Dniproenergo Signs Investment Agreement

According to DTEK, two related coal mines signed an agreement yesterday with Dniproenergo (DNEN: HOLD) to invest USD 200 mln over 2008-2012 in the company. USD 198 mln is planned to be invested in the modernization of Dniproenergo, the rest will be directed to social programs. Dniproenergo already decided to use first portion of investments (USD 39.6 mln) to modernize power unit #3 at Kryviy Rih TPP in 2008. Dniproenergo plans to invest USD 393 mln in modernization of power plants over 2008-2012. According to Dniproenergo, reconstruction will increase fuel efficiency and decrease annual operating costs by about USD 15 mln. Alexander Paraschiy: We expect the financial recovery process and restructuring to be finished within a month. With the augmented CapEx program, we expect Dniproenergo to remain the most profitable listed GenCo. Though all of these positives are already factored in to our current target price and hold recommendation, market sentiment towards the stock looks to be on the upswing. The negative mood surrounding the stock due to the DTEK acquisition has been swept away by the positive news that have taken place as a result of the move.