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. Last Updated: 07/27/2016

Government Nets Victory For Mosenergo Investors

MOSCOW -- Russia's new reformist government scored a victory for foreign investors by convincing power utility Mosenergo to drop a proposal to limit voting rights by outsiders Thursday, share analysts said.


"This is a very encouraging demonstration of political will by the reorganized government," said Christopher Granville, director of research for United City Bank.


The board of directors of Mosenergo, Russia's largest regional power utility, decided Thursday to drop proposals to limit shareholder voting rights and authorize new share issues from the agenda of the annual meeting April 21.


A company spokesman said the charter would not be materially changed -- the board had also recommended an amendment requiring directors to have 25 years of power industry experience.


Mosenergo shares closed on the Russian Trading System before the company announcement at $1.295, up from $1.215 at the close Wednesday, a rise which Granville attributed to speculation the proposals would not be put into effect.


Shares had fallen to about $1.12 from $1.35 in the week after Mosenergo announced the proposals late last month.


A company statement quoted Mosenergo chief executive Nestor Serebryanikov as saying the board decision was made as a result of reactions by shareholders and the management of Unified Energy System, or UES, the national electricity company.


UES holds 49 percent of Mosenergo shares and foreigners own about 34 percent.


"UES is controlled by a government that is controlled by reformers," Granville said.


The new-look government appointed last month has targeted UES for reform and dispatched special representatives to it to enforce its will.


Mosenergo still plans a new share issue, Serebryanikov said, adding that a revised proposal would be brought to the next meeting.


The board had recommended increasing authorized capital by 800 million shares, which, if issued, could represent a 30 percent dilution of Mosenergo's 2.56 billion shares.


"The question of an additional share issue, primarily for parts of the investment program, is completely relevant," he said.


Foreign shareholders have roundly opposed a proposal requiring shareholders with more than 1 percent of stock to get permission from the company to exercise full voting rights.


Creditanstalt investment bank research head Tom Balestrery said the share issue also looked suspicious.


"In theory the share issue was a good idea, but it looked like a possible dilution," he said.


"It is one thing to ask for a slush fund -- it is another at the same time to ask to put a tape over your mouth," one Western investor said of the proposals.