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Zaporizhyaoblenergo and Dniprooblenergo forecast decreased power supply in 4Q08

Zaporizhyaoblenergo and Dniprooblenergo forecast decreased power supply in 4Q08

18 November 2008

The top managers of two of Ukraine’s largest power distribution companies, Zaporizhyaoblenergo (ZAON) and Dniprooblenergo (DNON), warned yesterday that they expected decreases in power consumption in their regions by up to 25% yoy in 4Q08. The key reason is less demand from metallurgical plants, the two Oblenergos’ largest customers. According to Dniprooblenergo, the company has already applied to the National Electricity Regulation Committee for upward revision of power distribution and supply tariffs to compensate for the gap. Alexander Paraschiy: The drop in metallurgical production is causing a reduction in energy demand in these two industrialized regions, as we expected (refer to our Oblenergo note as of Nov. 6, 2008). We expect the top lines of DNON and ZAON to be negatively impacted (as well as two unlisted power distribution companies – Servis-Invest and Luhansk Energy Union). Still, their bottom lines are likely to suffer only in the short-term: according to regulations, NERC has to revise the tariffs of those distribution companies that, facing a more than 5% decrease in power sales from the forecasted level, apply to increase their tariffs. We expect NERC to revise tariffs for distribution companies operating in industrial regions in the near future.  

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