UES Delays OGK-1 Share Sale

The sale of a controlling stake in electricity producer OGK-1, whose sale could raise as much as $7 billion, will be delayed, Unified Energy System said in a statement Tuesday.

A source close to the sale said earlier Tuesday that the sale would be put off until the middle of May.

UES had intended to sell control of OGK-1 on Thursday. It did not set any new timeframe for the sale in its statement.

"There is a high probability that the sale of OGK-1 ... will take place in the nearest future," UES managing director Vladimir Avetisyan said in a statement.

The source said the sticking point in the negotiations was the price, with UES insisting that it will only sell for more than $400 per kilowatt of OGK-1's generating capacity. But this would mean UES has already yielded significantly on the asking price for OGK-1, without getting the potential buyer to agree.

The market value of OGK-1 is about $500 per kilowatt of generating capacity, and UES has repeatedly said it will sell at a premium to the market, with sources close to the deal pegging the price as high as $700 per kilowatt.

A selling price of about $400 per kilowatt would make OGK-1 one of the cheapest of the 20 generating companies being sold off, even though French utility EDF and other foreign giants were initially vying for control.

Last week, however, UES said only one bidder remained: a consortium of Russian multibillionaires, led by the investment vehicle of metals and oil magnate Viktor Vekselberg.

Mikhail Slobodin, the head of Vekselberg's investment vehicle, Integrated Energy Systems, said OGK-1 deserved to be sold at a discount, because its investment program will put major cost pressure on the buyer.

OGK-1's development plans through 2010, which the new owner will be obliged by contract to fulfill, have recently risen to around 93 billion rubles from the original 68.8 billion rubles.

"If you subtract from the market price the money that will have to be invested at the buyer's expense, then the cost is somewhere around $400," Slobodin said Tuesday.