Kyivenergo to receive USD 32.1 mln from city budget to compensate low tariffs

According to amendments to the Kyiv 2008 Budget approved by the Kyiv City Council yesterday, Kyivenergo (KIEN: HOLD) will receive UAH 155.9 mln (USD 37.5 mln) to compensate the difference between heating tariffs and its cost of heat production. Earlier, the city budget foresaw only USD 28 mln in compensation for Kyivenergo. Anatoliy Holubchenko, first deputy head of the Kyiv City Administration, said this will not be the last increase in compensation for 2008. Alexander Paraschiy:  Serhiy Titenko, Kyivenergo’s CEO, estimates the company’s losses from heating supply at USD 160 mln in 2008 – new compensation will cover only 23%. In 2007, the city of Kyiv was unable to fully compensate Kyivenergo’s losses: compensation rate was 75%. We expect about the same in 2008, which will allow Kyivenergo to show a positive bottom line (about USD 4 mln) due to profit from its electricity generation business.