Enel beat E.ON AG, Germany's biggest utility, and United Co. Rusal, the world's largest aluminum producer, as well as Russian gas producer OAO Novatek. Rome-based Enel plans to raise its stake to more than 50 percent, Stephane Zweguintzow, head of the company's Russian office, said after today's auction.
OAO Unified Energy System, Russia's national power utility, is selling units to help fund a $120 billion program to upgrade and expand Russia's aging power network as the economy expands for a ninth year. Demand for electricity is forecast to grow by as much as 5 percent a year.
``It's the highest price yet paid for a Russian generating company,'' said Alexander Kornilov, utilities analyst at Alfa Bank, which helped organize the auction with Merrill Lynch. ``Enel is much more sophisticated and experienced in utilities than any Russian strategic investor and it should favorably affect OGK-5's future competitiveness.''
Enel's winning bid was equivalent to a record $668 per kilowatt of installed capacity, Rafael Nagapetiants, Alfa Bank's managing director, said after the auction. OAO GMK Norilsk Nickel, Russia's largest mining company, paid closer to $600 per kilowatt for a 37 percent in OGK-3 last month.
The generator's shares fell 0.4 percent to 3.803 rubles today in Moscow, after gaining as much as 4.7 percent. Enel, the first foreign company to win a strategic stake in a Russian generator at auction, is paying 4.43 rubles a share.
Russia's First
OGK-5 last year became the first Russian generating company to sell shares to the public, raising $459 million from investors including OAO Gazprom's banking unit, Novatek and the European Bank for Reconstruction and Development.
Enel is seeking assets in eastern Europe and the Americas to boost sales because it is barred by law from selling more than half of Italy's electricity. Chief Executive Officer Fulvio Conti has earmarked about 13 billion euros ($17.6 billion) to expand over the next five years in areas such as Spain, France, Eastern Europe and Latin America.
``This is a great day for the good relations between Italy and Russia,'' Conti said in a statement today. ``We now look forward to continue contributing our experience, technology and people to the power generation sector.''
The Italian utility set aside as much as 4 billion euros to build a business incorporating gas extraction, gas-fired power generation and electricity distribution in Russia. The company bought OAO Yukos Oil Co.'s natural-gas assets at a bankruptcy auction in April.
Enel and its partner in the Yukos bid, Italian oil producer Eni SpA, gave Gazprom, Russia's state gas-export monopoly, an option to buy half those assets.
`Scale Down'
``The strategy of expanding abroad is a must since Enel's been forced to scale down in Italy and is destined to lose more market share with competition here,'' said Gianluca Ferrari, who helps manage the equivalent of $340 million in assets, including Enel stock, at Banca Valsabbina in Brescia, Italy.
The company, Italy's former power monopoly, already operates a gas-fired power plant in St. Petersburg and bought part of Russian power retailer RusEnergoSbyt last year. It plans to use some of the gas supplies bought in the Yukos auction to help fuel the power plants, Conti said last month.
Unified Energy's remaining stake in OGK-5 will be distributed to its shareholders, including Russia's government, which will hold no less than 25 percent plus one share.
OGK-5 has output capacity of 8,700 megawatts, or 5.8 percent of Russia's thermal generation, of which half is gas- fired and almost half runs on coal. It plans to add another 1,200 megawatts in the next three years, in part by expanding its Reftinsk plant in the Urals region, the largest coal-fired plant in the country.
OGK-5 also runs the Konakovskaya power plant north of Moscow, the Nevinnomysskaya generator near Rostov-on-Don in the country's south-west and the Sredneuralsk plant, also in the Urals region.
Rusal is seeking to buy stakes in generators such as OGK-5 that supply its aluminum smelters, while Novatek is building ties with customers for its fuel. Novatek and OGK-5 last year formed a joint venture to invest in power generation.
Bloomberg
by Torrey Clark
