Dniprooblenergo posts USD 5.5 mln Net income for 2007

According to the CEO of Dniprooblenergo (DNON: HOLD), Ukraine’s largest electricity distribution company, it has generated USD 5.5 mln net income in 2007 (+41% yoy). Management plans to increase net income in 2008 by 36% to USD 7.5 mln. Alexander Paraschiy: The profitability of Dniprooblenergo lags the sector median: its estimated net margin is 0.36% for 2007 and 0.49% for 2008. The low profitability of Ukrainian distribution companies with large electricity transmission levels is natural as profits are linked not to revenues, but to the companies’ investment needs, which do not vary widely across Oblenergos. We do not expect significant changes in Dniprooblenergo’s profitability even under the new tariff policy, and warn against comparing this company to other Oblenergos by EV/Sales or EV/Electricity multiples (refer to our Oblenergo report of August 21, 2007 for more details).