OREANDA-NEWS. June 01, 2010. Kyiv City Administration, in a decree yesterday, approved tariff hikes for heating energy consumed by households by 34-41%, effective from June 01, 2010. Earlier, in fall 2009, Kyiv city, Kyivenergo and Cabinet of Ministers signed a memorandum forbidding tariff hikes for utilities until May 2010.

Concorde Capital: We view the tariff raises as beneficial for Kyivenergo (UX: KIEN UK). For the last four years, heating tariffs in the capital have been among the lowest in the country and below production cost. According to the earlier Cabinet of Minister`s decree, losses from heat energy production have to be covered from the city’s budget (since the city of Kyiv is responsible for setting tariffs). However, the capital’s budget deficit problems resulted in systematic delays and underpayments to Kyivenergo. We estimate the new tariff hike will allow Kyivenergo to receive an additional USD 100 mln in cash revenues in 2010 reducing subsidies from the city budget by the same amount, from an est. USD 200 mln to ~USD 100 mln.