Industry News

Network estimates have been lowered

Moscow United Power Grid Company (MUPGC) and Moscow City Power Grid Company (MCPGC) have been re-evaluated.

The integration of the capital region network companies continues, in spite of opposition from "Gasprom". Yesterday the specialized committee from the Board of Directors of RAO UES of Russia has approved the re-evaluation of Moscow United Power Grid Company and Moscow City Power Grid Company (MCPGC) for their consolidation. The absolute value of MUPGC and MCPGC shares has been lowered; the portion of each company in the created structure is more accurate, note the analysts.

MUPGC and MCPGC have been separated from "Mosenergo" on April 1, 2005. MUPGC deals with the distribution of electric energy in the Moscow region, runs key supply centers and power lines with total length of 74 thousand kilometers. MCPGC has been created on the basis of cable electric networks of the capital.

As Margarita Nagoga, head of RAO UES media relations department, told to RIA RBC, the price of one share of MUPGC has been confirmed at the rate of 1.96 rubles, and the price of one share of MCPGC - at the rate of 1.42 rubles. This price corresponds with evaluation of the companies at the level of about 55.53 billion rubles and 40.23 billion rubles respectively.

Let us recall that last summer the companies were estimated at much higher levels. The value of one share of MUPGC was 2.21 rubles (total value - 62.4 billion rubles) and of MCPGC - 1.85 rubles (52.35 billion rubles for the whole company). On the basis of the new estimates, new f exchange ratios will be used for changing MCPGC shares for MUPGC shares.

According to the plans of energy holding, which were supported by the Moscow government, initially plans were issue additional MUPGC shares, which would be paid for by MCPGC shares within the framework of creating a united network company. "Gasprom", which had opposed the consolidation, blocked the deal, and RAO UES decided to consolidate its assets by means of integrating MCPGC into MUPGC. For such deal to be approved, a simple majority of shareholder votes is necessary, which had been done. "Gazprom" structures own blocking shares in both companies, and RAO UES owns 50.9% in each of them. Yesterday evening we were unable to get a comment from "Gasprom" regarding the new evaluation of network assets.

Analysts consider the confirmed value of MUPGC and MCPGC to be more fair for integration. "The evaluation of the Moscow network companies is more attractive for shareholders now and more fair, - stated Semen Birg, the portfolio manager of Alfa Capital MK. - But, as a result, 58% will fall to MUPGC, and 42% - to MCPGC".

Senior electric power industry analyst of Alfa-Bank, Alexandr Kornilov agrees that MUPGC shareholders are luckier: their part in the new structure will be 4% larger than it was thought to be in previous estimation. According to Mr. Birg's calculations, MUPGC could be estimated as more expensive than MCPGC, as its revenues and electrical supplies exceed the corresponding indexes of MCPGC by twofold.

According to Vasiliy Konuzin from "Alemar" IFK, with the current high prices for capital network assets, the estimate is adequate, although it does not take into account the whole potential that the companies possess. "Our fair estimate of network assets is closer to the previous one - 64 billion and 49 billion rubles MUPGC and MCPGC respectively",  - he says.

Mr. Kornilov points out the fact that the new estimates in absolute terms are lower than the old ones, 11% for MUPGC and 23% MCPGC. The analyst does not exclude the fact, that the forecasted collection of connection payments was adjusted downwards by the appraisers, which effects the value calculations of both companies. "If this is so, than this fact, is not a very good signal for the market", - stated the expert. We failed to get this assumption confirmed or denied by the companies as of yesterday evening.