OREANDA-NEWS. June 03, 2010. First VP Igor Sechin announced that all OGKs and TGKs have signed the Capacity Delivery Agreements (CDAs) with the Energy Ministry. The CDAs stipulate the size and timing of new capacity additions for each company, as well as the capacity tariffs these new energy blocks will receive. The government had called for all CDAs to be signed by 1 July. No details or further confirmation of this news is available at this juncture, reported the press-centre of OTKRITIE Financial Corporation.    

View: We view the signing of CDAs as the main catalyst for Russian generation companies this year, as the future capacity additions and capacity tariffs represent a vital part of the fundamental valuation of these companies. Official publication of the CDAs will significantly decrease uncertainty in cash flow forecasts of the gencos, hence we expect positive market reaction in the generation stocks following such publication. We believe that at the moment the approved launch of the long-term capacity market in Russia is not fully priced in by investors.

Action: We regard this news as fundamentally positive for the Russian thermal generation companies. TGK-1, OGK-4, Mosenergo and OGK-1 remain our top picks in the sector.