Oblenergos To Water Companies: Pay Or Lights Out.

A series of electricity distribution companies have started to use the threat of cutting electricity supplies to force water and sewerage companies to pay their bills. Kirovohradoblenergo (KION: HOLD) is threatening to pull the plug on its local water company and leave about 0.5 mln of citizens without water. Last week Dniprooblenergo (DNON: HOLD) and Luhansk Energy Union (LEU) temporarily disconnected water companies and pump stations in the cities of Dnipropetrovsk and Luhansk. Concorde Capital: A week ago the Cabinet announced that it would begin allowing Oblenergos to de-energize water companies which do not fully pay for the electricity they consume. Three other oblenergos also have water companies that are bad at making their payments: Kievenergo (KIEN: BUY), Kievoblenergo (KOEN: N/R) and Cherkassyoblenergo (CHON: N/R). While KIEN is unlikely to disconnect the water supply in Kyiv for political reasons, we expect KOEN and CHON to use temporary disconnections of local water companies in order to improve payment discipline in the near future.