GenCos To Generate More Cash Flow?

The Cabinet is preparing a draft of a law according to which the power generation companies [Centerenergo (CEEN: HOLD), Dniproenergo (DNEN: BUY), Donbassenergo (DOEN: BUY), Vostokenergo (VSEN: N/R), and Zakhidenergo: (ZAEN: BUY)] will not pay profit tax from investment surcharges to their tariffs. Alexander Paraschiy: This amendment should shore up a legal snag that has been plaguing Gencos: currently when a power generation company receives money for a reconstruction project, these additional payments are classified as income, and the company has to pay income tax which decreases its actual cash inflow by 25%. According to the Ministry of Fuel and Energy, regulatory changes will save about USD 60 mln in GenCos’ cash flows annually. When combined with another new regulation, according to which GenCos do not pay dividends on the profits they generate from reconstruction payments, this amendment will help GenCos to accumulate more money for their reconstruction projects.