Kyivenergo wants Kyiv city to compensate UAH 0.98 bln

Yesterday Kyivenergo (KIEN) filed financial claim worth UAH 0.98 bln (about USD 125 mln) to Kyiv city. The amount is the difference between heat tariffs and Kyivenergo’s costs of heat production since 2000. The largest portion of the difference, according to Kyivenergo, is attributable to 2008: UAH 0.52 bln. Kyivenergo said it would demand compensation via court, should Kyiv city not compensate the difference (deadline was not disclosed). Alexander Paraschiy: Kyivenergo’s referred to the law “On Heat Supply” (effective mid-2005) which stipulates that Kyiv city has to work out a mechanism of compensation for loss-making heating tariffs. We believe that there is higher chance for Kyivenergo to claim compensation referring to the law “On Prices and Pricing” (effective 2007) which explicitly provides for compensation of losses from local (Kyiv city) budget. We believe Kyivenergo has high chances to have its losses for 2007 and 2008 (UAH 660 mln) compensated. Still, decision on the compensation may only be done by Kyiv city council which is responsible for local budget, so the process should be time-consuming.