NERC Announces Plans to Start Electricity Market Reforms in 2008

According to the head of National Electricity Regulation Commission, a new tariff policy for Oblenergos will be introduced in 2009. In addition, the NERC plans to send the government a new model for the wholesale energy market of Ukraine by the end of 2007, which might be implemented as early as April 2008. Alexander Paraschiy: The timing for the introduction of the new tariff policy for Oblenergos is what we expected (refer to our August 21 report). The timetable for the new model for the wholesale market, which foresees direct contracts between electricity producers and consumers, was a surprise. We believe that political changes expected in late 2007 might postpone the introduction of new energy market model until late 2008 or early 2009. The new model might be a trigger for Ukrainian generation companies: their discount to Russian peers (currently about 40% by EV/Electricity) would shrink over the next two years.