Daily analyst comments

The Russian Federal Antimonopoly Service (FAS) has authorized the possible consolidation of TGK-12 (Kuzbassenergo; RTS: KZBE) and TGK-13 (RTS: TGKM) shares by SUEK, Interfax reported with reference to an FAS spokesperson. The FAS has set out certain behavioral and structural requirements; for example, SUEK will be obliged to sell off a total of 368 MW in generation capacities from among TGK-12 and TGK-13 assets.

During the restructuring of the power utilities industry, SUEK consolidated large share packages in the above gencos: 44.02% in TGK-12 and 32% in TGK-13. After the reorganization of UES, during the exchange of assets with other UES shareholders and the state, SUEK acquired additional share packages in TGK-12 and TGK-13. As a result, SUEK’s stake in the charter capitals of both gencos became a controlling one, which required the authorization of the antimonopoly body. In early April, SUEK filed applications to consolidate 100% of TGK-12 and TGK-13.

The behavioral and structural requirements set out by the FAS could have a moderately negative impact on the gencos’ value. However, there is no reason to make any definite evaluations of this decision until more details emerge as to which particular power plants SUEK will have to sell are made clear. In our opinion, this event will not produce any major impact on the gencos’ stock valuations.

The fair value of TGK-12 (Kuzbassenergo; RTS: KZBE) is USD 0.14 per share, which corresponds to a BUY recommendation. The fair value of TGK-13 (RTS: TGKM) is USD 0.0034 per share, which also corresponds to a BUY recommendation.