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. Last Updated: 07/27/2016

Irkutskenergo Managers Bid Farewell

Apparently resigned to the fact that they will be unemployed if, as expected, aluminum barons secure control over their company later this month, top Irkutskenergo officials Friday told minority shareholders good-bye and denied accusations of bad management.

"We would like to thank everybody who supported us all these years," Irkutskenergo's acting managing director Sergei Kuimov said. "As for our three main shareholders, we hope that they will finally reach a compromise to avoid an embarrassment at the upcoming shareholders meeting."

Kuimov was referring to metals giants Russian Aluminum and Siberian-Urals Aluminum, or SUAL, who together own 36.4 percent of Irkutskenergo, and the federal and regional governments, which control 24.5 percent and 15.5 percent, respectively.

The aluminum giants have called an extraordinary shareholders meeting for April 28, apparently confident that by then they will secure the 15.5 percent controlled by Irkutsk Governor Boris Govorin, which would give them more than the 50.1 percent needed to elect their own general director.

With nothing to lose, Kuimov disclosed the details of Irkutskenergo's Eurobond dealings and its controversial sale of a stake in Rusia Petroleum.

Irkutskenergo is due to repay by April 19 a 1998 Eurobond worth 125 million Deutsche marks ($57.6 million). With a 12.5 percent coupon, the company was slated to spend 170 million marks on servicing the debt, but will end up paying only 130 million marks once it completes a full buyback.

"We started to buy out Eurobonds in the market in the fall of 1998," said Kuimov. "By now, only 58 million marks remain in the open market."

Irkutskenergo will have spent only 130 million marks to service a loan worth 125 million marks. Adjusted for the 20 percent decline in the Deutsche mark over the last three years, Irkutskenergo will have paid even less for the loan than it borrowed in dollar terms.

Forty percent of the borrowed money was spent on capital expenditures, while 60 percent was used to replenish working capital.

By repaying debts to the Pension Fund and tax arrears, Irkutskenergo avoided penalties of 700 million rubles ($34 million) at the start of 1999, according to Kuimov.

When it came to repaying the debt in full, the company sold its 12.88 percent stake in Rusia Petroleum for some $40 million to Interros, which increased its share in the project to 24 percent.

"We had to hurry up with sales before oil prices fell," said Irkutskenergo board member Vasily Boiko, whose company Vash Finansovy Popechitel brokered the deal.

Now, Russian Aluminum and SUAL are accusing Irkutskenergo's bosses of mismanagement, contending the company did not need to borrow Eurobonds or sell its stake in Kovykta.

The fate of the company may be decided at two shareholder meetings slated to take place in Irkutsk on April 28.

At 10 a.m., company managers will invite shareholders to cast their votes, while at 3 p.m., Russian Aluminum and SUAL are to host another meeting.

"I will participate in both," said Kuimov. "But I would prefer that neither takes place and that shareholders reach a compromise before that."

On March 13, Prime Minister Mikhail Kasyanov signed a decree ordering Kuimov to be managing director, but the outcome of this decision, Boiko said, "is being ignored."

The Property Ministry has also sued to retake the region's 15.5 percent stake in Irkutskenergo. The arbitration court in Irkutsk, which is hearing the case, is scheduled to convene Thursday.

Talks between SUAL, Russian Aluminum and the government are now under way, but no details are available.

Russian Aluminum spokesman Alexander Ptashkin said Friday it was important the shareholder meeting takes place, while SUAL representative Alexei Goncharov said his company wants to participate in the management of Irkutskenergo and it continued to coordinate such efforts with its rival.

"It appears that neither party has a clear strategy," said Svetlana Smirnova, analyst with Renaissance Capital. "It is strange that the federal government cannot get hold of its 40 percent stake."