Daily analyst comments
FST to raise Transneft tariffs 3.3% as of August 1 and 9.9% on December 1
30.07.10 10:33
The news about tariff hikes does not come as a surprise for market participants, as FST previously voiced its intentions. Quotes for Transneft shares should now grow on news about the possible privatization of the company.
At a session on July 29, the Federal Service for Tariffs (FST) considered raising tariffs on oil pumping through the Transneft-operated trunk oil pipeline system. Following the decisions, the average tariff will rise 3.3% as of August 1 and will spike by a further 9.9% from December 1, 2010.
Earlier, at the start of last July, FST spokespersons stated the possibility of raising Transneft tariffs in the range of 3%-3.5% as of August and by a further 10% from December. Therefore, the news released has not caught by market players by surprise. In early June, FST representatives stated that there were no plans to increase Transneft tariffs in 2011. In April, however, the agency made a contradictory statement that Transneft tariffs would grow at a CAGR of 15% before 2014. In light of the statements made, we are inclined to believe that the decision not to raise the tariffs in 2011 may be reversed.
We expect the news to have a marginally positive effect on quotes for Transneft preferred shares, as the news had been expected. A stronger short-term positive effect on the quotes may be produced by the release of news early this week about the possible privatization of Transneft common shares. We assign a BUY rating to Transneft preferred shares, with a target price of USD 1,703 per share.