OREANDA-NEWS. February 25, 2010. The government convened for a meeting over investment programs in the electric utility industry. The Russian PM, Vladimir Putin, approached the cabinet with several important statements. Firstly, Putin said he had signed a decree defining the work principles of the long-term capacity market. Secondly, it was announced that in order to access the long-term capacity market, a company was to have no troubles with its investment commitments. The prime-minister also named the companies that had failed to fulfill their investment obligations: OGK-3, TGK-2, TGK-3, and the gencos subsidiary to IES Holding (TGK-4, TGK-6, TGK-7, and TGK-9).

In our opinion, the adoption of a decree in the long-term capacity market is a positive event for the whole electricity generation segment, as it officially confirms the government’s intention to define the related terms and launch the market in the near future. However, based on the statements made, not all companies will be able to become fully-fledged members of the long-term capacity market. Most likely, companies that have failed to fulfill their investment commitments could be subject to limitations or fines. For this reason, companies such as OGK-3, TGK-2, TGK-4 and the gencos subsidiary to IES Holding, which have defaulted on their investment obligations, may be denied access to the market. In our opinion, the threat of sanctions could put pressure on the above gencos’ stock valuations.