Dubai faces competition over Russian utility

FACING COMPETITION: A second group is interested in buying the Russian government's controlling stake in OGK-1, Khlebnikov said. (Getty Images)

A potential $5.3 billion Russian power sector investment involving the Dubai government fund will be decided within three months, and may face a rival bid, the head of OGK-1 utility said on Monday.

OGK-1 Chief Executive Vladimir Khlebnikov said a second consortium had expressed interest in buying the government's controlling stake in his company, and a previously announced bid, in which Dubai World could guarantee investment, was conditional.

"There is another potential buyer. It is a consortium of Russian and foreign companies, which are now working out the structure of the deal. They have shown a very serious interest in the company," said Khlebnikov.

Anatoly Chubais, who headed the former state power monopoly of which OGK-1 was a part, has said Dubai World was guaranteeing $100 million of investment in OGK-1 as part of a $5.3 billion bid for the company.

The first bid for OGK-1 was made by Roskommunenergo, a Russian company chaired by the son of a Kremlin official which operates some municipal utilities, and Khlebnikov said Dubai World's role in financing the bid was unclear.

"It is not clear who is the main company financing Roskommunenergo's offer... but it is hardly possible that Roskommunenergo can be the main financier," he said.

Khlebnikov said Dubai World had nearly three months to firm up a deal for OGK-1.

"The Dubai fund in its preliminary agreement said it is ready to conduct very serious due diligence. This will take about two months," Khlebnikov said.

"They have until Oct. 1 to structure the deal or it will be annulled. The preliminary agreement is not unconditional, but conditional."

He clarified on the sidelines of the press briefing that Dubai World had itself set the conditions, including the Oct. 1 deadline, in the offer documents.

"The Dubai fund set this limit for itself and by Oct. 1 they will make their decision," Khlebnikov said, declining to say what other conditions had been imposed.

UES, OGK-1's former parent company, was liquidated on July 1 as part of a sweeping liberalisation of the power sector.

Despite months of negotiations, UES failed to sell OGK-1 to a consortium of cash-rich Russian businessmen led by Viktor Vekselberg, one of BP's Russian partners in oil venture TNK-BP, before it ceased to exist. It said the consortium's price was too low.

Its remaining assets, including the government's 66 percent stake in OGK-1, was then transfered to two state-controlled companies, the Federal Grid Co and hydro-electricity giant RusHydro, formerly known as Hydro-OGK.

These firms will now be responsible for completing the sale, though the Russian government will have final say over a deal.

"The most important thing for us is getting the money [for the stake] on time," Sergei Yushin, board member RusHydro, told newswire Reuters on Monday.

He said that RusHydro had already factored this money into a draft budget for 2009, but added that the company was by no means certain it would be paid in time.

"We have worked out a plan of what to do in case we get less income from the sale of this asset than initially planned," Yushin said.

Spokespeople for Dubai World did not respond to requests for comment made on Friday and Monday.

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