Deripaska Said to Offer $2 Billion for Norilsk's Stake in Power Generator

OAO EuroSibEnergo, the utility owned by billionaire Oleg Deripaska, offered $2 billion in cash to OAO Norilsk Nickel for its controlling stake in Russian power generator OAO OGK-3, according to a document.

EuroSibEnergo is ready to buy Norilsk’s 79 percent in Moscow-based OGK-3, according to Andrei Likhachev, chairman of the utility’s Cyprus-based parent company EuroSibEnergo Plc. Likhachev commented in a Nov. 30 letter to Norilsk Chairman Vasily Titov and Chief Executive Officer Vladimir Strzhalkovsky, a copy of which has been obtained by Bloomberg News.

A deal would scupper Norilsk’s plan to swap OGK-3 shares for those of OAO Inter RAO UES, a state-run utility chaired by Russia’s energy policy chief and Deputy Prime Minister Igor Sechin. Instead, EuroSibEnergo, with OGK-3 capacity, would become Russia’s biggest power utility in advance of a Hong Kong initial public offering in 2011.

“EuroSibEnergo’s offer naturally looks superior to the deal with Inter RAO, as it is willing to pay all cash,” Troika Dialog analyst Mikhail Stiskin said in a note to investors today. The main risk to the bid is Deripaska’s battle for control of Norilsk with rival shareholder Vladimir Potanin and the miner’s management, Stiskin said.

Andrei Petrushinin, a spokesman for EN+ Group, the holding company for EuroSibEnergo and Deripaska’s 48 percent stake in United Co. Rusal, declined to comment as did Norilsk spokeswoman Maria Uvarova when contacted in Moscow.

The bid, which didn’t specify a stock price, equates to 1.673 rubles a share compared with OGK-3’s close yesterday of 1.675 rubles. It’s priced in line with OGK-3’s average weighted price of 1.671 rubles over the past six months.

OGK-3, which operates six power plants in Russia including two coal-fired plants near the Chinese border, rose as much as 4.2 percent today, trading up 2.6 percent at 1.718 rubles at 11:31 a.m. in Moscow. The generator is up 17 percent this year.

Deripaska, Potanin

Both Deripaska and Potanin have called for Norilsk to sell its stake in OGK-3 and other electricity assets. Russian state- run utility OAO Inter RAO UES said Oct. 18 that it sought to offer its shares for Norilsk’s stake in OGK-3. OGK-3 fell as much as 2 percent after the statement by Inter RAO, which is chaired by Prime Minister Vladimir Putin’s deputy Igor Sechin.

Norilsk was offered 15 percent of Inter RAO in exchange for an 83 percent stake in OGK-3, two people familiar with the matter said Oct. 20. Rusal and Potanin each own 25 percent of Norilsk, with the latter last month making an offer to buy out the aluminum maker’s stock for $9 billion. Deripaska called the bid “a joke,” in a Nov. 13 interview.

Siberian Plants

OGK-3, which buys 1 million metric tons of coal a year from EuroSibEnergo, has two power stations located in east Siberia, near the Chinese border. That would fit with EuroSibEnergo’s aim to export power to China, a trade that would first require five years preparation to set up electricity transit infrastructure, according to estimates made by EN+ head of strategy Dmitry Yudin at a September briefing.

The two companies would have combined revenue of 111.5 billion rubles ($3.5 billion) and net income of 23.6 billion rubles. The combined power capacity would be 27,800 megawatts.

“The acquisition could have a rather significant synergy effect given the fact that OGK-3 operates 1,500 megawatts of coal-fired capacity in Siberia, which could potentially be supplied with coal from EurosibEnergo’s coal mining assets,” UralSib Financial Corp. analysts led by Matvey Taits said today in a note to investors. “It could result in a substantial increase in OGK-3’s profitability through an improvement in fixed cost efficiency.”

EuroSibEnergo has already tied up with China Yangtze Power Co., the nation’s biggest hydro dam operator, to build 10,000 megawatts of hydro and thermal power capacity, with a plan to sell some of the electricity to China. The Chinese utility will also likely buy shares in a planned initial public offering of EuroSibEnergo next year, people familiar with the matter said Nov. 30.

To contact the Bloomberg staff on this story: Yuriy Humber in Tokyo at yhumber@bloomberg.net

To contact the editor responsible for this story: Andrew Hobbs in Sydney at ahobbs4@bloomberg.net

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