Galnaftogaz Shareholders Approve USD 119 mln CapEx for 2007

At yesterday’s AGM, Galnaftogaz (GLNG: HOLD) shareholders voted to invest about USD 119 mln into increasing its fuel retail network by 100 outlets – to at least 300 outlets by the end of this year. It was reported that the company’s network currently consists of 216 filling stations. The company plans to finance the CapEx mostly from borrowings, and by USD 5.9 mln from 2006 earnings. Shareholders voted to not pay dividends for 2006. Vladimir Nesterenko: We admit that Galnaftogaz’s 2007 expansion plans are perhaps the most aggressive among Ukrainian fuel retailers. As usual, such rapid growth is likely to come at the cost of higher leverage and thinner margins. However, given that the company launched only 24 new stations in 2006 (excluding re-constructions), we stick to our previous forecast of 256 outlets by the end of 2007, and correspondingly CapEx of USD 74 mln.