Kyiv city to cover its debt to Kyivenergo

Yesterday the Kyiv City Council decided to raise a UAH 1.2 bln loan from Bank Khreschatyk (close to municipal authorities), primarily to compensate Kyivenergo (KIEN) for the company’s accumulated losses related to low heating tariffs.  Alexander Paraschiy: It looks like Kyivenergo is set to become the most profitable company in Ukraine in 1Q09: last week the company was compensated UAH 130 mln for losses last year from Kyiv, and it is due to receive about UAH 1 bln from Kyiv’s loan. The payments are likely to be reported as part of the company’s sales or “other operating income”, and (as all costs related to these payments were incurred earlier) will be fully accounted for in the company’s income before tax. We are interested in how the company will record all these payments to avoid huge income tax payments. According to Kyivenergo’s CEO, the total outstanding debt owed by the city of Kyiv for heating losses compensation (for 2000 – 2M09) is about UAH 1.4 bln.