Former electricity monopoly Unified Energy System will ask the potential buyer of power producer OGK-1 to make a final decision on the acquisition in early June, a source close to the sale said Friday.

Also Friday, UES chief executive Anatoly Chubais told reporters that a deadline for the negotiations over the sale of OGK-1 had been set, although he declined to say what it was.

"I will not tell you [the deadline] because that would influence the course of negotiations," Chubais said.

The source, however, said that in the first 10 days of June the buyers will have to take the firm or leave it.

The only bidder for OGK-1, whose sale was to raise up to $7 billion, is a consortium of Russian investors led by billionaire Viktor Vekselberg's investment vehicle, Integrated Energy System. The company has emerged as a major player in the country's liberalized energy sector, buying up billions of dollars in assets from UES.

IES has argued that OGK-1's $4 billion development program through 2010, which the buyer would be obligated to fulfill, justified a discount to the market price.

UES, however, has insisted on selling at a premium.

The Soviet-era monopoly is in the process of selling off its assets, including 20 major power producers, as part of an industry-wide reform that will see UES dismantled and mostly privatized by July 1.

After that date, its "shell," including all of its assets and liabilities, will be transferred to the two largest UES subsidiaries that will remain under state control — the Federal Grid Company and hydroelectric giant Hydro-OGK.

OGK-1 chief executive Vladimir Khlebnikov said last week that if his firm is not sold by July 1, two-thirds of its shares will be transferred to the grid company and one-third to Hydro-OGK.
 
"They will then sell these assets as they see fit," Khlebnikov said at a news briefing this month.

He added that this could take place as late as 2010, but most likely it would happen sooner.

Chubais said UES still had the option of buying up a new share issue of OGK-1 to fund the firm's investment program in the near term, until it can be sold at an appropriate price.

n Germany's RWE is late in paying for power firm TGK-2, which it acquired in March, UES said Friday, threatening to void the deal if delays continue.

"The board of directors of UES decided to unilaterally cancel the sales contract of TGK-2 … if it is not paid for by May 31, 2008," UES said in a statement. RWE had no comment.

The utility paid $800 million for effective control of TGK-2, a Yaroslavl-based regional producer of electricity and heat. This is the first time UES has threatened to void a sales deal in response to late payment.

n UES sold a 21.3 percent stake in regional utility Bashkirenergo to investment firm Unitrade for 11 billion rubles ($466 million) on Friday.

A source close to the deal said Unitrade was linked to Vekselberg's IES. Bashkirenergo, which generates, distributes and retails energy in the republic of Bashkortostan, is one of the few vertically integrated companies UES is selling.