Mosenergo's ADRs Top NYSE Performer

Moscow power utility Mosenergo's American Depositary Receipts have been the best performing ADRs on the New York Stock Exchange, with growth of more than 62 percent in the past year.

However, its shares on the Russian Trading System have dropped to about 0.97 rubles from their 1.75 ruble high last March.

The stock is likely to recover quickly, said Fyodor Tregubenko, energy analyst at Brunswick UBS Warburg, in a telephone interview Friday after Mosenergo released its 2000 financials to Russian accounting standards.

"The company will reap benefits from a 3.5 percentage-point cut in turnover taxes, which became effective Jan. 1, and from a steady growth in energy consumption," Tregubenko said.

The market had been anticipating the strong annual results after Mosenergo released preliminary figures last month, he added.

Mosenergo said its profit on sales had increased 57 percent to 5.4 billion rubles ($189.7 million), in line with analysts expectations.

"Our performance has been very solid despite some challenges," Mosenergo's head engineer Igor Gorunov said at a public meeting.

The company, which services Moscow and the Moscow region, attributed the augmented profits to its debt-collecting crusade. As a result of the effort, last year Mosenergo lowered its debt exposure by 3.1 billion rubles, about 18 percent, to about 14 billion rubles. It plans to curtail it by 5.8 billion rubles in 2001.

One analyst calls Mosenergo the most promising investment in the energy sector.

In addition to a tightened cash collection, Mosenergo can also thank an increase in state-controlled energy rates for its robust financial performance last year, analysts said.

"Revenues increased on a nearly 30 percent average electricity tariff hike, 40 percent heat tariff hike and 5 percent growth in electricity sales," said Aton brokerage in Friday's research notes. "We expect to see improved 2001 financials driven by a tariff hike planned for February."

While tariffs jumped twice last year, Mosenergo says it needs more rate hikes to compensate for growing expenses.

"Gazprom, which is one of our main suppliers, has already raised its rates as of Jan. 1, so we are forced to do the same," Gorunov said.

The energy giant has already received a green light from the government for a 25 percent rate increase for residential customers, which will take effect on Feb. 15, and is lobbying the state for a similar increase for its commercial clients.

Mosenergo reported that last year it bought back $5 million of its Eurobonds in the secondary market, bringing its total Eurobond debt to $155 million.

But, Gorunov said, the company will temporarily halt payments to its creditors because "the question of tariffs has not been resolved, and that makes it impossible to plan ahead."

Mosenergo is preparing a financial report to Western accounting standards.

Gorunov confirmed Mosenergo dividend payments last year totaled 211 million rubles ($7.4 million), about 150 percent higher year-on-year, a move analysts applauded.

"High dividend payment is always a sign that the company cares about its shareholders," said Ilya Marshak, energy analyst at NIKoil brokerage. "We view Mosenergo as the most promising investment in the energy sector."