UES to Sell 21% of Mosenergo to City

The board of state utility Unified Energy System on Friday approved the sale of 21.2 percent of Moscow utility Mosenergo to the city government for 6.5 rubles per share, valuing the stake at $2.25 billion.

The city, which already owns 5.4 percent of Mosenergo, will have until Jan. 30, 2009, to pay for the stake in full, UES said in a statement after the board meeting. Mosenergo is majority controlled by Gazprom.

The board also sought to make progress on the utility's various spinoff sales, which have so far had mixed results.

Integrated Energy Systems, the investment vehicle of billionaire Viktor Vekselberg, said Friday that it wanted more talks on the price of power firm TGK-9 despite UES dropping the price by 6.2 percent to appease IES.

The utility decided Friday to lower the minimum asking price for TGK-9 to 0.801 kopeks per share after IES declined to pay the initial price.

"The lowering of the price was predictable, but we will continue in the course of the next week to talk about this price with UES," IES chief Mikhail Slobodin said.

The initial asking price set by UES was 0.854 kopeks per share, at a premium of about 15 percent to market levels. IES declined to enter a bid at that price last month. Talks with UES over the sale of TGK-9 then broke down.

IES already owns more than 30 percent of TGK-9, and UES was depending on IES to purchase control. Reported talks with other potential buyers did not produce a deal.

UES could put off a secondary share offering of its power producer OGK-6 until as late as the first quarter of 2009, the utility said Friday. UES initially planned to sell OGK-6 shares in October but decided to postpone the offering, citing unfavorable market conditions. UES had said the placement would still be carried out before the end of 2007.

But the board decided Friday that the share sale could be split into two parts, the first taking place either this year or in the first quarter of 2008. The money raised from this part of the sale would finance OGK-6 investment until the second round of the sale could be held sometime between the fourth quarter of 2008 and the first quarter of 2009.

OGK-6 is majority controlled by Gazprom, and analysts have said the initial plan for the share sale broke down because not enough investors were ready to become Gazprom's strategic partners.

UES also said Friday that it would not lower the price of the supply firms that it has twice failed to sell at auctions, and is seeking instead to sell them on a new platform.

UES attempted on Thursday to sell seven regional electricity supply companies that it had been unable to sell earlier this year. Five of the companies again failed to attract any bidders, leading analysts to speculate that the price would have to drop.

On Friday, UES instead proposed using an electronic auction system as a way to address the backlog of unsold companies. The system will allow for "the possibility of accepting bids from any interested party that has access to the ... system and can provide an electronic signature," UES said.