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Transelectrica First Impression 2Q 2010: Mismatch in passthrough items causes operating loss

Transelectrica reported its RAS unconsolidated results for 2Q 2010. Transportation revenues and costs were in line with estimates, but due to a mismatch in passthrough items the company reported an operating loss of RON 36 mn, while we were expecting operational break-even.

Transportation revenues in line with estimates: Total revenues reached RON 526 mn, 15% below our forecast, due to significantly lower revenues from balancing services, which are pass-through revenues. Revenues from transportation reached RON 211 mn, fully in line with estimates.

Mismatch between revenues and costs from pass-through items generates operating loss: Grid losses and salaries costs came close to our estimates, while maintenance costs stood some 20% below our forecast. The company recorded higher costs from tehnological system services than the corresponding revenues. We remind that the revenues from tehnological system services are pass-through and should not affect the bottom line. The difference amounted to around RON 32 mn, explaining most of the operating loss reported of RON 36 mn. We were expecting the company to break-even over the quarter.

Due to the revaluation of the FX denominated loans, RON depreciation brought financial losses of RON 93 mn, 6% higher than estimated. The net loss for the quarter amounted to RON 108 mn, while we were forecasting a loss of RON 88 mn.

Over 1H 2010, Transelectrica reported almost flat revenues of RON 1.2 bn and a net loss of RON 58 mn, compared with a profit of RON 9 mn in 1H 2009.

Outlook and recommendation: We expect the difference between revenues from tehnological system services and costs to be offset over the following quarter. As transmission revenues and costs came relatively close to our estimates, we view the results as neutral. We keep both our 'hold' recommendation and target price of RON 18.6.

Sursa: http://www.rciro.ro

Tags: revenues costs estimates operating mismatch items transelectrica