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. Last Updated: 07/27/2016

Mosenergo's '97 Profits Fall by 50%

Moscow's energy company, Mosenergo, suffered a massive 52 percent drop in profits last year, according to a new report by Deutsche Morgan Grenfell investment bank.

The report, however, also cited a number of positive trends, such as higher payment collection, which should add to Mosenergo's long-term value in the eyes of investors, the report's author said.

Mosenergo's net profits fell last year from $972 million to $471 million, with the drop due to an 11 percent decline in sales, as well as a 20 percent rise in the unit cost of power, Derek Weaving, emerging Europe utilities analyst at DMG, said.

Despite the rise in unit power costs, Mosenergo's overall production cost increased by only 1 percent, as it generated 8 percent less power and 3 percent less heat, the report said.

An increase in fuel prices and, in particular, a 40 percent rise in maintenance costs due partly to inflation contributed to the higher cost of energy production per unit, Weaver said.

The report shows that Mosenergo's decreased sales and lower output were due to the company cutting power from nonpaying regional customers and selling less to the wholesale market.

The report said Mosenergo's major success in 1997 was to increase its payment collection rate. Debt owed by heat and electricity consumers for 1997 increased by 10 percent -- just a fraction of the 140 percent in 1996, the report said.

Bowing to the unwillingness of the city's politicians to make residents pay more for their electricity, the company kept its domestic tariff of 2 cents to 3 cents per kilowatt-hour unchanged in 1997 -- although it reduced its industrial tariff by 5 percent to 7 cents per kilowatt-hour.