Industry Forecast - Russia - Q3 201526 May 2015RussiaAutosAUTOS TOTAL MARKET - HISTORICAL DATA AND FORECASTS (RUSSIA 2013-2019)

2013e2014e2015f2016f2017f2018f2019f

Vehicle production, units2,184,2661,886,6461,529,8121,486,1791,658,7861,825,6141,950,035

Vehicle production, units, % y-o-y-2.2-13.6-18.9-2.911.610.16.8

Vehicle sales, units2,820,8102,446,1441,735,3041,913,1742,293,2322,373,8372,434,547

Vehicle sales, units, % y-o-y4.6-13.3-29.110.319.93.52.6

Motorbike sales, units306,235313,939250,159254,037281,353313,285347,849

Motorbike sales, units, % y-o-y5.52.5-20.31.610.811.311.0

Vehicle trade balance, units-636,544-559,498-205,492-426,994-634,445-548,223-484,512

Vehicle trade balance, units, % y-o-y37.4-12.1-63.3107.848.6-13.6-11.6

Vehicle fleet, units43,298,54944,492,03045,590,11246,514,55647,072,51648,135,99849,131,605

Vehicle fleet, % y-o-y-3.02.82.52.01.22.32.1

Vehicles per 1,000 of population303.1312.3320.8328.2333.0341.5349.7

e/f = BMI estimate/forecast. Source: National sources, BMIClick here to explore data

SalesLooking forward,BMIbelieves that Russia's automotive industry will experience a sharper slowdown in 2015 than the 10.3% slump in vehicle sales seen in 2014. The government's announced efforts to buoy the market - such as the extension of the car scrappage scheme and subsidised auto loans scheme - will fail to address the key problems of rising inflation and the increasingly unaffordable costs of borrowing. We therefore forecast vehicle sales to fall by 29.1% in 2015, with passenger cars (-29.1%) set to fare slightly worse than commercial vehicles (-28.6%).In 2014, the sales slump came as Russia's economy slipped into recession caused by a variety of factors, including international financial sanctions imposed on the country in response to Russia's military intervention in the Ukraine crisis, the resulting currency weakness, a slump in the global price of oil over H214, and sluggish fixed investment and private consumption levels.Subsidies Not Enough To Keep The Market AfloatThe Russian government is seeking to prop up sales in the country using a fresh round of fiscal stimulus into the market.In early 2015, the Russian government earmarked a further RUB20bn (USD0.4mn) for the extension of its car scrappage scheme followed by a further USD10bn (USD166mn) in March. The program subsidises the purchase of new vehicles in return for the scrappage of older vehicles. Further to this, the government added a RUB25bn (USD424mn) extension to its subsidy program in mid-march. Of this RUB25bn budget, RUB15bn has been earmarked for the extension of the government's current scrappage scheme. On top of this, the scheme also includes RUB3bn for state purchases of commercial vehicles and RUB5bn dedicated to servicing automakers' interest on loans specifically used for re-tooling and plant modernization.More importantly, the government also committed RUB1.5bn to the reintroduction of its preferential lending scheme, first introduced in 2009 to 2011 and re-introduced for the full year 2013.The scheme offers a discount on auto loan interest equal to two-thirds of the current central bank key policy rate. This means that at the current key policy rate of 12.5%, consumers are eligible for an 8.3% discount, bringing the average car loan interest rate down to around 11.5% from 21.1%. The scheme requires consumers to provide an upfront deposit of at least 30% of the value of the car, which is far higher than the 15% deposit required in the previously successful 2009-2011 loan scheme.As we have stated before,a program targeted at reducing effective lending rates on car loans is a useful stimulus measure for markets such as Russia where interest on car loans have risen dramatically following the dramatic rate hikes seen since November 2014.This is especially pertinent in Russia where more than 45% of new cars are traditionally purchased on credit.However, while we think the preferential loan scheme and scrappage schemes will help slow the fall in sales, we do not believe the stimulus will be enough to reverse the market slowdown over 2015. The scheme will struggle to turn sales declines into growth due to three key reasons: (a) rising vehicle prices, (b)worsening private consumption factors, (c) declining corporate investment.Firstly, car price inflation continues to remain an issue since the run on the rouble in Q414 led to a significant drop in the currency's exchange value. Carmakers have been forced to increase prices after the rouble's collapse led to higher inflation of components - especially imported components - and dragged down repatriated earnings. Highlighting the pricing pressures automakers are feeling,AvtoVAZraised the prices of itsLadamodels by 9% in January 2015 despite the automaker boasting that up to 81% of components are sourced locally. With prices rising in conjunction with interest rates, consumers are seeing their real purchasing power diminishing dramatically as wage growth fails to keep pace.Secondly, with our Country Risk team forecasting a 5.2% decline in GDP, Russia's macroeconomic foundations are looking increasingly unstable, which will weigh onconsumerdemand for cars over the year. More consumers will steer clear of locking themselves into loan contracts owing to falling real wages across the country. With our Country Risk team forecasting inflation to average 15% without an equivalent rise in wages in 2015, consumers will remain less able to service their car loan debts over the year. The rise in unemployment will also force consumersto cut back on big-ticket items in an effort conserve savings in case of a future job loss.Thirdly, high interest rates and a poor growth outlook for the economy will also slow business and government purchases of new vehicles. With a poor outlook for growth and an expectation of future monetary easing over 2015 and 2016, Russian firms will delay their investments this year, waiting for a more opportune moment to ramp up capital expenditure. As a result, we expect sales of new vehicles, especially commercial vehicles to remain weak.As a result, we maintain that risks in the Russian automotive market remain heavily weighted to the downside. The worsening mix of falling consumer confidence, currency fluctuations, growing unemployment and falling fixed investment will increase uncertainty in the economy over 2015.Subsidy Stimulus Is No Remedy For StagnationRussia - Vehicle Sales Forecast, Units

e/f=BMI estimate/forecast. Source: AEB, BMIClick here to explore dataProductionIn 2015, we forecast production of new vehicles to fall 18.9% to a five-year low of 1.529mn vehicles thanks to tumbling domestic demand and the weakness in the Russian rouble, which has raised input costs for automakers in the country. More specifically,we forecastpassenger car and commercial vehicle outputin 2015tofallby20.1% and9.1%, respectively. This represents an acceleration of declines seen in 2014 whenproduction fell by 13.6%.Output Mirroring Sales DeclinesRussia - Vehicle Output Forecast, Units

f=BMI forecast. Source: BMI, OICAClick here to explore dataWith Russia's automotive manufacturing industry geared towards domestic consumption rather than exports, falling domestic sales (see 'sales' section of this chapter) will provide the main headwind to domestic production in 2015 and 2016. Indeed, the fall in domestic has already pusheda number of major manufacturers to trim their work schedules and workforces in H115 with total vehicle production in the country having fallen 20.7% year-on-year in Q115, according to the Federal State Statistics Service (Rosstat).Q1 Output A Sign Of Things To ComeVehicle Output, Units

Source: RosstatThe most notable of decisions by major automakers to cut back production was General Motor Company's decision to idle its operations in the country indefinitely. At a charge of USD600mn the company is shuttering production at its wholly-owned St Petersburg plant and freezing its joint ventures withAvtotorandGAZ Group.The closure will have a significant impact on production since we estimate that in 2014, GM-produced passenger cars accounted for 8.1% of total output in the country.The fall in output created by GM's exit is also being exacerbated by cuts from other major manufacturers. Low sales have indeed prompted major companies such asRenault,Nissan,AvtoVAZ,Ford Motor,PSA Peugeot CitroenandVolkswagento all announce significant suspensions to production up until July with a significant cut in staff numbers as well. In the heavy truck and bus segments, Russia's largest truck maker,Kamaz,will impose a three-day working week from March 2 until May 24,whileUAZhas planned for the possible lay-off of up to 2,400 workers from April this year.Furthermore, direct investment into the sector will also dried up in 2015. In 2014, new greenfield investments from foreign automakers were still flowing into the country despite declines in sales. These included,Chinese autos manufacturer Great Wall Motor'sCNY2.1bn (USD337mn) investment into in a vehicle production site in Tula Oblast, Russia with an expected annual capacity of 150,000 units. However, in 2015 we expect announcements such as this to remain minimal. In evidence of this,BMW Motorannounced in May it was delaying its decision on whether or not it would commit to building a plant in the country.TradeIn an effort to protect revenues from falling domestic sales, automakers in Russia have pledged to ramp up exports. Most notable of these announcements have come from home-grown vehicle manufacturers KAMAZ, AvtoVAZ and GAZ group. These producers have pledged to double exports over the next five years when compared with export volumes in 2014. More specifically, AvtoVAZ will seek to double exports to 100,000 cars in 2015, GAZ group is aiming to raise exports from 17% of total production to 30% of total production by 2019 and KAMAZ aims to raise export sales up from 18% of total sales in 2014 to 20-30% by 2020. Currently, vehicle exports are heavily focused on CIS countries such as Kazakhstan and Belarus.This is a significant change to pre-2014 years when exports historically accounted for a small 6-7% of the total production. While we believethere is scope for Russian autos exports to grow in the longer term as trade ties are strengthened through the country's membership of the WTO, we believe that Russian main export markets, CIS countries like Kazakhstan, Uzbekhistan and Belarus, still remain largely undeveloped. As a result, we believe total sales of new vehicles in these countries will continue to remain limited when compared to more developed countries, which is therefore limiting export growth opportunities in the region.On the import side, In August 2014,Iranian carmaker Iran Khodro Industrial Group (IKCO) announced that it plans to export 10,000 vehicles to Russia. According to CEO Hashem Yekehzare, the move is in line with the company's efforts to increase its world market share, reports the Fars News Agency. IKCO intends to sell one-third of its cars in international markets, according to Yekehzare. He said: 'Meeting Russian standards is the first step to enter this market. But what is important is to provide suitable after-sales services to our customers in this market.'Economic Analysis - Shift To Free Float Will Not Impact Rouble, Short-Term19 Aug 2014RussiaMonetary PolicyThe Central Bank of Russia (CBR) introduced changes to its managed-float exchange rate regime on August 18, in accordance with its plan to gradually transition from a managed-float towards a purely inflation-targeting regime by end-2014. Over the long-term, abandoning of FX intervention will allow Russia's deteriorating macroeconomic fundamentals to drive gradual depreciation of the rouble in the coming years (see 'Even More Bearish On The Rouble', January 20).However, over a multi-month time horizon, the CBR's shift towards a free-float regime will have limited impact on the rouble, and, as such, we expect sideways trading of the unit by year-end. From a fundamental perspective, the expansion of Russia's current account surplus that we forecast for 2014 (driven mainly by the sharp drop in import growth, which will benefit the trade surplus) will provide solid support for the unit.In addition, geopolitical risks from the Ukraine crisis appear to have been already priced in by the markets, eliminating another potential trigger for a rouble sell-off in the coming months. Market selling pressure on the currency has eased, even though geopolitical tensions between the West and Russia over Ukraine remained elevated in recent months, as reflected in the amount of total FX sales by the CBR decreasing from USD22.3bn in March to zero in both June and July. We do not expect selling pressure to mount in the near future, barring any direct military confrontation between Russia and Ukraine.CBR's Steps To Have Limited Impact On Rouble, Short-TermRussia - RUB/USD Exchange Rate, Daily

Source: BMI, BloombergThe abandoning of FX intervention means that the CBR will rely on its benchmark interest rate as a monetary policy tool. This should simplify the CBR's communication with market participants and improve the effectiveness of monetary policy transmission. The transition should also bolster perceptions of CBR independence and inflation fighting credentials, as the CBR shows it is committed to its transition plan despite slowing economic growth.Against this background, we reiterate that the CBR will remain focused on inflation targeting in the coming months. Since we expect inflation, at 7.5% in July, to abate by year-end, we reiterate our view that the CBR will hold rates in the coming months.Slower consumer price growth will be driven by both weak demand-side inflationary pressures and limited upside risk from Russia's recent food embargoes on Western states.For 2015, the transition means that the CBR may be prone to tighten monetary policy to tighten rouble sell-off and rising inflationary pressures. Nevertheless, our core scenario remains that in line with receding geopolitical risks, stabilising rouble and weaker inflationary pressures, the CBR will cut its benchmark rate to 7.25% by end-2015 from 8.00% in August 2014.Industry Trends And Developments - Industry Trends & Developments - Russia - Q3 201507 Apr 2015RussiaMedical DevicesPoor Medical Device Import Performance Expected In 2015We note that quarterly import growth was negative between Q213 and Q214,and only started to show positive signs of growth in Q314.Due to the import restrictions imposed in February 2015 as well as the weakened currency, we believe that medical device imports will post further declines in 2015.Russian medical device imports increased by 5.3% in the three months to October 2014, to USD1,221.0mn; this performance was worse than 8.4% growth recorded in Q314 but an improvement over the H114 growth rate of -18.5%. Only two product areas recorded growth, other medical devices (18.9%) and diagnostic imaging consumables (0.5%). However, all other categories recorded decreases led by dental products (-7.9%), orthopaedics & prosthetics (-4.3%) and patient aids (-2.0%).In the 12 months to October 2014, imports fell by 22.8% to USD4,544.9mn. Only two product areas recorded a very small amount of growth, consumables (0.4%) and dental products (0.2%). All other categories recorded double-digit decreases led by diagnostic imaging (-44.4%), patient aids (-17.8%) and other medical devices (-14.2%).Slow Medical Device Export Growth Expected In 2015We note that quarterly export growth has gradually slowed down since Q313 and it fell by double digits in Q414. Due to the poor economic performance of key trade partners such as Ukraine, and slow economic recovery in the eurozone markets, we believe that exports will continue to post negative growth in 2015.Russian medical device exports decreased by 18.9% in the three months to October 2014, to USD33.6mn; this performance was a slight improvement over the Q314 growth rate of -21.8%, but worse than the H114 growth rate of 13.0%.All product areas fell in value apart from orthopaedics & prosthetics, which rose by 50.4%. Strong declines were recorded in patient aids (-41.6%), diagnostic imaging (-28.3%), other medical devices (-22.1%) and consumables (-19.6%).In the 12 months to October 2014, exports rose by 4.4% to USD148.4mn. All categories increased in value apart from consumables (-8.3%) and dental products (-2.4%). Patient aids recorded the fastest growth rate (14.5%), followed by other medical devices (11.5%) and diagnostic imaging (7.3%). The largest product areas were other medical devices, worth USD48.3mn, and diagnostic imaging, worth USD42.5mn.Medical Device Market To Contract In US Dollar TermsThe latest market forecasts from BMI indicate that the medical device market will contract by a CAGR of 2.9% to 2018, in US dollar terms; this is the lowest growth rate in the region. The CAGRs will range from -1.6% for consumables to -4.0% for diagnostic imaging. The market is forecast to decrease from USD6.7bn in 2013 to USD5.8bn in 2018, due to the weakening of the rouble. However, in local currency terms, the market is forecast to grow by a 2013-2018 CAGR of 7.2%, from RUB214.0bn in 2013 to RUB302.3bn in 2018.Spending On High-tech Medical Care To IncreaseIn February 2015, the government allocated over RUB26bn (USD433.3mn) for the provision of high-tech medical care that is not covered by the compulsory health insurance system. A grant of RUB5bn (USD83.3mn) will be provided to various regions in the country from the federal budget,while the regions themselves will fund approximately RUB21bn (USD350.0mn) of their own capital. The federal budget allocation will rise to R6bn (USD100mn) in 2016 and R6.2bn (USD103.3mn) in 2017. The purpose of the subsidies is to ensure that spending on high-tech care grows by 1.5 times between 2013 and 2017, helping to reduce mortality.High-tech medical care includes treatment of the abdominal cavity, neurosurgery, oncology, paediatrics and cardiovascular surgery.New Health Insurance Legislation Will Lead To SavingsOn January 1 2015, new legislation came into force regarding the financing of the healthcare system. The costs of medical facilities will no longer be funded by the federal budget; instead they will be covered entirely by the Obligatory Medical Insurance (OMI) fund. The amount of funding for each hospital, clinic or diagnostic centre will be determined by the number of potential patients in the area. Critics of the reform, such as the Independent Institute for Social Policy, have stated that healthcare professionals were not consulted on the amendment, and that the aim of the legislation is to cut costs rather than improve the quality of services for those who cannot afford private care.Federal Programme To Improve Geographical Distribution Of Physicians In 2015In November 2014, the government extended the Zemsky Doctor programme that provides financial incentives to young doctors to work in rural areas. The programme was implemented in 2011 as there is an excess of physicians in major cities and an acute shortage in rural areas. Doctors aged up to 45 are paid R1mn (USD20,408) to live and work in rural areas. Over the 2012-2014 period, 18,000 doctors signed up to the programme. The government has allocated R3.2bn (USD653,061) to draw a further 6,400 doctors into rural areas in 2015.Access To Healthcare Expected To Decline Due To Hospital ClosuresIn November 2014, thousands of medical staff and patients protested in Moscow over reforms that are taking place in the health system. Vladimir Putin made healthcare reform a priority when he returned to the presidency in May 2012, and a plan was formed to reduce the health system's reliance on the federal budget and have the costs of all health centres across covered by the Obligatory Medical Insurance (OMI) system by January 2015. However, the transition has involved hospital closures and staff redundancies, which are placing huge pressure on remaining staff. Some specialists have to consult with 50 patients in a six-hour period leaving them with very little time to examine patients, complete paperwork and prescribe the required tests. Doctors are expecting this situation to worsen due to a leaked document from Moscow's City Hall which indicates that there are plans to close 28 medical centres over the next two years, including 18 hospitals, and to merge smaller centres with larger hospitals.Leonid Pechatnikov, Deputy Mayor for Social Issues, pointed out that the document was not a final plan, but a proposal based on the results of an expert assessment. City officials had ordered three separate expert studies on the healthcare system in order to produce the modernisation plan. Pechatnikov stated that it would be necessary to merge smaller facilities with larger ones as some hospitals lack the full range of facilities. Therefore, under the new system, patients would no longer need to be sent urgently to a larger institution for treatment that cannot be obtained at a smaller facility. Pechatnikov also claimed that merging facilities would ensure a more efficient use of space and that Russia should emulate what is happening globally and create large, multi-specialisation hospitals.Medical personnel argue that the document is more than a proposal and that cuts and redundancies have already begun. The number of redundancies is escalating every day and there are fears that there will be a severe shortage of staff at the time of year when there is a spike in the number of illnesses. Doctors claim that the transformation has been motivated more by profit than the optimisation of Moscow's medical institutions, as the vacated premises, which reportedly occupy expensive plots of land, will be handed over to the Mayor's Office. Private centres are opening in tandem with the closures, which charge patients considerably more for services. Everyone is in agreement that healthcare reform is necessary, but medical staff feel that it shouldn't be carried out so rapidly. The research guiding the document has also been criticised with doctors claiming that it was conducted over the summer when people are away on holiday and hospitals have fewer patients.In 2013, Moscow's Hospital No. 11 was merged with the city's Clinical Hospital No. 24 as part of the reform. A neurologist from Hospital No. 11 said that salaries fell from an average of RUB60,000 (USD1,602.6) RUB20,000 (USD534.2) after the move, and the new leadership viewed the staff as freeloaders. He thinks that the reorganisation will adversely affect the city's patients, with the rich few going to commercial centres for expensive consultations and the masses with an average monthly salary of USD300 visiting 'barefoot doctors'. Another doctor from Hospital No. 11 believes that the reform should be carried out by professionals who won't be guided by profit rather than officials who are more interested in profits than improving healthcare.Days before the protest, the government acknowledged that the reform was being conducted solely by administration officials rather than medical professionals, so members of the State Duma submitted a draft law calling for the establishment of a public commission which will make decisions on how to carry out the ongoing reforms. Sergei Kalashnikov, head of the Duma's health committee, said that legislation must be put in place to ensure that the reforms are only implemented after they have been approved by members of public commissions which are composed of medical professionals, patients and members of the public. Following the protest, Health Minister Veronika Skvortsova promised that the MoHSD would take into account all views expressed by doctors and patients as it works on the reforms.Non-communicable Diseases On The Rise Due To Poor Lifestyle ChoicesIn October 2014, Nikolai Gerasimenko, first deputy chairman of the Health Committee of the State Duma, commented on the impact that lifestyle choices are having on the population's health. He stated that non-communicable diseases are on the rise as people tend to eat and drink whatever they like without any regard for their health, and they visit the doctor if they subsequently become ill. Gerasimenko claimed that personal lifestyle choices are to blame for 55% of disease cases, while genetics account for 15-20% of cases, environmental factors such as water, air and labour conditions are responsible for a further 15-20% of cases, and limited medical resources 10-15%. In order to improve the situation, Gerasimenko said that parents need to educate their children at an early age about the importance of adopting healthy choices in order to protect their health. A hindrance is the lack of promoting healthy lifestyles in the media and the vast advertising of fast food and sugary drinks on television. More education is also required on how to cook healthy meals.Gerasimenko stated that, at the legislative level, various projects are being developed in order to motivate people to monitor their health. For example, a law has been passed authorising companies to invest 0.2% of their profits in improving employees' fitness levels. The government has introduced a number of laws aimed at reducing tobacco and alcohol consumption, and while these have been deemed hostile, they have been effective, and mortality through alcohol and tobacco use has declined. Gerasimenko believes that employers and the state have a responsibility to help people quit smoking as well as the individuals concerned. Obesity is huge problem in Russia, and suggestions to help combat this include requesting cafes and supermarkets to display the nutritional values of their products.Expensive Medical Equipment Underused Due To Lack Of WarrantiesIn June 2014, it was reported that up to 40% of expensive medical equipment that was purchased under the national Health project has spent a significant amount of time out of use due to malfunctions, even in the most remote regions, according to the International Medical Device Manufacturers Association (IMEDA). It takes months to repair equipment and replace worn parts due to the shortage of funds and competent staff in clinics, lack of parts and the bureaucracy involved in conducting tenders for repairs. In order to make a one-off repair, it is required by law to hold a competition to hire a specialist who can make a diagnosis of the broken instrument. Documentation then needs to be prepared and a competition announced for the repairs. The competition lasts for one month but the whole procedure can take around three months to complete. This leads to delays in treatment for patients, who in some cases are suffering from serious diseases such as cancer.A lot of equipment is purchased without a service package and is therefore not regularly checked; the domestic company Electron sold 458 units of diagnostic equipment in 2013, including 28 scanners, but only product one was purchased by the public health system with an extended warranty. The company believes that up to 25% of the X-ray machines and scanners it has previously sold are now not being used due to the lack of servicing and improper handling. Becton, Dickinson and Company claims that 10-15% of the 1,000 diagnostic devices it has sold to Russian clinics are malfunctioning or idle due to a lack of consumables. GE Healthcare in Russia estimates that only around 15% of the 1,000 MRI and 2,000 CT scanners installed in Russian hospitals by different manufacturers are on service contracts and regularly serviced, compared with 70-80% of such equipment in Europe.New Cancer Centre To Be Built In The Voronezh RegionIn June 2014, plans to construct a new cancer centre in the Voronezh region at a cost of around RUB8bn (USD0.2bn) were announced. The new centre will be jointly developed by experts from Voronezh and Germany. Land for its construction has already been obtained. The existing Voronezh Oncology Center is the only hospital in the region that can provide care for cancer patients, including high-tech medical treatment. Since mid-2013, RUB650mn (USD18.5mn) has been spent on new equipment and repairs at the hospital as part of the healthcare modernisation programme. Over 10,000 patients are treated at the hospital every year.Midwife Points And GP Offices To Be Constructed In The Kirov RegionIn May 2014, it was reported that 65 midwife points (FAPs) and seven GP offices will be constructed in the Kirov region over a two-year period at a cost of RUB195mn (USD5.5mn). The work will be completed by Kirov-Chepetskoye Construction Management. Over the 2011-2013 period, major repairs were carried out at 81 FAPs and 95 GP offices in the region, under the healthcare modernisation programme. Around 65 FAPs require complete reconstruction.New PET Centre Opens In UfaIn May 2014, a new positron emission tomography centre was opened in Ufa, construction of which began in October 2012. The centre was built under a joint project between the state corporation RUSNANO, local manufacturer RosMedTechnology and the Hungarian company Mediluxto create the first federal network of diagnostic PET centres in Russia. Further centres are to be opened in Lipetsk, Orel, Tambov, Bryansk, Yekaterinburg, Samara, Novosibirsk and Kaluga.The centre received investment worth RUB6.4bn (USD0.2bn), RUB2.4bn (USD0.1bn) of which came from RUSNANO. It has been equipped with high-tech equipment manufactured by GE Healthcare.Production of short-lived isotopes and radiopharmaceuticals takes place at the centre, which has a total area exceeding 2,800 square metres. A robotic radiosurgery 'CyberKnife' capable of removing tumours close to vital organs with sub-millimetre accuracy will also be launched at the centre in the near future. The centre has a radiosurgery department, allowing patients to be diagnosed and treated in the same facility. All procedures at the centre are free of charge for residents of Bashkiria. As of May 2014, over 170 patients had been diagnosed at the centre. It is hoped that the capacity for diagnostic procedures will reach 5,000 by the end of 2015.RUB26.6trn Allocated to Healthcare Development ProgrammeIn April 2014, the government issued a document stipulating that RUB24.4trnwill be allocated to the state programme Development of Health for 2013-2020. Funds worth RUB2.4trn (USD0.1trn) will be sourced from the federal budget, RUB11.1trn (USD0.3trn) from consolidated budgets and RUB13.1trn (USD0.4trn) from OMI budget. The programme is being carried out in two stages; in 2013-2015, the structure of the health system will be changed and in 2016-2010, innovation in healthcare will be developed.The main objectives of the state programme include improving prevention and diagnosis through innovative technologies, developing primary healthcare, improving the provision of specialised medical care, developing palliative care and obstetric care and increasing the efficiency and transparency of supervisory functions.New Online Accounts For PatientsIn April 2014, the government was preparing to launch a new medical IT system that will enable patients to create personal accounts and access information on their doctor visits, services receivedand discharge summaries. The service is not expected to be available in all health facilities,but the National Medical Chamber will encourage providersthat haven't integrated the system to do so.New Regulations For The Pricing Of Implantable Medical DevicesIn December 2014, the MOHSD published a list of 205 implantable medical devices that are subject to state reimbursement programmes; the list will be reassessed annually. The MOHSD set a deadline of March 1 2015 for proposals to be submitted for the list in 2015;all medical devicesproposed after this date will be considered for inclusion on the list in 2016. The government also set a target date of Q315 to develop and implement regulations that will govern the pricing of medical devices included in the list.In January 2015, the MoHSD prepared the draft regulationswhich were open for public discussion until February 4 2015, and on March 9 2015, President Putin signed an amendment to Article No. 80 of the Russian Federal Law No. 323 introducing the price regulationsfor implantable medical devices on the reimbursement list.The competent authority, Roszdravnadzor, is now expected to introduce a separate state procedure for the registration of manufacturers' maximum sale prices of such medical devices, as well as maximum wholesale and retail mark-ups. It will also be responsible for maintaining a national open public register which contains this information. In March 2015, the regulator launched a website for the weekly monitoring of price dynamics.The methodology for determining maximum wholesaleprices will be available for public discussion by April 19 2015 and is expected to come into force at some point in Q215. According to the MoHSD, theregulationwill affect around 10% of medical devices on the market.New Restrictions On Medical Device Imports To Reduce TradeOn February 6 2015, the government published Order No. 102, which specifies that tenders for state procurements will be closed to foreign manufacturers if at least two bids are received from manufacturers located in a Eurasian Economic Union (EAEU) country i.e. Russia, Belarus, Kazakhstan or Armenia. We believe that the restrictions will result in a fall in medical device imports. The constraint applies to a wide range of medical devices including: Surgical needles; Certain disposable syringes; Microsurgical scissors and pincers; ECG machines; Holter ECG monitors; 1-65 slice CT scanners; Gamma chambers; Certain types of X-rays diagnostic complexes; Pneumatic micro motors for dental equipment; Dental carbide burs; Implants for ostheosynthesis; Non-implantable hearing aids; Microsurgical ophthalmic instruments; Antiseptic and sterile drapes and wipes; Gynaecological tool sets; Blood coagulation analysers; Individual blood glucose meters; and Certain blood transfusion devices.The Ministry of Industry and Trade (MIT) has been looking to protect domestic producers by restricting imports since December 2012 when the ministry produced a first draft on the prohibition of trading for foreign manufacturers and the requirement of localisation of production. However, in January 2013, the Federal Antimonopoly Service (FAS) blocked the law from coming into force, claiming that it restricted competition. The initiative unexpectedly resurfaced in March 2014,when the MITproposed to ban the importation of 66 types of medical equipment and supplies, causing alarm amongst doctors and patients with expectations of declining quality, higher prices and cartel agreements.The resolution was due to take effect in April 2014, but its adoption wasn't possible as only around 10% of imported products were also produced locally, meaning domestic production would not be able to meet most requirements.According to Philips Health in Russia, the volume of local production would not be able to fully meet the demand for high-tech equipment, a claim that Russian producers believed was groundless. Hartmann stated that the ruling would reduce its annual turnover by R1bn (USD28.4mn), force it to cut around 100 jobs and prevent the implementation of its investment projects. Local companies argued that the ruling would solve the problem of an ever-increasing volume of poor quality imports entering the country, which are provided without service support from countries such as China.Following extensive consultations, in July 2014, the MIT abandoned its plan to impose a total ban on the importation of medical devices and instead decided to apply restrictions only to products whose production capacity is able to meet the demand; where there is sufficient competition between domestic companies; and which comply with Russian GOST standards and ISO 13485. It also decided to allow foreign companies to take part in public tenders if only one bid had been submitted by a company from a Customs Union country. The MIT believed that this would promote effective competition between domestic manufacturers and support the development of innovative medical devices within the industry, although there were concerns that competition would in fact decline as that this would lead to price increases.The restrictions that were implemented in February 2015 are less severe than those initially proposed, and apply to only 45 different types of medical device.HarmonisationOf Medical Device Regulations AcrossTheEAEU ContinuesOn May 29 2014, a treaty on the establishment of the Eurasian Economic Union (EAEU or EEU) was signed by the leaders of Russia, Belarus and Kazakhstan. The treaty came into force on January 1 2015, coinciding with the termination of the Eurasian Economic Community. Additionally, the Customs Union was incorporated into the EAEU's legal framework. Armenia signed a treaty to join the EAEU on October 9 2014 and this came into force on January 2 2015. Kyrgyzstan signed an accession treaty on December 23 2014 and this is expected to come into force on May 1 2015. Modelled on the EU, the EAEU has a Moscow-based executive body, the Eurasian Economic Commission (EEC), and a political body, the Supreme Eurasian Economic Council.In December 2014, the members of the EEC signed the Agreement on the Single Principles and Rules for the Turnover of Medical Devices, which will come into force on January 1 2016. The document aims to harmonise the regulatory systems governing medical devices across the EAEU, and covers the manufacturing process, market access, state registration, post-market surveillance, labelling and quality control. After January 2016, current registration certificates will be valid until December 31 2021.Over ten legal acts are expected to be drawn up in 2015; as of February 2015, the guidelines to define a safety class for medical and in-vitro devices had been agreed upon and accepted. It is possible that the list of Essential Principles of Safety and Performance of Medical Devices and common marking, labelling, and testing requirements may be published in H115. Currently, the main topic of discussion is Kazakhstan's proposal to base the common Eurasian medical device registration rules on Kazakhstan's existing medical device approval model.NewMeasures To Reduce Circulation Of Unregistered Medical DevicesIn January 2015, the government implemented amendments to the civil and penal codes and significantly increased penalties for the manufacturing, sale or trade of counterfeit and unregistered medical devices, in accordance with the MEDICRIME European convention signed in 2011. Penalties of up to R2mn (USD33,333) and a jail term of up to 12 years can now be given for such offences. The distribution of unregistered medical devices which exhibit characteristics unlike those declared during the registration process has alsobeen listed as a separate crime. For this reason, Roszdravnadzor is to double the number of inspections that it conducts in the medical device sector in 2015.Potential Medical Device Price Freeze Would Prevent Severe Drop In DemandAccording to the Agami Center dental clinic in Moscow, medical equipment prices rose by an average of 35% in the last two weeks of December 2014, with implants increasing by 50%, due to escalating exchange rates. Only large players with a narrow specialisation were unaffected by the currency devaluation. For instance, the S. Fyodorov Eye Microsurgery State Institution, which carries out 300,000 operations annually, is able to dictate procurement terms to their suppliers as they will purchase goods elsewhere if prices increase. In 2013-2014, the institution was able to purchase consumables at previous years' prices.However, the government is preparing a special cost containment programme which could see the prices of medical devices frozen for three years, as contracts of that duration replace annual tenders. According to the Center of Social Economy, this would be advantageous for manufacturers as it would enable them to secure long-term product sales, although margins would be smaller, and they could also cut marketing costs. State institutions would benefit from obtaining medical devices at 2014 prices.Medical Advertising Ban May Be LiftedIn April 2014, the Duma Economic Policy, Innovative Development and Entrepreneurship Committee recommended to the State Duma that it cancels the law on advertisingmedical services and equipment that came into force in January 2014. The law allows medical products and services to be advertised only in specialist medical publications and at medical fairs and exhibitions. However, since its introduction, the Duma State Regulation of Excise Goods and Advertisement Committee has seen a growing number of fraudulentadvertisements for so-called miraculous medical devices, as genuine healthcare providers have not been allowed to advertise their services. The suggestion to lift the ban has been supported by the Federal Anti-Monopoly Service.Recession To Stifle Spending In 2015BMI is expecting Russia to enter a severe recession in 2015, mainly due to the credit market tightness and elevated inflation that will result from the sharp FX sell-off that took place in December 2014. BMI now expects real GDP to contract by 5.6% in 2015, compared with previously forecasted growth of 0.5%. Real GDP growth for 2016 has been revised down from 1.1% to 0.2%. While Russia's currency crisis has stabilised since December 16 2014, when the rouble lost 35% of its value, the rouble is now trading at levels equal to one-third of its value at the beginning of 2014. Unless oil prices rise, the rouble is unlikely to strengthen in the coming quarters.Banks have started to face growing funding shortages due to accelerating deposit flight, and excessively high funding costs in 2014 that resulted from aggressive monetary tightening by the Central Bank of Russia (CBR) and financial sanctions from the West. The 3-month interbank lending rate - Mosprime - has reached an all time high of 28.2%, a sign that there is a growing liquidity crunch in the system. Additionally, the FX sell-off has increased the banking sector's external debt, with the total due to be repaid by end-2015 valued at USD35.8bn.The five emergency rate hikes by the CBR will lead to prohibitively high interest rates for borrowers, effectively halting credit demand. The non-financial sector also has to repay USD62.9bn in external debt by end-2015. With this debt burden doubling in value in rouble terms as of December 2014, both households and businesses will struggle to meet their debt obligations, meaning credit defaults will dramatically increase in 2015.Elevated inflation is expected to affect domestic demand, as the FX sell-off further inflated import prices. CPI accelerated to 9.1% y-o-y in November 2014, and double-digit inflation readings are expected in 2015. Due to this, BMI has downgraded its household consumption growth forecast from 1.2% to -5.0% in 2015. The deep recession in 2015 and possibly 2016 will lead to a sharply-reduced demand for imports, as the severe currency weakness will make foreign goods extremely expensive for the average Russian.Currency Forecast - Rouble To Find Temporary Strength04 Nov 2014RussiaForexBMI RUSSIA CURRENCY FORECAST

Spot20142015

RUB/USD, ave36.0937.4441.08

RUB/EUR, ave48.4850.1751.35

Policy Rate, % eop9.509.508.50

Source: BMI, Bloomberg. Last updated: November 4, 2014

BMI View:The current selloff of the rouble isbecomingoverdone and we expect the currency to consolidate against the US dollar going into 2015.Beyond thiswe expect the rouble to return to a long-term trend of gradual depreciation owing to lack of structural reform, high inflation and a deteriorating current account position.Short Term OutlookWe believe the Russian rouble has moved into a weaker trading range against the US dollar, which will become entrenched as the central bank reduces its intervention in FX markets. Over the remainder of 2014 we believe the sharp depreciation will abate with the rouble experiencing temporary reprieve before returning to its depreciatory path on the back of underlying economic fundamentals in H115.Rouble Takes Out All Previous ResistanceRUB/USD Spot Weekly

Source: Bloomberg, BMIDespite having broken though all previous resistance lines we feel that the current breakout is overdone and a retracement is likely in the short term. Technical momentum indicators also suggest that the rouble has become heavily oversold on daily, weekly, and monthly timeframes.Fundamental factors align with this view as a consolidation in the price of Brent crude around the USD85/bbl level should bring support to the rouble given their recent correlation. We also believe thesharp 150 basis pointOctober rate hike by the central bank willlend support to the rouble over the coming weeks. Finally, the gradual easing of political tensions will reduce uncertainty in the markets and contribute to the stabilisation. Therefore we expect the rouble to pull back to RUB41.80/USD at end-2014, averaging RUB37.44/USD for the year.Core ViewBeyond a short-term correction we believe the Russian rouble will return to a depreciatory trend, potentially as early as H115, due to lack of any visible structural reform by the Russian authorities. The state currently controls large portions of the country's energy, transport and banking sectors. This situation will be slow to change as the current privatisation schedule mostly proposes stake reductions as opposed to full exits (see 'Balance of Payments Crisis Risk Rising',September 15, 2014). This substantial state footprint in the economy contributes to a significant lack of competitiveness which exerts pressure on the current account via increased import reliance.We expect theongoing erosion of the current account surplus to contribute to further depreciation of the rouble over the next few years, particularly given that heavy government involvement in the economy will limit capital inflows due to a lack of domestic investment opportunities.Slowing economic activity, and waning consumer import demand has likely slowed the erosion of the current account surplus until now. However we expect this dynamic to subside with Russia eventually realising a current account deficit in 2017 of roughly USD10bn, equating to -0.50% of forecasted GDP for that period.Current Account SlidingRussia - Current Account Balance, USDbn

Central Bank of RussiaClick here to explore dataWe also believe that weak productivity will keep supply-side inflation elevated as demand for goods and services continually exceeddomestic production. In light of this we expect Russian inflation to remain considerably higher than its main trading partners for a considerable period of time. Since this inflation differential will be driven by weak productive capacity rather than strong growth, we believe this will play out via rouble depreciation against other major currencies. As a result we forecast the rouble to depreciate to an average value of RUB41.08/USD over the course of 2015; this incorporates a modest pull back in early 2015 and then subsequent depreciation. For 2016 we forecast the rouble to average RUB42.13/USD.Lofty Russian InflationRussian Inflation vs. Other Major EconomiesMarket Strategy - Oil Prices A Major Risk To Rouble Stabilisation19 Dec 2014RussiaForexRussia's currency crisis has abated since December 16 when the currency lost 35% of its value versus the US dollar at one point despite FX intervention and aggressive monetary tightening by the Central Bank of Russia (CBR). Support for the rouble has come from stabilising global oil prices; regulatory relaxation and liquidity support from the CBR to the banking sector; further FX sales; and verbal intervention by the government pledging to use fiscal buffers to support the unit.Oil Prices KeyRussia - RUB/USD Exchange Rate, Weakly And Brent Crude, USD/bbl (RHS, Reversed)

Source: BloombergIf oil prices head further down, however, we would expect the rouble to again suffer steep losses, presenting the authorities with a set of unpalatable policy choices. Policymakers have signalled reluctance to hike rates further - following 10 percentage points of rate hikes throughout 2014 - or to burn through FX reserves - deemed of strategic significance in the context of restricted access to international capital markets. But if they fail to do so, then the authorities would be likely to resort to a form of capital controls to stave off further erosion in the rouble's value, such as requiring exporters to convert hard currency assets into roubles. Even in a light form, capital controls would be a highly risky strategy, as they might bar Russia from external financing for quite some time.

National Sources/BMIClick here to explore dataRisks to OutlookThe main risks to our short-term forecast are to the downside. Given the pace at which the currency has been depreciating, this may continue longer than expected, particularly if the recent sell-off mutates into a currency run. Nevertheless, over the longer term there remains a risk that we are overly pessimistic on the outlook for structural reform as a hastened privatisation schedule would bode well for domestic productivity, the current account position and the value of the rouble.Industry Forecast - Russia Power Forecast Scenario06 Feb 2015RussiaPowerElectricity Generation And Power Generating CapacityTOTAL ELECTRICITY GENERATION DATA AND FORECASTS (RUSSIA 2013-2018)

20132014e2015f2016f2017f2018f

Generation, Total, TWh1,014.6701,004.278979.240992.2361,004.9231,011.821

Generation, Total, % y-o-y0.217-1.024-2.4931.3271.2790.686

Generation, Total, KWh per capita7,103.8577,049.1646,891.2907,000.9307,109.5937,178.930

Generation, Thermal, TWh672.767636.285617.214611.997618.193628.387

Generation, Thermal, % y-o-y-0.921-5.423-2.997-0.8451.0131.649

Generation, Thermal, KWh per capita4,710.1434,466.1704,343.5774,318.0714,373.5684,458.441

Generation, Thermal, % of total generation66.30463.35763.03061.67961.51662.105

Generation, Coal, TWh184.075177.632172.303173.561175.019176.374

Generation, Coal, % y-o-y-0.500-3.500-3.0000.7300.8400.774

Generation, Coal, KWh per capita1,288.7371,246.8261,212.5661,224.5981,238.2191,251.385

Generation, Coal, % of thermal electricity generation27.36127.91727.91628.36028.31128.068

Generation, Coal, % total electricity generation18.14117.68817.59617.49217.41617.431

Generation, Natural Gas, TWh474.329445.869432.493426.352431.681440.746

Generation, Natural Gas, % y-o-y-1.000-6.000-3.000-1.4201.2502.100

Generation, Natural Gas, KWh per capita3,320.8473,129.6163,043.6223,008.2143,054.0403,127.121

Generation, Natural Gas, % of thermal electricity generation70.50470.07470.07269.66669.83070.139

Generation, Natural Gas, % of total electricity generation46.74744.39744.16642.96942.95743.560

Generation, Oil, TWh14.36312.78312.41812.08411.49311.266

Generation, Oil, % change y-o-y-3.602-11.000-2.860-2.690-4.890-1.970

Generation, Oil, KWh per capita100.56089.72887.38985.25981.30979.936

Generation, Oil, % of thermal electricity generation2.1352.0092.0121.9751.8591.793

Generation, Oil, % of total electricity generation1.4161.2731.2681.2181.1441.114

Generation, Nuclear, TWh161.380184.038170.879185.199190.292185.668

Generation, Nuclear, % y-o-y-2.95414.040-7.1508.3802.750-2.430

Generation, Nuclear, KWh per capita1,129.8461,291.7861,202.5431,306.7091,346.2681,317.322

Generation, Nuclear, % of total electricity generation15.90518.32517.45018.66518.93618.350

Generation, Hydropower, TWh177.912181.292188.544192.315193.568194.824

Generation, Hydropower, % change y-o-y8.2041.9004.0002.0000.6520.649

Generation, Hydropower, KWh per capita1,245.5891,272.5161,326.8581,356.9191,369.4491,382.291

Generation, Hydropower, % total electricity generation17.53418.05219.25419.38219.26219.255

Hydro-Electric Pumped Storage, TWh-0.919-0.971-1.003-1.034-1.065-1.097

Hydro-Electric Pumped Storage, % y-o-y17.9725.6823.2253.1243.0292.940

Hydro-Electric Pumped Storage, KWh per capita-6.434-6.817-7.055-7.295-7.536-7.780

Hydro-Electric Pumped Storage, % total electricity generation-0.091-0.097-0.102-0.104-0.106-0.108

Generation, Non-Hydropower Renewables, TWh3.5303.6343.6053.7603.9364.039

Generation, Non-Hydropower Renewables, % change y-o-y0.4252.954-0.8094.2944.6832.623

Generation, Non-Hydropower Renewables, KWh per capita24.71425.50925.36826.52727.84428.656

Generation, Non-Hydropower Renewables, % of total electricity0.3480.3620.3680.3790.3920.399

e/f = BMI estimate/forecast. Source: National sources, BMIClick here to explore data

TOTAL ELECTRICITY GENERATION DATA AND FORECASTS (RUSSIA 2019-2024)

2019f2020f2021f2022f2023f2024f

Generation, Total, TWh1,026.6381,036.2371,059.7761,070.8351,078.0181,084.367

Generation, Total, % y-o-y1.4640.9352.2721.0440.6710.589

Generation, Total, KWh per capita7,306.9787,401.1237,598.5567,710.1077,796.5817,879.139

Generation, Thermal, TWh636.720647.435649.441657.023666.252679.859

Generation, Thermal, % y-o-y1.3261.6830.3101.1671.4052.042

Generation, Thermal, KWh per capita4,531.7814,624.1764,656.4664,730.6214,818.5504,939.941

Generation, Thermal, % of total generation62.02062.47961.28161.35661.80362.697

Generation, Coal, TWh177.850179.329180.584182.318183.735187.336

Generation, Coal, % y-o-y0.8370.8320.7000.9600.7771.960

Generation, Coal, KWh per capita1,265.8271,280.8211,294.7811,312.7041,328.8331,361.208

Generation, Coal, % of thermal electricity generation27.93227.69827.80627.74927.57727.555

Generation, Coal, % total electricity generation17.32417.30617.04017.02617.04417.276

Generation, Natural Gas, TWh447.798457.202458.116464.072472.008482.014

Generation, Natural Gas, % y-o-y1.6002.1000.2001.3001.7102.120

Generation, Natural Gas, KWh per capita3,187.1543,265.4763,284.6773,341.3593,413.7143,502.373

Generation, Natural Gas, % of thermal electricity generation70.32970.61870.54070.63370.84570.899

Generation, Natural Gas, % of total electricity generation43.61844.12143.22843.33743.78544.451

Generation, Oil, TWh11.07210.90410.74010.63310.50910.509

Generation, Oil, % change y-o-y-1.730-1.515-1.500-1.000-1.1660.000

Generation, Oil, KWh per capita78.80177.87977.00876.55876.00476.360

Generation, Oil, % of thermal electricity generation1.7391.6841.6541.6181.5771.546

Generation, Oil, % of total electricity generation1.0781.0521.0140.9930.9750.969

Generation, Nuclear, TWh191.906189.795209.932211.906208.377199.480

Generation, Nuclear, % y-o-y3.360-1.10010.6100.940-1.665-4.270

Generation, Nuclear, KWh per capita1,365.8701,355.5741,505.2071,525.7401,507.0541,449.444

Generation, Nuclear, % of total electricity generation18.69318.31619.80919.78919.33018.396

Generation, Hydropower, TWh195.019195.955197.317198.717200.155201.633

Generation, Hydropower, % change y-o-y0.1000.4800.6950.7090.7240.739

Generation, Hydropower, KWh per capita1,388.0281,399.5731,414.7541,430.7761,447.5871,465.091

Generation, Hydropower, % total electricity generation18.99618.91018.61918.55718.56718.595

Hydro-Electric Pumped Storage, TWh-1.128-1.159-1.191-1.222-1.253-1.284

Hydro-Electric Pumped Storage, % y-o-y2.8562.7772.7022.6312.5632.499

Hydro-Electric Pumped Storage, KWh per capita-8.027-8.279-8.536-8.797-9.063-9.333

Hydro-Electric Pumped Storage, % total electricity generation-0.110-0.112-0.112-0.114-0.116-0.118

Generation, Non-Hydropower Renewables, TWh4.1204.2114.2774.4124.4874.679

Generation, Non-Hydropower Renewables, % change y-o-y2.0192.2051.5573.1581.7054.269

Generation, Non-Hydropower Renewables, KWh per capita29.32730.07930.66531.76632.45333.996

Generation, Non-Hydropower Renewables, % of total electricity0.4010.4060.4040.4120.4160.432

f = BMI forecast. Source: National sources, BMIClick here to explore data

ELECTRICITY GENERATING CAPACITY DATA AND FORECASTS (RUSSIA 2013-2018)

20132014e2015f2016f2017f2018f

Capacity, Net, MW237,808.2246,161.5247,746.6250,816.3251,809.6254,116.1

Capacity, Net, % y-o-y1.43.50.61.20.40.9

Capacity, Conventional Thermal, MW162,523.9164,201.2165,801.3166,250.7166,250.7167,078.6

Capacity, Conventional Thermal, % y-o-y0.81.01.00.30.00.5

Capacity, Conventional Thermal, % of total capacity68.366.766.966.366.065.7

Capacity, Nuclear, MW23,643.026,960.125,031.727,131.827,877.927,200.5

Capacity, Nuclear, % y-o-y0.014.0-7.28.42.8-2.4

Capacity, Nuclear, % of total capacity9.911.010.110.811.110.7

Capacity, Hydropower, MW50,642.553,908.954,170.454,594.654,731.056,829.5

Capacity, Hydropower, % y-o-y4.36.50.50.80.33.8

Capacity, Hydropower, % of total capacity21.321.921.921.821.722.4

Capacity, Non-Hydroelectric Renewables, MW998.71,091.32,743.22,839.32,950.03,007.5

Capacity, Non-Hydroelectric Renewables, % y-o-y6.49.3151.43.53.91.9

Capacity, Non-Hydroelectric Renewables, % of total capacity0.40.41.11.11.21.2

e/f = BMI estimate/forecast. Source: National sources, BMIClick here to explore data

ELECTRICITY GENERATING CAPACITY DATA AND FORECASTS (RUSSIA 2019-2024)

2019f2020f2021f2022f2023f2024f

Capacity, Net, MW257,653.0259,885.7264,625.8266,635.5267,658.6267,740.3

Capacity, Net, % y-o-y1.40.91.80.80.40.0

Capacity, Conventional Thermal, MW167,412.7167,580.2166,792.5165,958.6164,962.8163,808.1

Capacity, Conventional Thermal, % y-o-y0.20.1-0.5-0.5-0.6-0.7

Capacity, Conventional Thermal, % of total capacity65.064.563.062.261.661.2

Capacity, Nuclear, MW28,114.427,805.530,755.631,043.230,527.929,228.9

Capacity, Nuclear, % y-o-y3.4-1.110.60.9-1.7-4.3

Capacity, Nuclear, % of total capacity10.910.711.611.611.410.9

Capacity, Hydropower, MW59,032.861,346.463,775.666,327.069,007.571,824.4

Capacity, Hydropower, % y-o-y3.93.94.04.04.04.1

Capacity, Hydropower, % of total capacity22.923.624.124.925.826.8

Capacity, Non-Hydroelectric Renewables, MW3,093.03,153.73,302.13,306.83,160.42,878.8

Capacity, Non-Hydroelectric Renewables, % y-o-y2.82.04.70.1-4.4-8.9

Capacity, Non-Hydroelectric Renewables, % of total capacity1.21.21.21.21.21.1

f = BMI forecast. Source: National sources, BMIClick here to explore data

While Russia maintains its position as one of the world's biggest power markets, benefiting from widespread electricity export links and an abundance of natural resources for use in power generation, we maintain there is unlikely to be significant growth in the power market over our ten-year forecast period to 2024.Instead, we expect only moderate growth as severe macroeconomic headwinds and a prolonged period of geopolitical uncertainty take a toll on economic growth. The annexation of Crimea and perceived Russian belligerence towards the West has shattered investor confidence and will deter significant foreign investment in both the domestic economy and the power sector. Meanwhile, the plunge in global oil prices has led to a sell-off in the rouble. Subsequent emergency rate hikes have served to tighten credit conditions. At the same time, a shrinking population, structural risks such as the opaque business environment and weak institutional capacity continue to deter significant foreign investment.Ukraine Crisis And Falling Oil Prices Temper GrowthThe risks to our forecasts for the Russian economy and the domestic power sector will remain significant, and are firmly to the downside in 2015. Our Country Risk (CR)team forecast a severe recession as a consequence of credit market tightness and elevated inflation - a result of the sharp Russian rouble sell-off at the end of December 2014.On the back of the steep losses suffered by the rouble - due to plunging oil prices - we now forecast a 5.6% contraction in real GDP in 2015 (we previously expected growth of 0.5%). While Russia's currency crisis has stabilised since December 16 2014 - when the rouble lost 35% of its value despite aggressive monetary tightening - the rouble is now trading at levels equal to one-third of its value at the beginning of 2014. Barring any resurgence in oil prices, we fail to identify any drivers of rouble strength in the coming quarters, with the FX sell-off likely to bring about severe credit market tightness, which is the main factor underpinning our recessionary outlook for the economy.Until recently, the 58% fall in the price of oil in dollar terms has been mitigated by the 47% depreciation of the Russian rouble against the dollar, which has ensured the price of oil in roubles stayed broadly in line with government budgetary assumptions. However, the decline in the price of oil has now exceeded that of the rouble; in other words, the rouble price per barrel of oil has fallen nearly 14.0% since July 2014. This will reduce government revenue intake during 2015, particularly as our Oil and Gas team expects the price of Brent to remain suppressed averaging just USD55.0/bbl over the course of the year. In the face of the looming recession, we do expect the government to enact counter-cyclical fiscal policy, but this will be subject to tighter budgetary constraints due to reduced revenues.At the same time, Russian banks have started to face growing funding shortages on the back of accelerating deposit flight. Funding costs are also prohibitively high as a result of aggressive monetary tightening by the Central Bank of Russia (CBR), while Western sanctions have imposed restrictions on access to foreign capital. These sanctions could be extended as fighting intensifies in eastern Ukraine in early 2015 - taking a greater toll on some segments of the economy. Non-oil revenues will also suffer due to decreased consumption in the economy largely brought on by stifled economic activity and damaged purchasing power.Weak Economic Outlook To Feed Into Weak Power DemandIn this environment, the operating environment for both domestic and foreign utilities operating in the Russian power marketwill become increasingly challengingover 2015. This will present significant challenges for domestic utilities such asInter Rao,RusHydro,GazpromandRossetti,as well as foreign firms likeE.ONandFortum, which have domestic subsidiaries.Taking the aforementioned macroeconomic factors into account, higher inflation, and a near-term slowdown in household spending and broader investment will weigh on overall electricity consumption - depressing sales. Power demand in Russia correlates highly with economic development and industrial production. As such, we have downgraded our estimates for electricity generation in 2015 and 2016. We now expect generation to contract by 2.5% in 2015 and remain relatively flat in 2016. Total electricity generation will grow at an annual average rate of 0.7% to reach 1,084 terawatt hours (TWh) by 2024.Any fall in demand for electricity will feed into lower revenues for utilities. In particular, weak electricity demand could feed through into lower capacity payments in some of Russia's wholesale electricity pricing zones - weighing on the margins of utilities that have capacity in those zones. The price in the 2015 capacity auction covering Russia's first wholesale pricing zone (spanning European Russia and the Urals), fell by 3.5% to RUB128,400 (USD3,350) per megawatt hour per month. The decline was a symptom of surplus capacity due to falling demand for electricity and the introduction of new more efficient power plants. This will reduce revenues generated by utilities that are present in that pricing zone.Furthermore, a two-year freeze in electricity tariffs will have an impact on earnings as inflation surges. Russia froze tariff growth on state-regulated services including gas and electricity in 2014 - in an effort to ease pressure on household budgets and help lower inflation. With regards to the tariff freeze, Economy Minister Alexei Ulyukayev was quoted by Bloomberg as saying that gas and electricity rates, which are normally raised in July, would not be raised until July 2015 - and then only at the level of inflation in 2014.Notably, the last time that Russia failed to increase tariffs was 1999 (following the 1998 financial crisis). The annual rises have marked the final stage of power sector reforms that have dismantled previous state-owned monopolies and moved power generation assets into private hands (electricity prices for industrial users were deregulated altogether in 2011).Tightening Credit Conditions To Stall Utility InvestmentIn addition to weaker demand, tightening credit conditions are also emerging as a major downside risk to domestic utilities, as are a series of downgrades to Russia's credit rating (and the ratings of some Russian utilities themselves) over late 2014/early 2015 - to just above 'junk status'.Both credit constraints (as a result of aggressive monetary tightening by the CBR) and ratings downgrades will result in higher borrowing costs for domestic utilities and this will in turn starve the power sector of much-needed funding for new, more efficient generation capacity. State-owned banks in Russia account for a significant portion of infrastructure project financing and limiting their access to external capital is bound to have an effect on their capacity to fulfil this role. Planned projects might be delayed, particularly amongst those utilities that have large amounts of ruble-denominated debt, such as Inter Rao (64%), Rossetti (100%) and RusHydro (86%), according to Bloomberg data.We also reiterate that Western sanctions are designed to block loans from multilateral organisations such as the European Bank for Reconstruction and Development (EBRD) and the European Investment Bank (EIB). These loans had been earmarked for new public sector infrastructure projects in Russia; in 2013, Russia borrowed USD2.4bn from the EBRD and USD1.3bn from the EIB. We believe that one of the projects that will be targeted by the sanctions is a USD285mn EBRD loan to modernise the Russian grid infrastructure.Furthermore, apart from funding, the EBRD and the EIB provide considerable expertise in project management and the structuring of project finance - experience that Russia will not be able to tap for the time being.Additionally, although the weak rouble has mitigated against the adverse impact of weaker hydrocarbons export revenues (contracts are in US dollars) on the public purse, we do not expect the government to significantly boost expenditure in the power sector. On the contrary, despite recent announcements of come country-cyclical government spending, the Kremlin has repeatedly reaffirmed its commitment to the 'fiscal rule', which ties spending to the price of Ural prices (Russia's equivalent crude benchmark). This indicates growth in Russian public spending on infrastructure and power projects is unlikely to pick up any slack from the private sector and, as a consequence, we question Russia's capacity to live up to its financial commitments to fund power projects.The Russian government's promise to developed infrastructure in the newly annexed Crimean territory is a case in point. The promise of three new power plants and a gas pipeline in Crimea is already detracting from funds for projects at home - with the Russian government shelving plans for a domestic port and a bridge in Eastern Siberia. Alexei Ulyukayev, Russia's Minister of Economic Development, declared in May 2014 that the federal government was planning to spend USD4.5bn a year on Crimea's transport, energy, and water infrastructure. However, we warn the political will for the large-scale investment Moscow has promised in Crimea could fade as Russian economic growth slows.Utilities To Freeze Capex PlansAlthough there will not be an exodus of foreign utilities, overseas investors in the utilities sector will withhold investment and will concentrate on repatriating profitsrather than channelling capital into their Russian subsidiaries. Capital spending by Italy'sEneland Germany'sE.ONwas set already to fall post-2014, once they had met their government-mandated power plant investment targets (which are decided on the basis of government-led capacity supply agreements).E.ON's Russia earnings have already been hit hard by rouble volatility and its impact on euro-denominated earnings, and we note that the utility announced plans in November 2014 to break itself in two and spin off its fossil fuel-focused operations into a new company in 2016. The Russian subsidiary will be part of the new business that emerges - a unit we believe could become a bad bank for some of E.ON's more unattractive assets.With much of the country's ageing power generation capacity having been built in the 1960s and 1970s, we expect any investment that is channelled into the country's power sector to be aimed at modernising and substituting ageing thermal and nuclear power plants. Improving the inadequate transmission infrastructure will also be critical to enhancing energy efficiency.Real GDP Growth To Take A HitRussia - Real GDP Growth (% change y-o-y)

e/f = BMI estimate/forecast. Source: Federal State Statistics Service, BMIClick here to explore dataDeteriorating Relations With The West To Reorient Power PoliciesOver a longer timeframe, geopolitical risks in Russia will remain high. At the time of writing, the conflict with Ukraine is escalating and fighting has continued around Donetsk International Airport, with Ukrainian government forces capturing it from pro-Russian rebels in January 2015, only to withdraw on January 22.Regardless of what happens next, we believe that the outcome will be a long-term stalemate. Ukrainian government forces will not be able to recapture Donetsk and Luhansk for as long as Russia continues to support the rebels with arms and personnel. At the same time, the rebels lack the strength to undertake a major offensive. Given that the Russian economy is reeling from Western sanctions and falling oil prices, President Vladimir Putin has good reasons to refrain from further escalation, for this would trigger even tighter sanctions. Negotiations involving Ukraine, Russia, Germany, France, and possibly other countries will continue, and this should act as a partial constraint on Kiev's and the separatists' actions.This impasse will continue to depress the domestic economy and - by extension - the outlook for the power sector.Domestically, we expect Russia to retaliate to Western sanctions by targeting specific Western companies and restricting their operations in Russia. In the power sector, we note thatGazprom Energoholding, which manages the power generating assets of gas monopoly Gazprom, has responded to sanctions by declaring it will source spare parts for its gas turbine locally instead of relying on imports. In announcing its import substitution plan on July 30 2014, Gazprom Energoholding said that the Uralsky Turbine Factory will produce spare parts for its gas turbines, while its power generating assets - Mosenergo, TGK-1 and OGK-2 - had signed long-term maintenance services agreements with local firm,TER-Service, according to Bloomberg. This could hit turbine manufacturers such asGeneral Electric(and now Alstom) andSiemens, which supplied the majority of Russia's turbines between 2009 and 2011.The difficult operating environment will also push domestic Russian utilities to carve out opportunities elsewhere. To this end, we maintain that Russian energy policy is orienting eastwards toward China in the wake of deteriorating relations with Europe. This will feed through into the power sector, where we have already seen projects mooted that would deliver export electricity flows to the Chinese market - presumably with backing from Chinese investors.Reports thatInter RAOis planning to build the world's biggest coal-fired power plant in Russia and export the electricity to China align with this view. This development would not only boost the economies of Siberia and Russia's pacific regions, but also underscore the Kremlin's focus on becoming an emerging economic force in Asia.While construction of the coal power plant is certainly not a foregone conclusion, Russia's desire to enhance Sino-Russian relations could help push the plant along the project pipeline. The proposed eight gigawatt (GW) power plant would be built in the Amur region in the Russian Far East and will utilise coal from the Erkovetskaya deposit - meaning there will be a plentiful and cheap supply of domestic coal for electricity generation. We have already seen Russia make significant concessions to China in order to secure the geopolitical and diplomatic dividends - evidence by the historic Sino-Russian gas supply agreement.Similarly, Russia is also considering relocating Moscow-headquartered utility RusHydro to Siberia and is looking at establishing electricity trading links and a power corridor with Central Asian states, Afghanistan and ultimately Pakistan.We also highlight that the weak rouble boosts the potential for Russian utilities to benefit from exporting electricity to some Baltic countries, and Finland. Russia's electricity exports to Finland rose to a two-year high at the end of 2014, as Inter Rao exported more electricity over the border so as to access payments in euros and benefit when transferring earnings back into roubles. This type of strategy could help offset weaker domestic earnings elsewhere.Thermal Generation To DominateRussia's domestic energy consumption is high due to extremely cold weather across the country for much of the year. Despite inefficiencies within the energy sector and the cost of producing energy, the country's domestic reserves have enabled Moscow to offer its citizens and manufacturing industries low energy prices.In order to keep pace with muted but growing demand and ensure there is reliable supply for its manufacturing and energy-intensive extractive industries, Russia adopted its 'Energy Strategy 2030' in 2009. The strategy, which was released partly in response to the global financial crisis and the deleterious impact of falling demand on Russian oil export revenues, outlined three stages of energy sector development.During the first stage (2009-2013) the emphasis was placed on overcoming the consequences of the global economic downturn; the second phase (2015-2020) will be aimed at increasing energy efficiency and implementing energy saving measures across the energy sector, while also developing new oil and gas fields on the Arctic shelf, in Eastern Siberia and the Far East. During this stage there is to be a greater focus on encouraging private rather than state investment in the sector via public private partnerships (PPPs). Phase three (2022-2030) envisages the highly efficient use of traditional sources of generation and places a greater emphasis on use of renewables in electricity generation.It envisaged a possible doubling of generation capacity from 225GW in 2008 to 355-445GW in 2030. A revised scheme in mid-2010 projected 1,288TWh of power demand in 2020 and 1,553TWh by 2030, requiring 78GW of new plant by 2020 and 1,78GW by 2030. Across this whole period it is hoped that the energy sector will decrease as a share of the overall economy.However, while the strategy will also focus on the expansion of the nuclear and non-hydropower renewable industries, delays to the construction of nuclear installations, and slow progress in establishing an appropriate regulatory framework to stimulate demand and attract investors to the renewables industry, reinforces our belief that these targets will not be realised.Instead,BMIbelieves that Russia's heavy reliance on thermal energy sources, particularly gas, will continue into the next decade. According to our forecasts thermal generation currently dominates (and will continue to dominate) Russian power generation. We expect gas generation to register an annual average growth rate of 0.79% between 2015 and 2024 and account for just under 45% of all generation at the end of our forecast period. Large indigenous reserves of coal will also continue be utilised in power generation (as well as for export) and coal will account for 17% of total generation by 2024, having registered slower annual average growth of just 0.35% between 2015 and 2024.There have been a number of recent developments to support our view that thermal sources of power generation will continue to make the biggest contribution to Russia's energy mix over our forecast period. In October 2014, it was reported that Russian equipment manufacturerPower Machineshad developed and tested a new 140MW power turbine that would be deployed at a new 420MW combined cycle power plant at the Verkhnetagilskaya SDPP. The new turbine has been developed as part of a contract awarded to Power Machines by Inter RAO. All of the equipment was due to be delivered by end-2014. Inter RAO UES plans to undertake an 800MW coal-fired power plant project in Kaliningrad, Russia. The USD2bn project involves the construction of the power facility as well as building substations, powerhouses, coal washer units, storage facilities, access roads and other related facilities. The project also includes laying transmission lines and the installation of turbines and other power related facilities. Construction is expected to start in Q215, with completion due in Q420. It was reported in March 2014 that French engineering firmAlstomhad commenced work on the first of its GT13E2 gas turbines that are under commissioning supervision at Nizhneturinskaya thermal power plant (TPP) in the Urals. Alstom signed a framework agreement in 2011 under which it would supply five of the 180MW turbines to IES-Holding - for deployment at the Nizhneturinskaya and Novogorkovskaya, and Akademicheskaya TPPs. The deal is valued at RUB20bn and commissioning of power generating units is scheduled for December 2015. E.ON is pushing ahead with its investment plans in the country and plans to commission the Berezovskava GRES. The plant will include 800MW coal-fired unit in Kranovarsk in central Russia. The power plant is located in the area which is rich in lignite, near the Kansko-Achinsky coal pit. The power plant will be one of the most efficient coal-fired power stations in Russia when it is commissioned in 2015. E.ON has also commissioned new and upgraded gas-fired capacity under a EUR2.8bn investment programme in the Russian power sector, which it stated it would meet on time and within budget. Gas-fired facilities include the Shaturskaya, Yaivinskaya GRES and Surgutskaya GRES-2- standard single-shaft condensation power units, which were constructed with the use of CCGT technology. In January 2014, German engineering conglomerate Siemens and Finnish energy company Fortum have signed a six-year service contract for the latter's Nyaganskaya GRES combined cycle power plant in Nyagan, Western Siberia. As per the contract, Siemens will provide service and maintenance for the plant's steam turbines, gas turbines and generators. The power plant is installed with three combined cycle power units, with a total capacity of 1,254MW. The first and second units have already commenced commercial operations and the third unit is undergoing construction. Once completed, the power plant will consist of three 418MW units. The last unit was due to be operational by end-2014. In June 2013, General Electric (GE) said it has signed a memorandum of understanding with Russian state-backed private equity fund the Russian Direct Investment Fund to build a series of 25MW mini power plants across Russia. The mini power plants will be built independently of the federal power grid and will not need transmission lines. The project will focus on providing electricity to manufacturing plants and infrastructure projects in the Russian regions. In May 2013, Finland'sWrtsilwas awarded the contract to supply a new 110MW gas-fired power plant. According to PennEnergy, the plant will be the first to rely on combustion engine technology of this size in the country. The order was placed in April 2013 by independent power producerTransmashenergo, and the power plant is to be located in Tikhvin in Russia's Leningrad region. It will run on natural gas using six Wrtsil 50SG engines. The primary purpose of the project, set to be constructed by the end of 2014, is to provide a reliable and efficient electricity supply for local industrial consumers.Nuclear: A Critical Role To PlayLooking beyond conventional thermal energy sources, we forecast that nuclear will account for 17.44% of total generation in Russia in 2015. However, as a result of Russia's energy policy calling for an expansion of nuclear power, this figure is set to increase - with the majority of existing plants set to be uprated and granted life extensions. In July 2012, the country's Energy Ministry (Minenergo) published draft plans to commission 83GW of new capacity by 2020, with nuclear power to account for 10GW of that new capacity. This would have taken total nuclear capacity to 30.5GW - with nuclear power plants generating 238TWh annually. In 2013, Minenergo cut the target to 28.26GW.That said, we note that there are downside risks to Russia's ambitious nuclear expansion plans - with the nuclear sector blighted by delays. To this end, with aging capacity due to come offline over our forecast period, we have seen delays to original timelines for new nuclear capacity and as a result we have only included those that are in operation or under construction in our forecasts. We currently forecast that nuclear generation will grow at an annual average of 0.94% between 2015 and 2024.We currently expect Russia to fall short of the aforementioned nuclear generation targets. We expect Russia will generate 185.48TWh by 2020, which will potentially account for just under 18.0% of total generation. According to the World Nuclear Association (WNA), Russia has 33 operating reactors totalling 24.2GW capacity, and steps have been taken to add capacity, both by upgrading existing plants and building new installations.Half of the reactors, which are currently operational, use the RBMK design employed in Ukraine's ill-fated Chernobyl plant. The working life of a reactor is considered to be 30 years - nine of Russia's plants are between 26 and 30 years old, with a further six approaching 25 years of age. However, the WNA stated that all RBMK plants (except Leningrad 1) would be upgraded by 2013. Furthermore, the state nuclear energy company Rosatom announced in February 2012 that it would invest RUR30bn in upgrading and extending the operating lives of the Kursk 2-4 plants, which are all RBMK type.A number of plants are due to be decommissioned in the coming decade and this will further impede Russia's nuclear expansion plans. It is unlikely that the decommissioning timetable will be altered in favour of increasing output as the Fukushima nuclear disaster has weighed heavily on the minds of the Russian population; a downside risk that could potentially be heightened by the emergency shutdown at Russia's Kursk nuclear plant. On May 26 2013 the first turbine generator of the plant, located about 500km south of Moscow, was brought to a halt due to an emergency protection system alarm.Aligning with our view that delays are a major problem in the nuclear segment, state-owned Rosatom decided in June 2013 to revise plans to build the 2,300MW Baltic Nuclear Power Plant (NPP) near the town of Nieman in Kalingrad. This decision was based on new plans to build small and medium-sized reactors which could prove more economical taking sunk costs into account.We have also seen delays to a host of other nuclear projects in recent months including reports in June that the 1,150MW Nizhny Novgorod NPP has been delayed yet again because an investment decision has still not been made - with reports a new gas-fired plant may come online in the region instead. The Nizhny Novogorod project was first mooted in 2006 but the investment decision has been delayed repeatedly. Furthermore, a plant near Ozersk has been postponed twice, and the first unit of the Seversk AES-2006 plant was due to come online in 2015, but its development has also been marred by delays.On a more positive, reports have emerged from one of Russia largest shipbuilders - the Baltic Shipyard in St Petersburg - indicating that Russia's first floating nuclear power plant (FNNP) would be operational by 2016. The first ship will be called the Akademic Lomonosov and is intended to be the first of a small fleet of FNNPs that will provide power for isolated port cities, large industrial companies and offshore oil and gas platforms. It is likely the plants, if they prove viable, could provide power to energy assets in the Russian Arctic as oil & gas activity in the area is ramped up. The ship's power-generating capabilities will be based on the nuclear reactors that are already on-board icebreaker ships; although the vessels will not have a propulsion system so will have to be towed to the required location, according to global news service, RT.The Akademic Lomonosov will be fitted with two modified KLT-40 reactors that will be able to provide enough energy to supply 200,000 people. Together the reactors will have a capacity of 70MW. However, while construction appears to be proceeding, we will refrain from including the plant in our forecasts for the time being. Notably, construction of the vessel has been delayed in the past. To this end, assembly of the first ship originally started in 2007 at that Sevmash Submarine-Building Plant in Severodvinsk, but the unfinished vessel was later moved to the Baltic plant after financing ran out where it sat for two years before a deal between the Baltic shipyard and Rosatom secured the necessary financing in December 2012.Meanwhile, On August 1 2014, state-owned nuclear companyRosatom's subsidiaryRusatom Overseas signed a memorandum of understanding (MoU) with China'sCNNC New Energy Corporationto jointly develop six floating nuclear power plants (NPPs). The plants may be self-propelled or barge-mounted.The floating NPPs will provide a reliable power supply to remote areas and large industrial facilities. The two firms will now establish a joint Chinese-Russian working group to implement the project.Total Net Generation, By Type TWh(2014-2024)

e/f = BMI estimate/forecast. Source: National sources, BMIClick here to explore dataHydropower: RusHydro - Powering AheadHydropower generation makes only a limited contribution to the energy mix relative to the country's vast potential. Although Russia has hydropower plants with total capacity of just over 55.1MW (according toBMIforecasts for 2015), hydro-generated electricity constitutes around 19.25% of total electricity generation.That said, given the substantial resources concentrated especially in Siberia and in the country's Far East, Russia has been looking to make significant investment in the segment, with state-owned hydropower RusHydro planning to invest massively in upgrading its creaking infrastructure and developing Siberia's potential to produce hydropower for export to energy-hungry China.To this end, it was reported in April 2014 that RusHydro had been shortlisted as a company that might be relocated. According to the Siberian Times, this would mean the company's headquarters in Moscow would be relocated to Siberia. Such a move is being driven by the Russian government in an effort to orient eastwards and boost the economies of eastern Siberia and Russia's pacific regions. The move would also underscore Russia's focus as an emerging economic forced in Asia. The company was one of three named by Yuri Trutnev, the Russian president's envoy in the Far Eastern Federal District.RusHydro is in the process of adding more than 5GW of new hydropower capacity, according to the company's website. A great deal of this new capacity appears to have included installation of units at the Boguchanskaya hydropower project (HPP), a hydropower station on the Angara River in the Krasnoyarsk region, which is jointly owned by RusHydro andUC Rusal. As of end-December 2014, the plant was operating at a capacity of 2,880MW, after the launch of the ninth and last 333MW unit.The HPP will reach the full 3,000MW capacity in 2015, after the reservoir is filled to its design level of 208m. Notably, although construction at Boguchany started in 1974, the first turbine was only launched in October 2012 - making the longest running project in Russian hydroelectric engineering.Another significant project that is not included in the aforementioned 5GW of capacity is Russia's biggest hydropower station, the Sayano Shushenskaya plant. Work on the facility is reportedly advancing following the violent breaking apart of turbine two in an accident that killed 75 people in 2009. Work has focused on the repair and refurbishment of 10 turbines at Sayano Shushenskaya. As of October 2014, nine 640MW units were operating at the complex - with Russian supplier Power Machineshavinginstalled the final giant generator rotor to unit 2. RusHydro expected to switch on two more units at the HPP in June 2014 and October 2014 res