Wholesale Generating Company OAO OGK-4

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In October 2007, the Russian state-owned electricity monopoly RAO UES sold 29 million of shares or 47% stake of charted capital in JSC OGK-4 for US$3.9 billion to E.ON Russia Power GmbH. JSC OGK-4 was one of Russia’s six thermal power generating companies created based on the thermal generating assets controlled by RAO UES. OGK-4 operated five thermal power plants utilizing gas, coal, peat, and fuel oil with a total installed capacity of approximately 8,630 MW. The company operated in the Tyumen Region, the Krasnoyarsk Territory, the Moscow Region, the Smolensk Region, and the Perm Territory. JSC OGK-4 was incorporated in 2005 and headquartered in Moscow. In September 2007, E.ON Russia Power GmbH, a subsidiary of German E.ON, won the stake in OGK-4 in competitive tender by offering the highest price for those shares (US$3.9 billion). Two other qualified bidders (Finnish utility Fortum and Russia's RUSAL) also submitted final bids for the company. The same month E.ON acquired for US$1.8 billion additional shares in OGK-4 capital equivalent to 23% by subscribing a capital increase in OGK-4. As of December 2008, after successive share acquisitions, E.ON owned 78% of OGK-4 while the UES was the minority shareholder in JSC OGK-4 with a 22% stake. The acquisition documents of both transactions were finalized and signed in October 2007. E.ON paid US$3.9 billion for the RAO UES stake (47% of the charter capital) and US$1.8 billion for additional shares issue (23% of the charter capital). Previously the Russian Federal Antimonopoly Service (FAS) authorized E.ON to consolidate its stake in OGK-4. JSC OGK-4 was sold as part of a sweeping reform of the power sector that started in 2003. Until then, 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 January 2012, Germany's E.ON. increased its stake in E.ON Russia (former OGK-4) by buying an extra 3.26% stake from Russia's Inter-RAO UES, valued at US$164 million. 2012 investment info in project description