Russia UES will take OGK-1 bids until May 20

“We will be ready (for a sale) by May 10 but will take bids until May 20,” Vladimir Avetisyan, managing director of Unified Energy Systems (UES), was quoted by news agencies as saying. The sale of OGK-1, expected to raise as much as $7 billion in the biggest deal to date in the course of the Russian power sector restructuring, was due to take place in mid-April but has been delayed due to price arguments with investors. The UES insists that it will only sell for more than $400 per kilowatt of OGK-1’s generating capacity and wants to get “the maximum price”. The deal, which includes existing and new shares, will allow investors to gain about 70% of OGK-1. Potential investors expect a discount and have so far been pulling out of the race, leaving UES with only one bidder – a consortium led by the investment vehicle of metals and oil magnate Viktor Vekselberg.

Mikhail Slobodin, the head of the Vekselberg’s investment vehicle Integrated Energy Systems (IES), earlier said OGK-1 deserves to be sold at a discount, because its investment program will put major cost pressure on the buyer. OGK-1’s development plans through 2010, which the new owner will be obliged by contract to fulfill, have recently risen to around 93 billion rubles ($3.97 billion) from the original 68.8 billion rubles. The time pressure on UES to sell OGK-1 is also increasing.

By July 1, the Soviet-era monopoly must sell off all of its assets as part of a sweeping reform of the sector, aiming to raise investment for an overhaul of Russia’s power systems and introduce a competitive market for power. (Reuters)