Russia's plan to freeze tariffs for natural monopolies (including network utilities) in 2014 is an example of the sector's unpredictable regulatory framework, which Fitch Ratings sees as the key constraint on utilities' ratings, the rating agency informed.
If the changes are implemented across the utilities sector, Fitch estimates that some generating companies, such as Mosenergo, could benefit moderately thanks to zero growth in gas prices. Networks such as MOESK, however, would suffer, while the impact on Gazprom would be limited.
Russian utilities still have substantial headroom for improving operational efficiencies and cutting costs, which could help offset any adverse impact from the tariff freeze.
Fitch regards Gazprom as being well positioned to cope with the proposal following a 19% average annual increase in regulated domestic gas prices between 2007-2011. Fitch also expects Gazprom to be able to negotiate smaller increases in the mineral extraction tax, which is set to rise by 17% in 2014.
Implications for Russian Railways would be negative, but mitigated by a possible increase in direct subsidies - depending on the government's decision regarding the company's budget and investment plans.
"AK&M", 18.09.2013 18:18