Kyivenergo posts UAH 1.4 bln loss in 2011

Kyivenergo (KIEN UK) reported a UAH 1.38 bln loss in 2011, after UAH 0.16 bln profit a year ago. Revenue increased 31% yoy to UAH 11.04 bln, while EBITDA was negative UAH 0.63 bln (vs. positive UAH 0.36 bln a year ago). The company attributes its losses to low heating tariffs in Kyiv and a lack of compensations to cover the gap between its production cost and the tariff. According to Kyivenergo, it is owed UAH 2.24 bln in compensation as of end-2011 (vs. roughly UAH 0.8 bln a year ago).

Alexander Paraschiy: The company was compensated for a record high UAH 1.9 bln from the city of Kyiv in 2010, but this amount was much smaller in 2011 (the company has not disclosed the exact number). We believe Kyivenergo’s inability to get the compensation in 2011 was the main reason for the reshuffle of Kyivenergo’s top management a month ago. Most likely, the company will revert its previous tactics to enforce compensation: (1) stop paying for gas to raise gas payables to the amount of compensation receivable; and then (2) ask state/municipal bodies to repay Kyivenergo’s debt to gas suppliers in order to prevent its heat generating units from cutting the gas supply. The company accumulated UAH 1.83 bln in payables for gas supplies as of end-2011.