On Tuesday, December 4, UES held regular public auctions to divest its holdings in energy sales companies – a 49% stake in Permskaya Energy Sales Company and 48.17% in Kirovenergosbyt. Tsentr Nadezhnosti was declared the winner of the auction for Permskaya ESC with a $51.50 mln bid, which is 44% higher than the initial bid. Center Region Invest won the tender for Kirovenergosbyt, this company offered $12.40 mln, close to the starting price of $12.30 mln.
It was initially clear that investors would be interested in the assets, which were put up for sale on December 4. The Kirov region is home to 40% of TGC-5's capacities, and the Permskaya region has of 41% TGC-9's capacities. Both utilities are the largest in these TGCs, where CES is looking to become a controlling shareholder. CES clearly operates systematically. According to the company's estimates, the power holding's assets are overvalued and it is inadvisable to pay significant amounts for these assets. Earlier, UES believed that CES instructed bidders at previous auctions to sell off energy sales companies to refrain from participation in the auctions. The results of the December 4 auctions underscored that investors were only prepared to pay the amount close to the initial bid.
Summing up the results of the third stage of auctions, we would like to note that stakes in 11 companies were sold off, out of 19 sales concerns, while 8 equity positions failed to find buyers. To date, 27 stakes in power sales businesses have been put up for sale and only 18 of them have been purchased. The power holding therefore has 34 sales companies to be spun off. UES has raised a total of $490 mln for these assets. It's worthy to note that should UES sell off all the other sales businesses, the proceeds could be 4 times higher, up to $2 bln.
In our opinion, taking into account all the risks involved in the sales companies segment, which includes uncertainty as to the 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 carry out speculative transactions, overall, we view the results of the auctions as upbeat.
We should note 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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