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. Last Updated: 07/27/2016

Mosenergo Tariff Hikes Approved

Moscow's tariff regulator said Friday it had approved electric power rate increases of 15 percent to 20 percent for Mosenergo, short of its request for a 40 percent rise.

Analysts said the lower-than-expected tariff increase was disappointing and probably had a political motive. They said it would deal a blow to Mosenergo's revenues for this year.

"Rates for households were raised by 20 percent and for industrial consumers by an average of 15 percent," Vladimir Mokhov, the city energy commission's first deputy chairman, said by telephone.

Mosenergo shares closed down 3.76 percent at $0.0435 on the RTS on Friday.

Mokhov said the differentiation in rates was intended to end subsidization of residential consumer tariffs by industry. He said nearly all consumers were now paying 73 kopeks ($0.023) per kilowatt hour.

"We analyzed Mosenergo's costs and realized that they were asking for money to buy expensive fuel -- coal and fuel oil," Mokhov said. "But Moscow is mainly fueled by gas."

Mosenergo had lowered its initial 40 percent request to 30 percent, he said.

Mosenergo declined to comment on the increases, saying it had yet to receive documentation from the commission.

"We believe that the decision of the Moscow [energy commission] is politically driven and reflects continued tensions between the city government and the management of the company," Renaissance Capital analyst Hartmut Jacob wrote in a note to investors.

The city utility's parent company, national power monopoly Unified Energy Systems, took on Moscow Mayor Yury Luzhkov last year by removing Mosenergo's Luzhkov-backed chief executive officer and replacing him with an ally of UES chief Anatoly Chubais.

Mikhail Seleznyov of United Financial Group said in a market comment that the commission's decision meant a 15 percent year-on-year tariff increase, while he had expected 20 percent.

He downgraded his forecasts for Mosenergo's revenues by 4 percent, based on generally accepted accounting principles, and his net profit forecast by 22.9 percent.

NIKoil analyst Ilya Marshak said he expected Mosenergo to appeal the commission's decision to the national tariff agency.