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31 Jul, 2007 03:37

RAO UES split begins

Russia's electricity monopoly Unified Energy Systems will hold an extraordinary general meeting on October 26 to discuss the company's final reorganisation – UES is spinning off its power generating assets.

It is the final countdown for a reform that has spun out over a period of nearly 7 years.

State-monopoly UES has picked the date for an extraordinary session that will pave the way for the irreversible break-up of the company.

Under the company's reform, UES will spin off all its assets to its shareholders. This is being done to boost investment in the capital-hungry sector and prevent a potential electricity deficit.

Analysts say liberalizing Russia's entire power sector on time is not an easy task.

The company says it is restructuring is currently on schedule, but its track record shows unexpected delays in the past, according to market insiders.

“Previously the decision on this was scheduled for last June. However Gazprom opposed. It is not in the interest of Gazprom to oppose this restructuring but it played on the fact that it can block it, block the restructuring, can delay it, postpone it in return for, sort of, going ahead and requesting more and more generating capacities,” reminded Dmitry Bulgakov, utilities analyst of the Deutsche Bank.

The UES board has voted to give Gazprom the exclusive right to swap its stake in state-owned Hydro-OGK for control of OGK-2 and OGK-6, which jointly produce about 8% of the country's non-nuclear electricity.

But RAO-UES says Gazprom will not get anything before the unbundling is over, and allays fears that the gas giant will monopolize the market.

October 26 could become a turning point for the fate of UES. The company says the date will set the clock ticking for it own existence. But what happens to the entire power sector once UES is gone is equally important, yet much more unpredictable.