UES Bills Move to Upper House

Bills to break up giant power monopoly United Energy Systems cleared the State Duma on Friday as a board member pleaded to make the restructuring more transparent for investors.

All six bills passed a third and final reading by a comfortable majority and should easily clear their remaining legislative hurdles to become law.

Andrei Sharonov, a deputy in the Economic Development and Trade Ministry who has sheperded the reform from its beginnings, said the Federation Council was due to pass them Wednesday, and they should be signed by the president without a hitch.

"The Federation Council will look at them literally on Feb. 26. I wouldn't swear to it, but they should pass easily," Sharonov, deputy minister for economic development and trade, told reporters in the Duma.

"We have agreed all the texts with the Kremlin legal department at every stage," he added.

Once signed by President Vladimir Putin, the laws will clear the way for the government to break up UES into competing generating companies and a single state-owned grid monopoly.

Also on Friday, UES board member David Herne, a fund manager, said he had written to Alexander Voloshin, the Kremlin administration chief who chairs the UES board, to ask for a more serious approach to the so-called 3+3 three-year strategy paper describing what will emerge from UES after it is broken up.

"The 3+3 commission was created by the board in September to improve the company's market capitalization," Herne wrote. "The shares are still undervalued, and there is no plan."

Herne said he wanted the board to declare the commission's work unsatisfactory and form a new group to focus on a stage-by-stage plan describing: what investors could expect at each stage; how to improve UES operations and corporate governance; and a float of UES shares on the New York Stock Exchange.

Many foreign investors sold UES in the first half of 2002 over reform fears. Foreign holdings are reported to be under 17 percent of shares, down from nearly 27.

The sell-off helped a consortium of Russian industrial groups with a vested interest in the electricity business, including the coal, metals, banking and financial consortium MDM Group, to buy up a joint stake that analysts and traders said could be over 15 percent of UES.