MUEC's EBITDA adjusted for one-off non-cash items (in our view, the most reliable parameter for the valuation of utility companies) grew 22.4% YoY to RUB38 bln ($1.3 bln), which implies a slight deterioration of 2.2 ppt YoY in the EBITDA margin to 34%.
In 2010, MUEC almost doubled its connections fees to RUB19.9 bln ($654 mln) while Lenenergo grew close to 55% YoY.
Currently, the Moscow heat market is divided between two major players - Mosenergo (thermal power plants producing both heat and electricity) with a 68% market share and MUEC
(boilers producing only heat) with nearly a 26% market share.
In 2008, a controlling stake in MHDC was acquired by MUEC
, the second-largest heat producer in the Moscow region that later, according to media reports, resulted in conflicts between Mosenergo and MUEC
on the heat market (limitation of competition).
Mosenergo could potentially increase its share in the heating market by providing an alternative to the expensive heating generated by MUEC
. In addition to profits generated from the sale of heating, there would also be a positive impact on the company's fuel efficiency, as it could sell off additional volumes of heating without any extra fuel cost (heat is a by-product of electricity generation and very often TGKs are unable to utilize this heat).