16 March 2005 – The break-up of Moscow’s giant power utility Mosenergo under Russia’s electricity restructuring programme took a further step on 28 February with the holding of organizational general shareholders’ meetings of the thirteen new companies that are being established.
Under the restructuring legislation agreed by the Russian Dumas in 2003 Mosenergo and all other Russian regional power utilities are required to divide their vertically integrated entities along existing lines of business (e.g., generation, transmission, distribution, supply, construction and repair, and others).
On January 30, 2004, principles for the restructuring of Mosenergo were approved by the Board of Directors of RAO UES, the Company’s principal shareholder. On March 4, 2004, the Board of Directors of Mosenergo approved general principles for restructuring the Company. In accordance with the overall restructuring plan for the Russian power sector, the restructuring of the Company aims to separate monopolistic and competitive lines of business and improve operating efficiencies. Mosenergo’s Board of Directors also approved an indicative timetable for implementing the proposed restructuring.
In the case of Mosenergo, the thirteen companies that have been formed are, Energy Management Company, Trunk Grid Company, Moscow City Electricity Network Company, Moscow Heating Network Company, Moscow Region Electricity Network Company, Mosenergosbyt, Specialized Design Bureau for Repair and Modernization, Mosteplosetenergoremont, Mosenergosetstroi, GRES-4, GRES-5, GRES-24 and Zagorskaya GAES.
At the general shareholders’ meetings charters were agreed for the newly formed companies, board members and director generals were appointed as well as an audit commission.
Each of the Newcos will be formed as a separate joint stock company under Russian law as of the date of its state registration. These dates of state registration («Formation Dates») may occur on different dates and are currently not expected to occur until April 2005. As of each Formation Date, the shares of the Newco registered on that date will be considered to have been issued to Mosenergo shareholders, although such Newco shares will not be tradable in Russia until the date such shares are registered with the Federal Services for the Financial Markets (the «Trading Dates»), which will not occur until at least 30 days after the Formation Date for that Newco.
On the Trading Date for each Newco, its shares will become tradable over the counter in Russia and may become tradable on an off-list basis subject to the approval of the relevant Russian exchanges. It is currently anticipated that some of the Newcos will apply at a later date for listing on the RTS and MICEX stock exchanges (on which Mosenergo shares are now traded). Initially, there will be no American Depositary Shares («ADSs») for any of the Newcos.
As of each Formation Date, each holder of Mosenergo shares will be considered to own a number of common shares of the relevant Newco equal to the number of Mosenergo common shares held by such holder and will continue to own the same number of Mosenergo common shares as before. At the same time, each holder of Mosenergo ADSs will become entitled to receive 100 shares of the relevant Newco for each Mosenergo ADS held by such holder, and will continue to own the same number of Mosenergo ADSs as before.
The creation of the separate companies is expected to lead to a series of spin-offs and sales as planned under the restructuring programme. These include the establishment of ten maintenance and repair subsidiaries, seven of which will become subsidiaries of Mosenergo and three of which will become subsidiaries of OAO Moscow Region Electricity Network Company and which will be sold to third parties. In accordance with a Russian regulation, OAO GRES-4, OAO GRES-5 and OAO GRES-24 will be integrated into the Wholesale Generating Companies No. 1, No. 4 and No. 6, respectively. It has been proposed that Zagorskaya GAES be integrated into the Wholesale Generating Company No. 7.
The trunk transmission lines throughout the entire Russian Federation will comprise the Unified National Grid. The Federal Grid Company will manage and own substantially all of the assets of the Unified National Grid. OAO Trunk Grid Company will be integrated into the Federal Grid Company.