Siemens does not lose hope

The company is still ready to increase its stake in Power Machines

The German concern Siemens is ready “to expand its equity participation in the authorized capital of OJSC Power Machines to a controlling stake, if such a step is approved by Russian authorities,” according to a press release issued yesterday by the Russian representative office of the concern. This statement was a reaction to decisions made at the board of directors of Power Machines (where Siemens now owns a 25% plus one share stake) last week, which supported an additional issue of shares of the company “in order to meet the investment needs of development.”

And the development plans announced were serious: the company intends to increase the annual production capacity from 8.8 GW in 2006 to 17 GW in 2011; maintain the gained positions in the international market with the gradual formation of a ratio of Russian and export contracts of 60:40; expand the product line and power range of manufactured equipment, etc. Siemens supported the strategic plans of the management of Power Machines and expressed its readiness “to take part in increasing the capitalization of the enterprise if a constructive business plan is developed.”

It is obvious that considerable funds will be needed to implement the stated plans of Power Machines. And that is why the decision was made to issue an additional share issue. However, its parameters have yet to be determined at one of the next meetings of the board of directors. Previously, information appeared that Power Machines could raise about $300 million. However, given the company’s ambitious intentions, it cannot be ruled out that this amount may increase. Siemens has the means. And her interest in controlling Power Machines is no secret to anyone. Two and a half years ago, the company already made an attempt to fulfill this desire: in 2004, it applied to the FAS with a request to acquire more than 70% of the shares of Power Machines, which it was going to buy from Interros. However, the FAS rejected this request, pointing out the impossibility of a foreign concern gaining control over a company producing defense products.

Siemens can hardly count on the fact that it will now be able to gain control over the Russian company. According to analysts, in the near future the authorities will not agree to the sale of Power Machines to foreigners. If the sale does take place, it will be “not in the near future,” Aton analyst Tatyana Kapustina is sure. In her opinion, the state will definitely prevent the sale of the stake, at least until the 2008 presidential elections. And a stake larger than the current one, but less than a controlling one, is hardly of interest to Siemens itself. Ms. Kapustina is confident that after the sale of the additional issue shares, the shareholder structure of Power Machines will not undergo changes. Most likely, current shareholders will buy back shares of the additional issue in proportion to their shares. Currently, Interros remains the largest shareholder of Power Machines, owning 30.4% of the company's shares. At the same time, the right to vote with the Interros stake until 2007 belongs to RAO UES of Russia. RAO itself, like Siemens, owns a blocking stake in Power Machines.

Anna LANDER