Dubai World allowed months to look into Russia power buy

STATE-TO-STATE: The Russian government controls regional power firm OGK-1 through two public sector companies. (Getty Images)

The Dubai government may take several months to conduct due diligence on a potential acquisition of Russian regional power firm OGK-1 for up to $5.3 billion, a source close to the matter said on Tuesday.

Morgan Stanley and Goldman Sachs have been hired as consultants on the deal, which has seen Dubai partner with Russian energy holding company Roskommunenergo, whose chairman, Igor Kozhin, is the son of the Kremlin's property manager.

"The consultants have been given a lot of time to conduct due diligence - a few months - and the process is just getting started," one of the sources said.

Morgan Stanley and Goldman Sachs have met with the managers of OGK-1, the sources said. Dubai World, the Arabian Gulf emirate's sovereign wealth fund, has some $100 billion in assets worldwide, but no major investments in Russia.

It guaranteed $100 million toward the acquisition of OGK-1 under a preliminary agreement, which also set the October deadline.

The general director of OGK-1, Vladimir Khlebnikov, said last month that the agreement will be annulled if the Dubai fund and Roskommunenergo fail to structure the deal by Oct. 1.

One of the sources confirmed this but said a new deal could be written up or the current one extended if Dubai needs more time for due diligence.

"No one is going to punish them," he said. The Russian government indirectly holds a 66 percent stake in OGK-1 through two state-controlled power companies - the Federal Grid Co. and RusHydro - who are seeking to sell the stake to fund their own development. (Reuters)

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