Rotation of Ownership in Power Generation Companies and Related Investment Risks

A major obstacle for domestic investors to make investment in the Russian electric power industry in light of unprecedented anti-Russian sanctions is considered to be industry risks mediated by the composition of owners and accompanying corporate governance. The purpose of the study is to determine the ownership structure in generation companies after the departure of foreign owners and to identify increased investment risks. The ownership structure that has been established in generating companies by 2024 is determined. A significant increase in the state's equity participation relative to domestic private capital in the ownership of these companies is revealed. General and more detailed assessments of their corporate governance are made using a new methodology of the Bank of Russia. The assessments show a relative deterioration in the quality of corporate governance, multidirectional changes in compliance with the principles of the Corporate Governance Code in companies with both a high share of state participation and domestic private capital. The investment risks related to such rotation of ownership and non-compliance of generation companies with these principles are outlined. In the generation companies, primarily the boards of directors fail to comply with the principles due to the lack of “de facto” powers delegated “de jure” to them.