On Thursday, November 29, 2007 the third stage of auctions to sell off the power holding's stakes in energy sales companies was completed. As part of the auctions the power holding managed to divest only Khakasenergosbyt and Udmurtskaya ESC and the final bids came in only slightly higher than the starting price. Stakes in three sales concerns were sold off on November 27 and in four power sales companies on November 28.
The auctions held on the last day of the third stage called for selling off the companies that were not divested as part of the second round of auctions on September 18-19. Thus, the fact itself that even two stakes were sold can be viewed as a positive, since it signals that interest in these assets is stronger than in September.
Summing up the results of the third stage of auctions, we would like to note that stakes in 9 companies were sold off out of 17 sales concerns, while 8 equity positions failed to find their buyers. To date, 25 stakes in power sales businesses have been put up for sale and only 16 of them have been purchased. The power holding therefore has 36 sales companies to be divested. UES has raised a total of $426 mln for these assets. It's worthy of note that should UES sell off all the other sales businesses, the proceeds could be 4 times higher, up to $1.60 bln.
In our opinion, taking into account the risks involved in the sales companies segment, including uncertainty as to auctions for the right to gain the status of a guaranteed supplier, ongoing asset redistribution in the electricity generation segment and a dubious situation from the liquidity crunch to execute speculative transactions, overall, we view the results of the auctions as upbeat.
It's noteworthy that the power holding's proceeds from the sale of 16 stakes in sales businesses exceeded the initial bid by 30%. Strategic investors, which were previously skeptical, could become more active further down the road as UES auctions off its sales companies.
We expect investor demand for sales companies to climb and UES will be able to largely accomplish its plans to divest non-core assets.
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