Territorial Generating Company TGK-9

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At end of 2007 and beginning of 2008, TGK-9, one of Russia’s fourteen Territorial Power Generating Companies created as part of the energy sector reform in Russia, became fully privatized through a series of transactions. The company included 23 electric stations, 35 heating plants and 4 heating networks in Perm territory, Sverdlovsk and Komi regions, with installed capacity of 3,280 MW and 16,952 Gcal/hr. The company was registered on December 9, 2004 in Perm and began operations on April 1, 2005. By September 2007, RAO UES, the state-owned holding company for electricity companies owned 50% stake in TGK-9. The remaining shares were owned by private parties among which Integrated Energy Systems (IES Holding) was the largest private shareholder having 30% stake in the company. Private ownership of TGK-9 was the result of the Russian voucher privatization program of the early 1990s. Energy Systems (IES Holding) was one of the largest strategic investors in the Russian power sector and part of the Renova group. In mid 2007, the Federal Antimonopoly Service approved the possible total acquisition of TGK-9 by IES Holding. In December 2007, RAO UES announced the sale of the government shares equivalent to 34% stake in TGK-9 to IES Holding for US$632.51 million (RUB15,488 million) for the stake. Thus, RAO UES decreased its stake in the power generation company TGK-9 from 50% to 16%. The sale was finalized in January 2008. In addition, IES Holding purchased 99.99% of the additional share issue by TGK-9 or 27.18% of the increase share capital for US$691 for the additional shares in January 2008. IES used its pre-emptive right as an existing major shareholder to purchase additional shares issued by the company. Other existing share holders acquired .01% of the additional share issue for about US$.07 million. The additional share issue raised total US$694. That increase in capital was required by the Russian regulations to ensure funding for the investment program that all generating companies created based on the assets of RAO UES had to agree as part of the privatization process. The funds would be used for the TGK-9 investment program. Following the transaction, IES consolidated a 75% share in the TGK-9. RAO UES shareholding in TGK-9 was reduced to 12.75%. That residual share was to be distributed to the existing shareholder by July 1, 2008 when RAO UES was dissolved. At the end of March 2008, EBRD obtained 8% stake in TGK-9 (617.4 billion shares) from IES. It paid US$196 million for the stake. In April 2008, IES sent a buyout offer to the TGK-9 minority shareholders offering US$.00034 a share, the price at which IES acquired TGK-9 additional issue and the state's UES share package earlier. Minority shareholders had 80 days to decide whether to sell their shares. In August, IES calculated the results of the buyout offer that led to IES preserving its stake in the TGK-9 at slightly above 75%. 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. http://www.tgk9.ru/rus.html utility website on the 25% stake (others) - difficult to confirm the owners as company lists as shareholder investment vehicle/share holding companies that purchase shares on behalf of the sponsor. 2008 annual report not avail.