French and Russian Firms to Buy OGK-1

Electricite de France and a Russian firm controlled by former Unified Energy System executive Mikhail Abyzov will jointly buy power producer OGK-1 after no other bidders came forward, a source in the UES subsidiary said Wednesday.

The deal, worth up to $7 billion, is set to become the biggest sell-off in the country's electricity reforms this year.

OGK-1 on Wednesday said the sale would take place on April 17.

Anastasia Izotova, a spokeswoman for the Russian bidder, TransNeftServis-S, said it would "go into the auction with a partner" but declined to name the partner company.

Abyzov, a former UES deputy chairman, controls TransNeftServis-S, an electricity service provider and consultant to large industrial enterprises, through his company, Rukom, which holds a blocking stake in TransNeftServis-S.

Electricite de France was not immediately available for comment.

UES had previously scheduled the sale for March 14, but had put it off until an unspecified date in mid-April, without giving a reason.

Russian media have cited UES sources as saying that Finland's Fortum pulled out of the race for OGK-1 after it bought another power producer, TGK-10, for $3 billion.

"They had no one to bid -- and now the deal has already been made," the OGK-1 source familiar with the deal said on condition of anonymity Wednesday. "The auction will be a formality, so UES felt safe to fix a new date."

OGK-1 owns six power plants across northwest Russia with a total generating capacity of 9.5 gigawatts. It is one of the last of 20 major generating firms being sold off by UES to raise investments and introduce competition to the sector.

The sell-off will include the sale of the government's stake, a secondary share sale and the mandatory buyout offer to OGK-1's minority shareholders.

"OGK-1 is the tastiest and the most expensive asset that UES is selling," said Irina Filatova, a utilities analyst at Brokercreditservis. "No Russian company can afford to buy it. Gazprom is an exception, but the Federal Anti-Monopoly Service will not allow it to buy any more in the electricity sector."

TransNeftServis-S posted net earnings for the first half of 2007 of 1.66 billion rubles ($70 million).

n Viktor Vekselberg's Integrated Energy Systems and the New Russian Generation Fund boosted their stake in TGK-6 to 82.2 percent Wednesday with the purchase of another 30.6 percent stake.

The two companies bought a state stake of 23.6 percent earlier this month, and previously held a 28 percent stake.

n TGK-7 sold an additional 3.85 billion shares Wednesday for 2.8 rubles each. Among the portfolio buyers were affiliated structures of Integrated Energy Systems, sources said.

The state's remaining 32 percent stake in TGK-7 will be sold before June 1.

n Lukoil acquired 29.99 percent of TGK-8 in a transaction worth 24.6 billion rubles ($1.05 billion), the company said in a statement distributed by the Regulatory News Service on Wednesday.