Apr
11
By the given research we start the analytic coverage of the distributing sector of power energy. We evaluated 8 intra-regional distributing companies using the discount cash flow approach.
Due to introduction of the new regulating model based on invested capital yield the distributing sector will become more clear, foreseeable, stable and hence attractive for investing in the power energy. During 2008 the most significant conversions were conducted in the sector, such as consolidation of DNC into IRNC, separation of IRNC from UES and their shares entering the trade grounds. The legal base of the new tariff regulation has been adopted and pilot projects using the new tariff-making started.
However, risks at the transient phase to the new model still remain. Among those risks are the following: excessive affect on sales of companies with cross-subsidization and such a strong volatile income source as payment for joining. At the same time the crisis at the financial markets added extra risks to the sector: power energy consumption and paying capacity of the public dropped, claims for new joining lowered and the opportunities of attracting borrowed assets declined significantly, which made the companies revise their investment programs for the coming 1-2 years.
However, totally the transfer to the new model of tariff regulating allows us look positively at the prospects of the distributing network sector. Particularly we prefer the common shares of Volga IRNC, Ural IRNC, Center and Volga region IRNC, Sibir IRNC and Lenenergo, and we assign the recommendation BUY for those shares.
IRNC: Serene port of the branch? - April 10, 2009 (PDF)