TGK-11 to Appeal Rosneft Court Win

Power producer TGK-11 said Monday that a Moscow court's ruling could leave some Siberian residents without heat and electricity as soon as this winter, and promised to appeal the decision calling its merger illegal.

TGK-11, in which Rosneft formerly controlled a blocking stake, is the only asset that Unified Energy System failed to find a buyer for before being wound up July 1.

"I will file an appeal in two days," Anna Kaflevskaya, a TGK-11 deputy CEO and lawyer, said by telephone.

She said Friday's hearing at the Moscow Arbitration Court was emotional, with lawyers "shouting at each other for 4 1/2 hours" followed by a 1 1/2-hour wait for the judge's decision.

Rosneft had held a 25.8 percent stake in Tomskenergo, which was merged into TGK-11 at a shareholders meeting in August. The move left Neft-Aktiv with just 5 percent in the combined company.

Neft-Aktiv claimed that it did not receive an absentee ballot in time, making the decision a violation of its shareholder rights. TGK-11 insists that Neft-Aktiv received the proper documents in time.

"The court's decision will not only trigger the deformation of our company, but will significantly complicate the electricity supplies of Omsk and Tomsk regions," TGK-11 spokeswoman Oktyabrina Yermakova said. "With extremely low winter temperatures, the regions may face significant heat and power cuts as early as this winter."

She said the decision would also hold up TGK-11's investment program, which would be particularly dramatic given the region's energy deficit. The company needs 1.5 billion rubles ($65 million) for new stations and renovations at existing stations, Yermakova said.

Nikolai Manvelov, a spokesman for Rosneft, said his company "was satisfied with the court decision" and that the company had "stood up for its shareholder rights."

Rosneft's primary interest in the Tomsk region is its 50 percent stake in Tomskneft, a former Yukos unit, which produces 240,000 barrels of oil per day.

Anatoly Chubais, then chief of UES, said in April that Dmitry Medvedev, who was still serving as first deputy prime minister, had stepped in to mediate the dispute. Analysts say Chubais' departure from the fray may have had something to do with Friday's ruling.

"When Chubais was there, someone was lobbying for TGK-11's interests, but now that he's gone, Rosneft, with its Kremlin connections, won a flawless victory," said Konstantin Reily, a utilities analyst at Finam brokerage.

Deputy Prime Minister Igor Sechin is chairman of Rosneft's board.

The victory could prove less than full, however, if residents are left out in the cold as a result, which could pose a major public relations problem for the state oil giant.

"TGK-11 has got no money for its investment program, as there was no additional share emission," said Dmitry Bulgakov, Deutsche Bank utilities analyst.

"If the company gets disintegrated, it will be hard for its parts — several generating stations in Omsk and Tomsk — to take bank loans separately with their small assets as collateral," Bulgakov said.