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. Last Updated: 07/27/2016

MDM Outs Self as UES Mystery Buyer

MDM-Group confirmed the market's belief that it was one of the mystery buyers snapping up shares in Unified Energy Systems by going public Thursday with its bid for seats on the UES board.

A source at MDM-Group said the industrial holding's main shareholders, board chairman Sergei Popov and Andrei Melnichenko, who is chairman of the board of MDM-Bank, will be nominated as candidates to the UES board by March 3.

Shareholders have until March 3 to nominate candidates ahead of the UES annual general meeting set for May.

The UES board has 15 seats, and shareholders are required to own at least 2 percent of the company to be eligible candidates. The government controls around 52 percent of UES shares.

The source, who asked not to be identified, said Melnichenko and Popov would represent the "interests of a pool of Russian and Western financial investors" on the UES board. He did not name the investors.

MDM-Group, together with oligarch Oleg Deripaska's Base Element, another aggressive industrial group, is reported to have accumulated a 17 percent stake -- an investment that analysts estimate to have cost around $600 million.

The MDM-Group source neither denied nor confirmed this information. But he did say that MDM-Group started buying UES shares as early as last summer and would continue to increase its stake. He declined to reveal the size of MDM's stake or the name of the other buyers.

UES CEO Anatoly Chubais in December accused the buyer of trying to engineer delays of power reform legislation, which is up for consideration in the State Duma.

"We have a vital interest in seeing reforms implemented soon," the MDM-Group source said. He said there had been disagreements between MDM-Group and Chubais, but they had been resolved. He would not comment on what the disagreements involved.

Three minority shareholder representatives now sit on the UES board: two fund managers -- Halcyon Advisors executive David Herne and Prosperity Capital Management director Alexander Branis -- as well as National Reserve Bank chairman Alexander Lebedev.

Herne was elected to the UES board last year by a narrow margin, but expressed doubts this week that he would be able to get re-elected this year.

On Wednesday, Herne said a representative of Deripaska planned to run for the board. A Deripaska spokesman denied the report.

Lebedev told journalists Wednesday he held more than 4 percent of UES, but he would step down from the board this year and throw his support behind Branis.

UES shares closed down 2.7 percent Thursday at $0.114.