock Company Inter RAO UES - CFO & Member of the Management Board [27]

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Well, I think you have touched upon this subject, and I don't think I can add anything. The situation is challenging. We try to control that to the extent we can, cooperating with the government. There will clearly be a deterioration, but I cannot say yet as to what that's going to be by year-end. The uncertainty is too high.

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Matvey Tayts, Sova Capital Limited, Research Division - Research Analyst [28]

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Regarding the 10% nonpayment on the wholesale market. Do I hear it correctly that the generating companies are now entitled not to pay up to 10% within the same 3 days? Did I get that right? Because it's 5% for 3 days or 10% for x days, and none has used that. And this opportunity has not been extended. Do I get it right?

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Alexandra Panina, Public Joint Stock Company Inter RAO UES - Interim Head of the Trading Block & Member of Management Board [29]

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Let me handle that. Well, the decision of the market council is in effect until the end of May, so it's still in effect now. Let me explain how it works. As at the end of May, you may have payables of up to 10%, and that could be a cumulative number. So -- and you're entitled not to provide any bank guarantee until the end of May as well. And again, if you pay like 92% and still you are a nonpayer and you will be considered by market council, but you're not required to bring in a bank guarantee. That's the point. Again, pretty much all payment dates have been passed like 21st of May. And now 28th of May is the last payment date when the opportunity is still in effect. So if we see the full payment on the 28th of May, I think the market council is now thinking to extend the same rule for June and July.

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Matvey Tayts, Sova Capital Limited, Research Division - Research Analyst [30]

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So the same 10% extended for June and July, right?

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Unidentified Company Representative, [31]

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Yes. Exactly. That is the proposition that we have today. And if you're interested, we decided that we'll work with the market council and the union of generation companies to think of potential tools. Whether that extension enters into force or doesn't, I cannot yet tell you.

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Matvey Tayts, Sova Capital Limited, Research Division - Research Analyst [32]

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Understood. So it gives you some flexibility for the supply companies. In case they have some issue, they have some leeway, right?

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Alexandra Panina, Public Joint Stock Company Inter RAO UES - Interim Head of the Trading Block & Member of Management Board [33]

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Well, yes, kind of. Before the first of May, any nonpayment above 5% would result in bank guarantee. With the challenges of the new markets and the cash gaps, they may not be able to do that as quickly. So for a short time span, it has been decided that they supply a bank guarantee only if they extend 10% nonpayment.

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Larisa Sadovnikova, Public Joint Stock Company Inter RAO UES - Head of IR [34]

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Mr. Maslov would comment on the General Electrics project.

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Maslov Aleksey, Public Joint Stock Company Inter RAO UES - Member of the Management Board and Head of Strategy & Investment Division [35]

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Given the confidentiality clauses, I cannot really disclose any particulars here. But we're moving along, and we believe in this segment. We believe in this market, it is of interest to us. As soon as we can disclose the information, so we'll do.

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Larisa Sadovnikova, Public Joint Stock Company Inter RAO UES - Head of IR [36]

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Let me remind one other question that was asked by Mr. Tayts, that is any changes in the dividend policy in -- linked with the strategy. Mr. Miroshnichenko taking that.

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Evgeniy Nikolaevich Miroshnichenko, Public Joint Stock Company Inter RAO UES - CFO & Member of the Management Board [37]

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Colleagues, we don't expect any changes. We are not aware of any such initiatives on the level of the government, and we are unaware of any such changes. So we live with the current dividend policy. And that's our plan.

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Larisa Sadovnikova, Public Joint Stock Company Inter RAO UES - Head of IR [38]

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The next question comes from Sergey Beiden, Ren Cap.

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Sergey Beiden, Renaissance Capital, Research Division - Research Analyst [39]

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In fact I have 2. We see you have a significant increase in your EBITDA margin for electricity generation. And looking at your costs, it's not very much apparent where it comes from. Do I get it right it's mostly linked to the increased average CDA price across all of your units, right? That's my first question.

And my other question is this. If we see at the developments of May vis-à-vis the developments of April, we'll see some reduction despite the opening up of the lockdown, like April was full lockdown and it's less rigid lockdown in May, but the drop in power electricity consumption is much more significant as was the case in April, do you see some growth in bankruptcies for your business and hence the nonpayments? Or do other factors come into play here?

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Evgeniy Nikolaevich Miroshnichenko, Public Joint Stock Company Inter RAO UES - CFO & Member of the Management Board [40]

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The EBITDA margin is growing, indeed, because the revenue for electricity sales is coming down while the CDA payments remained flat. So that's why the EBITDA margin is growing. As to the bankruptcies, no, we don't see any bankruptcies of our offtakers. So there is no landslide at all. More than that, you may know that there is a bankruptcy ban currently in effect for a number of industries. But there will be some decline, of course. I would argue against your idea that the lockdown is easing up in May. And the COVID-19 effect is clearly there for us as well as the whole country's economy. We're going to see that effect for some time looking forward.

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Alexandra Panina, Public Joint Stock Company Inter RAO UES - Interim Head of the Trading Block & Member of Management Board [41]

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In May, consumption fall. We look up to 14 countries as well to see their dynamics, and we see that their lead time from end of lockdown to restarted consumption was about 2 months. That is the case for China. The same is for the Baltic states, Finland, Italy, France. It started with a major drop and then gradual recovery. And we see consumption per country week-to-week. And we see an improvement with every country except for Georgia. In the case of Georgia, that was mostly about tourist flow that's why it hasn't restarted as yet. The other countries has demonstrated some positive developments. Russia entered into lockdown much later than the other countries. So we're going to see the improvement later as well. Going to be tough in May, but starting in June, we'll see some positive developments as it has been the case in other countries.

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Sergey Beiden, Renaissance Capital, Research Division - Research Analyst [42]

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We dropped 2.9% in April. And then in 20 -- 20th May, even though construction activities started after lockdown in May, we had a 5.4% drop, even though there is no ambient temperature coming into play. I think you have explained it in your answer.

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Unidentified Company Representative, [43]

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So ready to take more questions. Mr. Roman Filkin from Prosperity Capital Management.

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Roman Alexeevich Filkin, Prosperity Capital Management Ltd - Director [44]

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I have 2 questions. Has been about -- my first question is to Ms. Panina regarding the 10% -- regarding the 10% receivables. Is that a one off? So you are entitled not to pay 10% for a single month? Or could you actually add June to that and then July? Or do you have to pay by all means in the following month and then you can get some other 10%? Now if I get it right, there is a feature in CDA contract that in case there is a major macro change, you may see a revision of the rules. Can you please remind me how it works? If there is demand decrease by 5% for the full year or so, is there a risk that the volumes for 2021 would be different?

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Alexandra Panina, Public Joint Stock Company Inter RAO UES - Interim Head of the Trading Block & Member of Management Board [45]

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Let me explain how the 10% works. The waiver for May could last until the end of May. That's the current rule. Before the end of May, you could get up to 10% of the nonpayment. So we take the payments for May, take 10% out of that. So you could not pay like up to 10% without providing a bank guarantee. Now if we extend that rule for 2 more months, that wouldn't mean another 10% for June and another 10% of July. It works differently. That's 5% -- like if we don't extend the rule, it would be 5% for June and 5% for July, so that we have up to 10% by the end of the -- end of the month of July. That's if we extend the same provision, which, again, that has not been extended. And to my knowledge, it has not even been proposed.

Now regarding the price changes and the demand, yes, there is a possibility, there are some drivers depending on the actual consumption. I think there could be one trigger on the positive side, but it was not triggered. So far, we have only observed April and May in terms of consumption demand -- reduction. Significant reduction was only visible in May. Now if we include that, you'll see that like 2% or so. I would suggest reverting to that discussion within a couple of months. 2% change that we have observed so far does not seem material to me. We'll see how it unfolds.

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Roman Alexeevich Filkin, Prosperity Capital Management Ltd - Director [46]

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Another question if I may, and that is to Mr. Miroshnichenko probably for the Trading business. You have your segment breakdown for each segment. You explained your fuel costs, et cetera. I just want to understand, if we take your trading business for the segments and then reduce that by the transfer costs as well as the acquisition costs, so we'll have some margin income, which is less than the EBITDA. Can you just clarify how it works and why your actual EBITDA is larger than the marginal income?

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Evgeniy Nikolaevich Miroshnichenko, Public Joint Stock Company Inter RAO UES - CFO & Member of the Management Board [47]

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So we need some time for that. So I'll be happy to revert to your question in writing. We have somehow dug up in paperwork, but we're going to respond to that in writing.

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Unidentified Company Representative, [48]

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Mr. Alexander [Bedrov] from VTB Capital asking the next question.

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Unidentified Analyst, [49]

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I have just a quick thing to clarify regarding capital construction regarding -- sorry, regarding your CapEx. You have seen a significant reduction Q1 year-on-year. Had that been planned ahead? Or was that linked to any particular drivers?

And my other question on your capital construction -- on your CapEx in full. You mentioned RUB 32 billion, is that the full number for the year? And does that include any modernization capital expenditure or any facilities to be launched in 2022? If not, then when is the investment coming?

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Evgeniy Nikolaevich Miroshnichenko, Public Joint Stock Company Inter RAO UES - CFO & Member of the Management Board [50]

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The CapEx numbers which we announced do include modernization and upgrade costs. And the reduction in Q1 is related to shifting some of the costs between different periods. So I wouldn't draw any conclusion from that.

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Unidentified Company Representative, [51]

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Any further questions? We do have a question from Igor Goncharov of Gazprombank.

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Igor Goncharov, Gazprombank (Joint Stock Company), Research Division - Senior Analyst [52]

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I have one thing to clarify on the nonpayments and payments collection for the wholesale as well as the retail markets. Could we start with the wholesale market? You're suggesting there is a government decree preventing supply companies from accruing a fine to households and building management companies. Do you still have any real mechanisms to incentivize payments from the households and building management companies or is that left up to the actual subscribers of yours who are entitled not to pay anything until the end of the year? That's my first question.

Second question, let's assume there is no change in the regulations. The decree we have discussed above would last until the end of 2020. What will happen then early into 2021? So when would you have the possibility to collect all the receivables built up in the course of 2020? Or is that a really vague mechanism?

And my third question on the retail market. That's probably an accounting question. What's the proportion of the receivables to be provisioned against thus making way into your P&L?

And one final question on the wholesale market. Just to follow up on the 10% extension discussions. If we assume that the 10% waiver would be extended into June and July, that would mean that by the end of July, the offtakers may have the possibility to have like 20% of the total payment for May through July, unpaid.

And 2 further quick questions on your investment projects. Starting with (inaudible). Do you have any understanding how significant that project would be in money terms? And also whether Inter RAO would require to invest its own funds. And as far as Kaliningrad project is concerned, you would expect to complete the last unit by the end of the year. We see other companies on the market pushing their commissioning dates down because of the COVID. How hard is your deadline in Kaliningrad, which is now end of 2020?

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Unidentified Company Representative, [53]

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Well, Government Decree 424 suggests moratorium on recovering the fines. So accruing a fine, it's still okay. There is nothing about it in the government decree. So we do collect statistics within the guaranteed supplies association, according to which, about 11% is the realistic target of reduced collections before the end of the year. In money terms, that's about RUB 500 billion. That's in case there are no changes in the regulations, as you have asked.

As you hear from Mr. Miroshnichenko, we are working very actively with the authorities to get some amendments introduced whether the actual receivables are going to grow or not. That depends on how fast the economy recovers, especially when it comes to small and medium enterprises, how many of them will be able to operate normally and restart their operations. We understand all that, and we work with our off-takers. As far as households are concerned, we actively advertise remote payments while our offtakers are locked down in the households so that the receivables don't grow. It's hard to forecast how fast the receivables could be collected. It all depends on how, first, the lockdown measures would end up. As you are aware, the Russian regions are starting to ease up on the restrictions. And if everything goes well, then we'll see some recovery by autumn.

As for the write-offs, we do have some provisions of 1.5% for guaranteed supplies. In money terms, the whole market would have a number of RUB 220 billion according to the association of guaranteed supplies. Hence, we would expect the receivables growing to be offset with -- to be paid eventually. And in case it will be impossible to recover, some liquidity cushion is available, thanks to the current regulations.

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Igor Goncharov, Gazprombank (Joint Stock Company), Research Division - Senior Analyst [54]

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Just a follow-up question on the same subject. You suggested that the decree of the government bans recovery of the fines, but not accruing the fines. So what's the current situation? Would the Supply businesses currently accrue the fines for delayed payments or don't they?

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Unidentified Company Representative, [55]

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Absolutely. The decree only mentions recovery. So we do mention these numbers for reference, so that the offtakers see the numbers are there. And after some time, they will still have to pay for that. So we do indicate these numbers for reference.

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Igor Goncharov, Gazprombank (Joint Stock Company), Research Division - Senior Analyst [56]

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So not only the actual outstanding amount, but you also indicate for reference the fine, right? Correct?

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Unidentified Company Representative, [57]

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Correct.

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Igor Goncharov, Gazprombank (Joint Stock Company), Research Division - Senior Analyst [58]

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So you understand that if there are no regulatory changes, then in January 2021 you could actually demand payment of the accrued fines. Correct?

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Unidentified Company Representative, [59]

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That would be subject for another discussion. Just like I said, consultations are currently ongoing. To introduce amendments into government Decree 424, there could be some targeted measures taken. Some offtakers, still in a position to pay. Others actually contains the disease and spend some time while ill. So discussions is ongoing, and we understand the situation offtakers are in, including the retail off-takers. So it's hard to say now as to when the amounts are going to be recovered. It's difficult to say. We are working towards that end, together with the regulatory authorities.

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Igor Goncharov, Gazprombank (Joint Stock Company), Research Division - Senior Analyst [60]

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So you mentioned RUB 600 billion, right? Is that going to be before the end of the year from households and building management companies?

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Unidentified Company Representative, [61]

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I mentioned RUB 500 billion. That's a view of the association of guaranteed supplies in case the nonpayment situation would continue. And that would be 11%, and that's RUB 500 billion for the full year. That's again an assessment.

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Unidentified Company Representative, [62]

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And the next question comes -- hold on. Hold on. We still have a question pending on Mr. (inaudible). Mr. Aleksey (inaudible) is going to comment on that.

Mr. Kovalchuk taking the floor. Mr. Miroshnichenko. Mr. Evgeniy Miroshnichenko is taking the floor.

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Evgeniy Nikolaevich Miroshnichenko, Public Joint Stock Company Inter RAO UES - CFO & Member of the Management Board [63]

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Just like I said, it would take us a while to identify the particular infrastructure and facilities to be built. What you hear in statements of Rosneft and Inter RAO, the generating capacity was 2.5 gigawatts, and that is temporary facilities as well. Like a small power plant to be used for a limited time as well as sustainable power plants and continuous operation, and the capacity for those would be higher. So it's difficult for now to consider, in particular, target, including the generation units, not to mention the infrastructure units and other things. I think it's too early to say.

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Igor Goncharov, Gazprombank (Joint Stock Company), Research Division - Senior Analyst [64]

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And just for Kaliningrad, it's still going to plan?

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Evgeniy Nikolaevich Miroshnichenko, Public Joint Stock Company Inter RAO UES - CFO & Member of the Management Board [65]

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Yes. It's still going to plan. Q4 is the current target.

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Alexandra Panina, Public Joint Stock Company Inter RAO UES - Interim Head of the Trading Block & Member of Management Board [66]

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Let me comment on the 10% to grow into 20% for the wholesale market. Let me try to explain that again. 10% cannot convert into 20%, so they don't end up -- so the current regulation lasts until 28th May, so you could potentially build up 10% before 28th May. So it's going to get down to 0 after May 28. So the new regulation, if extended, would mean 10% in total rather than accrued. And that's unrelated to actual payment. That's 10% of nonpayment with no banking guarantee to be provided. Currently, even a small nonpayment amount would require bank guarantee. So you still have to pay, but you're entitled not to provide -- to provide the bank guarantee. That's the point. We have 10%, it would still be 2 negatives. One is fine to be accrued, so they wouldn't recover that, but still accrue that, and it's about 1.5% of the Bank of Russia key rate. So that's significant. Late payment is quite material. You'll have to pay fine by all means. And then another negative development. If you do that more than twice, if you do that more than twice, then the market council will consider stripping you of your status on the wholesale market. Again, the 10% is unrelated to any possibility of nonpayment. It's just about nonprovision of a bank guarantee. I hope it explains it.

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Unidentified Company Representative, [67]

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Okay. We're ready to proceed with a question from Vladimir Sklyar.

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Vladimir Sklyar, VTB Capital, Research Division - Equities Analyst [68]

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I have 2. One is about replacing electric power meters to smart meters. So the meters are already quite costly. And now you're suggesting some ciphering protocols to be supported which will make them even costlier. So would one expect any significant additional investments to be acquired next year?

And my other question. Yesterday, government decree to review Kaliningrad generation tariff to be reconsidered because the forecast has been updated for Kaliningrad exports to nearby adjacent countries. Hence, my 2 questions. One, would Inter RAO see any different profit management fee maybe given that the tariffs are different? And secondly, given that the tariffs are different because of the new forecast, maybe you have that forecast for electric power exports from Russia for the full year.

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Unidentified Company Representative, [69]

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(technical difficulty)

You have just mentioned that the price tag of each meter is up. Well, that matter is still under discussion. We are expecting some bylaws for Federal Law [522]. Hence the investments and the meters, the smart meters, as well as requirements to those meters have not been approved by the government as yet. The Ministry of Energy is still designing those. Ciphering or encrypting is discussed with the Ministry of -- for Digital Development and the Federal Security Service, so I think it's too early to discuss that, colleagues. We're going to keep you up-to-date by all means.

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Alexandra Panina, Public Joint Stock Company Inter RAO UES - Interim Head of the Trading Block & Member of Management Board [70]

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Could you clarify the question Kaliningrad, like all exports across the group or Kaliningrad only? Was that question Kaliningrad-specific? Let me answer in general. The situation early in Q2 is rather unpleasant, so that's a major deviation from our target numbers. So that's the actual force majeure active guard globally. How long that current challenge on the global market is going to last is still a question mark being discussed with leading financiers. So I asked this to our dedicated departments involved in forecasting. Well, everyone is saying, whether that's gradual recovery or slow recovery and base case and worst case and base case. So generally speaking, base case and worst case would be -- fall by 50%. I would say it's somewhat in between worst and base case. Then the situation may be aggravated with new waves upcoming and further lockdown, but we'll see the actual worsening of the economic situation, the actual slowdown early in June. So I would say, 50% for the full group.

Your question was about Kaliningrad specifically. The situation is a little bit more complicated then. As you may remember, we are expecting Belarus NPP to be launched this year. So the consequences could be different. We are trying to open up contact points with Estonia and Latvia. So we're looking towards that end. I cannot clarify that any further at this point. So Kaliningrad is a very challenging thing given the Belarus NPP launch.

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Unidentified Company Representative, [71]

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Thank you. Any further questions from Mr. Sklyar?

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Vladimir Sklyar, VTB Capital, Research Division - Equities Analyst [72]

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Yes. Regarding the Kaliningrad situation within your tariff. Are you going to see Inter RAO's management fee changing or deviate?

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Unidentified Company Representative, [73]

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Mr. Miroshnichenko suggesting that more detailed explanation will be provided by the IR team. Any further questions? You're welcome.

That's it from Mr. Sklyar side, but we have another question from Fedor Kornachev at Sberbank CIB.

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Fedor Kornachev, Sberbank CIB Investment Research - Research Analyst [74]

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And actually, my questions have been answered already.

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Unidentified Company Representative, [75]

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And we have a follow-up question from Mr. Matvey Tayts.

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Matvey Tayts, Sova Capital Limited, Research Division - Research Analyst [76]

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I have a question on the dividends and the bankruptcy then. Well, these are somehow linked, right? Like (inaudible) suggesting that, a, utilities companies has decided to discontinue the ban. So -- and some are suggesting that given the ban, you can't really pay the dividend. Or does that apply to you or doesn't?

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Unidentified Company Representative, [77]

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As for Kaliningrad, well, frankly speaking, I have not read the government decree, so it would be very exciting to understand the impact of this on the company.

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Unidentified Company Representative, [78]

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And we have another follow-up question from Mr. Sklyar.

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Vladimir Sklyar, VTB Capital, Research Division - Equities Analyst [79]

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Actually, we don't see any moratorium on dividend payments. I haven't heard anything on that. So everything is going to be in line with the plan. A follow-up question. So it is just suggested that companies can make part of the strategic enterprise list are eligible to the bankruptcy ban. And as long as that ban remains, it has alleged that no dividend payments would be (inaudible), but I understand your answer.

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Unidentified Company Representative, [80]

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Mr. Vladimir Sklyar over the follow-up question.

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Vladimir Sklyar, VTB Capital, Research Division - Equities Analyst [81]

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Yes. I think you have commented at length on the strategy day. So one further question. You see very detailed numbers on the per unit gas emissions, reductions and absolute numbers across the company. So would Inter RAO be happy to commit to particularly higher gas emission reductions? ;

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Unidentified Company Representative, [82]

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;

Yes. Just like I said, ESG block would be a key element of the strategy, which we expect to finalize in the nearest future, and obviously, the numbers will be reflected there.

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Unidentified Company Representative, [83]

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Don't seem to be -- to have any further questions on the Russian line.

And I would like to thank our investors and shareholders, if you're on the line, for taking part on this call and also for taking part in remote vote at our meeting of shareholders. And we had the quorum without using our quasi treasury stock. So thank you so much. We have collected quite a lot of ballots using remote voting. So if you have any further questions, don't hesitate to turn to our IR team, okay? We'll be happy to respond promptly. Thank you so much.

If we don't have any further questions, then I see you on the next call in August. Cheers.

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Operator [84]

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This concludes our conference call. Thank you for taking part. You may now hang up.