Source Says Dubai World Quits OGK-1

The Dubai government's sovereign wealth fund, Dubai World, has pulled out of a $5.3 billion deal to buy control of OGK-1 because of poor market conditions, a source close to the deal said Monday.

Dubai World spokeswoman Sana Maadad said the company, which guaranteed $100 million in July toward the acquisition of the electricity generator, could not immediately comment.

Dubai's Russian partner in the preliminary deal, Roskommunenergo, said last week that the deal was on track.

When asked about the progress of the deal in July, OGK-1 general director Vladimir Khlebnikov said Dubai World's commitment was "conditional."

OGK-1 spokeswoman Yana Dubeikovskaya said Monday that the company was waiting for word from Dubai World.

The development came as Prime Minister Vladimir Putin announced that Deputy Prime Minister Igor Sechin would lead a new government commission to oversee the electricity industry. The commission, which the Presidium created at a regular session Monday, will coordinate investment plans that the state and private owners have for the industry, Putin said.

Energy Minister Sergei Shmatko said the commission would include officials, representatives from the energy industry and corporate consumers.

The commission will seek to ensure that investors follow through with investment promised as part of the deals to purchase electricity assets, said Dresdner Kleinwort analyst Sergei Beyden.

Dubai World would be the second foreign investor in the electricity sector to scrap investment plans. German utility RWE on Friday said it would not go ahead with a deal to buy control of TGK-2 , citing market conditions.

Shmatko said Monday that it did not make business sense for the government to sell its electricity assets right now because their market values had fallen so low. OGK-1 is indirectly controlled by the government. OGK-1's market value has since fallen more than 70 percent below the offer price.

Reuters, MT