Daily analyst comments

As of October 12 close, WGC-5 (RTS: OGKE) surged over 4%. The utility's shares could climb due to an upcoming mandatory buyout offer, which Enel should make. The media reported in March 2007 that the Italian concern bought out from UES a blocking stake in WGC-5 at $0.17 per share. In June 2007 Enel reported an increase in its stake in the utility to 29.99%. Enel President Silvio Conti said in August that his company is prepared to upsize its stake in the genco to 100%.

For the record, Italian energy major Enel has already invested $6 bln in the Russian electric power industry and plans to invest another $3 bln. In 2006, Enel acquired Rusenergosbyt for $105 mln and the company allocated at least $1.7 bln to consolidate 29.99% in WGC-5. As reported earlier, Enel is prepared to invest in Russian utilities assets in every possible way proposed by the power holding's management. Therefore, there are many assets in which the Italian party could acquire equity positions. Enel could require up to $1.2 bln to upsize its stake to a controlling interest.

According to the joint stock companies law, after raising its stake to over 30%, Enel will have to make a buyout offer at least at the weighted average price for the last six months of trading. Since WGC-5 shares are hovering around their all-time highs, we believe that the buyout offer price, which Enel should announce, will be below the current market valuations. The price will not likely exceed $0.156 per share, which is the weighted average market price for the last six months. We assign a Sell recommendation to WGC-5 with a target price of $0.15 per share.