Gazprom to Control Mosenergo

Unified Energy Systems will sell $2.1 billion of its shares in Mosenergo to Gazprom or a subsidiary, giving the gas giant a controlling stake in Moscow's main power provider, a person familiar with the deal said Wednesday.

Gazprom offered $2.1 billion for 14.6 percent of Mosenergo, and UES will formally accept the offer at a board meeting Friday, said the person, who asked not to be identified because he was not authorized to discuss the deal.

The person said UES had considered selling shares through an initial public offering but was going with the Gazprom offer because it would not be able to raise $2 billion through an IPO.

With the purchase, Gazpom's share in Mosenergo would increase to 52.4 percent, while UES would have 36.3 percent, compared to 50.9 percent now.

The person said Gazprom's $2.1 billion payment would be placed in a jointly managed company created to oversee the expansion of Mosenergo's generating capacity as it rushes to meet Moscow's growing energy demands.

Vedomosti first reported about the decision Wednesday.

Gazprom is expanding into power generation as President Vladimir Putin aims to make it into a multinational energy firm able to compete with the likes of ExxonMobil.

Last week, Gazprom said it was looking into joint electricity projects with Spanish power company Endesa.

The generating capacity of Mosenergo, which was itself spun off from national electricity monopoly UES in 1993, is under increasing amounts of strain as the city's electricity needs jump 5 percent each year. By 2010, it hopes to bolster capacity by 23 percent.