We initiate coverage of the Federal Grid Company with a HOLD rating and target price of ¢1.2, which implies a 8% upside to the current market price. FGC is among the largest and most liquid stocks in the Russian utilities sector. It has already transferred to RAB tariffs, and since the RAB parameters are known there are few downside risks to its financial forecasts. However, we believe that these benefits were already priced in by the market, and future valuations will be driven by the management’s ability to execute on cutting operating costs. The main downside risk for its valuation is the uncertainty regarding future capex plans, as these assumptions have a high sensitivity.