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Transelectrica First Impression 4Q 2009 - Negative outlook due to quantities and grid losses costs

The power grid operator Transelectrica (TEL) reported this morning its preliminary 4Q 2009 results under RAS and we come back with more details after discussing with management.

Lower quantities transported: According to the management, quantities transported stood at 13.7 TWh, 11% below our estimate. We based our assumption on management guidance regarding electricity consumption, which fell by 8.3% yoy in 2009, but the recovery in consumption was not fully reflected in the quantities transported by Transelectrica. Balancing revenues came above estimates, which offset the drop in transmission revenues, thus revenues stood in line with forecast. We remind that balancing revenues are pass-through.

Operating profit meets expectations: Salaries came 16% below our forecast (and 13% lower yoy) at RON 36.7 mn. We do not have quarterly data regarding maintenance and grid losses costs thus we compare them with our annual forecast. Grid losses reached 891 GWh, 4% below our estimate and maintenance costs reached RON 152 mn, 15% below our estimate. With the help of lower costs, the operating profit for the fourth quarter came in at RON 60 mn, in line with our estimate.

Financial result better than expected, offset by extraordinary expenses: Interest expenses came lower than anticipated thus the financial losses for the year stood at RON 83.1 mn, compared with RON 89.5 mn our estimate. The company recorded in 2009 extraordinary losses of RON 5.6 mn generated by repairs after some incidents that affected the grid, which counteracted the positive effect from lower financial losses. We remind that the company records in December the FX losses from the revaluation of the FX loans (RON 67 mn). The losses wiped out the operating profit, the company recording in 4Q a net loss of RON 5.7 mn, against our estimated loss of RON 3.2 mn. Over 2009 the company recorded a net profit of barely RON 5.8 mn. We expect the dividend to stand at aprox. RON 0.04, some 90% lower yoy, the dividend yield standing below 1%.

Outlook and recommendation: We are disappointed by lower quantities, though impressed by the cost cuts. In addition we learnt from the management that the company will pay for grid losses RON 250/MWh in the first 9 months of 2010 and 220/MWh in 4Q, which exceeds our estimate of RON 220/MWh for the whole year. In view of the falling quantities, coupled with higher price to be paid for grid losses, we see the news as negative. We will review our estimates to incorporate the data. For the moment we place our target price under review but keep our 'hold' recommendation.

Sursa: http://www.rciro.ro

Tags: losses estimate company below costs quantities transelectrica lower

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