In FY 2008, TGK-14 (RTS: TGKN) may suffer losses of RUB 600 million, reports Interfax with reference to the company's press-service. These losses may come as a result of several factors, such as the February 2008 emergency at Ulan-Ude TPP and additional expenditures caused by UES restructuring.
TGK-14 management believes that the genco will be able to show positive financial results as soon as 2009 after the tariffs for heat and hot-water supply are raised to an economically feasible level. Thus, the company has not raised its tariffs in the Republic of Buryatia for several years. An upturn in tariffs may be compensated for by subsidies from the federal budget.
Many thermal gencos will show negative financial performances in FY 2008 as compared to FY 2007, and TGK-14 is not an exception. The company's financial health was largely affected by the breakdown at Ulan-Ude TPP, which was caused by the serious deterioration of capital assets. However, the management's forecasts about the genco's negative financial results in 2008 should not have any considerable impact on TGK-14 stock valuations in the short-term, since they are maintained at a high level on expectations of a buyout offer in the near future.
The fair value of TGK-14 (RTS: TGKN) is USD 0.0004 per share, which corresponds to a Sell recommendation.
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