OREANDA-NEWS. October 07, 2010. INTER RAO is willing to buy 75% of the electricity retail company Promishlennaya Energetika, according to Kommersant. That company currently belongs to the state and supplies the plant's state corporations. INTER RAO plans to transfer a 25% stake to the state corporation Rostekhnologii, which currently has a 25% stake in Promishlennaya Energetika. The deal is part of a program of cooperation between Rostehnologii and INTER RAO, reported the press-centre of OTKRITIE Financial Corporation.    

View: INTER RAO plans to buy the 75% stake in this retail company for cash, rather than swap it for its shares during an additional share issue. The Kommersant report estimates show the expected annual revenue of Promishlennaya Energetika to amount to USD 360m. Taking into account its previous purchase of 5 retail companies in which the price amounted to double the EBITDA of each company, we anticipate the price to be around USD 20- USD 30m, assuming an average EBITDA margin of 3% for retail companies. Also, Promishlennaya Energetika would add only 5% to INTER RAO’s 2010E EBITDA, thus its purchase would be unlikely to have an impact on the target price of INTER RAO.

Valuation & Action: INTER RAO trades at an EV/Installed capacity multiple of USD 260/kW (including TGK-11 and OGK-1) versus a thermal generation average of USD 262/kW. We view this news as neutral for the stock and reiterate our HOLD rating for INTER RAO.