Inter RAO Says Unable to Meet VEB Put Option Without State Help

OAO Inter RAO UES, Russia’s biggest electricity company, said it may need government help if it’s forced to buy back 31.4 billion rubles ($918 million) of its own shares from OAO Vneshecombank.

State-controlled Inter RAO has been notified that Vnesheconombank, or VEB, is exercising a put option, Inter RAO spokesman Anton Nazarov said by phone today. A put gives the buyer the right to sell a specific quantity of a particular security by a specific date. Inter RAO shares fell 0.1 percent today before Interfax news agency’s report.

VEB owns a 5.1 percent stake in Inter RAO, which is valued at 5 billion rubles, based on today’s price. Under the put option, the state-run development bank had the right to demand the company buy the shares back after June 2013, according to Interfax.

“We’re surprised by this decision considering that we had repeatedly warned state authorities about the absence of resources for the payment of this option,” Nazarov said. “We’ll insist on delaying or freezing this option’s execution or on resolving this problem” through government help or by selling Inter RAO’s 40 percent stake in Irkutskenergo, a Siberian energy utility, he said.

Inter RAO is 28 percent owned by state energy holding company OAO Rosneftegaz, which is chaired by Igor Sechin, OAO Rosneft’s chief executive officer and an ally of President Vladimir Putin. The U.S. imposed sanctions on Sechin in April, along with six other Russian officials and 17 companies linked to Putin’s inner circle in the banking, energy and infrastructure industries in response to the crisis in Ukraine.

“It’s quite unusual for VEB to try to force a Sechin Inc. company into a put option,” Luis Saenz, head of equity sales and trading at BCS Financial Group in London, said by e-mail. “This is a question of political will. We doubt the option will eventually be realized. Bottom line: this is negative news.”

Inter RAO shares have fallen 5.4 percent this year, compared with a 1.7 percent gain for Micex Index.

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