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. Last Updated: 07/27/2016

UES Shares Battered Over Asset Sale Fears

National power utility Unified Energy System sank to a 21-month low Friday after politicians sparked fears of further delays to a sector reform and Brunswick UBS Warburg cut the stock to "reduce."

The stock was down 5.21 percent to $0.08 cents, a low it has not seen since Jan. 7, 2001, when it dipped to $0.0755. It recovered slightly minutes later and ended the day down 2.73 percent at $0.821.

It tested those lows last summer as UES and the government, its majority shareholder, dithered and fought with minority shareholders over plans to reform the mammoth utility.

It is off a year high of $0.1813 reached in January, after which foreign investors disgruntled with the long and complicated reform began to sell off the stock.

"I think investors like this process of power reform less and less, partly because it is going slowly and partly because it is unclear what will happen to minority shareholders in UES and regional [utility] companies," Renaissance Capital trader Dmitry Kulyashenets said.

"The stock has been going against the direction of the rest of the market for a long time and it is forcing people to sell, although it already looks pretty cheap," he said.

President Vladimir Putin on Thursday told lawmakers to move cautiously on bills underpinning the reform, interpreted by some as a sign he was in no hurry to see them passed even though he said he was counting on progress.

Brunswick UBS Warburg said Friday it cut the stock to "reduce" from "hold" and lowered its target price to $0.075 from $0.11, using a new break-up valuation to reflect the government plan to split up the near monopoly.

Brunswick UBS Warburg analyst Fyodor Tregubenko also said he saw a high probability of a negative outcome of the government mandated electricity industry restructuring for minority shareholders.

"We are increasingly concerned about the recent examples of planned asset sales under tenders that in our view lack transparency," he wrote. "We believe there is a heightened risk that most of UES' assets will be sold off to strategic investors by the time minority shareholders receive their pro-rata stakes in the new companies."

Aton head of trading Dmitry Starenko, however, said the risks facing UES were no greater that those faced by LUKoil or Yukos, Russia's two top oil producers whose shares are widely held by foreign investors.

"The main thing is that the paper is moving," Starenko said. "It's a good paper, and when it costs 5 or 6 cents, it will be a diamond in anyone's portfolio."

He said realistically, however, it could fall as low as 6 to 7 cents.

The benchmark RTS index rose 1.12 percent to 335.47 on turnover of $14.34 million Friday.

The Reuters index of the ruble-denominated MICEX rose 0.75 percent to 1,273.24 on turnover of 3.47 billion rubles.

The Reuters-MICEX basket of liquid stocks traded on three exchanges rose 2.17 percent to 864.29 in dollar terms, or 2.16 percent to 4,586.88 in ruble terms.