OREANDA-NEWS. April 16, 2010. The head of Integrated Energy Systems (IES) Mikhail Slobodin announced that IES Holding is  looking to spin off and sell some of TGK-6’s and -7’s generation plant to comply with a request by FAS and avoid reversal of deals involving the purchase of its stakes in two gencos. Mr. Slobodin said that the assessment of plants to be sold could take until the end of this year. Antimonopoly authorities requested IES to sell a total of 741MW of generation capacity in TGK-6 and TGK-7, reported the press-centre of OTKRITIE FC.

View: We believe that this event encapsulates IES’s answer to the Antimonopoly Service, as yesterday it also became known that FAS plans to take legal action against IES, urging it to reverse the purchases of its stakes in TGK-6 and TGK-7, which we regard as a significant risk for these two gencos. The requested capacity represents 14% of TGK-6’s and TGK-7’s total installed capacity of 5.4GW. We would expect IES to pick the most inefficient generation plants for the spinoffs, thereby increasing the overall efficiency and attractiveness of the remaining assets. That said, the potential pricing of these assets is unknown at this point, thus the effect for minorities remains uncertain.

Valuation: TGK-6 and TGK-7 trade at an EV/installed capacity multiple of USD249/kW and USD 263/kW respectively vs. the TGK average of USD 316/kW.

Action: We view this news as essentially neutral for the shares of TGK-6 and TGK-7.