Territorial Generating Company 4 (TGK-4)

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On April 7, 2008 RAO Unified Energy Systems (RAO UES) concluded the privatization of the Territorial Generating Company - 4 (TGK-4) by selling the state's stake in the company (47.3%) to Onexim Holdings Ltd, affiliated of Onexim Group. In April 2010, TGK-4 changed its corporate name to the Joint Stock Company “Quadra – Power Generation” (JSC “Quadra - Power Generation”). TGK-4 operated thermo-electric power stations in 11 regions of central Russia including Belgorodskaya, Bryanskaya, Voronezhskaya, Kaluzhskaya, Kurskaya, Lipetskaya, Orlovskaya, Ryazanskaya, Smolenskaya, Tambovskaya and Tulaskaya energy companies. The company’s 26 power plants had a total electricity generating capacity of 3,300 MW and were 96% fueled by gas. At the time of its privatization, RAO UES was the main shareholder with 47.3% stake followed by Archivo Ltd., an affiliated of portfolio investor Prosperity Capital Management, with 19%. The government shares were sold through a public tender in which several investors participated. Investors interested in TGK-4 included Czech utility CEZ AS, South Korea's KEPCO, Kazakhstan's Eurasian Natural Resources Corp. PLC, billionaire Vladimir Lisin, and wholesale generator OAO OGK-3 controlled by mining giant OAO Norilsk Nickel. Onexim Holdings Ltd won the tender by offering about US$1.28 billion for the RAO UES stake, or an equivalent of US$598 per kilowatt of installed capacity. The Onexim Group was a private investment vehicle of the Russian billionaire Mikhail Prokhorov. In May, Onexim bought the additional share issue of TGK-4 apart from the shares that went to the energy company's existing shareholders at a price of RUB 0.027 per share. The additional share issue raised more than US$ 600 million for the company. At the end of 2008 Onexim Group owned 50% of TGK-4, the Russian government through either RusHydro or FSK owned 11.43%., and the remaining 38.57% was owned by minority private investors. By end of 2008 Onexim did not bough the share of minority shareholders because it indicated that the price required to be paid (similar to the one offered for the government shares) was too high considering the decline of TGK-4 share in the second half of 2008. 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. As of end of 2011 Onexim owned 49.95 of the shares. 2008-2011 capacity http://www.quadra.ru/about/main_indicators/ need to check on %private

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