OREANDA-NEWS. On 14 February 2008 Sumyoblenergo and Poltavaoblenergo reported strong income growth of 12x and 3.5x, respectively, along with a 21-24% increase in net sales in 2007. Both companies reduced electricity losses in their grids by nearly 0.4 ppt, while diverging in terms of net electricity sales with SOEN up 3% y-o-y and POON down 4% y-o-y.

This boost in profits is reflected in higher margins for both DisCos. We attribute this improvement in profitability to better cost control at Sumyoblenergo and higher margins for electricity generation at Poltavaoblenergo.

Energy Standard and Privat Group both have an interest in POON and SOEN, which we expect will drive up the price for the 25% state-owned stakes up for sale in 2008. Overall, we view SOEN’s and POON’s operating and financial performance as POSITIVE. We have placed both companies UNDER REVIEW in order to adjust their valuations to account for expected regulatory and market changes.