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Transgaz Company News - Analysts meeting highlights (positive)

Transgaz held an analyst meeting yesterday, focusing on the 2009 results. However, we had the opportunity to discuss other matters as well, including the 2010 budget (only some key figures were available) and Nabucco.

Transportation tariff: The management mentioned that they will propose to the regulatory authority a change in the revenue-cap methodology setting the tariffs. Therefore, instead of quantities transported (122.6 TWh in 2009), the company intends to charge the tariff on the total quantities passing through the grid (152.6 TWh in 2009), including the gas transported in/out of storage. This would not impact the level of regulated revenues but would lower the tariff, as the base that it applies to would increase. We do not believe that the change would significantly impact our forecasts, as the revenues level should not be influenced.

Nabucco: The company budgeted a participation of RON 78 mn for 2010 in Nabucco International, which exceeds our estimate of RON 50 mn. As we have not included Nabucco construction capex or revenues in our forecasts, the impact of the higher cash outflow is negative, but as the payments depend on certain milestones which could be delayed, we keep our present estimate. One of the following steps in the process is the signing of support agreements between each country and Nabucco International. This involves a clear strategy to be agreed with the state, including support with the land acquisition/concession, which could prove difficult and lengthy. The open season follows to take place this year, and could be a decisive factor in the decision to move on with the project.

2010 estimates: The company budgeted for 2010 an increase of some 10% yoy in quantities transported, which is based on the requests received from suppliers and other gas consumers. We continue to believe that the growth would be limited to 6.5%. We expect a surge of close to 9% in quantities transported in 1Q 2010, but a more stable performance going forward, especially as the allowance to interruptible consumers to use only domestic gas should end in October 2010. On the costs side, the company budgeted a rise of 20% yoy in technological consumption costs, partially explained by higher quantities transported. We feel that the assumption is overly pessimistic, and we would expect to see lower grid losses costs. On the other hand, the company budgeted third parties expenses close to RON 180 mn, in line with our estimate, and we believe that TGN will stick to the maintenance program.

Outlook and recommendation: We believe that the information provided supports so far our estimates. We could see some positive surprises in 1Q 2010 results with higher quantities transported and lower grid losses costs. Also, we forecast the bulk of maintenance works will take place in 2&3Q, which could further boost the 1Q 2010 net profit. We remind that the 1Q 2010 results are due to be made public on May 11. Until the release of the 1Q 2010 results we maintain our 'hold' recommendation and target price of RON 231.2.

Sursa: http://www.rciro.ro

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