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Rosseti North-West

December 22, 2009

Transition to RAB-regulation is positive for the quotations of IDGC of North-West. It will help to reach the improvement of the financial results and increase the profitability of the companies

Federal Tariff Service (FTS) approved the transition to RAB-regulation of the distribution grid companies of Vladimir, Kaluga, Yaroslavl, Novgorod and Omsk region, as well as the Udmurtia Republic.

RAB-regulation is implemented for three-year period. The companies which will be transited to the tariff regulation system include the affiliated companies of IDGC of Centre and Volga Region, JSC (the Regions of Kursk and Yaroslavl), IDGC of North-West  (the Region of Novgorod), IDGC of Siberia, JSC (Omsk region).

FTS considers that during the coming year the new tariff regulation scheme will be implemented in the three-five companies. FTS does not disclose their names.

Nine distribution grid companies-pilots have already been transited to RAB-regulation during 2009, among them are: Belgorodenergo, Lipetskenergo, Tverenergo, Permenergo, Tulaenergo, Ryazanenergo, Astrakhanenergo, Kurgaenergo (KRGE) and Orenburgenergo.

Coefficients used during the account of the regulated capital base, vary from 1.2. to 3.3 and in general account for 2.3. The FGC plans to make the transition to RAB before the beginning of the next year as well.

RAB is the new system of electric power tariff regulation, directed to stimulate the investments to the sector giving the investors the certain level of their profitability. The previous account method based on the economically viable costs did not encourage the company to decrease the costs or invest into the future growth. 

We assess the transition to RAB-regulation as positive for quotations of IDGC, as far as it will help to reach the improvement of the financial results and increase the profitability. We think that other future RAB regulation transitions indices used during the account of the investment capital base, on an average, will account for 2.3 which determine 15% general increase of the tariffs.




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