Daily analyst comments
SUEK to improve business efficiency at Kuzbassenergo
24.06.09 10:41
The decisions taken at Kuzbassenergo’s recent AGM clearly show its majority shareholder’s willingness to improve the genco’s business efficiency. However, the effects of the proposed measures will become evident only in the future; therefore, this event should have a neutral impact on the company’s stock valuations.
At an AGM held on June 23, 2009, shareholders of Kuzbassenergo (TGK-12; RTS: KZBE) endorsed new revisions of internal regulatory documents than govern the activities of the company’s management, reports Interfax. In particular, the AGM adopted new revisions of the Statute on Preparing, Convening and Holding Annual Shareholder Meetings, the Statute on the Board of Directors, the Statute on the Audit Committee, and the regulation on remuneration of members of these bodies. In addition, shareholders resolved that starting July 1, 2009, the authority of Kuzbassenergo’s sole executive body would be delegated to management company - Siberian Generation Company. SUEK has thus decided to completely spin off the power utility business from its core coal business.
We are upbeat on the Kuzbassenergo AGM decisions and believe they will improve the genco’s corporate governance and raise its information transparency, which should enable the company to cut administrative expenses in the future. However, the effects of the proposed measures will manifest themselves only in the course of time; therefore, the current news is unlikely to have any sudden impact on Kuzbassenergo stock valuations.
We assign a BUY rating to Kuzbassenergo with a target price of USD 0.006 per share.