Author: Gordon Platt

Russia’s national power utility OAO Unified Energy System has completed the spin-off of two power-generation units, OGK-5 and TGK-5, completing the first part of the government’s plan to break up the company. UES, the former power monopoly, also is seeking to sell its 23-story headquarters building in Moscow for a minimum of $165 million. The company will spin off all of its generating units and distributors by the middle of 2008, when it will cease to exist. UES is planning to offer additional share issues of its eight power-generating companies by the end of this year.

Power generator OGK-2 plans to float global depositary receipts on the London Stock Exchange and has mandated Deutsche Bank, Troika Dialog and UBS to organize the offering. The issue is expected to be worth about $1.9 billion at current market prices. Russia’s gas-export monopoly, Gazprom, will take control of OGK-2 following a series of asset swaps, but this will be diluted following the new share issue. Gazprom will need to buy new shares to retain control of the power company.

The country’s power sector is being restructured and partially privatized in an effort to improve its efficiency and to attract investment to upgrade its facilities. Italian power firm Enel already holds a major stake in OGK-5, while Integrated Energy Systems, which is controlled by Russian billionaire Viktor Vekselberg, has a large stake in TGK-5 and is seeking control.

Gordon Platt