Friday, December 23, 2011

RusHydro: Consolidating assets

RusHydro is rolling up power generating assets in Russia. It issued shares at one ruble to RAO ES of East Group for company shares worth 1.65 Rubles.

"On June 30, 2011, the AGM of RusHydro passed a resolution to increase RusHydro's authorized capital by issuing 89,000,000,000 additional ordinary shares with a par value of RUR 1 each. Monetary value of the property transferred to pay for additional shares of RusHydro was determined by an independent appraiser- LLC Institute for Enterprise Issues (the City of Saint Petersburg). In addition, JPMorgan and Morgan Stanley presented their fairness opinions to the Board. The valuations as well as the offering price of shares of in the amount of RUR 1.65 per share were approved by the Board of Directors of RusHydro."

Consolidation provides lots of opportunity for economies of scale for these power generation assets.

"Thus, the first stage of the placement is now complete. As a result, RusHydro consolidated a number of energy assets and became the controlling shareholder of the RAO ES of the East Group and the dominant player in the power sector of the Far East of Russia. This acquisition is fully inline with the development strategy of RusHydro to consolidate undervalued generating assets in Russia to create additional shareholder value through realization of synergies with existing generating, retail, engineering and R&D assets of RusHydro Group.

RusHydro is developing into the preeminent power generation company of Russia with the consolidation of the Far East assets.

"The strategy of RusHydro on development of the Far Eastern power sector shall include substitution of economically inefficient thermal plants with efficient low-cost generation, conclusion of bilateral power-purchasing agreements with consumers both for existing capacities and generation assets under construction, realization of opportunities of electricity export to neighboring countries and carrying out of investment projects using instruments of private-public partnerships and project financing."