The biggest energy holding in Russia has been created as a merger of Siberian Coal and Energy Company (SUEK) and a number of power assets owned by Gazprom. The new company will be under control of the Russian gas monopolist. In case the deal is approved by the Russian regulatory bodies, the energy holding's value will exceed $16 billion. Consolidated SUEK plans to file IPO in prospect.

The talks on the merging power and coal assets have been held for over a year. Finally, 26 February, the companies announced they had signed the long-expected agreement.

The assets performing as a basis for the new company have been estimated at $8 billion. Nevertheless, the cost of renewed Siberian Coal and Energy Company may well pass the $16 billion mark and reach $20 billion. In 2008-2009 the energy holding intends to file the Initial Public Offering to approximately attract $5 billion.

 To fulfill the transaction Siberian Coal and Energy Company will issue additional shares in favour of Gazprom’s subsidiaries, which will eventually own 50% plus one share of SUEK. The rest of the stock will be kept by SUEK’s top managers.

Gazprom will contribute targeted power assets to the newly formed company including 60% of OGK-2 and OGK-6 as well as the total of shares Gazprom receives after the reorganization of RAO UES of Russia. Siberian Coal and Energy Company will retain its assets.

In the consequence of the transaction the world’s leading gas company will gain control over one of the biggest coal and power producers. The proven and prospective coal deposits of the new energy holding are figured at 5.8 billion tons. The total installed capacity of SUEK's power generating companies (stations of OGK-2, OGK-6, TGK-12, TGK-13) will average 25 MW (nearly 35 thousand MW considering participation in the Far East power system).

Taking into account the value of coal as an alternative fuel to natural gas at many power generating plants, the power market may fall into a “coal trap”, note experts. Monopolization of power generating facilities is called to be another drawback of the transaction: Gazprom has a chance to gain control of almost 40% of the national power industry.

 In fact the merger is expected to be completed prior to the 31st of August, 2008, after the Russian regulatory bodies approve the transaction. The Federal Antimonopoly Service is concerned about the deal and will probably bind Gazprom and SUEK to sell a number of coal, gas and power assets, the head of the service said on Wednesday. This step is necessary to secure competitive balance in the power industry.

Gazprom and SUEK have agreed upon the new company’s structure, the board of directors and IPO plans. The board of directors will consist of 11 members: 5 representatives from Gazprom, 4 representatives of SUEK shareholders and 2 independent directors.

Sources:

    Russian Business
    www.vesti.ru
    www.finiz.ru
 

Olga Pletneva