Territorial Generating Company-12 (TGK-12)

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Territorial Generating Company-12 (TGK-12), also known as KuzbassEnergo, was created by merging power generating companies KuzbassEnergo and AltaiEnergo on March 4, 2007. At that time, TGK-12 had a total installed generating capacity of 4,407 MW, which was distributed in six power plants in Kemerov region and three in Barnaul. At the time of its creation, the two major shareholders were Russian state-owned RAO UES with a 49% controlling stake and Siberian Coal and Energy Company (SUEK) with 42% stake. Other minority shareholders owned the remaining shares. The private ownership in TGK-12 was a result of the Russian voucher privatization program which partially divested the regional power utilities or Energos in 1993. From December 6 to 17, 2007, TGK-12 offered 100 million of additional shares (14.16% of its charter capital) through an initial public offering (IPO) in the local stock exchange. Existing minority shareholders of TGK-12 purchased 44,613,712 new shares under their pre-emptive right (6.32% stake in the increased charter capital) while company accepted eight bids for the remaining 55,386,288 additional shares which were offered to local and foreign investors. On December 18, 2007, TGK-12 completed its IPO, raising US$304 million which was expected to finance capacity expansion, in particular the construction of a coal-powered generating unit at its Kemerovo Region-based Tom-Usinskaya GRES power plant. As a result of the IPO, the stake of RAO UES in TGK-12 declined from 49% to 42.06% while SUEK became the controlling shareholder by raising its stake from 42 to 44.02%. The remaining shares were owned by minority share holders. In 2009, Donalink, the Cyrpus-registered holding company that owns SUEK, acquired a further 16.14% stake in TGK-12, bringing SUEK's effective holding to 66%. Over 2003-2007 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.