Power generator OGK-3 will sell off stakes in noncore assets, including stakes in U.S. fuel cell maker Plug Power and the giant Kovykta gas field, after the Energy Ministry ordered it to return misspent funds, CEO Vladimir Kolmogorov said Tuesday.
OGK-3’s shares surged 2.9 percent in Moscow, outperforming the broader MICEX Index, which fell 0.5 percent, and MICEX’s Power Index, which finished down 0.2 percent.
The announcement came after Prime Minister Vladimir Putin warned power companies to carry through on investment plans that they agreed to when privatizing the sector. Private business bought generators spun off from state-run Unified Energy System at discounted prices, promising in exchange to invest billions of dollars in new capacity.
Putin singled out OGK-3, controlled by Norilsk Nickel, as one of the biggest offenders of delayed investment.
“Yesterday we received a letter from Deputy Energy Minister Andrei Shishkin requiring that we return the funds by August, and we will try to fulfill the demands within this time frame,” Kolmogorov told reporters.
OGK-3 spent a total of 29 billion rubles ($981 million) on noncore assets, according to an Audit Chamber report released in April 2009.
The generator has returned 6 billion rubles to the state so far and still owes 23 billion rubles, Kolmogorov said.
The company has spent 16.7 billion rubles on its investment program and has another 40 billion rubles in cash available, he said.
OGK-3 shareholders must buy back the generator’s stake in Kovykta license holder Rusia Petroleum, and they may borrow to do so, Kolmogorov said.
In 2008, Norilsk Nickel bought through OGK-3 a 24.99 percent stake in Rusia Petroleum for $576 million. It also purchased 35 percent of Plug Power for $33 million from Interros, billionaire Vladimir Potanin’s holding company.
The generator’s stake in Plug Power may be floated on the U.S. stock market, he said.
Selling the 35 percent stake in Plug Power, at least at the price the company paid for it, wouldn’t be a problem, said Sergei Beiden, a utilities analyst at Metropol. U.S. markets are on the rise and interest in companies offering alternative energy sources is high, he said.
Power Plug’s shares were trading up more than 13 percent by 11:30 a.m. in New York.
But divesting the gas stake could be considerably more costly for OGK-3.
Viktor Vekselberg, one of the billionaire shareholders in TNK-BP, said Tuesday that the oil producer would sell its 62.8 percent stake in Rusia Petroleum for $700 million to $900 million to state-owned Rosneftegaz.
“TNK-BP is slated to sell its stake in Kovykta for $700 million to $900 million, so by my estimates, the 25 percent stake owned by OGK-3 is not worth more than $220 million to $300 million,” Beiden said.
“The shareholders, however, will have to buy back the stake at the price OGK-3 paid for it two years ago, or almost $600 million, and the only reason why Norilsk Nickel would really do that is to fulfill the order from the Energy Ministry,” he said.
Norilsk Nickel also bought 4.23 percent of OGK-3 shares for 8.1 billion rubles from other shareholders in 2008 using the funds attracted through an additional emission, but the company is not yet considering selling the stake, Kolmogorov said.
Speaking on its investment program obligations, Kolmogorov said almost half of 2009 profit, or 2 billion rubles, would be spent on new capacity at its Kharanorskaya, Cherepetskaya, Yuzhnouralskaya and Gusinoozerskaya power stations.
OGK-3 will also build a power plant in Dzhugba, in the Krasnodar region, with the money.
OGK-3 net profit sank 37 percent to 4.24 billion rubles last year, from 6.72 billion rubles in 2008, he said. But the company is still considering paying a dividend, which will be not less than 10 percent of net profits, he said.
The payout is still under discussion, Kolmogorov said, but it would be at least OGK-3’s 2007 dividends of 334.9 million rubles.