UES Delays Auction Over Foreign Bidder

Unified Energy System said Tuesday that it had delayed an auction for its 25 percent stake in Russian Communal Systems by two months due to interest from a foreign investor.

UES refused to disclose the name of the potential bidder, but an analyst close to a rival bidder said it was probably French-based Veolia Water, the world's leading water-supplying company.

The auction for the stake in country's biggest private housing utility has been rescheduled from Thursday to May 22 after a new investor expressed interest, UES spokeswoman Tatyana Milyayeva said.

Applications to bid will be accepted from April 21 through May 21, she said. The starting price for the stake is 3.1 billion rubles ($130 million), and bids will be accepted in increments of 100 million rubles.

A UES official, speaking on condition of anonymity, said the new bidder was a big foreign company.

Two companies have already expressed interest in participating in the auction, Viktor Vekselberg's Integrated Energy Systems, which owns the other 75 percent of Russian Communal Systems, and Alfa Group's subsidiary Rosvodokanal, the country's biggest private water-supplying company.

In an indication of how high the stakes are, Rosvodokanal head Alexander Malakh has said he was ready to pay 5.8 billion rubles, nearly double the starting price.

Veolia Water declined to comment on the auction. A company official responsible for Russia, Nathalie Cenek, said the company did not "comment on its deals and business."

Alexander Kornilov, chief analyst at Alfa Bank, said he believed Veolia Water was the only potential foreign bidder.

"The Russian housing and utilities sector is not interesting in terms of investing money because it is actually stagnating," he added.

He said his bank's parent company, Alfa Group, found the sale in Russian Communal Systems interesting because it was looking to diversify its investments.

Veolia Water, which operates in 59 countries, is the leading international water services company in Russia, with operations in Moscow, St. Petersburg, Rostov-on-Don and plans to expand to Nizhny Novgorod. It entered the market in 1991 when it obtained a major stake in Saint Petersburg -- Pure Water, a company that makes and installs water filtering equipment and checks water pipes.

Russian Communal Systems was established in May 2003. It provides heat, water and electricity to 4.5 million people in 12 regions, including Nizhny Novgorod, Tula and Altai.

Its consolidated revenue for 2006 was 23.8 billion rubles, the latest figure available.