Ukrainian Electricity Distribution

Publication Date	November 2007
Publisher	Concorde Capital
Product Type	Report
Pages	18
ISBN Number	not applicable
Product Code	CNC00030

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Summary

Ukrainian electricity distribution is state regulated. The 28 licensed distribution & supply companies account for 97% of electricity distribution and 80% of electricity supply in Ukraine.

Operating improvements by most electricity distribution companies were rewarded with a more than 300% over the last 52 weeks on the local stock market.

Recent industry changes:

Electricity distribution companies` investment programs for 2008 recently adopted by the sector regulator, which are 20%-100% larger than in 2007, suggest companies` management expect to generate higher profits in 2008.
No shifts in decreasing accounts payable suggest that electricity distribution companies which are highly in debt will seek long-term debt restructuring sometime in 2008. We now use a more conservative approach to calculate their net debt.

Our approach for valuing electricity distribution companies was developed in our August report: we weight peer multiples and RAB valuation to arrive at 12M targets, giving more weight to a multiple in proportion to its explanatory power as a key electricity distribution company's value/liquidity determinant.

Content

1. Recent industry changes
- Performance, 52 week
- PFTS vs. Oblenergo index*
- Total 52wk trading volumes, USD mln
2. Top picks
- WATCH:
- Summary
3. Stock market: Golden mean performed better
- 52 week performance* vs. profitability
4. Interim results: No surprises
- 9M07 results summary
- Convergence in profitability: faster than we expected
- EBITDA margin of different groups: 9M06,9M07
5. Increase in investment, Increase in welfare
- Increase of investment program, 2008/2007
6. Debt issue: Hope for restructuring?
- Account payable statistics
- Net debt adjustments
- Account receivable statistics, Sept. 30, 2007
7. Scoring: Still converging toward the best
- Updated scoring
8. Valuation
- Explanatory power* of parameters
- Peer comparison
- Peer data
- Peer multiples, 2008E
- Oblenergo data, USD mln
- Oblenergo multiples
- RAB (Regulatory Asset Base)
- RAB calculation, USD mln
- Valuation summary
- Valuation summary
9. Donetskoblenergo: A special case
- High bankruptcy risk requires special treatment
- We value Donetskoblenergo using a scenario analysis, refer to the next section.Valuation of DOON: Scenario analysis
- Valuation of DOON: Scenario analysis
- Scenario 1: Restructuring with compensation. Probability: 20%
- Scenario 2: Restructuring without compensation. Probability: 50%
- Scenario 3: Bankruptcy. Probability: 30%
- Scenario weighting
10. Analyst Certification
- 11. Sector report history