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. Last Updated: 07/27/2016

Mosenergo Loses $25M, Eyes $70M EBRD Loan

Local power monopoly Mosenergo on Tuesday reported losses of 780 million rubles ($24.7 million) for the first half of 2002, citing unseasonably warm weather early in the year.

Mosenergo general director Arkady Yevstafyev said the loss, calculated to Russian accounting standards, was also due to depreciation of assets and low energy tariffs, which lag behind rising gas prices.

He said Mosenergo nonetheless would achieve its forecasted profit of 709 million rubles by the end of the year.

"We will reach that figure if we follow our business plan closely, continue our expenditure-cutting program and act in accordance with all the figures in our budget," Yevstafyev told reporters.

Mosenergo had posted a profit of 2.37 billion rubles in the first half of 2001 and 9 billion rubles for the year. The utility was under a different management team at the time.

Yevstafyev, an ally of Unified Energy Systems head Anatoly Chubais, was voted general director in April after a drawn-out battle between the city government and UES, Mosenergo's parent company.

Analysts said the losses were expected and Mosenergo should not have trouble achieving the profit goal set out in its business plan.

"Profits went down considerably after a re-evaluation of fixed assets resulted in an increased depreciation charge," said Fyodor Tregubenko, an analyst at Brunswick UBS Warburg.

"In addition, losses caused by electricity tariffs that were indexed only 2 1/2 months after gas prices went up will be recuperated when numbers for the new tariffs are plugged into the accounting in the second half of the year," he said.

The Regional Energy Commission in May allowed Mosenergo to raise tariffs, but not by as much as the utility had hoped. Mosenergo then turned to the Federal Energy Commission, which approved a tariff hike that was to begin Aug. 1.

The European Bank of Reconstruction and Development was to sign off on a five-year, $70 million loan to Mosenergo on Wednesday, said Vladimir Nazin, deputy general director of economics at the company.

Nazin said the loan will not be used to pay off the remaining $110 million of a $200 million Eurobond issue in 1997. "We will mainly pay off that sum using our own funds," he said.

Some $50 million of the EBRD loan is to be injected into Mosenergo's turnover.

An unspecified part of the loan will go toward expanding a hydroelectric power plant in the Ryazan region, Yevstafyev said.