Moscow. 19 July 2006. Today, RAO "UES of Russia" held a public auction* to sell its 100% stake in OAO "Taymyrenergo"**.
The public auction was arranged by the Company's Accredited Agent, OAO "Alfa-Bank". Bids were accepted from 1 June through 12 July 2006.
The auction start price was RUB5.95 billion, with a price increment of RUB20 million.
The shareholding was sold to OAO "A.P.Zavenyagin Norilsk Mining and Metallurgical Combine", which offered the highest price, RUB7,29 billion. The auction had four bidders, with the price offered during the auction exceeding the auction start price by RUB1,34 billion.
After the auction, RAO "UES of Russia" and OAO "A.P.Zavenyagin Norilsk Mining and Metallurgical Combine", the auction winner, signed the Auction Protocol and the Contract of Sale of 100% shares in OAO "Taymyrenergo". The auction winner will acquire ownership of the shares in OAO "Taymyrenergo" subject to approval by the Federal Antimonopoly Service of Russia and full payment for the shares, which must be made within 65 calendar days after the Contract of Sale conclusion.
The cash proceeds from the sale of shares in OAO "Taymyrenergo" (less all required tax and other mandatory payments, as well as appraisal and auction expenses) are expected to be used to finance the investment projects of RAO "UES of Russia". The Board of Directors of RAO "UES of Russia" will decide on the use of the proceeds from Taymyrenergo divestiture at the Board meeting scheduled for 28 July 2006.
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* On 23 December 2005, the Board of Directors of RAO "UES of Russia" tentatively approved the sale of the Company's 100% stake in OAO "Taymyrenergo". The sale was accepted by the Government Resolution of April 20, 2006. The shares were to be sold through a public auction with open bidding organized by an accredited agent.
** The authorized capital of OAO "Taymyrenergo" is RUB629,770,078 and is divided into 1,259,540,156 ordinary shares of RUB0.5 par value each.
OAO "Taymyrenergo" is classified as an energy system with limited competition. Such energy systems may be reorganized using scenarios different from the "basic" restructuring plan. This is due to the peculiarities of the Norilsk isolated energy area: the local energy system does not have any links to the country's power grid; another factor is that the company has one major consumer, OAO "Norilsk Nickel MMC", which consumes 97% of the electricity generated by OAO "Taymyrenergo". Besides, OAO "Norilsk Nickel MMC" has its own generation and power grid facilities.
The majority of equipment at OAO "Taymyrenergo" has reached the end of its useful life and is in need of radical upgrade. The equipment is maintained in working condition owing to additional repairs, which leads to significant additional costs and ultimately puts the reliability of electricity supply in jeopardy.
In the near term, OAO "Taymyrenergo" will need over RUB2.7 billion in investments. However, the company in unable to finance the investments it needs with internally generated funds.
The auction to sell the Taymyrenergo shares is aimed at attracting a private investor to carry out modernization at OAO "Taymyrenergo" (replace the company's worn and obsolete hydrogeneration and electrical equipment, and improving the reliability of power supply for customers).
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