Daily analyst comments
Inter RAO UES may get a block of shares in TGK-11
10.03.09 10:56
Inter RAO UES may receive a share package in TGK-11, which could be a boon for the genco, once the company settles its existing problems. Nonetheless, we would like to turn investor attention to the high risk of investment in TGK-11 shares in view of the uncertainty over future events.
On March 5, Tomsk region governor, Viktor Kress, stated in a meeting with deputy prime minister, Igor Sechin, that he would discuss the transfer of a share package in TGK-11 in trust to Inter RAO UES. The governor did not specify what shares were at stake exactly. Meanwhile, Interfax cited an industry representative as saying that Inter RAO could take in trust the shares held by Neft-Aktiv, a Rosneft unit.
In 2008, Group E4 bought a state share in TGK-11 from UES of Russia. As part of the deal, the group was granted a deferral of payment until October 2009. The 27.5% share package is now on Federal Grid Company books. The planned spinoff of TGK-11 from UES of Russia has been blocked and the genco has not yet been able to incorporate TGK-11 Holding, an intermediate structure. TGK-11 Holding is currently a TGK-11 shareholder with 16.25% of its stock, while its own shares belong to former minority shareholders in UES of Russia. TGK-11 is yet to hold an additional share issue for investors.
Even though E4 spokespersons have expressed their favorable attitude towards the transfer of the share package in trust to Inter RAO, and have not spoken about the difficulties the group may face in the buyout of the shares from FGC before 1Q 2009, we believe that the share buyout may not take place at all. Under one possible scenario, Inter RAO may take the share package in trust after E4 fails to pay for the shares and become a TGK-11 controlling shareholder later on, having bought out its additional share issue. We believe that this turn of events would benefit TGK-11 minority shareholders in the long run, as Inter RAO would assist the company in ending its litigation with Rosneft units, while the additionally issued shares would not be floated at a price lower than the nominal price of TGK-11 shares, which now exceeds the company’s current stock valuation by twofold. We would, however, like to turn investor attention to the heightened risks involved in investments in TGK-11 shares, due to uncertainty over further developments.