Kyivenergo’s heating segment to stop bringing in losses?

The Kyiv City State Administration is drafting plans to increase heating and water supply tariffs by 1.4-10.1 times for non-residential consumers. Cold water tariffs, based on the plan, would rise by 1.4-10 times depending on category; hot water tariffs would increase by 1.6-10.1 times and heating tariffs would be upgraded by 1.5-9.4 times. Corporate and state consumers will be slotted into 20 categories according to the profitability of their business, and assigned a tariff accordingly. Tariffs for residential consumers will no be altered, according to the draft. Alexander Paraschiy: The key beneficiaries of the tariff increase (if approved by the Kyiv City Council) will be Kyivenergo (KIEN: HOLD), the main supplier of heat to the city of Kyiv, and Kyivvodokanal (KVKL: N/R), the water and sewage company. We expect tariffs to be approved by the end of October 2008, and they will allow Kyivenergo’s heating segment to breakeven in 2009 (in 2008, the company expects about USD 120 mln in losses from heat supply). Even if new tariffs do not cover Kyivenergo’s heating costs in full, the gap in tariffs will be easily covered by the Kyiv city budget in 2009.