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Ministries discuss implementation of 6% utilities tariff cap

Head of the Federal Tariff Service Sergey Novikov has said that implementing the 6% cap on utilities tariff growth in 2013, as suggested by President Vladimir Putin, would not necessarily result in adjustments to tariffs. At the same time, Minister for Economic Development Andrey Belousov said that he did not rule out the possibility of some downward adjustments to gas and electricity tariffs. Belousov added that more certainty on the tariffs decision would follow in April, when MinEconomy is to reconsider the three-year socio-economic plan.

The next step in tariff growth in Russia is planned for 1 July 2013. The current plan suggests the following YoY growth patterns: 15% for gas tariff, 10% for grids, 12-14% for spot prices and 12-15% for households electricity tariffs, 10% for heat tariffs.

The current news flow on possibly adjusting tariffs is quite mixed. This, in our view, leaves sizable room for speculation and clouds the outcome of what was once a fairly stable tariff outlook (after the 2011 election year tariff reshuffle). In our view, such uncertainty will weigh on utilities’ stock prices unless a final decision is taken in April-June 2013.

This is yet another reminder of the contained tariff growth environment in the utilities sector and respectively high risk of additional pressure on the tariffs.  

Mikhail Rasstrigin, Alexander Seleznev
VTB Capital analyst

gas, Russia

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