OREANDA-NEWS. August 10, 2010. Electricity consumption in Russia during the week ending 5 August was up 9.4% YoY and 1.4% higher than the previous week. The average price in the Europe-Urals price zone of the wholesale electricity market reached RUB1,057/MWh, which is up 1.5x YoY and 7.9% above last week’s average, reported the press-centre of OTKRITIE Financial Corporation.

Similarly, the average price in the Siberian price zone reached RUB550/MWh, up 49% YoY and 3.9% above the previous week. According to the Market Council, the main reason for higher electricity prices and consumption is the abnormally temperatures in Central Russia.

View: The latest data supports the upward trend of the wholesale electricity prices in Russia, which continue to outpace our expectations: The YTD average price in the Europe-Urals price zone is RUB866/MWh (RUB487/MWh in the Siberian zone) vs. our FY10 forecast of RUB814/MWh (RUB490/MWh in Siberia). Although we see an upside risk to our top line forecasts for the gas-fuelled gencos, we note that higher electricity output also implies that the companies need to use more expensive fuel (additional natural gas bought at higher prices, and fuel oil), which could undercut their margins.

Valuation: Russian thermal generation companies trade at an average EV/installed capacity multiple of USD253/kW versus a USD1,048/kW average of for EM peers.

Action: We regard this news as supportive of the shares of the most fuel-efficient generation companies: TGK-1, RusHydro, OGK-4, Mosenergo, OGK-1 and OGK-2.