Kievenergo to Lose Control of CHPPs?

Kievenergo (KIEN: BUY) has been informed by new Kiev mayor Leonid Chernovetsky that he does not intend to prolong the company’s lease of Kiev’s heating infrastructure, according to Interfax. The infrastructure includes the city’s heating network, boilers and combined heat and power plants (CHPPs). Alexander Paraschiy: This is bad news for Kievenergo, but we think this is only a preliminary warning and Chernovetsky will probably back down. Kiev’s CHPP-5 and CHPP-6 are among the biggest producers of electricity and heat in Ukraine, and they have become attractive assets after a reform of CHPPs’ business model in March 2006. The mayor could aim to put the CHPPs and other infrastructure under a separate company. However, KIEN has made significant upgrades to the CHPPs and heating networks, some with financing from an ongoing World Bank loan project, which would make it legally and politically difficult for the mayor to take them away from KIEN.