MOSCOW: Russian utilities and gas companies dragged down Moscow's stock market on Friday after President Vladimir Putin called for limits on rises in gas and power tariffs.
The Economy Ministry, responding quickly to Putin's call on Thursday, has proposed rates for electricity producers should rise by 6 percent from July 2014 and by 6 percent from July 2015, instead of the previously planned 9-10 percent.
Growth in gas tariffs for industrial consumers may be capped at 5 percent from July 2014 and July 2014, against the earlier expected rises of 15 percent, all moves aimed at curbing price growth.
But the proposal could cripple businesses in the power distribution and transmission sector in the medium-term, analysts said, while also cutting margins for the country's largest gas producers.
At 1345 GMT, the dollar-traded RTS index was down 1 percent at 1,374.21 points, while the rouble-denominated MICEX lost 0.6 percent to 1,364.60 points.
Shares of Federal Grid Company (FSK) were down 4.7 percent on the day, while those of the power company MRSK traded 3.5 percent lower.
"(Putin's move) puts the whole electricity distribution and transmission sector on the brick of bankruptcy essentially in three years time," Vladimir Sklyar, head of Russian research at Renaissance Capital said in a note.
"Russian grid tariffs in absolute terms are at par with the United Kingdom, however Russian grids are making 18 percent earnings before interest, taxes, depreciation and amortisation (EBITDA) margin, while in the UK 65 percent."
Shares of the state gas monopoly Gazprom were down 0.6 percent, while those of the largest independent gas producer Novatek traded 1.4 percent lower.
"We see the news as negative for both Gazprom and Novatek because lower tariff growth would negatively affect margins and thus profitability," analysts at Alfa Bank wrote in a note.
"Since Gazprom still enjoys an export monopoly and receives higher margins from export sales, a slowdown in tariff indexation would affect its profitability to a lesser degree."
The Russian rouble traded 0.4 percent down on the day against the dollar at, but it was 1.1 percent stronger on the week, supported by stronger oil and monthly tax payments.
The rouble was 0.6 percent weaker against the euro at 40.76 and lost 0.5 percent to 35.54 versus the euro-dollar basket.
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