Oil Report

Russia UES break-up approved, few buyouts needed

MOSCOW, Oct 30 (Reuters) - Shareholders of Russia's power monopoly Unified Energy Sistem (UES) EESR.MM, have backed a final break-up plan, freeing the firm from the need to spend extra money to buy out minorities, the head of UES said Tuesday.

“The attendance at the meeting was more than 75 percent (of voting shareholders), meaning that the main decision was passed. In line with that, UES will cease to exist from next July 1,” chief executive Anatoly Chubais told reporters.

UES has already set aside 102 billion roubles ($4.12 billion) to buy out investors who voted against the plan at an extraordinary shareholders’ meeting last Friday.

Chubais said UES would not have to spend more than this sum on the buyouts because the number of takers among UES’s 350,000 shareholders would be small.

“We are absolutely ready to buy out the entire amount that shareholders want to sell,” he said, adding added that investors will want to hold on to their shares in light of the growing capitalisation of the companies those shares represent.

UES is being broken up into dozens of smaller companies, separately dealing in the generation, distribution and sale of electricity.

UES shareholders will get pro rata stakes in these companies, whose underlying assets are currently worth more than their market valuations, analysts say.

Other investors, mostly strategic, are being given the opportunity to buy up new shares in these companies, especially the 20 generating firms known as OGKs and TGKs that are issuing billions of dollars in new stock.

The aim of this sell-off, the largest privatisation under President Vladimir Putin, is to raise $120 billion to upgrade Russia’s power plants and high-voltage grids, and to introduce a competitive market for power.

UES had gone to great lengths to ensure the vote would pass on Friday, even securing a special exemption from regulators that allowed it to count abstentions as votes in favour of the proposal.

But with the support of the government, which owns 52 percent of UES, and major shareholders such as gas export monopoly Gazprom GAZP.MM, which holds 11 percent, the plan was effectively guaranteed approval in advance [ID:nL26708239].

For small portfolio investors, it was merely a chance to voice their dissent, ask for a buyout, and make a choice between two baskets of pro rata stakes available to them.