Dubai to invest $100mn in Russian power sector

CAPITAL NEEDS: Dubai World has agreed to invest #100 million in OGK-1. (Getty Images)

Dubai will invest $100 million in electricity generator OGK-1, marking the last deal in the sell-off of former state power monopoly Unified Energy System (UES), the Russian company's chief executive Anatoly Chubais said on Monday.

With its assets sold or spun off, and a liberalised domestic power market in the works, state-owned UES - formed in the early 1990s as a stopgap between the Soviet command system and privatisation - ceases to exist on Tuesday.

At a press conference marking the end of UES, Chubais said the Dubai government's investment arm is guaranteeing investments in OGK-1, which is the subject of an offer of as much as $5.3 billion from a Russian company, Roskommunenergo.

Chubais said the company had offered to buy OGK-1, which has big capital needs for stations in some of Russia's most energy intensive oil and gas regions, at a price of $516 per kilowatt.

Russian media have reported that Roskommunenergo was bidding on behalf of Dubai World.

UES has already spun off seven wholesale generating companies, known by the Russian acronym OGK, but an attempt to sell OGK-1 to a consortium of investors led by magnate Viktor Vekselberg failed as the group balked at its high investment needs.

Roskommunenergo's offer sent OGK-1 shares soaring 25 percent by 1000 GMT. They stood at 2.2 roubles per share, a discount of around 15 percent to Roskommunenergo's offer price. Shares in UES were delisted earlier this month.

In terms of price per one OGK-1 share, the Roskommunenergo offer works out at 2.6 roubles per share, a spokeswoman for UES told newswire Reuters. Chubais said the total price would not exceed 125 billion roubles ($5.33 billion).

Marking a new stage of Russian power reform, which will see the development of liberalised electricity trade, the government has approved the launch of a capacity market where independent generators can buy and sell each other's excess capacity - a key step toward loosening state price controls.

The decree was published on Monday in the government newspaper, Rossiiskaya Gazeta. (Reuters)

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