Inter RAO Plans Sale of State-Owned Shares in London Next Year

OAO Inter RAO UES, Russia’s third- largest power producer, plans a public offering of state-owned shares on the London Stock Exchange next year.

“We are preparing it for next April, but there is no set date,” Ilnar Mirsiyapov, Inter Rao’s head of strategy and investment, said in an interview. “It depends on when exactly the government will decide to sell.”

The Russian government has a direct stake of 13.8 percent in Inter RAO, whose shares are currently traded in Moscow. The proposed sale follows an agreement Moscow-based Inter RAO signed with the European Bank of Reconstruction and Development in July this year for a five-year convertible loan of 9.6 billion rubles ($307 million) to prepare the company for a potential international public offering.

Prime Minister Dmitry Medvedev’s government is seeking to boost budget revenues by selling state assets, including shares in Inter RAO and OAO Rosneft (ROSN), the country’s biggest oil producer. The government raised 159.3 billion rubles selling shares in lender OAO Sberbank this year and plans to dispose of stakes in tanker operator OAO Sovcomflot and diamond monopoly OAO Alrosa next year.

Other Russian companies that have sought London to list their shares include OAO MegaFon (MFON), Russia’s second-largest mobile-phone operator, which plans to raise as much as $2.1 billion in the biggest initial public offering by a company from the country since aluminum maker United Co. Rusal’s sale almost three years ago. MegaFon’s shares will start trading Nov. 28 in London and Moscow.

Pay Debt

Inter RAO won’t sell any of the shares it keeps in treasury. The company plans to use a third of the shares it owns to pay back in 2014 a debt the company has to Russia’s state-run gas exporter OAO Gazprom. (OGZD)

“We are keeping 2 percent for EBRD and the rest will probably be used for mergers and acquisitions,” Mirsiyapov said.“We are cautious though and we want to be very selective.”

The Russian state nuclear company Rosatom owns 12.5 percent of the company’s shares, while OAO GMK Norilsk Nickel (MNOD), the world’s largest producer of the metal, has a 13 percent ownership.

The company aims to pay shareholders 25 percent of its net income from 2014, a level for state-controlled companies set by new Russian government regulations approved earlier this week.

“The new rules state that companies can increase dividends to 25 percent gradually,” Mirsiyapov said.

Rosneft Contract

Rosneft, which owns almost 1 percent of the company, will supply 99 percent of the natural gas for Inter RAO’s plants from 2016 after Russia’s biggest oil producer won a 25-year contract from OAO Novatek. Novatek is currently providing almost 55 percent of Inter RAO’s gas needs, with the rest being supplied by OAO Gazprom and TNK-BP.

“Rosneft will be our main partner in any plant we would build from now on,” Mirsiyapov said. Rosneft, whose CEO Igor Sechin was formerly chairman of Inter RAO’s board, will deliver as much as 35 billion cubic meters a year to Inter RAO starting from 2016.

Inter RAO, which posted net losses of 10.7 billion rubles for the first half of this year, put its overseas expansion plans on hold this summer as utilities’ market values declined. For the first six months of 2011, Inter RAO announced net income of 46.7 billion rubles.

The company was looking to expand aggressively in Europe, Latin America and Southeast Asia in partnership with Gazprom, as it sought to rank among the world’s ten biggest utilities by capacity by 2020. Inter RAO said in February it wanted to buy assets from RWE AG.

To contact the reporter on this story: Roxana Zega in London at rzega@bloomberg.net

To contact the editor responsible for this story: Will Kennedy at wkennedy3@bloomberg.net

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