On May 27, 2008, a meeting of OGK-2's (RTS: OGKB) BoD was held. The board accepted the voluntary resignation of OGK-2's general director Mikhail Kuzichev. In line with the 3-year labor contracts signed in January 2008, all company top-managers, as well as the general director himself, in case of resignation, upon a mutual agreement of all parties, were entitled to receive one-time maximum payments of 24-36 monthly wages depending on length of service. On 30 May 2008, almost all of the company's top-managers filed letters of resignation, and the general director accepted these letters on the condition of maximum payouts, which totaled RUB 557 mn. This amount was paid from the company's borrowed funds. In the meantime, OGK-2's FY 2007 net profit audited to RAS amounted to just RUB 40 mn.
The resignation of the company's top-management team should produce negative impact on the company's stock valuations in the short-term. The move made by OGK-2's former top-managers brings considerable financial and image risks, which in turn could negatively affect the company's investment ratings, complicate implementation of OGK-2's investment program and performance of the second IPO stage. The situation is even more aggravated by the lack of experienced management personnel in the power utilities industry. However, we believe that Gazprom, as the company's main shareholder, will help to resolve the current situation promptly.
The fair value of OGK-2's shares is USD 0.122 per share, which corresponds to Buy recommendation.
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