Only One of 9 Firms Sells at UES Auction

Unified Energy System failed to auction off eight out of nine of its supply firms Friday, it said in a statement, throwing doubt on its ambitious schedule of company sell-offs.

As part of a sweeping reform of the sector, UES, the former electricity monopoly, has until July 1 to sell all of its assets and cease to exist.

Large stakes in all nine of the regional supply firms had been unsuccessfully put up for auction at least once before.

But at its November board meeting, UES declined to lower the minimum price of firms it had twice failed to sell, instead choosing to auction them again.

The only firm that attracted bidders was the Novgorod Electricity Supply Co.

A 49 percent stake in the company went to Russian investment firm KIT Finance for 124.3 million rubles ($5.11 million). The starting price was 120 million rubles, and UES said two other bidders took part in the auction.

UES held stakes in a total of 52 supply companies, 22 of which have been sold since the auctions began in 2006, raising a total of 13 billion rubles.

The supply firms are being sold as part of a sector-wide reform that will see UES broken up into dozens of companies dealing separately in the generation, distribution and supply of electricity.

The supply companies play the role of a middleman in the power sector, buying electricity on the wholesale market or directly from generators and selling it to end consumers.

Their sales have been plagued by poor demand, largely because the lack of legislation governing tenders for supplier status makes the supply business risky, analysts say.

The firms not sold before UES' July liquidation will be transferred onto the balance sheet of Energy Systems of the East, another UES subsidiary.

The firms that failed to sell on Friday were the Kolsk Electricity Supply Co., the Astrakhan Electricity Supply Co., the Bryansk Electricity Supply Co., the Komi Electricity Supply Co., StavropolEnergosbyt, Energosbyt RostovEnergo, Kostromskaya Supply Co., and Orlovsk Supply Co.

UES also said it would sell its 50.9 percent stake in the country's largest power supply company, Mosenergosbyt, in March, two months earlier than planned.

Moving the date forward is meant to "raise the efficiency of the sale of these assets," UES said.

Mosenergosbyt supplies power to more than 5 million customers in Moscow and the Moscow region, and has a market capitalization of more than 17 billion rubles ($699 million), the largest of Russia's 52 supply firms.

Gazprom holds a blocking stake of more than 25 percent in the company.

n UES wants to team up with Norilsk Nickel, a minority shareholder in its power generation unit TGK-14, to sell shares in that company, Bloomberg reported.

UES plans to auction its stake with Norilsk's as a single lot, the utility said Friday in a statement after a company board meeting approved the decision. Unified Energy holds 49.5 percent of TGK-14. Norilsk owns about 28 percent.