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. Last Updated: 07/27/2016

Rivals Spar for Stake in OGK-5

Germany's E.On and Italy's Enel will compete for a stake in power generator OGK-5 on Wednesday at what may become one of the country's most hotly contested auctions to date.

Industry sources said last week that the world's largest aluminum producer, United Company RusAl, and gas producer Novatek had also placed bids for the 25 percent stake in OGK-5.

"The auctions have been mainly won by the Russians so far but tomorrow there is a high chance for foreigners," an industry source said. "I think both E.On and Enel are very keen to win. It will be a tough battle."

The stake is held by former power monopoly Unified Energy Systems and is offered at a starting price of around $1 billion. Enel and E.On have said they are prepared to commit billions of dollars for the country's power sector.

OGK-5 is one of six diversified thermal generation companies located in central Russia and the Urals, where demand for electricity is currently outpacing production capacity.

It is being spun off from UES together with other power distributors, as part of broader industry reforms to introduce competition.

The partial privatization of UES is meant to help raise new funds to modernize aging equipment and meet growing demand for electricity amid the country's economic growth.

The reforms envisage breaking up of the state-controlled industry into separate private and semiprivate generation and distribution firms and a state-controlled grid.

UES's first landmark sale of a power generator was the sale of OGK-3 to metals giant Norilsk Nickel for $3.1 billion in March.