Natural gas prices were
hiked; electricity prices remained low
Government increased natural gas prices by roughly 10%, electricity tariffs by only 4%. As a result, the profitability of natural gas fired electricity generators remains under pressure. Moreover, the slowdown in economic activity led to a decline in consumption and depressed electricity prices in the spot market.
Oversupply to put prices under pressure in 2013 and 2014
Despite higher natural costs, we do not expect electricity generators to pass through higher costs as sharp increases in generation capacity will lead to an oversupply in the market in 2013 and 2014.
Cutting our TP by 11%
We trim our DCF based TP on reduced earnings estimates. Main upside risk is a better-than-expected pricing environment, while downside risk could come from a premature termination of the electricity sales agreement with Syria that makes up 20% of total revenues, and/or lower-than-expected prices.
We cut our 2013 and 2014 EBITDA estimates by 11% and 8%
We cut our revenue and net income estimates by 2% and 21% for 2013 and by 1% and 17% for 2014 due mainly to high natural prices, which we increased by 4% over prior estimates. .
Government increased natural gas prices by roughly 10%, electricity tariffs by only 4%. As a result, the profitability of natural gas fired electricity generators remains under pressure. Moreover, the slowdown in economic activity led to a decline in consumption and depressed electricity prices in the spot market.
Oversupply to put prices under pressure in 2013 and 2014
Despite higher natural costs, we do not expect electricity generators to pass through higher costs as sharp increases in generation capacity will lead to an oversupply in the market in 2013 and 2014.
Cutting our TP by 11%
We trim our DCF based TP on reduced earnings estimates. Main upside risk is a better-than-expected pricing environment, while downside risk could come from a premature termination of the electricity sales agreement with Syria that makes up 20% of total revenues, and/or lower-than-expected prices.
We cut our 2013 and 2014 EBITDA estimates by 11% and 8%
We cut our revenue and net income estimates by 2% and 21% for 2013 and by 1% and 17% for 2014 due mainly to high natural prices, which we increased by 4% over prior estimates. .
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