OREANDA-NEWS. July 13, 2010. The 3 top managers of INTER RAO and its ex-CEO Evgeny Dod bought a 0.65% stake in the company in accordance with the options program started in July 2008. This stake is worth USD20.5m. The total amount of shares that INTER RAO purchased for the options program is about 2% of its share capital, and approximately 150 employees participated. The shares can be sold on the market 2 years from the beginning of the program. The option purchase price is RUB0.0229/share, which is 47% below Friday’s closing price, reported the press-centre of OTKRITIE Financial Corporation.

View: We believe that there is a high likelihood that the managers of INTER RAO will sell the 0.65% stake in the near future, because the market price now is almost twice the options strike price. 2% of share capital is currently worth USD63m, hence we see a short-term risk of share overhang in the stock. The average MICEX daily trading volume is around USD8m.

Valuation: Taking into account the generation assets of OGK-1 and TGK-11, INTER RAO trades at an EV/Installed capacity of USD167/kW, which is at a discount to the Russian thermal generation average of USD230/kW. However, we note that at this point the company still has yet to not complete the acquisition of the two of OGK-1 and TGK-11.

Action: We view this news as a short-term negative for the stock and reiterate our long-term HOLD rating.