UPDATE – Russia’s HydroOGK completes consolidation with 20 units

Russia’s HydroOGK reported the completion of its merger with 20 subsidiaries and dependent companies, completing the first phase of consolidation of the world’s second largest hydroelectric generator.

HydroOGK said January 10 that Russian markets discontinued trading of the subsidiaries in late December as Russia’s securities regulator, Federal Service for Financial Markets, registered additional share issues of HydroOGK for the purpose of the merger. The company issued 39.19 billion shares valued at 1 ruble (4.1 US cents) each.

Shares in HydroOGK, are expected to start trading on domestic stock exchanges in late January. (HNN 1/3/08) HydroOGK, which is due to receive 100 billion rubles (US$4.04 billion) in proceeds from the sale of government stakes in other power generators, is consolidating about 50 power stations totaling 24,000 MW, second only to Canada’s Hydro-Quebec. (HNN 10/26/07)

The company, which is 98 percent owned by former electricity monopoly Unified Energy Systems (UES), with the remainder owned by the state, will have a small free float as a result of consolidation.

Hydro OGK, which produces 20 percent of Russia’s power, plans to double its generating capacity by 2020, bringing on line 22,200 MW, mainly in the Russian Far East, Siberia, and the Caucasus.

Chief Financial Officer Sergei Yushin said the company planned to list its shares officially in April and issue depositary receipts tradable on markets outside Russia in the summer of 2008. HydroOGK also plans to raise syndicated loans worth US$600 million together with the world’s largest primary aluminum producer, United Company RUSAL, to fund construction of the 3,000-MW Boguchanskaya hydropower complex in Siberia. (HNN 9/13/07)

As part of a sweeping reform of the power sector, state-controlled UES is selling off all of its assets by July 2008 to raise money for this investment plan and to introduce a competitive market for power. All of those companies are holding secondary share sales to raise money for investment, while the government will fund the development of HydroOGK, the federal grid, and other strategically important assets. (HNN 12/3/07) Under the reform plan, HydroOGK will remain state-controlled.

Yushin said HydroOGK sees its 2007 net profit calculated to Russian accounting standards rising nine-fold to 9.1 billion rubles (US$368 million). He expects net profit to double again in 2008.

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