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The risk shall not materially influence performance of the Issuer's obligations under securities.
7. Risks related to possible changes of prices for the Issuer’s products and/or services (separately on the
domestic and foreign markets), their influence on the Issuer’s activities and fulfillment of the obligations under
securities:
Foreign market:
The Issuer does not export electricity on the foreign market, so in this respect, risks inherent in a possible
change in prices for products and/or services on the foreign market are absent.
Domestic market:
The most significant risks for the Issuer are those related to possible decrease in sales prices for electric
power and capacity on the wholesale market. Realization of these risks leads to a decrease in revenue of the
Issuer.
In present the above mentioned risk is assessed as being insignificant.
8. The influence of a possible decline in situation in the Issuer’s industry on its activities and fulfillment
of obligations under securities:
Foreign market:
The Issuer does not export electricity to the external market, and therefore the risks associated with a
possible worsening of the situation in the global power industry, which do not affect the Russian market, are
missing for the Issuer.
Domestic market:
The Issuer is the largest hydropower company in Russia holding a key position in the national economy.
The Issuer believes that the possible decline in the Issuer’s industry, adverse changes in the operation, and
production process, construction of alternative power supply facilities by large consumers may affect the Issuer
but shall not substantially affect fulfillment of its obligations under securities.
2.4.2. Country and Regional Risks
Risks inherent in the political and economic situation in a country (countries) and region, where
the Issuer is registered as a taxpayer and/or performs its primary activity, provided that primary activity
of the Issuer in such a country (region) brings 10 and more per cent of income for the last complete
reporting period preceding the securities prospectus approval date.
Country Risks
The Russian economy has no protection against market recessions or a slowdown
in global economic
development. Nowadays, perception of country risks by investors decreases the volume of foreign investments in
Russia and has a negative impact on the Russian economy. Furthermore, as Russia produces and exports large
volumes of natural gas and oil, the Russian economy is vulnerable to changes in international prices for energy
products, and a slide in natural gas and oil prices have a significant effect on development of the Russian
economy. These events may limit the Company's access to capital and adversely affect the purchasing ability of
the Company's consumers. The Issuer supposes implementation of all the actions intended for a decrease in the
influence of such events on its activities by optimizing leverage in crisis conditions.
Furthermore, due to the world financial market crisis and a slump in industrial production, there is a risk
of a drop in demand for power, which may lead to a reduction in sales volumes and in the Issuer's proceeds, as
well as a risk of accounts receivable growth due to non-payment by power consumers.
Exposure to country risk may be indirectly assessed by credit rating with some assumptions (less political
risks for business). Due to external factors such as the decrease in the oil prices according to the results of 2014,
Russia’s rating was initially decreased from BBB at a positive forecast to BBB- with a negative forecast
(according to Standard & Poor’s international rating agency) and in January 2015 from BBB- to non-investment
BB+, which is inevitably a negative factor; however, it has a specific character connected with anti-Russian
sanctions. Depending on the continuation of this policy or its cancelation, the level of country risk will
be subject
to change. In this connection, there is possible growth in the risk connected with failure to discharge obligations
by separate foreign suppliers and contractors, contraction of the sales market and contract revision. It is worth
noting that the results of the first quarter of 2016 do not show a deterioration of the situation. According to the
International rating agency Standard & Poor's as of March 2016 the long-term credit rating of Russia on foreign
currency liabilities is maintained at "BB +" level (sub-investment) with a negative outlook on it. The situation in
Russian macroeconomics since the previous estimates S & P and Fitch did not undergo adverse changes, the
economists pay attention. In the basis of assessments is political engagement of leading rating agencies. Russian
outlook could be revised to stable if the financial situation and the prospects for economic growth in the country
will improve. The downgrade is likely to happen if geopolitical developments lead to a tightening of sanctions