MRSK Siberia reported 1H 11 unaudited IFRS results. The is the first time the company has reported half year results according to IFRS. Revenue was up by 24% y-o-y to RUB 27.9bn, predominantly due to tariff increases.
OPEX increased by 10% to RUB 26.2bn, growing at a significantly slower rate than revenue. Electricity transmission costs, which account for about 50% of total OPEX, rose by 33% y-o-y. Transmission costs grew faster than OPEX overall do to FGC and TSO tariff increases.
Adjusted EBITDA was up by 243% y-o-y to RUB 4.7bn given a marked decline in depreciation charges and spending on electricity purchases. EBITDA margin increased to 16.7%, while net income rose to RUB 1.4bn compared to a net loss for 1H 10.
We anticipate no movement in the stock price following release of the results. As of May 1, MRSKs adjusted tariffs downward in compliance with the government policy to cap electricity price increases in 2011.As a result, financial results will weaken in the second half of the year.
Moreover, the market is waiting for guidance on 2012-14 tariffs as well as suggestions from the regulators regarding adjustment of RAB parameters.

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