According to WGC-5's press service, the company's shareholders have adopted a decision to elect the new BoD which includes 4 Enel nominees, 3 UES nominees, 3 independent directors and WGC-5's CEO. The utility was upbeat on the arrival of the new shareholder and noted that advanced corporate governance practice, technological innovations and vast experience of operations on the deregulated utilities market represent real competitive advantages which Enel could contribute to WGC-5.
Previously, Enel was reported to have received approval from FAS to consolidate 100% in WGC-5. We believe that WGC-5's new BoD composition underscores both the success of the Italians and Enel's intention to actively develop the utility, since the BoD's new structure is balanced and includes several independent directors who will make decision-making more efficient. Most likely, further changes in the industry could raise the number of Enel's appointees on the utility's board and decrease the number of the power holding's appointees, since the power holding will cease to exist in less than a year.
More than 50% of the utility's board members could be changed as a result of industry restructuring and associated changes of strategic priorities. For the time being, we can say that this is the first WGC in which foreign investors will gain control and at present, market participants value this development at a premium to the WGC segment. WGC-5 is valued by the market at $530 per kW, while WGCs are valued at an average $530 per kW. As of Friday's close, the company's shares climbed 0.15% on MICEX. Obviously, market participants have already priced in Enel's stronger positions in WGC-5's charter capital.
We assign a Hold recommendation to WGC-5 with a fair price of $0.167 per share.
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