Research Notes

In our reports we have repeatedly given descriptions of the Russian power industry, the segments and its dominant players. However, the entire industry and its players are in a constant state of flux as the reform progresses. In view of this, we deem it necessary to return to the origins of the reform and write a kind of ‘A brief guide to the industry', which allows clients to gain a deeper insight into the ongoing transformation of the industry and its new structure; evaluate prospects and the prospects of having electricity utility shares in investment portfolios. We hope that this guide will be especially useful for those investors who have not had time to gain an insight into how the industry functions.

In our view, Russian electricity companies have excellent growth potential due to their fundamentals. In the long-term perspective, growth is to hinge on portfolio and strategic investors' interest in the industry. The prime domestic investors have already formed their investment portfolios, and are on the way to restructuring generation assets. In our opinion, the main factors that will determine the future of Russian electricity companies are the consistent work on all of the reform stages, compliance with corporate governance standards and the enhancement of efficiency in the industry. Naturally, macroeconomic factors and political conditions in Russia are to impact the industry's attractiveness for investors as well.

Konstantin Reily

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