OREANDA-NEWS. May 14, 2010. The RF Ministry of Economic Development announced that end-consumer electricity prices in Russia will go up by an average 17% y-o-y in 2010 vs. 2009 and by 20.2% YoY in 2011 vs. 2010. The ministry’s previous forecast called for a 14% average price hike in 2010 and 16% growth in 2011, implying that the growth forecast was upgraded by 3-4 ppt, reported the press-centre of OTKRITIE Financial Corporation.

View: End-consumer electricity prices in Russia include the following parts: 7% goes for electricity transmission services (Federal Grid Company), 30% for low-voltage distribution (MRSKs), 60% for generation (OGKs, TGKs, RusHydro, etc.) and the other 3% goes to retail sales companies. Our forecasts of electricity price and tariff growth for each of these parts and the weighted average imply end-consumer electricity price growth in Russia of 17% in 2010 (vs. 2009) and 21% YoY in 2011.

This is in line with the ministry’s upgraded forecast for 2010 and 1 ppt. higher than the ministry’s new 2011 forecast. We find the news supportive for the sector overall, as it implies in our view that the state remains on track with the sector’s reforms: RAB tariffs for electricity distribution and transmission, liberalization of the wholesale electricity market and launch of the power capacity market next year for newly-built generation capacity.

Action: We find the news generally supportive for the Russian Utilities sector stocks, without direct read-through for specific names.