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. Last Updated: 07/27/2016

UES May Beef Up Trading Unit

Unified Energy Systems is considering giving four power plants to its international trading unit Inter RAO UES to make the subsidiary more attractive to investors when it is spun off.

"The idea is to add four plants with combined cycle technologies to Inter RAO,'' CEO Anatoly Chubais said Wednesday at the World Economic Forum in Davos.

Russia is reorganizing its power industry along market lines by splitting UES, the world's biggest power company, by generating capacity. Stakes in the competing companies being created will be sold to investors.

Inter RAO holds UES's foreign assets and oversees all imports and exports. The unit would get power plants not included in the newly formed wholesale and regional generation companies, or the OGKs and TGKs, during the reorganization of the power sector in the last two years.

The unit may get the Northwest, the Sochi, the second Kaliningrad and the Ivanovsk power plants, Interfax reported Tuesday, citing documents from the company. The four could add $1 billion in value to Inter RAO, which currently stands between $1.5 billion and $2 billion, said Semyon Birg, an analyst with the brokerage Finam.

"The final decision will be made by the board at the beginning of February,'' Chubais said. The board will review the decision Feb. 9.

UES plans to sell Inter RAO to private investors, although the dates and manner of the sale have yet to be decided. The Federal Atomic Energy Agency owns 40 percent in the trader, which controls 20 companies in 10 countries.

CS First Boston valued the company at $1.2 billion in 2005, although Moscow-based Alfa Bank rates it slightly below this.

"The move kills two birds with one stone for UES,'' Alfa Bank analyst Alexander Kornilov said. "The utility puts smaller assets not attractive to investors into a bigger structure and boosts Inter RAO's market appeal."

Finam's Berg said he expected the state to retain shareholder control over Inter RAO while at the same time allowing it to develop its own strategy as a corporate utility, separately from UES.