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. Last Updated: 07/27/2016

Luzhkov Wants UES Bankrupted Over Debts

Moscow Mayor Yury Luzhkov on Tuesday scolded Unified Energy Systems for trying to prolong paying its $120 million tax bill and his deputy said City Hall would sue to have the national power grid bankrupted.

"Don't even approach us with these proposals," Luzhkov was quoted by Interfax as saying.

With penalties, UES owes the city a total of 3.5 billion rubles, including 1.2 billion rubles to the budget and 1.4 billion to the city-administered part of the State Road Fund. At Tuesday's weekly City Hall meeting, UES executive Alexei Maximets told Luzhkov that the energy giant wanted to delay paying off the Road Fund portion of its debt until the end of next year and its debt to the budget by 2006.

"[The city] does not see any justification for spreading out the payment of debts over the coming years," the mayor said. "[Moscow] pays its taxes to the federal budget on time and [pays what it owes UES] in cash and on schedule."

Deputy Mayor Boris Nikolsky said City Hall was preparing documents to initiate bankruptcy proceedings, and Luzhkov threatened similar tactics against other perennial tax deadbeats.

UES spokesman Yury Melekhov, in a telephone interview, defended the company's debt proposal by saying that companies owned by City Hall owe a similar sum — 4 billion rubles — to Mosenergo, the local power monopoly 50.87 percent owned by UES.

"We are in the same position," he said.

Melekhov called the bankruptcy threat and Luzhkov's reprimand an unjustified "emotional splash," as UES is one of only a handful of City Hall debtors that has actually submitted a proposal to restructure its debts.

Indeed, the bankruptcy threat seems to have more bark than bite. By law, energy companies can only be declared bankrupt if their debts exceed the value of their assets, including what they are owed. UES's physical assets are valued at $4.6 billion.

Troika Dialog analyst Kakha Kiknavelidze called the dispute "purely political" and said it "would be resolved politically."

Luzhkov, however, defended the decision to pursue a bankruptcy verdict. "This is an economic issue, therefore we should protect the financial and economic interests of the city," he said. "There is no point in looking for political [motives connected with] the polar positions of Luzhkov and [UES chief Anatoly] Chubais," Interfax quoted Luzhkov as saying.

The "polar positions" held by Luzhkov and Chubais have intensified recently over Chubais's efforts to sack Mosenergo chief Alexander Remezov, who is backed by City Hall, which owns 2.98 percent of the regional utility.

Chubais accused Remezov of financial mismanagement after an internal audit uncovered what was described as "financial abuse," including 270 million rubles of "missing profits." However, subsequent audits by Vneshaudit and the Moscow Audit Chamber found no irregularities.

Remezov has twice thwarted a UES-led attempt to hold an extraordinary shareholders meeting — now scheduled for Friday — at which Remezov's successor is to be elected.

City Hall used its minority stake to get Remezov on the list of five candidates, but the other four are Chubais loyalists.

A Moscow court on Tuesday upheld a request by Deputy Mayor Nikolsky, who is also a Mosenergo board member, to again ban Friday's meeting, according to City Hall, but the nature of the complaint was unclear.