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. Last Updated: 07/27/2016

Interros to Offer 20% Siloviye Mashiny Stake

Russia's largest power engineering company Siloviye Mashiny said Thursday that negotiations were in full swing to find buyers for a 20 percent stake in the company.

"The company is in negotiations and actively working with potential investors," said Nina Dementsova, a spokeswoman for Interros, Vladimir Potanin's empire that owns 94.3 percent of Siloviye Mashiny.

Siloviye Mashiny's four turbine- and generator-building factories make the equipment that produces 60 percent of the country's electrical power. The 4.9 percent in the company not owned by Interros is held by German conglomerate Siemens. The company's main assets are a 78.2 percent stake in Leningrad Metal Plant, or LMZ, a 75 percent stake in Elektrosila, 76.9 percent of Turbine Blade Factory, and 18.3 percent in the Kaluga Turbine Factory.

On Monday, Potanin said Siloviye Mashiny would hold a private placement in November, offering 20 percent of the company's shares to institutional investors.

Dementsova said the company is not yet ready to announce any specifics because the details are still being hammered out. Alongside the private placement, the company's sweeping plans also include pursuing a listing on the Russian Trading System and launching a possible initial public offering on a Western exchange somewhere in the middle of 2004.

"The private placement is the step toward transformation of the company from a closed company into an open company," said Viktoria Vergelskaya, the spokeswoman for Siloviye Mashiny.

On Wednesday, Siloviye Mashiny for the first time posted financial results calculated under international accounting standards, and verified by multinational auditing firm KPMG, in another step toward reshaping the company's market status.

These results for 2002 show revenues up 13 percent to $276 million, net income tumbling 71 percent to $2 million -- which the Aton brokerage called "measly" in a morning research note.

Yelena Sakhnova, an analyst at UFG, said that UFG previously estimated the company's value to be over $200 million. However, due to the "somewhat disappointing IAS results," the company is now seen to be worth $150 million to $200 million, she said.

Nikolai Ivanov, an analyst at the Prospect brokerage, was also disappointed with the results, as revenues turned out to be lower than he expected, net profit was too small and an EBITDA margin of 12 percent margin was also too low.

Siloviye's factories, like Elektrosila and LMZ, are overestimated in comparison to their foreign analogs, Ivanov said.

"It won't be easy to place a 20 percent stake under current prices among foreign investors," he said, suggesting there was a better possibility of a buyout by groups friendly with Interros.