Daily analyst comments

NorNickel is poised to sell off its non-core assets if the shareholders do vote at the EGM to spin them off into Energo Polyus, RBC reported quoting the company's CEO Denis Morozov. According to him, utilities assets are to be spun off in order to create value for Energo Polyus. If the spin-off is not approved and is called off, NorNickel will consider all its options, including utilities asset sale, so as not to keep the utilities stocks on the company's balance sheet.

It's noteworthy that initially the metal maker's expansion on the utilities market was attributable to the intention of NorNickel's core shareholder Mikhail Prokhorov to establish a new utilities company. He went public with his upbeat outlook for the utilities segment and voiced large-scale plans on asset acquisition. He said in the first interview after the metal maker's unbundling was announced that one of reasons behind this move is that NorNickel will not post robust growth any longer.

We believe that NorNickel could change its plans and euphoria could give way to sounder judgment. Utilities assets will not likely pay off over the next five years and we do not expect major growth in this segment. Many investors could target WGC-3 and it will be possible to sell it at a higher price than NorNickel purchased the utility ($600/kW). Foreign investors Enel and E.ON have made buyout offers to shareholders in gencos, which they have targeted, at over $700/kW. Therefore, NorNickel will likely manage to resell WGC-3 to those strategic shareholders that failed to receive gencos they are interested in.

It should be noted that this development is a negative for the utilities sector, since NorNickel's possible reluctance to roll out its utilities assets is indicative of a downbeat outlook on utilities by some strategic investors.