Daily analyst comments

Interfax reported that UES has found an investor willing to buy out WGC-6’s additional share issue and become the utility’s second strategic shareholder along with Gazprom. On Thursday, November 22 the power holding’s spokesperson said that UES’s BoD will address the strategy to sell WGC-6 shares at its November 30 meeting. The investor will own a blocking interest in WGC-6 after buying out an additional stock offering. The power holding planned to place WGC-6’s additional shares in Moscow and London in November. However, the IPO was rolled back due to downbeat market conditions.

For the record, after the share swap between the state and the power holding’s minority shareholders the government’s stake shrank to nearly 11.6% in the genco’s charter capital. As part of an additional stock offering, 44.3% of the current charter capital is to be placed. After the reorganization of UES is complete, Gazprom will turn into WGC-6’s strategic shareholder with 51.79% in the genco (before the additional stock offering) as a result of share swap with other shareholders of UES and the state. Thus, the gas giant is to buy out 20.36% of the 44.3% floated shares or 46% of the additional stock offering in order to remain the genco’s controlling shareholder.

One of the French companies which recently voiced interest the domestic utilities industry (Gaz de France (GdF) or Electricite de France (EdF)), could become Gazprom’s junior partner in WGC-6. Thus, GdF could buy out the remaining 23.94% of the additional shares after Gazprom buys out its stake and also acquire the state’s 11.6% interest. As a result, GdF could acquire 35.54% of the current or 24.6% of the uplifted charter capital, which is close to a blocking stake.

We believe it will be no problem to buy out the remaining shares in order to accumulate a blocking interest. WGC-6 is currently valued by the market sufficiently downbeat, at $391/kW, including net debt. News about the arrival of a large investor could lend mid-term support to the company’s shares. We assign a Buy recommendation to WGC-6 shares with an estimated target price of $0.15 per share.