Daily analyst comments

On September 29, 2009, Mosenergo (RTS: MSNG) published its 1H 2008 financial report audited to IFRS.

Mosenergo: Income Statement Key Indicators, USD million

In the reporting period, Mosenergo's revenue grew by 33% due to an increase in sales and rates and the expansion of its free market share. Revenue from electric energy sales went up by 48.5% y-o-y thanks to a rise in energy sales in natural terms, an increase in the approved rate and an increase in its free market share due to ongoing liberalization in 2008. Revenue from thermal energy sales rose by 21.5% y-o-y. We also note that Mosenergo lost part of its revenue due to the conflict with MTK and MOEK.

Mosenergo: Opex, USD million

In 1H 08, Mosenergo's operating expenses grew by 31%, i.e. at a slightly slower pace than the revenue. The main expenditure items that led to a rise in operating expenses were Fuel Expenses, Personnel Costs, Thermal Energy Transmission Costs and Purchased Electric and Thermal Energy. The surge in fuel expenses was caused by a rise in wholesale gas prices. The increase in purchased energy expenses is attributed to energy price performances on the wholesale market (the principle of fulfillment of obligations under regulated contacts).

As a result, we are moderately upbeat on the company's financials. On the plus side, we point out the higher growth of revenue as compared to operating expenses, and the positive net profit. On the downside, we note Mosenergo's low margin indicators; however, this is characteristic of other companies in this sector. We do not expect the report to have any notable impact on the company's stock valuations due to the unfavorable market environment.

The fair value of Mosenergo shares (RTS: MSNG) is USD 0.074 per share, which corresponds to a BUY recommendation.