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. Last Updated: 07/27/2016

UES Delays Sell-Off of OGK-6

Former electricity monopoly Unified Energy System will delay the sale of its OGK-6 subsidiary until market conditions improve, a senior company executive said Wednesday.

"Yes, we've postponed it. We will look at the bourses and at how the market situation is changing. We will study the situation," UES finance director Sergei Dubinin said.

Wholesale generating company OGK-6, which produces electricity at six power stations around the country, was due to sell up to 11.86 billion shares this month in preparation for a listing in Russia and abroad.

These shares would account for 44.33 percent of OGK-6 before the sale and 30.71 percent afterward.

Dubinin said the company still planned to list this year, perhaps in a closed or dual-track placement.

This is not the first listing in the power sector that has run into problems in recent weeks, and analysts said it might not be the last if market conditions do not improve.

By July, UES plans to spin off all of its 20 major generating companies, opening the power sector to competition and helping to fund the sector's $125 billion overhaul.

But the crammed schedule of UES sell-offs has faced problems in recent weeks amid the fallout from the U.S. subprime mortgage crisis, which has dampened investor confidence and caused global liquidity to ebb.

In a share sale held late last month, power producer OGK-2 was able to raise $1.05 billion, below the intended $1.68 billion required to fulfill its investment program.

One of the main reasons for the weak turnout was the involvement of natural gas monopoly Gazprom, which has effectively been guaranteed control of both OGK-2 and OGK-6 through a share swap scheme.

Analysts said Gazprom's dominance of OGK-2's placement had scared away portfolio investors and hampered the book building process, as may also happen with OGK-6.

"At the moment, we are not psychologically ready to place shares at below the market price," a UES source said.