MDM, Allies Acquire 6.13% of UES Shares

MDM Group, one of the nation's largest financial-industrial conglomerates, said Friday that it and a pool of local and foreign investors had bought 6.13 percent of national power utility UES.

Market analysts late last year noted heavy buying of UES shares by unknown investors. Analysts at the time estimated that between 4 percent and 15 percent of the company had been bought for $150 million.

MDM Group also said Friday the pool of investors would remain as passive investors until the government had announced dates for electricity reform.

"MDM Group and its pool partners will finally outline its strategy on the UES market only after government decisions on the dates of the reform have been published," the company said.

The government plans to restructure UES, the world's biggest utility by installed capacity, by spinning off generating, marketing and distributing firms and putting them in private hands while keeping the grid under state ownership.

"The main reason for setting up the investor pool to buy UES shares was the fact that they were undervalued compared with their foreign peers," the statement said.

Shares in UES closed down 0.5 percent to 13.6 cents Friday, compared with a 2003 high of 14.94 cents.

"The future tactics of the pool will be defined by the situation in the industry. Investors may decide to take profits while the energy holding is still in its present form, or if the timetable for reform is sensible, keep UES shares until they are converted into shares in the independent generating companies."

Working out of the reform strategy and pushing it through parliament was a lengthy process fraught with horse-trading between lawmakers, the government and UES managers.

"Group specialists are sure that the best version of the legal framework of the reform was the first version, which set concrete dates for changes," the statement said.

"The final version, which makes the government responsible for setting the dates for the reform, is a compromise. But the pool supports it, because it is sure that without reform the electricity industry will stagnate."

Earlier this month, chairman of MDM Bank Andrei Melnichenko and MDM Group Chairman Sergei Popov were nominated to a new UES board to be elected at a UES annual shareholders' meeting, tentatively set for May 30.

"MDM Group will welcome any measures aimed at the growth of the energy sector's capitalization and the main measure -- a qualified and dynamic reform," the statement said.

The statement also said MDM and its partners were sure that the size of their UES stake was not much different from shareholders of other portfolio investors in UES and its subsidiaries.

"Pool participants are for transparency of the reform at each stage, for carrying it out in a clear timeframe without changing the reform plan, ridding the company of non-core assets and other measures aimed at increasing UES capitalization," the statement said.