We are potentially interested in all types of Russian energy/power companies, including vertically integrated utilities, thermal and hydro generation companies, distribution companies, transmission companies, service companies, supply companies, utility asset construction companies and equipment suppliers to the utility companies. Prospective investments are analyzed and considered, based on the best perceived relative value and other market impacting factors. For the latest update and a more specific explanation of the current investment strategy, please see Investment case.
EOS aims to be fully invested at any given time, providing thus with continuous and constant full equity exposure to the stock market and the Russian energy/power company sector. Any cash generated by the daily trading activities or the investments will be re-invested, except to the extent that cash is needed to cover administrative expenses, including the payments to the preferred shares.
The larger the size of EOS’ capital base, the better EOS can influence the on-going developments in the Russian power sector in general and in the underlying companies in particular. Therefore, the size of our capital base plays an important role in our investment strategy, and the opportunities offered by it are taken into consideration in the investment decisions. EOS continues to aim to maintain and further expand it by means of cash and non-cash share issues, utilizing its listing on the First North. Any cash from the share issues is invested without delay into liquid Russian energy/power shares and stock market instruments to prevent any moment of lacking market exposure. Further, there may be beneficial opportunities to exchange attractive blocks of power shares into newly issued EOS shares. Directed issues may only take place at an issue price equal to or higher than the net asset value.
While the portfolio is principally financed by equity, and while we consider the use of external borrowing unlikely in the short- to medium-term, we do not fully close the door to it. More specifically, EOS may theoretically borrow externally up to 40% of its net asset value to finance specific situations in which the Head of Research has identified an arbitrage or close-to-arbitrage opportunities within the Russian energy/power company shares. The Board of EOS AB may set limits on the leverage that are lower than the theoretical maximum.
The Personnel and Implementation
The BoD of EOS Cyprus makes investment and divestment decisions in Cyprus, based on the recommendations of the Head of Research, and in agreement with him. The decisions are executed by the authorized EOS Cyprus individuals.
The portfolio is actively managed and consists of multiple holdings. It thus offers some diversification within the Russian electricity sector.