Five Companies To Bid For Luganskteplovoz.

The Energy Standard Group (controlled by Konstantin Gryhoryshyn), AvtoKrAZ Holding (related to BYT MP Konstantin Zhyvago), Transmaholding (Russia), Siemens (Germany) and Kolej Baltycka (Poland) have all filedpreliminary applications for the purchase of Luganskteplovoz (LTPZ: HOLD). The State Property Fund’s preliminary estimate of the starting price for a 76% stake in the company is USD 200 mln, but the fund expects to get USD 350 mln for it (implying 2006E P/S x4.9). The major precondition for the owner of the stake is a 2.5 times increase in the company’s output. Last year LTPL operated at 17% of its capacity. Concorde Capital: Four of the these companies have previously announced their interest in LTPL, while Kolej Baltycka, A Polish railway transportation company and member of Heavy Haul Power International (UK holding) was a surprise candidate. Bombardier (Canada), earlier named by SPF as potential investor, is not participating. Transmasholding has already started cooperation with LTPL, and has signed a contract on the joint production of 50 electric locomotives by 2010. We believe, it will be able to increase LTPL production to the required level with Russian orders. At the same time, Siemens is likely to make the company an assembly point for its products, and AvtoKrAZ, fighting for control over LTPL since 2001, intends to use its present marketing channels for trucks in the developing world to sell LTPL locomotives.