Territorial Generating Company - TGK-10

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In 2008, TGK-10, the Russian territorial generating company operating in the Urals and West Siberia region, was privatized through a series of transactions. At the time of its divestiture, TGK-10 had 3,000 MW of total installed capacity in its 8 power plants and 15,800 MW of total heat capacity with an annual production of 18 TWh electricity and 27 TWh heat. In February 2008, Fortum, the Finnish utility Fortum Oyj, won the tender to acquire 29.07% of the shares in TGK-10 for approximately US$1.1 billion through a public tender from United Energy Systems of Russia (RAO UES). Russia's LUKoil was another bidder in that TGK-10 tender but dropped out of the running later, leaving Fortum with no competition. The purchase was completed in March 2008. The same month, Fortum paid approximately US$1.8 billion for 47.42% of the shares in TGK-10 through a share issuance, raising its stake in the company to 76.49%. That capital was received by TGK-10 and would remain in the company to finance its committed investment program which was estimated to cost US$3.5 billion. On 29 April, Fortum filed the mandatory public tender offer (MTO) to TGK-10 minority shareholders through which it acquired 23.51% of the share capital of TGK-10. As a result, Fortum’s registered ownership in TGK-10 was 93.4% by December 2008. Fortum invested US$657 million for share purchases under the MTO including the additionally redeemed shares.Additional shares, approximately 0.9%, have been redeemed by TGK-10. TGK-10 was committed and contractually obligated to an extensive investment plan to further increase its electricity capacity with 2,300 MW by 2013. The contractual obligations of TGC-10’s investment program included penalty clauses tied to the availability of the new generating capacity. Over 2003-2008 period, the Russian power sector underwent significant restructuring. Until 2003 the main assets of RAO UES, the state-owned holding for energy companies, were united into regional vertically integrated energy companies: 73 regional power utilities or Energos which produced and transmitted electricity and heat. RAO UES also centrally managed 32 Federal Power Plants, the Central Dispatch, High Voltage Grid plus Grid Service. 2003 energy sector reform envisioned a new organizational structure that included companies involved in potentially competitive activities (power generation and sales, repair and services) and natural monopolies (transmission, dispatching). As a result of the reform RAO UES was planned to be dissolved on July 1, 2008. The companies replacing RAO UES were: a System Operator was to receive functions and assets of regional dispatch administrations; a Federal Grid Company (FSK) was to manage the trunk grids; 11 interregional distribution grid companies were to manage regional distribution grids; RAO Eastern Energy Systems Holding was to manage energy companies of the East and isolated power systems of the Far East region; six wholesale generation companies (OGKs) were formed on the basis of large federal plants; one Hydro OGK was to manage large hydro plants; 14 territorial generation companies (TGKs) were formed on the basis of combined heat and power plants and Inter RAO UES was to remain the major investor and a leading exporter and importer of electric power in Russia. Rosenergoatom was to include all nuclear power plants. Wholesale generation companies (OGKs) were formed in 2004-05 on the basis of large federal power plants with a typical installed capacity of 1000-2000 MW. These large power producers were to become the largest participants and the main competitors on the wholesale power market. Seven of such companies were created in the process of reform: six of them incorporated large thermal power plants (OGKs) and one incorporated large hydro power plants (Hydro-OGK). In an effort to restrict the monopoly influence on the competitive wholesale power market, each of the OGKs was established on the basis of power plants geographically dispersed across the country. The reform also created Territorial generation companies (TGKs) by uniting combined heat and power plants with a typical installed capacity of 100-500 MW which were located in a few neighboring regions or one macro region. The territorial generation companies would sell electricity as well as supply regional consumers with heat energy. Interregional Distribution Companies were formed as operating companies to manage electricity distribution networks located in a number of neighboring regions. In march 2008, as a result of the mandatory offer made ??to minority shareholders in the Russian legislation, the proportion of Fortum in TGC-10 reached about 95% (including shares of 100%-owned subsidiary company TGC-10). In 2011 a third unit at Chelyabinsk HPP-3 of 216.3MW was launched. Sponsor website http://www.fortum.ru/company/ Change in % private http://www.fortum.ru/company/history/ Investment into facilities committment is until 2013 capacity for Tyumen http://www.fortum.ru/production/tyumen-production/ capacity for Chelyabinsk http://www.fortum.ru/production/tyumen-production/