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Unified Energy System

July 27, 2007

RAO UES Board of Directors holds its regular meeting

Moscow. 27 July 2007. At its first meeting, the new Board of Directors* of RAO "UES of Russia" unanimously approved the appointment of Alexander Voloshin** as Board Chairman, and Victor Khristenko, Minister of Industry and Energy of Russia, as Deputy Chairman of the Board of Directors.

The Board of Directors of RAO "UES of Russia" also reviewed the report on the work done by the Management Board of RAO "UES of Russia" in Q2 2007 and approved its work plan for Q3 2007.


* elected by the AGM of RAO "UES of Russia" held 26 June 2007.
** Alexander Voloshin has been Chairman of the Board of Directors of RAO "UES of Russia" since 1999.

* * *

The Board of Directors of RAO "UES of Russia" approved certain changes in the composition of its Committees. The changes in the Committees is due to the fact that new Board members were elected at the Annual General Meeting of RAO "UES of Russia".

In the Audit Committee and the HR and Remunerations Committee, the position previously held by Grigory Berezkin, Board Chairman of ESN Group, who was not elected to the new Board of Directors of RAO "UES of Russia", is now occupied by Vladimir Rashevsky, Director General of OAO "Siberian Coal Energy Company" (SUEC).

Also, the following non-voting experts have been included in the Audit Committee: Vitaly Zarkhin, Head of Directorate, OAO "Siberian Coal Energy Company"; Denis Kulikov, Deputy Executive Director, Investor Protection Association; Viktor Lebedev, Deputy Head of Department, Ministry of Economic Development and Trade of Russia; and Sergey Makshakov, Head of Financial and Tax Accounting Department, RAO "UES of Russia" , instead of the retiring members—Ruslan Kozhura, attorney with Asnis and Partners; Mikhail Kurbatov, Head of Department, Ministry of Economic Development and Trade of Russia, and Sergey Stolyarov, Chief Expert of Investment Department, ZAO "ESN".

Mikhail Kurbatov of the Russian Ministry of Economic Development and Trade became a member of the Appraisal Committee, with Mikhail Buyanov, Head of Electricity Directorate at Russian Energy Service, and Marina Belokoneva, expert with ZAO "ESN", leaving the Committee.

As Eduard Smelov, member of the Commission for Investments and Fuel Supply for Investment Projects, was elected Director General of OAO "TGC-5", he was replaced with Andrey Abramov, Vice President of ZAO "Complex Energy Systems" (KES).

* * *

The Board of Directors of RAO "UES of Russia" approved an increase in the amount of the TGC-4 investment programme* and made adjustments to the programme for the issuance of new shares by OAO "TGC-4".

The proceeds from the additional share issues will be used to increase the amount of financing for the TGC-4 investment projects from RUB13 billion to RUB18 billion. Such an increase is due to the fact that an additional modernization and expansion project at the Lipetskaya CHPP-2 has been included in the list of projects to be implemented by TGC-4. The Lipetskaya CHPP-2 project will involve the installation of two gas turbine units GTU-160 and waste heat recovery boilers. Previously, the list of TGC-4 projects included the following projects: modernization of the Dyagilevskaya CHPP (installation of a GTU-160 power unit and a waste-heat recovery boiler), expansion and modernization of the Novomoskovskaya TPP (installation of a 225 MW coal-fired power unit), modernization of the Voronezhskaya CHPP-2 (installation of two GTU-20 power units and waste-heat recovery boilers), modernization of the Kurskaya CHPP-4 (installation of two GTU-20 power units and waste-heat recovery boilers), modernization of the Kurskaya CHPP-3 (installation of a GTU-40 power unit and a waste-heat recovery boiler), and modernization of the Livenskaya CHPP (installation of a GTU-30 power unit and a waste-heat recovery boiler).

In addition, the price of the projects to modernize the Livenskaya CHPP, boiler plant in the Severo-Zapadny District of Kursk, and the Voronezhskaya CHPP-2 rose after the technological solutions were reviewed in order to achieve the maximum efficiency of the projects, i.e. an increase in the design capacity of the projects in question from 100 MW to 281.9 MW.

Accordingly, the maximum amount of the share issue will be increased from 518.81 billion to 586 billion ordinary shares of RUB0.01 par value (42% of the TGC-4 authorized capital prior to the share issue and 29.6% of the capital after the share issue).

The other parameters of the share issue approved by the Board of Directors of RAO "UES of Russia" on 27 April 2007 will remain unchanged. For its new share offering, TGC-4 will use a dual track approach, under which the company will simultaneously pursue a public offering and direct sale of shares to a strategic investor, and subsequently implement one of these options.

The offering price for the additional shares of OAO "TGC-4" will be determined by the company's board of directors taking into account the recommendations given by the banks acting as financial advisors and upon review of the bids received from the potential strategic investors.

The additional share offering of TGC-4 will be used to sell the TGC-4 shares attributable to the "state" interest which are held by RAO "UES of Russia".

The Board of Directors approved the reduction of the stake held by RAO "UES of Russia" in OAO "TGC-4" from 47.32 percent to at least 15.71 percent.

The Board instructed the RAO UES representatives taking part in the Board meetings and the general shareholder meeting of TGC-4 to vote FOR the approval of additional share issuance.


* OAO "TGC-4" was registered with the authorities on 20 April 2005 in the city of Tambov. The total installed capacity of TGC-4 (together with its wholly-owned subsidiary, OAO "Novomoskovskaya TPP") is 3,323.8 MW of electricity and 17,717.4 Gcal/h of heat. On 27 November 2006, shares of OAO "TGC-4" were included in the Schedule of non-listed securities of ZAO "MICEX Stock Exchange". On 29 November 2006, the company's shares were admitted to trading on OAO "RTS Stock Exchange" and included in the Schedule of securities admitted to trading but not included in the quotation list.

* * *

The Board of Directors of RAO "UES of Russia" considered questions relating to the convocation of an Extraordinary General Meeting of shareholders of RAO "UES of Russia" which will consider the second (final) phase of the RAO UES reorganization. As resolved by the Board of Directors, the EGM will be held 26 on October 2007 using the absentee voting method (i.e. without holding a physical meeting). The record date for determining the persons entitled to take part in the EGM was set at 23 August 2007.

Pursuant to the resolutions previously approved by the Board of Directors of RAO "UES of Russia", the Company will be reorganized in two phases. The first phase will be completed in Q3 2007 after OAO "WGC-5" and OAO "TGC-5" are separated from RAO "UES of Russia".

The Board of Directors at its 2 March 2007 meeting approved the conceptual model for the second (final) phase of the Company's reorganization. This model envisages that the restructuring of the energy company's assets will be completed in 2007-2008, all companies of the post-reform sector structure (FGC, System Operator, WGCs, TGCs, etc.) will be separated from RAO "UES of Russia", and the Parent Company, RAO "UES of Russia", will cease its activities. As a result, RAO UES shareholders will receive shares in the spin off companies pro rata to their holdings of the Parent Company's shares.

According to the approved model, the final phase of the Company's reorganization will be implemented by spinning off holding companies accompanied with the merger of some of the spin-offs with and into the companies which will comprise the intended post-reform sector structure. There will be several types of such holding companies (HoldCos).

The first group will include HoldCos whose shares will be distributed both to the state and the minority shareholders (OAO "IDC Holding", OAO "RAO Energy Systems of the East", and OAO "INTER RAO UES Holding").

Shares in the second group of HoldCos will be distributed only to the state. These will include OAO "State Holding" and OAO "HydroWGC State Holding". These HoldCos will receive, under the demerger balance sheet, the respective parts of shares in FGC and DCs attributable to the state, and shares in OAO "HydroWGC" and some AO-HPPs. In addition, these companies will receive part of the shares in the thermal WGCs and TGCs attributable to the "state" interest in OAO RAO "UES of Russia".

OAO "Intergeneratsiya", OAO "Sibenergoholding" and OAO "Centrenergoholding" will be established as part of the exercise by the shareholders of their right to create, in the RAO UES reorganization process, Special Purpose Holding Companies (SP HoldCos) whose shares will be distributed only to specific shareholders. These SP HoldCos will receive the shares in the thermal generation companies (TGCs), OAO "UES FGC", OAO "HydroWGC", and other assets attributable to the stake held by a particular shareholder in the capital of RAO "UES of Russia".

One more group of HoldCos will include the companies whose shares will be distributed only to those minority shareholders who do not use their right to create SP HoldCos. This list will include OAO "UES FGC Minority Holding", OAO "HydroWGC Minority Holding" and the minority HoldCos of the targeted WGCs and TGCs. According to the demerger balance sheet, these HoldCos will receive part of the shares in FGC and transmission (trunk grid) companies, part of the shares in OAO "HydroWGC" and some AO-HPPs, and part of the shares in relevant thermal generation companies which the minority shareholders are entitled to.

According to the approved reorganization model, most of these spin-off HoldCos will simultaneously merge with the respective companies forming the intended (post-reform) sector structure.

The exception will be OAO "IDC Holding", OAO "RAO Energy Systems of the East", OAO "Intergeneratsiya", OAO "Centrenergoholding" and OAO "Sibenergoholding". These companies will continue to exist as HoldCos.

OAO "State Holding" and OAO "UES FGC Minority Holding" will merge with and into OAO "UES FGC", and, as provided by the Board resolution of 30 March 2007, 56 regional transmission (trunk grid) companies (TCs) and 6 interregional transmission (trunk grid) companies (ITCs) will merge FGC.

OAO "HydroWGC State Holding" and OAO "HydroWGC Minority Holding", as well as HPP subsidiaries will merge with and into OAO "HydroWGC". As a result, OAO "HydroWGC" will become a single operating company with the government owning 50% plus one share.

OAO RAO "UES of Russia", which after the HoldCos' spin-off will hold the remaining part of the non-core assets not relating to the technological operations of the post-reform companies, will merge with and into OAO "UES FGC".

In the course of the reorganization, the spin-off company OAO "INTER RAO UES Holding" will receive holdings of shares in OAO "Ivanovskie PGU", OAO "Severo-Zapadnaya CHPP", OAO "Kaliningradskaya CHPP-2", OAO "Sochinskaya TPP", ZAO "INTER RAO UES", as well as the assets and liabilities of RAO "UES of Russia" relating to the activities of those companies.

The shares of OAO "INTER RAO UES Holding" will be distributed among all shareholders of RAO "UES of Russia" pro rata to their stakes in the Company. It is expected that, simultaneously with the spin-off, OAO "INTER RAO UES Holding" and ZAO "INTER RAO UES", OAO "Severo-Zapadnaya CHPP", OAO "Kaliningradskaya CHPP-2", OAO "Ivanovskie PGU" will merge with and into OAO "Sochinskaya TPP".

This will create a unified operating company on the basis of OAO "Sochinskaya TPP" in which RAO UES shareholders and shareholders in all of the merging companies will hold direct stakes. After the reorganization, OAO "Sochinskaya TPP" will change its name to OAO "INTER RAO UES".

At the EGM of RAO UES shareholders scheduled for 26 October 2007, the shareholders will consider the following items of business:

  • to approve the reorganization of RAO "UES of Russia" by way of spin-off, the parameters and charters of the spin-off companies;
  • to elect boards of directors for each of such companies (28 items of business, equal to the number of the companies);
  • merger of the interim spin-off HoldCos with and into the respective companies forming the intended sector structure (23 items of business)
  • to approve the reorganization of RAO "UES of Russia" by way of merger with and into OAO "UES FGC".

Under Russian law, the shareholders of RAO "UES of Russia" who vote against or do not participate in the voting are entitled to require that the Company repurchase all or some of their shares in RAO "UES of Russia".

Such shareholders will be entitled to send written share repurchase requests to the Company within 45 days upon approval by the EGM of the RAO UES reorganization. At one of the Board meetings which will be held not later than 15 December 2007 will approve the share repurchase report.

The share repurchase price has been determined by the Board of Directors based on the valuation report prepared by the independent appraiser, Deloitte & Touche, at RUB32.15 per ordinary share and RUB29.44 per preferred share of RAO "UES of Russia".

Holders of the Company's preferred shares will be entitled to vote on all items of business on the EGM agenda.

The Board of Directors also broadly approved the EGM materials which contain the ratios which will be used to distribute to RAO UES shareholders the shares in the HoldCos which will be spun off from RAO "UES of Russia" during the final phase of the RAO UES reorganization, and the share conversion ratios for converting shares in the spin-off companies into shares of the companies of the intended (post-reform) sector structure. The Board members will have two weeks to prepare their comments and suggestions to these materials. The Management Board of the Company has been given the task to finalize the EGM materials taking into account those comments, and to submit them to the Board of Directors at the next scheduled physical meeting.


This announcement was disclosed as material information in the Interfax newswire at 17:14 hours Moscow time on 27 July 2007 in compliance with the requirements of the Federal Service for Financial Markets (FSFM) of Russia.

* * *

The Board of Directors of RAO "UES of Russia" took several decisions aimed at completing the consolidation of OAO "HydroWGC".

The Board approved the acquisition by RAO "UES of Russia" of additional shares in OAO "HydroWGC" in a private placement ("closed subscription), in which shares will be sold to RAO "UES of Russia", the Russian Federation, and the Company's Stock Option Programme Operator (OOO "EZOP").

The placement price per share will be set by the Board of Directors of OAO "HydroWGC" based on the valuation report prepared by the consortium of independent appraisers consisting of ZAO "Deloitte & Touche CIS", OOO "Institut Problem Predprinimatelstva" ("Institute for Entrepreneurial Issues"), ZAO "ABM Partner", ZAO "Tsentr Professionalnoy Otsenki" (Center for Professional Appraisal), and ZAO "Rossiyskaya Otsenka" (Russian Appraisal).

According to the valuation report, the fair market value of HydroWGC shares is RUB1.73 per share.

This report was recommended for use by Russia's Federal Agency for Federal Property Management (FAUFI), and the fairness of the financial conditions of the share offering with respect to the market value was confirmed by the consortium of investment banks comprised of BNP Paribas SA, CIT Finance Investment Bank (OAO), and OOO "Metropol Investment and Finance Company".

RAO "UES of Russia" will acquire RUB17.1 billion of new shares in OAO "HydroWGC". Payment for the shares will be made in cash and shares of the RAO UES subsidiaries engaged in the core business of OAO "HydroWGC": OAO "Zelenchukskie HPPs", OAO "Zaramagskie HPPs", OAO "Sulakenergo", OAO "Vilyyskaya HPP-3", OAO "ESKO UES", OAO "Severo-Osetinskaya HGC", OAO "Krasnoyarskaya HPP", OAO "Geotherm", OAO "Verkhne-Mutnovskaya Pilot GeoPP".

The Board of Directors of RAO "UES of Russia" also approved the ratios for the purpose of conversion (exchange) of shares in 22 AO-PPs merging with OAO "HydroWGC" into (for) HydroWGC shares.

These ratios have been calculated based on the fair market value of the merging companies' shares and HydroWGC shares determined by the consortium of independent appraisers consisting of OOO "Institut Problem Predprinimatelstva" ("Institute for Entrepreneurial Issues"), ZAO "ABM Partner", ZAO "Tsentr Professionalnoy Otsenki" (Center for Professional Appraisal), and OOO "Otsenochnaya Firma BINOM ®" (BINOM ® Appraisal Firm) as at 1 April 2007. The fairness of the financial terms of the reorganization with respect to the conversion ratios was confirmed by the consortium of investment banks comprised of BNP Paribas SA, CIT Finance Investment Bank (OAO), and OOO "Metropol Investment and Finance Company".

The following quantities of shares in the companies merging with HydroWGC will be converted into (exchanged for) one ordinary share of OAO "HydroWGC" of RUB1 par value:

  • 0.9753053055711250 of an ordinary share of OAO "Bureyskaya HPP", RUB10 par value;
  • 0.0924777120278805 of an ordinary share in OAO "Volzhskaya HPP", RUB1 par value;
  • 0.1009802489930990 of a Type A preferred share in OAO "Volzhskaya HPP", RUB1 par value;
  • 0.0791401964646080 of an ordinary share in OAO "Votkinskaya HPP", RUB1 par value;
  • 0.0864164626169556 of a Type A preferred share in OAO "Votkinskaya HPP", RUB1 par value;
  • 0.4735290884122240 of an ordinary share in OAO "Dagestan Regional Generation Company", RUB0.4 par value;
  • 0.1660809314517490 of an ordinary share in OAO "Zhigulevskaya HPP", RUB1 par value;
  • 0.1813506567501080 of a Type A preferred share in OAO "Zhigulevskaya HPP", RUB1 par value;
  • 2.0118517662031500 ordinary shares in OAO "Zagorskaya PSPP", RUB0.1 par value;
  • 0.1611471300891550 of an ordinary share in OAO "Zeyskaya HPP", RUB1 par value;
  • 0.1759632344279920 of a Type A preferred share in OAO "Zeyskaya HPP", RUB1 par value;
  • 0.7265321674568300 of an ordinary share of OAO "Zelenchukskie HPPs", RUB10 par value;
  • 0.7904875674830130 of an ordinary share in OAO "Kabardino-Balkarskaya Hydrogeneration Company", RUB1 par value;
  • 0.1207407869959820 of an ordinary share in OAO "KabbalkHPP", RUB10 par value;
  • 0.0000447998082296 of an ordinary share in OAO "Kamskaya HPP", RUB346 par value;
  • 0.0999039271877230 of an ordinary share in OAO "Cascade of Verkhnevolzhskie HPPs", RUB0.5 par value;
  • 3.3200447514601600 ordinary shares in OAO "Cascade of Nizhnecherekskie HPPs", of RUB1 par value each;
  • 0,0012607083225520 of an ordinary share in OAO "Nizhegorodskaya HPP", RUB1,000 par value;
  • 0.0017846014274298 of an ordinary share in OAO "Saratovskaya HPP", RUB1,000 par value;
  • 0.3757435019735730 of an ordinary share in OAO "Severo-Osetinskaya HGC", RUB1 par value;
  • 0.4675003089462080 of an ordinary share in OAO "Stavropol Electricity Generation Company", RUB0.56 par value;
  • 0.5104829754817740 of a Type A preferred share in OAO "Stavropol Electricity Generation Company", RUB0.56 par value;
  • 0.3177272339096330 of an ordinary share in OAO "Sulakenergo", RUB10 par value;
  • 0,0482446653903393 of an ordinary share in OAO "PS Neporozhny Sayano-Shushenskaya HPP", RUB1 par value;
  • 0.0526803509394403 of a Type A preferred share in OAO "PS Neporozhny Sayano-Shushenskaya HPP", RUB1 par value;
  • 0.1103464122150060 of an ordinary share in OAO "Chebokarskaya HPP", RUB8.2 par value;
  • 0.0000577426386387 of an ordinary share of ZAO "EOZ", RUB30,000 par value;
  • 0.0002368251781486 of an ordinary share in OAO "Irganayskaya HPP", RUB1 par value.

The Board of Directors of RAO "UES of Russia" also instructed the RAO UES representatives on the Boards of Directors of its subsidiaries (OAO "HydroWGC", OAO "Irganayskaya HPP", OAO "Bureyskaya HPP", OAO "Severo-Osetinskaya HGC" and OAO "Kabbalkenergo") to vote FOR the approval of all resolutions required for the companies' merger with and into OAO "HydroWGC" in accordance with the above conversion ratios.

It is expected that the extraordinary general meetings of shareholders of RAO "UES of Russia", OAO "HydroWGC" and the AO-HPPs merging with HydroWGC to consider the companies' reorganizations will be held in September and October 2007. The merger of 21 HPPs with OAO "HydroWGC" is scheduled to be completed by January 2008, and OAO "Irganayskaya TPP" will merge with OAO "HydroWGC" by July 2008.

* * *

The Board of Directors the ratios for redistribution* of shares among OAO "State Holding", OAO "HydroWGC State Holding", OAO "Centrenergoholding", OAO "Sibenergoholding", and OAO "Intergeneratsiya" under the demerger balance sheet of RAO "UES of Russia" and noted the shareholders' proposals on the names of the SP HoldCos.

The Board of Directors also noted the shareholders' final joint proposals on the redistribution of shares among OAO "State Holding", OAO "HydroWGC State Holding", OAO "Centrenergoholding", OAO "Sibenergoholding", and OAO "Intergeneratsiya" under the demerger balance sheet of RAO "UES of Russia".

OAO "Intergeneratsiya" and OAO "Sibenergoholding" will exchange their shares in thermal generation companies with other shareholders in SP HoldCos, and OAO "Centrenergoholding" will also exchange its shares in OAO "HydroWGC". Shares of OAO "UES FGC" may not be used for such share exchange.

The Board of Directors has also approved the list of measures to ensure that the stakes in RAO "UES of Russia" held by the minority shareholders who have expressed their interest in creating SP HoldCos are held by them until the end of the reorganization.

These measures include the safekeeping of RAO UES shares owned by the shareholder in a securities account with a securities depository which will be impossible to close as long as the shareholder's shares in RAO UES are held in that account. Also, this mechanism provides that RAO "UES of Russia" or its designee will be appointed operator of such account in which all transactions in the securities held in it will be processed. It is also possible to block the securities account, and in that case the account can be unblocked only with the operator's participation.

The documents providing for such measures must be executed by 10 August 2007. If this is not done, RAO "UES of Russia" may refuse to create the specific SP HoldCos.

Pursuant to the Board resolutions of 2 March 2007 and 27 April 2007 on the structuring of the final reorganization of RAO "UES of Russia", the proceeds from the sale of shares of the thermal WGCs and TGCs will be used to finance the investment deficit of FGC and HydroWGC.

In this connection, the Board of Directors determined the maximum quantity of shares in the thermal WGCs and TGCs which RAO "UES of Russia" may sell before the completion of its reorganization. These are shares in WGC-1, WGC-2, WGC-3, WGC-4, WGC-6, TGC-1, TGC-2, Mosenergo, TGC-4, TGC-6, Volzhskaya TGC, Southern TGC-8, TGC-9, TGC-10, TGC-11, Kuzbassenergo (TGC-12), Yeniseyskaya TGC (TGC-13) and TGC-14, allocated to the spin-off companies, OAO "State Holding" and ??? "HydroWGC State Holding" taking into account the results of redistribution of shares among the SP HoldCos.

The Board of Directors instructed the Management Board to take these decisions into account in the course of preparations for the EGM scheduled for 26 October 2007 to consider the Company's reorganization, and to submit to the next scheduled Board meeting the final separation balance sheet of RAO "UES of Russia" and other EGM-related materials.

The Board of Directors of RAO "UES of Russia" approved as a basis the Company's Demerger Balance Sheet as of 31 March 2007, which takes into account the redistribution of shares among the SP HoldCos created on the request of some minority shareholders, and OAO "State Holding" and OAO "HydroWGC State Holding".

In the course of preparation of the Demerger Balance Sheet, the Company had to address some key issues, including measures to ensure that all companies of the intended (post-reform) sector structure, including OAO "IDC Holding" and OAO "RAO Energy Systems of the East", have all assets required for their operation. OAO "UES FGC" and OAO "HydroWGC" are to receive assets and facilities sufficient to cover the deficit of their investment programmes, and to ensure that the state holds the stake in these companies required by law (taking into account the funds to be received from the federal government), i.e. 75% plus one share and 50% plus one share, respectively. The Company's less liquid assets are to be equitably distributed among the companies comprising the intended (post-reform) sector structure. Until the completion of its reorganization, RAO "UES of Russia" must be able to perform its functions.

At the time of the merger of RAO "UES of Russia" with OAO "UES FGC", RAO UES should have the assets whose aggregate market value may not be less than all of the Company's liabilities. The structuring of the spin-off companies' assets and liabilities were structured taking that requirement into consideration.

The core assets, including shares in generation and power grid companies will be distributed among the companies comprising the intended sector structure according to the functional and territorial principle. The book value of such assets, without taking into account the technical items and shares in WGC-5 and TGC-5, and the companies spun off during the first phase of RAO UES reorganization, makes RUB943,756 million.

The illiquid assets will be distributed based on the territorial and equity principles. Their book value is insignificant and makes about 0.3% of the total assets of RAO "UES of Russia".

The liabilities and equity of all companies to be spun off from RAO "UES of Russia" must be formed from the additional capital and retained earnings of prior years. However, the liabilities must be held by RAO "UES of Russia".

The key mechanism to be used for distributing the assets of RAO "UES of Russia" will involve distribution of the assets among all companies comprising the intended (post-reform) sector structure.

The assets of the spin-off HoldCos, without taking into account the redistribution of shares among the SP HoldCos, will be formed with the property of the thermal WGCs and TGCs, HydroWGC and FGC which will be distributed among the shareholders pro rata to their share of RAO UES assets. For OAO "State Holding" and OAO "HydroWGC State Holding", this figure will be 52.87%, and for the SP HoldCo—OAO "Centrenergoholding" (to be created on the proposal of "Gas Energy Company"), OAO "Intergeneratsiya" (to be created on the proposal of "MMC Norilsk Nickel"), and OAO "Sibenergoholding" (to be created on the proposal of MADAKE ENTERPRISES COMPANY LTD.),— 10.53%, 3.43% and 0.97%, respectively; for other minority HoldCos the figure is 32.2%.

"INTER RAO UES Holding", "IDC Holding", and "RAO Energy Systems of the East" (the companies of the intended (post-reform) sector structure) will receive the assets relating to their core operations distributed by RAO "UES of Russia". The latter two companies will also receive the assets which may be used to finance the payment of liabilities of RAO "UES of Russia" which arose during the transitional period.

RAO "UES of Russia" will retain the assets needed to support the Company's operation until it ceases its activities on 1 July 2008: the cash and liquid short-term investments, current accounts receivable and recoverable receivables, the assets intended for sale, and the property, plant and equipment needed for the administrative staff of RAO "UES of Russia".

The shares in WGC-5 and TGC-5 spun off to OAO "WGC-5 Holding" and OAO "TGC-5 Holding", respectively, during the first phase of RAO UES reorganization, will not be taken into account when preparing this demerger balance sheet and will be recorded separately.

The disposal of the RAO UES property from the time the demerger balance sheet is prepared until the reorganization of RAO "UES of Russia" is completed will be regulated by the Rules for the Distribution of Property, Rights and Obligations During the Period of RAO UES Reorganization by way of spin-off or simultaneous spin-off and merger, the so-called "Rules of Legal Succession". This document constitutes an integral part of the demerger balance sheet and will become effective upon its approval by the Company's shareholders.

The Rules set out a few key principles. For instance, the "consistency principle" provides that if some property distributed to a company changes its form, the property in its new form would be distributed to the same company. All other property which is created during the transitional period will be kept by RAO "UES of Russia". The exception is represented by some special cases of property distribution arising as a consequence of RAO "UES of Russia" financing a number of projects, including the construction of the Ivanovskie PGU, design works relating to the electricity exports to China, establishment of OAO "Eastern Energy Company", etc. The property emerging in such cases will be transferred to different HoldCos which will be spun off from RAO "UES of Russia" during the second (final) phase of the Company's reorganization.

Under the Rules, shares in generation companies distributed to minority HoldCos and SP HoldCos during the transitional period may not be sold or encumbered.

On the other hand, the generation companies' shares distributed to "FGC State Holding" and "HydroWGC State Holding" may be sold. In that case, the proceeds from their sale will be distributed to "FGC State Holding" and "HydroWGC State Holding", respectively. The same applies to other shares distributed to the HoldCos spun off in the course of the Company's reorganization.

The tax obligations, property, rights and obligations arising from labour relations during the transitional period, the dividend rights and the related accounts receivable, as well as the subscription fees, will not be distributed and will be retained by RAO "UES of Russia". This rule will also apply to the proceeds from the sale of the property distributed to "IDC Holding" and OAO "RAO Energy Systems of the East" which was intended to be used to pay the obligations of RAO "UES of Russia" arising during the transitional period. If RAO "UES of Russia" raises debt secured by that property during the transitional period, all liabilities will be distributed to "IDC Holding" and "RAO Energy Systems of the East", respectively.

The Management Board of RAO "UES of Russia" was given the task to finalize the presented materials taking into account the Board members' suggestions and submit the revised materials to the next scheduled physical meeting of the Board of Directors.


This announcement was disclosed as material information in the Interfax newswire at 17:25 hours Moscow time on 27 July 2007 in compliance with the requirements of the Federal Service for Financial Markets (FSFM) of Russia.

* Ratios for Redistribution of Shares among OAO "State Holding", OAO "HydroWGC State Holding", OAO "Centrenergoholding", OAO "Sibenergoholding", and OAO "Intergeneratsiya"

shares

WGC-1

WGC-2

WGC-3

WGC-4

WGC-6

per share

 

  

  

  

  

WGC-1

1

0.7608879352918760

0.6910543296274110

1.1034870716244600

0.8222845545815850

WGC-2

1.3142539835598800

1

0.9082209055691270

1.4502622796892800

1.0806907514786100

WGC-3

1.4470642279879200

1.1010537126684600

1

1.5968166673949100

1.1898985641619900

WGC-4

0.9062181385848790

0.6895304483918950

0.6262459682559740

1

0.7451691784400200

WGC-6

1.2161240223086100

0.9253340963932490

0.8404077709802660

1.3419771361094900

1

TGC-1

0.0108926640967276

0.0082880966943870

0.0075274226852206

0.0120199140062868

0.0089568694449845

TGC-2

0.0104495251660108

0.0079509176283464

0.0072211896085223

0.0115309159253074

0.0085924831467222

TGC-3

1.9211156896073700

1.4617537505221800

1.3275953150183200

2.1199263265766400

1.5797037591284900

TGC-4

0.0075723413587169

0.0057617031817594

0.0052328992813580

0.0083559807912713

0.0062266193412923

TGC-6

0.0087547852686053

0.0066614104869528

0.0060500322648280

0.0096607923587543

0.0071989247050526

TGC-7

0.9643826389935960

0.7337871150151680

0.6664407980940330

1.0641837742285200

0.7929969487510630

TGC-8

0.0076833473403895

0.0058461662939593

0.0053096104456074

0.0084784744569200

0.0063178978454877

TGC-9

0.0022988570529951

0.0017491725965846

0.0015886351196668

0.0025367590374929

0.0018903146478688

TGC-10

25.6157925807107000

19.4907475276019000

17.7019043697378000

28.2666959422281000

21.0634705924839000

TGC-11

0.0132994012077347

0.0101193539255716

0.0091906087860571

0.0146757172930820

0.0109358921983039

TGC-12

29.0389344541285000

22.0953748798780000

20.0674813822921000

32.0440887438810000

23.8782672831369000

TGC-13

1,994.5336256326900000

1,517.6165722778700000

1,378.3310975809300000

2,200.9420698059400000

1,640.0741939513700000

TGC-14

0.0031978170975724

0.0024331804488129

0.0022098653506340

0.0035287498245908

0.0026295156077107

FGC

0.1902074105920240

0.1447265239225790

0.1314436546168370

0.2098914185154640

0.1564046158967790

HydroWGC

0.5520103345679430

0.4200180037291800

0.3814691317022530

0.6091362675988200

0.4539095720846330

 

shares

TGC-1

TGC-2

TGC-3

TGC-4

TGC-6

per share

  

   

  

  

  

WGC-1

91.8049056796330000

95.6981282989495000

0.5205308589220770

132.0595510196920000

114.2232469808260000

WGC-2

120.6549629997970000

125.7716463361190000

0.6841097549041850

173.5597909947590000

150.1183573596940000

WGC-3

132.8475949628020000

138.4813381468080000

0.7532415855099640

191.0986522447420000

165.2883747105820000

WGC-4

83.1952707379574000

86.7233796931309000

0.4717145060483520

119.6747605074200000

103.5111782620850000

WGC-6

111.6461511627780000

116.3807927143240000

0.6330300818880710

160.6007923703370000

138.9096345594710000

TGC-1

1

1.0424075662460000

0.0056699677982193

1.4384803300221600

1.2441954613996900

TGC-2

0.9593176722625700

1

0.0054393003099914

1.3799596017923500

1.1935786938696000

TGC-3

176.3678446840670000

183.8471757411700000

1

253.7016754264350000

219.4360718927620000

TGC-4

0.6951780842109910

0.7246588948699330

0.0039416373515041

1

0.8649374172398440

TGC-6

0.8037322358297520

0.8378165638647440

0.0045571358955455

1.1561530118458300

1

TGC-7

88.5350572118826000

92.2896135156886000

0.5019909234048750

127.3559383166800000

110.1549163577860000

TGC-8

0.7053689778883130

0.7352819595459820

0.0039994193904896

1.0146594001001700

0.8776168809007740

TGC-9

0.2110463549211780

0.2199963171984740

0.0011966260363346

0.3035860302769900

0.2625829169378770

TGC-10

2,351.6554217811800000

2,451.3834048681300000

13.3338105140071000

3,382.8100672222000000

2,925.9190025561200000

TGC-11

1.2209502734716800

1.2727278030770000

0.0069227487338115

1.7563129523242000

1.5191007888481800

TGC-12

2,665.9166385983100000

2,778.9716750559700000

15.1156614935894000

3,834.8686461024700000

3,316.9213822139300000

TGC-13

183,107.9713760650000000

190,873.1348023660000000

1,038.2163012995500000

263,397.2150947310000000

227,822.1069322040000000

TGC-14

0.2935752970233530

0.3060251108800590

0.0016645624804751

0.4223022901485070

0.3652650521355210

FGC

17.4619733889680000

18.2024931822465000

0.0990088268088103

25.1187052434009000

21.7261080376361000

HydroWGC

50.6772566991927000

52.8263558198290000

0.2873384135865140

72.8982369412724000

63.0524127813224000

 

shares

TGC-7

TGC-8

TGC-9

TGC-10

TGC-11

per share

 

 

 

 

 

WGC-1

1.0369328102417700

130.1516065456590000

434.9987741504490000

0.0390384172907859

75.1913551881130000

WGC-2

1.3627930765441800

171.0522673693500000

571.6988717708930000

0.0513063954362883

98.8205380852433000

WGC-3

1.5005083765278500

188.3377340473810000

629.4711652917120000

0.0564910971787614

108.8067203466520000

WGC-4

0.9396873211348810

117.9457466176380000

394.2037793973240000

0.0353773218505557

68.1397699362462000

WGC-6

1.2610389000549900

158.2804952622340000

529.0124589191580000

0.0474755570602325

91.4420133142032000

TGC-1

0.0112949607928393

1.4176977317513100

4.7382955293091100

0.0004252323664164

0.8190341750418490

TGC-2

0.0108354554960836

1.3600224879955900

4.5455306376689600

0.0004079329239213

0.7857139583046410

TGC-3

1.9920678908241100

250.0362933624690000

835.6829699803990000

0.0749973159547683

144.4512921747240000

TGC-4

0.0078520092052043

0.9855523931491420

3.2939592084906100

0.0002956122218299

0.5693746087089220

TGC-6

0.0090781240916381

1.1394493676712500

3.8083208597937300

0.0003417729606070

0.6582841687273620

TGC-7

1

125.5159497897580000

419.5052657741890000

0.0376479718890213

72.5132375458172000

TGC-8

0.0079671149497336

1

3.3422466744415300

0.0002999457196642

0.5777212989048660

TGC-9

0.0023837603043064

0.2991999386661360

1

0.0000897437409267

0.1728541771984560

TGC-10

26.5618557872865000

3,333.9365573198500000

11,142.8383715013000000

1

1,926.0861583612400000

TGC-11

0.0137905854688691

1.7309384332819500

5.7852232222996100

0.0005191875740651

1

TGC-12

30.1114239099459000

3,779.4639715789000000

12,631.9008901811000000

1.1336340409000500

2,183.4768348247100000

TGC-13

2,068.1973575490000000

259,591.7556854310000000

867,619.6821520690000000

77.8634359779529000

149,971.6862795820000000

TGC-14

0.0033159214696249

0.4162010326882240

1.3910465174013500

0.0001248377182746

0.2404482012101880

FGC

0.1972323047939970

24.7558000654416000

82.7399904418616000

0.0074253962664913

14.3019529692361000

HydroWGC

0.5723976275060350

71.8450318738243000

240.1238188554350000

0.0215496097896897

41.5064051340073000

 

shares

TGC-12

TGC-13

TGC-14

FGC

HydroWGC

per share

 

 

 

 

 

WGC-1

0.0344365252650594

0.0005013703389848

312.7133195826430000

5.2574187140631500

1.8115602867882900

WGC-2

0.0452583405095648

0.0006589279652495

410.9847259737220000

6.9095834881997600

2.3808503233703800

WGC-3

0.0498318638472697

0.0007255150825191

452.5162583833970000

7.6078225526750400

2.6214440878548700

WGC-4

0.0312070038250333

0.0004543508953365

283.3864823828810000

4.7643682008196200

1.6416687910275700

WGC-6

0.0418790856196761

0.0006097285133124

380.2981800403210000

6.3936731935070300

2.2030819826235100

TGC-1

0.0003751055023708

0.0000054612586906

3.4062811487863500

0.0572672960681394

0.0197327176949563

TGC-2

0.0003598453373872

0.0000052390819747

3.2677057027255900

0.0549375291608589

0.0189299448065399

TGC-3

0.0661565489822661

0.0009631904245274

600.7584645994170000

10.1001095784221000

3.4802168896186000

TGC-4

0.0002607651245151

0.0000037965473539

2.3679720032973100

0.0398109691685927

0.0137177528834560

TGC-6

0.0003014843840925

0.0000043893896579

2.7377379635787900

0.0460275719087700

0.0158598213119645

TGC-7

0.0332099871128876

0.0004835128506233

301.5752963875570000

5.0701633337625400

1.7470372900688800

TGC-8

0.0002645877848075

0.0000038522024606

2.4026850523196500

0.0403945740940108

0.0139188469114499

TGC-9

0.0000791646489862

0.0000011525787399

0.7188832202880810

0.0120860540913727

0.0041645181422092

TGC-10

0.8821188883901640

0.0128429986095547

8,010.3995316544600000

134.6729472893880000

46.4045525538214000

TGC-11

0.0004579851657003

0.0000066679252918

4.1588999001321300

0.0699205207953786

0.0240926670659964

TGC-12

1

0.0145592604110232

9,080.8615902933000000

152.6698374355880000

52.6057804277473000

TGC-13

68.6848075911105000

1

623,717.2310908010000000

10,486.0984092295000000

3,613.2179068600300000

TGC-14

0.0001101217092736

0.0000016032906422

1

0.0168122634529283

0.0057930384583748

FGC

0.0065500823004538

0.0000953643539259

59.4803907754505000

1

0.3445721912813440

HydroWGC

0.0190093178329229

0.0002767616085654

172.6209841666670000

2.9021494633137600

1

* * *

The Board of Directors of RAO "UES of Russia" considered some matters relating to the day-to-day operations of OAO "Russian Communal Systems".

Specifically, the Board of Directors instructed the RAO UES representatives on the Board of Directors of OAO "RCS" to vote FOR the approval of a RUB2.5 billion three-year bonds, Series 2. The bond issue is intended to raise additional funds needed for the company's investment programme, and as a replacement of the bank credit facilities which are more costly to service. The bonds are expected to be issued in Q3 2007.

Also, the RAO UES representatives on the Board of Directors of OAO "RCS" voted for raising a credit facility from Gazprombank in order to provide working capital. The credit facility amount will be not more than RUB3 billion and the interest rate will be not more than 8.5% per annum.

Also, the Board of Directors of RAO "UES of Russia" instructed the Company's representatives on the Board of Directors of OAO "RCS" to vote for the establishment of a wholly-owned subsidiary, OAO "Smolensk Communal Systems". It is planned that OAO "Smolensk Communal Systems" will take part in the tender to lease the heating facilities in the city of Smolensk. The analysis made by RCS staff suggest that it is possible to ensure reliable and accident-proof operation of the district heating system in Smolensk while maintaining the necessary profitability level.

Also, the RAO UES Board of Directors instructed the Company's representatives on the RCS Board to vote for the sale of the company's stake in OAO "DVEUK-KS". Currently, OAO "RCS" holds 49% of OAO "DVEUK-KS".

* * *

The Board of Directors of RAO "UES of Russia" considered the mechanism intended to ensure implementation of the investment programmes of OAO "WGC-4" and OAO "TGC-1" and to control that the proceeds from the generation companies' share offerings are used for their intended purpose. The Board of Directors approved changes to some of its previous decisions, in particular, the principal terms and conditions of the Share Purchase Agreements to sell the shares in OAO "WGC-4" attributable to the "state" interest, which were considered by the Board on 22 June 2006.

The Board approved the agreements between the generation companies, WGC-4 and TGC-1, and NP "ATS" and ZAO "Center for Financial Settlements" (ATS/CFS), to supply capacity on the wholesale market. The Agreement will set forth the generation companies' obligations relating to the supply of new capacity to the wholesale market in the volumes and within the time frame provided by the investment programme of the WGC/TGC in question. Conclusion of such agreement is a pre-condition for the completion of the new share issues by WGC-4 and TGC-1.

The Board of Directors of RAO "UES of Russia" broadly approved the Basic Terms of the agreement on the supply of capacity to the wholesale market. According to the Basic Terms, the generation company will undertake to ensure availability of the generation equipment provided by its investment programme for generating electricity in the required amounts and of specific quality. If the generation company fails to perform or improperly performs its obligation to supply capacity, ATS/CFS will have the right to purchase the shortfall of capacity on the wholesale market and to charge the cost of such purchased capacity to the generation company. The capacity is to be provided from the date the generation company's new generation equipment is brought on line until 31 December 2021.

The Board of Directors instructed the Management Board to arrange for the drafting of a model capacity supply agreement and to submit it for approval by the Board of Directors.

The Board of Directors also commissioned the Management Board of RAO "UES of Russia" to carry out all corporate procedures needed to have WGCs/TGCs and ATS/CFS conclude new capacity supply agreements in accordance with the Basic Terms.

The Board of Directors also approved the draft Shareholders Agreement which will be entered into between RAO "UES of Russia" and the buyer of WGC-4 shares. The Shareholders' Agreement will set forth the shareholders' undertaking to perform all legal and formal actions needed to implement the approved investment programme of the generation company. The draft Agreement will be available for review in the Dataroom along with other materials about the company.

Shareholders' agreements will be concluded after the WGCs/TGCs complete their share offerings, and will be required for an investor to receive the shares in the particular generation company which are owned by RAO "UES of Russia" and are attributable to the so-called "state" interest.

The capacity supply agreements, along with the Shareholders' Agreements, will be part of the system to control the proper use of the proceeds from the new share offerings by the thermal WGCs and TGCs. This approach was approved by the Board at its meeting of 25 May 2007. In the future, the practice of concluding new capacity supply agreements and Shareholders' Agreements will be extended to the sales of shares in other thermal generation companies.

The Board of Directors of RAO "UES of Russia" noted that, after consultations of the WGC-4 and TGC-1 management with the interested investors, the latter suggested that the period for submitting bids for shares in these generation companies should be extended so that the investors can familiarize themselves with the terms and conditions of the Shareholders' Agreements, the agreement to supply capacity on the wholesale market, and the procedure for taking corporate resolutions. The Board of Directors instructed the Management Board of RAO "UES of Russia" to take the resolutions needed to extend the deadlines for the receipt of potential investors' bids for the additional shares and the sale of the shares attributable to the "state" interest in the generation companies.

* * *

The Board of Directors of RAO "UES of Russia" commissioned the Company's representatives on the Board of Directors of OAO "WGC-5" to vote "FOR" the convocation of Extraordinary General Meetings of WGC-5 shareholders.

WGC-5 shareholders will be invited to approve the Master Agreement for the preparatory phase of the project to build a combined-cycle gas turbine at the Nevinnomysskaya TPP and the EPC Contract to implement the CCGT project signed with the tender winner, the Consortium consisting of OAO "E4 Group", OAO "Power Machines-ZTL, LMZ, Electrosila, Energomashexport", ZAO "SibKOTES", OAO "Firma CENTROENERGOMONTAZH", OOO "Energostroysnabkomplekt-invest", and OOO "ZAO "Novosibirskenergospetsremont".

As the Company has a new shareholder, Enel Investment Holding B.V.*, the next EGM will elect a new Board of Directors and Auditing Commission.


* Enel Investment Holding B.V. is the winner of the public auction to sell a 25.03% stake in OAO "WGC-5" previously held by RAO "UES OF Russia".

* * *

The Board of Directors approved the Agreement on joint actions to be taken by RAO "UES of Russia", the Moscow City Government, and Gazprom Group in order to consolidate and manage the power grid assets.

This document is intended to ensure further reform of the Moscow Region's power grids.

The parties have agreed that consolidation of the power grid assets will be implemented in two phases.

During the first phase, OAO "Moscow United Electricity Distribution Company" (OAO "MOESK")* will issue additional shares. The shareholders are to take a resolution approving the share issuance before 1 October 2007. The payment for the new shares will be made with the shares in OAO "Moscow City Electricity Distribution Company" (OAO "MGEK)** held by RAO "UES of Russia" (50.9% of the authorized capital of OAO "MGEK"), the Moscow City Government represented by its Property Committee (about 7.5%), and Gazprom Group (about 28.2%). After the additional share issue, OAO "MOESK" will hold in excess of 75% of OAO "MGEK".

At this phase, the Moscow City Government will establish a wholly-owned municipal electricity distribution subsidiary and contribute the city-owned grid assets to the subsidiary's authorized capital.

During the second phase, OAO "MGEK" and the city electricity distribution company will merge with and into OAO "MOESK" and the latter will become a unified operating power grid company carrying out activities in Moscow and the Moscow Region. The share conversion ratios for the companies' merger with OAO "MOESK" and the price for the repurchase of shares of OAO "MOESK" and OAO "MGEK" will be calculated based on the fair market value determined by reputable international appraisal firms.

After the second phase is completed, RAO "UES of Russia" will remain the major shareholder of OAO "MOESK", with the Moscow City Government holding more than 25% of OAO "MOESK".

The Board commissioned the Chairman of the Management Board of RAO "UES of Russia Anatoly Chubais, if necessary, to make amendments to the Agreement to the extent of changes in the timeframes, and sign the relevant supplementary agreements without submitting them for approval to the Board of Directors of RAO "UES of Russia".

* * *

The Board of Directors also instructed the RAO UES representatives taking part in the shareholder meetings of OAO "MOESK" to vote FOR the approval of resolutions aimed at the implementation of the Agreement between RAO "UES of Russia", the Moscow City Government, and Gazprom Group.

During the first stage of the project to consolidate the power grid assets, OAO "MOESK" will hold an EGM to approve an increase of the company's authorized capital through issuance of 23,693,011,361 additional ordinary shares of RUB0.5 par value each. The shares will be issued by private placement ("closed subscription") in favour of MOESK shareholders: RAO "UES of Russia", the Moscow City Government, and Gazprom Group.

The additional shares of OAO "MOESK" are to be issued in exchange for MGEK shares. The placement price for MOESK shares and the money value of MGEK shares will be determined by the Board of Directors of OAO "MOESK" based on the valuation reports prepared by a consortium of independent appraisal firms—ZAO "Deloitte & Touche CIS" and OOO "Institut Problem Predprinimatelstva" ("Institute for Entrepreneurial Issues"). The appraisal will be made as of 1 April 2007 and agreed with the Appraisal Committee under the Board of Directors of RAO "UES of Russia".

At its next meeting, the Board of Directors plans to consider the Agreement between RAO "UES of Russia" and the Moscow City Government aimed joint efforts to consolidate Moscow's heating grid assets.


OAO "Moscow Unified Electricity Distribution Company" and OAO "Moscow City Electricity Distribution Company" were spun off from OAO "Mosenergo" on 1 April 2005.

* * *

The Board instructed the RAO UES representatives taking part in the shareholder meeting of OAO "Lenenergo" to vote FOR the approval of a private placement of the company's additional shares.

The additional shares of Lenenergo are to be issued in accordance with the understandings set forth in the Agreement on Cooperation between the city of Saint Petersburg and RAO "UES of Russia" in the implementation of measures aimed at ensuring stable electricity supply and creating the conditions for connecting the city's customers to the power grid, dated 27 July 2006, and in the Minutes of the Meeting of 26 October 2006 between OAO "UES FGC" and the Saint Petersburg City Government. Specifically, the parties reached an agreement to set up a joint power grid company in Saint Petersburg, with the city Government acquiring a blocking stake (25% plus one share) in OAO "Lenenergo" in the course of the additional share offering.

OAO "Lenenergo" will issue 239,937,573 additional ordinary shares, RUB1 par value each, which will be placed through closed subscription (private placement).

According to the valuation report prepared by independent appraisers KPMG International (ZAO "KPMG") and OOO "Marketing. Consulting. Design" (OOO "MKD-Partner") which has been submitted for approval to the Appraisal Committee of the Board of Directors of RAO "UES of Russia", the fair market value of the 100% of shares in OAO "Lenenergo" as of 1 January 2007 is RUB29.099 billion. Accordingly, one ordinary share in OAO "Lenenergo" is worth RUB37.44.

Based on these figures, the value of the entire additional share issue will make RUB8,983,262,733.12. 232,949,100 ordinary shares worth RUB8,721,614,304 will be issued to the Saint Petersburg City Property Management Committee. The shareholders who do not participate in the vote or vote against the resolution to increase the authorized capital through placement of additional shares to Saint Petersburg will be entitled to a pre-emptive right to acquire additional shares in OAO "Lenenergo" (6,988,473 ordinary shares worth RUB261,648,429.12).

The additional share issue of OAO "Lenenergo" is scheduled to start in Q4 2007 and is expected to be completed in Q4 2008.

Payment for the new shares in OAO "Lenenergo" to be purchased by the Saint Petersburg Government will be made in form of cash and property after the Saint Petersburg City Government adopts a resolution to privatize the property concerned and contribute it to the authorized capital of OAO "Lenenergo". The property to be contributed to Lenenergo will include the grid facilities owned by Saint Petersburg as of 1 January 2007, as well as the substations and distribution grids to be put into operation in 2007-2008.

The payment for the new shares in Lenenergo to be acquired under the pre-emptive right will be made in cash.

RAO "UES of Russia" will not purchase any shares in this new issue of OAO "Lenenergo". However, RAO "UES of Russia" will buy 26,188,772 ordinary shares in OAO "Lenenergo" worth RUB980,507,623.68 from Fortum Power and Heat Oy at the market price in order to preserve the controlling stake after the additional share issue of Lenenergo.

The Board approved the change in the Company's interest in OAO "Lenenergo" as a result of purchase of the stake from Fortum from 56.01% to no less than 59.34%; after the new share issue RAO "UES of Russia" will hold at least 50% plus one share.

 

 

 

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