Tuesday, May 15, 2012

Romania Utilities Post First-Quarter Profit Drops on Weather

Transelectrica SA (TEL) and Transgaz SA, Romania’s biggest publicly-traded utilities, said profit fell in the first quarter as a cold snap and heavy snowfall disrupted energy supplies, lowering revenue and raising maintenance costs.

Transelectrica’s net income fell 73 percent to 43.6 million lei ($12.7 million) from 160.9 million lei a year earlier, according to an earnings statement to the Bucharest Stock Exchange today. Transgaz posted an 11 percent decline in net income in the first quarter to 173.5 million lei from 194.9 million lei a year ago, it said in its bourse filing.

Romania’s utilities need to increase spending to expand and upgrade their outdated energy grids to accommodate growing output and consumption. A decline in the companies’ first- quarter profits may be compensated by higher regulated tariffs later this year, as the country’s energy regulator is expected to approve pricing plans for both utilities.

“Even though the volumes transported by the two companies declined and none of them benefited from an increase in regulated prices, the results are quite promising,” said Mihai Caruntu, an analyst at Erste Group Bank AG’s Banca Comerciala Romana SA. “We expect 2012 to be a decent year especially if we compare the current results with an exceptional first quarter last year, but for Transgaz (TGN) it will be crucial to see a tariff increase approved by the energy-market regulator in July.”

State-owned Transelectrica plans to invest 782 million lei this year in power-grid expansion, as Romania’s incentives for renewable-energy companies boost investments and wind-farm output.
No Capital Raise

Transelectrica’s majority owner, the Romanian Economy Ministry, has no plan to increase the company’s share capital through a cash contribution this year, after it sold a 15 percent stake on the stock exchange in March.

Romania raised 37.7 million euros ($49 million) from the sale of the minority stake, the country’s first in more than four years, to meet pledges to international lenders under a precautionary agreement. The ministry plans to sell a 15 percent stake in Transgaz on the stock exchange this year.

“Considering the results the Transelectrica shares may fall below 12 lei per share in the short term,” Andrei Radulescu, an analyst at the brokerage SSIF Broker SA, said in an e-mailed response to Bloomberg questions. “Trangaz’s results are decent. The company is undervalued at this point, so its shares may rise to about 235 lei.”

Transgaz fell 6.7 percent at close to 194 lei per share in Bucharest trading today, while Transelectrica’s shares declined 5.8 percent to 13 lei, valuing the company at 953 million lei.

To contact the reporter on this story: Irina Savu in Bucharest at isavu@bloomberg.net.

To contact the editor responsible for this story: James M. Gomez at jagomez@bloomberg.net

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