Bloomberg News

Federal Grid Retreats as Investment Program Cut on Tariffs

May 18, 2012

Federal Grid Co. retreated for a second day on bets a reduced investment program at Russia’s high-voltage power transmission monopoly signals the government will raise prices the state company charges less than forecast.

Federal Grid fell 0.1 percent to 22.75 kopeks by the close in Moscow after losing as much as 5 percent earlier. The shares have dropped 19 percent this year.

Russia’s Energy Ministry approved 504.8 billion rubles ($16.1 billion) of investments for 2012-2014, according to a statement from Federal Grid yesterday. That’s a 22 percent cut from the previous version, ING Groep NV analysts wrote in an e- mailed note today. The program was reduced because Federal Grid’s tariffs will climb 11 percent in July, 10 percent next year and 10 percent in 2014, RBC Daily reported today, citing a government official it didn’t identify.

“Official approval of the reduced capex program is a strong signal that the tariff hikes are likely to be approved according to a pessimistic scenario,” Igor Goncharov, an analyst at ING, said in an e-mailed note.

The stock rebounded after Russia’s Federal Tariff Service recommended the Energy Ministry approve the investment program of Federal Grid up to 2018.

To contact the reporter on this story: Ksenia Galouchko in Moscow at kgalouchko1@bloomberg.net

To contact the editor responsible for this story: Gavin Serkin at gserkin@bloomberg.net


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