Ukrnafta Revives its Plan to Expand Retail Network 1.8 times

Yesterday, Ukrnafta’s Deputy Chairman Vladimir Pustovarov disclosed that the company plans to expand its retail network to 1,000 filling stations by 2010, from the current 563. Vladimir Nesterenko: we remain sceptical about the announcement. In the past, the company planned to have 800 stations by the end of 2005, then the plan was revised, with new target set at 947 by 2006 eoy. Neither of those have been achieved. If the commitment is in fact stronger than we believe, and the plan is implemented, the effect on the company value remains still uncertain: there is a possibility that Ukrnafta pays too high price per station, as it already seems to have done before. There is also risk that the Supervisory Board, controlled by Naftogaz, does not approve acquisitions.