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. Last Updated: 07/27/2016

Minority Investors Get 2 UES Seats

KONAKOVO, Tver Region -- Minority UES shareholders increased their number of board seats from one to two at the power monopoly's annual shareholders meeting Friday, a move analysts said boded well for the company's looming reform.

The shareholders meeting also approved controversial changes to the company charter that have sent UES share prices tumbling in recent weeks. Unified Energy Systems CEO Anatoly Chubais said an extraordinary shareholders meeting may be called to reconsider the changes.

Minority shareholders elected to the board Alexander Branis, director of the Prosperity Capital Management investment company, and David Hern, manager of the Brunswick Capital Management fund.

Hern saved his seat on the 15-member board by a narrow vote of 2.56 percent, just above the minimum of 2.5 percent.

Branis unexpectedly won a strong 8.23 percent, with only Chubais (9.32 percent), head of the presidential administration Alexander Voloshin (8.89 percent), Economic Development and Trade Minister German Gref (8.46 percent) and Finance Minister Alexei Kudrin (8.36 percent) getting more votes.

"I carried out a rather large campaign among the foreign shareholders," Branis said after the results of the vote were announced."This is a vote of support to my stance, which has, no secret, often not been in line with the UES management's point of view."

Analysts said having two representatives for minority shareholders was good news for the market, as it would boost their influence over the new board.

"This year's board of directors is the most balanced that UES has ever had," said Kaha Kiknavelidze of Troika Dialog. "The voice of minority shareholders will be louder now."

Approval of the modified charter had been another key issue at the shareholders meeting. Some minority shareholders and analysts said the changes could limit the board's authority and weaken its role disposing shares in subsidiaries and dependent companies.

UES shares have dropped to the lowest in eight months in the past two weeks over investor jitters that the new charter would be approved. Minority investors wanted to make sure that the board has the power to rein in UES management as the company undergoes a restructuring to split UES into generating, transmitting and supplying companies.

Chubais and Voloshin, who was re-elected UES board chairman, said an extraordinary shareholders meeting may be called to discuss the charter. "We could think up a set of amendments that would give the shareholders more control over management," Chubais said. "I think it would be appropriate to deliberate a package of amendments."

UES on Friday closed down 0.68 percent at $0.1015 despite an announcement at the shareholders meeting that 2001 consolidated net profit to international accounting standards soared to 41.7 billion rubles (about $1.32 billion) from 590 million rubles in 2000.

Most of the profit growth, which had been expected, came from a one-off debt swap with the Czech Republic.

Voloshin told shareholders that investment in UES increased 26 percent to 45.2 billion rubles. "Unfortunately, UES still cannot boast of any serious strategic investments aside from its own resources," he said.

After announcing the positive financial results, Voloshin warned shareholders about UES's sagging shares.

"UES's capitalization at the end of last year was $6.7 billion, but the dynamics of UES shares have worsened recently. ... This is a serious warning from the market to the company's management, board of directors and the government as well," Voloshin said.

Chubais said UES should work harder to explain the essence and direction of its reforms to shareholders in order to bolster its capitalization, which has shed about $2 billion since the start of the year.

Shareholders do not know exactly what they will own after the restructuring is completed, he said.

Chubais said UES would by September prepare the 3+3 document explaining the details of its restructuring and future ownership.

Branis, who obtained a draft of the document, said: "It is horrible."

He said the plan calls for the sale of six of UES's 10 wholesale generation companies to foreign investors and the sell-off of the most dilapidated power plants. "Minority shareholders will not get a thing from it," he said.

UES Board of Directors

1. Alexander Voloshin (chairman), head of presidential administration
2. Anatoly Chubais, UES CEO
3. German Gref, economic development and trade minister
4. Alexei Kudrin, finance minister
5. Ilya Yuzhanov, anti-monopoly minister
6. Valentin Zavadnikov, Federation Council member
7. Alexander Kazakov, Federation Council member
8. Sergei Kosarev, deputy property minister
9. Yury Sakharnov, deputy head of FEC
10. Leonid Melamed, UES first deputy CEO
11. Anatoly Yanovsky, deputy energy minister
12. Alexander Branis, director Prosperity Capital Management
13. Rolf Bierhoff, former Eurelectric president
14. Alexander Lebedev, president of National Reserve Bank
15. David Hern, manager of Brunswick Capital Management