A New Competitor For DNON?

The National Electricity Regulation Commission (NERC) awarded a license for electricity supply at a non-regulated tariff to the company CenterBusinessConsulting (CBC). The company is allowed to supply 3.5 TWh annually, and its client is expected to be Mittal Steel Kryvyi Rih (KSTL: BUY).  KSTL makes up 14% of the market for Dniprooblenergo (DNON: HOLD). The media has linked CBC to former Prime Minister Yulia Tymoshenko. Concorde Capital: Note that currently the minimum price at which CBC can potentially sell electricity to KSTL is 38.7 USD/MWh, while DNON’s price for KSTL is 42.7 USD/MWh: KSTL can benefit from buying electricity from CBC. However, with introduction of a 10% discount to DNON’s tariff for KSTL, as stipulated by the draft of a Government decree (refer to our Friday news) DNON’s tariff for KSTL will be 38.4 USD/MWh. Thus, with introduction of a discount, it will be more beneficial for Mittal Steel Kryvyi Rih to buy energy from Dniprooblenergo that from CBC. Thus, DNON will need the resolution to pass if it hopes to retain its largest client.