OREANDA-NEWS. July 21, 2010. ESN Group, owner of 49% of Energopromsbyt, a company created to acquire TGK-14 during the energy reform in 2008, has obtained agreement from the Federal Antimonopoly Service to buy the remaining 51% stake owned by RZD, according to Interfax. There is still no official information on whether RZD intends to sell its stake. There is speculation that ESN wants to consolidate control of TGK-14 in order to sell it to INTER RAO during the upcoming IRAO additional share issue. ESN is also reportedly mulling the opportunity of selling its 51% stake in Rosenergosbyt to IRAO, reported the press-centre of OTKRITIE Financial Corporation.

View: If ESN buys the remaining 51% of Energopromsbyt, it should pay a premium for control. While this could vary significantly, we expect it to be around 15%-20%. Also, as these maneuvers progress there might be short-term speculative interest in TGK-14, especially if the price announced is higher than the market quote. Moreover, positive dynamics can be driven by expectations of improvement of corporate governance and improved efficiency.

Valuation: TGK-14 trades at an EV/Installed capacity of USD156/kW versus the TGK average of USD232/kW.

Action: We view this news as positive in the short-term for the stock and reiterate our BUY rating.