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. Last Updated: 07/27/2016

Medvedev Approves Allowing Investors to Swap Utility Assets

First Deputy Prime Minister Dmitry Medvedev has approved a plan to allow investors in Unified Energy Systems to swap stakes in the utility's assets with one another, supporting Gazprom's bid to create a major power holding.

Holders of more than 0.1 percent in Unified Energy Systems, or UES, will be eligible to exchange their pro rata stakes in the state-controlled utility's units among themselves. The government will use the plan to gain majority control in the country's grid operator and biggest hydropower generator, Medvedev said Friday.

"Gazprom and other minorities will get the assets they want," Medvedev said at a meeting with Gazprom and UES chief executives, the government web site reported. Medvedev is also chairman of Gazprom.

The asset swap is due to take place before UES breaks up in June 2008 to create competition in the country's power industry. The state plans to increase control over transmission and hydropower generation, while exiting the coal- and gas-fired markets and the retail and services segments.

The state holds 52 percent in UES, which in turn directly owns the Federal Grid Co. and Hydro OGK. Both companies are considered key components of the government's strategy to expand the country's aging power industry so that it can meet demand forecast to grow at 5 percent a year.

Minority investors in UES will be able to swap their stakes in its thermal generation units via a specially created holding, Medvedev said.

They will not be allowed to swap transmission assets among themselves, Kommersant reported Monday, citing an unidentified official.

UES' board will vote on the plan Friday.

"To gain preference for assets swaps, all you need is to buy 0.1 percent of UES, or about $5.5 million based on today's trading," the Bank of Moscow said Monday in a note to investors.

Other banks were less optimistic in their morning investor notes as to how far the opportunity stretched. Troika Dialog said this signaled a deal between Gazprom and the state. Aton Capital said the option looked open only to Interros and Gazprom because of "a very short time window left to act."