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. Last Updated: 07/27/2016

UES Prepares to Merge Energy Firms in Far East

National electricity grid Unified Energy Systems is pressing ahead with a major merger program that will lead to the teaming up of power and coal companies in the far-east republic of Buryatia this summer, officials said Monday.

The resulting Buryatskaya company - a 50-50 venture between the Gusinoozerskaya hydropower station and the Tunguiski and Kholboljinski coal mines - is expected to bring in about 300 million rubles ($12.08 million) in additional annual revenues, UES deputy head Alexander Remezov said at a news conference.

"Our main objective is to boost the effectiveness of separate enterprises by merging them into single power-coal entities," he said.

He did not give a figure for the companies' revenues last year.

The merger will be the second undertaken by UES since it started its restructuring program at the end of 1997. The plan was initiated by then Fuel and Energy Minister Sergei Kiriyenko.

The first alliance, which resulted in the Luchegorsk company in the far-eastern city of the same name, has operated with great success and it inspired UES to draw up nine similar plans, Remezov said.

The Luchegorsk merger allowed the new company 18 percent and 200 million rubles in extra annual revenue last year.

UES hopes to form another one or two new companies this year, one of which would be in the southern Ural Mountains near Kazakhstan.

In future deals, UES plans to hold at least 50 percent of the stock plus one share in order to keep its control over the national power grid.

But, Remezov stressed, the coal miners will have equal say in the new ventures. "We have no object of taking over the coal industry," he said.

Merging energy units with coal suppliers makes a lot of economic sense, said Dmitry Vinogradov, an energy analyst at Brunswick Warburg.

"Coal tariffs can be lowered [since value-added tax won't need to be paid on unloaded coal], so the cost of the end product, energy, becomes cheaper," he said.

In another development Monday, UES lashed out at Prosector General Yury Skuratov, who accused the company of breaking the law by appointing Anatoly Chubais as chief executive last year.

In a letter to the State Duma, Russia's lower house of parliament, Skuratov wrote that UES had illegally appointed Chubais through its board of directors rather than letting the post be filled by the government.

But Yulia Mozharenko, deputy head of UES' executive board, said Monday that Skuratov's arguments had been superceded by recent legislation that allows CEOs of joint-stock companies to be nominated by shareholders and then appointed either at shareholders' meetings or by a board of directors.

"We are absolutely confident on our legal stance on this matter," she said.