OREANDA-NEWS. August 12, 2010. FGC management held a meeting with the analysts. Please see the highlights below, reported the press-centre of OTKRITIE Financial Corporation.

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1H10 results indicate that FGC is on track to realize its FY10 business plan: EBITDA of RUB65bn, net income of RUB15bn, capex of RUB170bn. These figures are broadly in line with the estimates that we have in our model.

Regarding the potential 2011 tariff growth cap of 15%, management believes that none of the RAB parameters will be changed by the regulator. However, management does not rule out the use of a tariff smoothing mechanism that would transfer part of the company’s 2011 revenue to later periods. The final 2011 tariff decision is expected by the end of November. In our model, we conservatively assume that tariff smoothing will be used.

The GDR listing that FGC plans for 2011 will likely take place on the Frankfurt Stock Exchange, as many major international utilities companies are traded there.

FGC will swap its non-core utilities assets with INTER RAO in 4Q10-1Q11. The company is hiring an independent appraiser to value these stakes.

Valuation: FGC trades at an EV/RAB of 0.7x, using its current net debt (not including the equity stakes in utility companies it holds on its balance sheet) to calculate EV. The average of its EM peers is 1.1x.

Action: We see the news as neutral for the stock and reiterate our HOLD rating.