On August 25, a commission of the Russian Federal Antimonopoly Service (FAS) upheld a claim filed by Mosenergo (RTS: MSNG) against the Moscow government, Moscow Unified Energy Company (MOEK) and Moscow Thermal Grid Company (MTK), reports Interfax with reference to an FAS spokesperson. As a result, the FAS announced that MOEK and MTK had performed coordinated actions on the Moscow heat market and requested the companies to remedy the breaches.
Earlier, MTK had sent a notification to Mosenergo to terminate a contract for heat transportation, while MOEK had filed a request to terminate a contract for heat purchases. MTK said it would purchase heat from Mosenergo and resell it on its own. In practice, the settlement of this complaint means that MTK is not entitled to sign contracts for energy supply and sell heat without purchasing it from a supplier. For that matter, in the near future, Mosenergo will request MTK to terminate energy supply contracts concluded with consumers in respect of those volumes of heat that MTK had not really possessed.
The fact that the FAS has upheld the complaint should have a positive impact on Mosenergo's heat sales margin. In fact, MOEK and MTK's actions were destroying the vertical integration of Mosenergo's heat sales business, which could have had a negative impact on the genco's revenues. The penalty inflicted on MOEK and MTK may turn out to be a crushing burden for both companies: MOEK expects its profit for FY 2008 at RUB 500 million, while the fine could exceed RUB 1.5 billion.
The fair value of Mosenergo (RTS: MSNG) is USD 0.135 per share, which corresponds to a Hold recommendation.
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