Research Notes

Novosibirskenergo is presently one of the lowest priced Russian companies because it has not participated in the restructuring of the power sector. Our optimism is supported by the interest of strategic investors that would like to integrate the company into their value added chain, and the likely unbundling of this regional power company. We believe that the growth of the company's capitalization is to be catalyzed by the upcoming sell off of the RAO UES stake in Novosibirskenergo in February 2008.

The upcoming sale of RAO UES's stake sparks not only short term interest of investors; Novosibirskenergo's stocks are going to be attractive in the mid and short terms due to the undervaluation of its assets by the market. Based on our model of valuation of integrated power utility companies the stocks of Novosibirskenergo have the highest upside potential in the segment of the companies independent from RAO UES.

Our recommendation for shares of Novosibirskenergo is to Buy. The fair value of the common shares is USD 74 and the fair value for the preferred shares is USD 51.8. This implies the upside of 41% and 35%, respectively.

Clients of Finam Investment Company may receive full versions of analytical research reports translated into English by sending requests to the International Trading Department.

Simon Birg

* Short overviews of equity research reports and sector reports are posted on the website http://www.finamrus.com with a 1-day delay after their full versions are emailed to the company’s clients. To get overviews on the day of their release, please contact your manager at Finam to sign up for full versions of research reports.