Translated material
Doesn't bite
There was no demand for OGK-2 securities on the London Stock Exchange
The first placement of securities of Russian energy generating companies on the London Stock Exchange began with failure. It turned out that the placement of OGK-2 securities would not be able to bring this company the amount necessary to implement the investment program until 2010 - 42 billion rubles. ($1.66 billion), for which, in fact, the placement was conceived. The maximum that OGK-2 can count on is $1.46 billion.Experts believe that the culprit is, firstly, unfavorable market conditions, and secondly, the planned presence of OGK-2 as a controlling shareholder in the person of Gazprom, which, obviously, will not tolerate any strategic investor in its share capital. But it was precisely the competition between strategists (mainly foreign concerns) that recently allowed RAO to sell generating companies at high prices. However, the head of the energy holding, Anatoly Chubais, does not consider the situation critical. He says the placement was above the current market price. But the volume of placement has not yet been approved, so it’s too early to talk about it.
Today trading should begin (conditional for now) of GDRs issued for shares from the additional issue of OGK-2. The company planned to place on the market up to 12 billion shares (including in the form of GDRs), which is 45.3% of the current authorized capital, or 31.18% of the securities increased by this volume. In parallel, it was planned to place Eurobonds worth $300-350 million, which could be exchanged for declared shares of OGK-2 (approximately 10.5% of the current capital). The offering price range was set at 14.75-18 cents per share. On Friday night, the board of directors of OGK-2 set the price at 16 cents, while putting out an offer for only about 7 billion shares from the additional issue. That is, up to $1.1 billion will be raised. Market participants are inclined to explain such a small volume of the issue by market conditions: “Such a situation could be expected,” says one of the investors. “Not everyone fully understands the scheme, and besides, the market situation is bad.”
Gazprom, which is going to become the controlling shareholder of OGK-2 and contribute the company to the capital of the joint venture with SUEK (in this joint venture, according to Vremya Novostei, a controlling stake in OGK-6 will also be contributed, and Gazprom will limit itself to this) , a large stake in OGK-2 is not needed. As part of the asset exchange, the concern is believed to receive about 40% of the company's shares. Therefore, the concern was going to pay only such an amount that would guarantee obtaining a controlling stake. Which, in general, is what happened.
The book of applications for the purchase of OGK-2 shares has not yet been closed, but, as they say in RAO, Gazprom (or rather, the special company Gazenergoprom-Invest, which, according to Russian laws, is not affiliated with Gazprom.) will receive shares for the amount of $640 million. This means that the gas concern will buy 4 billion shares, that is, at least 11.6% of the increased capital.
However, Anatoly Chubais claims that it is too early to talk about the volume of placement. “Probably, once we see real demand, we will return to the issue of issuing convertible bonds,” he said Friday evening. “They were part of the entire placement process, and at some point it seemed to the specialists that they would not be able to be placed.” However, based on today’s results, such an opportunity may arise, and we would not want to miss it.” As Margarita Nagoga, head of RAO's media relations department, told Vremya Novostey, the recommendation not to place bonds was made by the organizers of the process - Deutsche Bank and Troika Dialog. It was not possible to find out why they did this over the weekend (market participants assume that it was due to poor market conditions). However, RAO, according to Ms. Nagoga, did not listen to this recommendation and instructed the organizers to decide on the placement of bonds by the end of Wednesday.
According to Mr. Chubais, unfavorable conditions in the financial markets will not force RAO to cancel placements of shares in generating companies: “I have said many times before, and I can repeat it now: if we ever encounter a situation in which problems in the financial market make sales in at this point in time is unprofitable, which means we will reschedule it. We will not sell for the sake of selling. But fortunately, practically no such situations have arisen for us so far. Including the placement of shares in OGK-2.”
Thus, RAO still hopes to place bonds. But even raising an additional $350 million through this will not allow OGK-2 to finance the investment program. Therefore, two options are possible: either it will be adjusted downwards, or the new owner will independently attract its financing. However, Mr. Chubais said mysteriously on Friday: “We are not isolated from the problems (existing in Western financial markets - Ed. ). But seeing them in front of us, we try to maintain our priorities. And our priorities are that we do not intend to sell cheaply. And so far, it seems to me, we are fully succeeding in this. Moreover, it succeeds, without in any way calling into question the task of financing the investment program approved by RAO UES in each generating company.”
At the same time, the head of RAO made it clear that he is not inclined to consider what is happening with OGK-2 a failure. “Let's think together,” he suggested to analysts during a teleconference. -- When demand is low, the first thing that happens is a reduction in price. And in this case, we would be forced to decide to issue at or near the lower price of 14.75 cents per share. I just announced my decision - the price is 16 cents. This is not a lower price, but a higher one, and this is higher than the market today. In this sense, it seems to me that it is not entirely correct to say that there is no demand or it is very low... Whether it will be possible to reach the maximum volume of placement, we will say in a few days - when the placement is completed. However, I can absolutely say that when we are faced with the dilemma of selling low or selling high, we will always choose the second. We consider it wrong to reduce our sales price. We will adhere to this when deciding on the volume of placement of shares in OGK-2.”
By the way, the placement of an additional issue of OGK-2 shares in the current volume allows RAO to say that it did not sell itself short, setting the price at 16 cents per share. Indeed, in this case, the generating company is valued at $633 per kW of installed capacity. At the same time, as is known, E.ON assessed OGK-4 at $750 per kW, Norilsk Nickel OGK-3 at $584 per kW, and Enel OGK-5 at $668. per kW.
Gazprom did not comment on the situation over the weekend.
The total installed capacity of OGK-2 is 8695 MW . The company owns and operates five state district power plants: Surgutskaya, Stavropolskaya, Troitskaya, Pskovskaya and Serovskaya. OGK-2 ranks second in terms of electricity generation among OGKs: the volume of electricity generated at the end of 2006 amounted to 48.1 billion kWh. Revenue at the end of the 2006 financial year in accordance with IFRS amounted to 25.4 billion rubles.