Daily analyst comments
Energy distributors delay transition to RAB
25.06.10 10:33
The shift in RAB transition deadlines at MRSK North-West branches demonstrates that other energy distributors could fail to switch to RAB on time as well. Earlier it was stated that certain interregional distribution grid companies were to switch to RAB in July 2010.
Komienergy and Vologdaenergo, subsidiary to MRSK North-West, are to switch to the RAB-based tariff regulation on 1 January 2011, and not on 1 July 2010, as was earlier planned. The initiative was put forward by regional authorities, as regions are not yet ready to switch to the long-term tariff regulation, including for lack of an official long-term national development forecast, unresolved last mile issues and statutory limitations.
In our opinion, the shift in RAB-adoption deadlines at MRSK North-West branches could elicit a negative response from investors, as on one hand, this move actually demonstrates that regional authorities are not ready to fulfill the set tasks on due time, which undermines investors’ confidence, and on the other hand, could have a downward impact on company financial health. Moreover, we expect other energy distributors to postpone RAB transition, too. The Russian government is set to deliberately limit the tariff growth rate and impose a 5-year RAB regulation on distribution grid companies. In this case, companies need more time for preparations; therefore, all companies whose braches were to adopt RAB on 1 July 2010, i.e. MRSK South, MRSK North Caucasus, MRSK Volga, MRSK Center and MRSK Siberia, could see their RAB transition deadlines broken.