OREANDA-NEWS. March 16, 2010. Holding MRSK CEO Nikolay Shvets said that the agreement with French Utility ERDF signed earlier this year implies that the French company may be assigned management rights over one of the MRSKs (possibly MOESK). The exact details of the potential transaction were not disclosed. Mr. Shvets also mentioned that Holding MRSK expects to finalize the 2011 investment programs for MRSKs by 10 April, reported the press-centre of OTKRITIE Financial Corporation.

View: We view this news as an indication of a lower probability that the consolidation scenario of MRSKs will actually materialize. We think that if MRSKs remain as standalone companies, it would be a positive for the sector’s overall efficiency, given that the performance of individual companies could be compared to their peers. Moreover, we think a foreign management company could further improve the operating efficiency of the business by phasing in best practices. 

Valuation: Holding MRSK currently trades at a 0.46x EV/RAB multiple, which is less than the 1.3x international peer average. 

Action: We read this news as positive for Holding MRSK and reaffirm it as our top pick in the Russian Utilities sector.