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RusHydro to Manage Dam Alone

RusHydro is taking full control of management to complete building the Boguchanskaya dam, and the hydropower firm will be able to raise up to $660 million selling shares to the private sector next year, Energy Minister Sergei Shmatko said Wednesday.

Shmatko said United Company RusAl would be pulling out the management of its joint project with RusHydro — building the Boguchanskaya hydroelectric plant — although the aluminum giant will stay on as a financial partner.

After the Sayano-Shushenskaya accident, the government urged RusHydro and RusAl to speed up the construction of the Boguchanskaya plant, which the companies started in 2006.

The project has caused frequent feuding between the two firms, however, with RusHydro claiming that RusAl has delayed paying its share on several occasions. RusAl has since paid up on most of its Boguchanskaya obligations.

“RusAl paid almost all of its debt on the Boguchanskaya project by now, except for a small portion from 2008,” said Yelena Vishnyakova, a spokeswoman for RusHydro. She did not specify the exact amount.

Speaking about the power company’s future partnership with RusAl, she said, “We will maintain 50-50 parity financing, but RusHydro will be the sole manager of the project.”

“The decision to put RusHydro in charge of the project is due to the state’s push to speed up construction,” she said.

She said RusHydro would keep track of the payments and cover payment delays by its partner, RusAl.

“The form of managing the project is fully in the interests of RusAl, as RusHydro guarantees that the timelines of the launch and the budget for the construction, which took into account on optimization, suggested by RusAl, will be sustained," the RusAl's press service said in e-mailed comments. "All the extra funding exceeding the agreed budget will be provided by RusHydro, while the shares of the partners in the project will remain unchanged.”

RusHydro earlier announced that it would sell additional shares to finance reconstruction work on its Sayano-Shushenskaya hydroelectric plant, but Shmatko said there had been enough interest from private investors that the share placement would likely be able to raise enough cash without the state’s participation.

“The decision to finance [rebuilding] is already in place. The reconstruction will be carried out using [RusHydro’s] own funds in 2009-2010,” Shmatko said.

“The company will list an additional emission by open subscription provided that the state keeps control [over the company]. The amount of cash raised could be as high as 19 billion rubles [$660 million].”

The state currently holds a 61 percent stake in RusHydro.

The state-run firm’s board of directors decided in October to list an additional 19 billion shares at 1 ruble per share in 2010 to help refinance the reconstruction of the plant, where an accident in one of the dam’s engine rooms resulted in the death of 75 people and incapacitated the dam.

RusHydro issued 7.5 billion rubles worth of shares in June, two months before the dam collapse.

Shmatko did not rule out the possibility of further state support for RusHydro after 2010, saying the energy and finance ministries are currently discussing the issue.

He added, however, that the costs of reconstruction, previously estimated at 40 billion rubles, might be lower than anticipated, without specifying a figure.

The final details on the additional emission will be set by the end of November, Vishnyakova said.

“Whether or not the state participates in the share emission will depend on the market,” she said.

“But currently, we are witnessing a high interest in this emission from private investors,” she added.

RusHydro may indeed find a high level of private interest in its share sale, as the company is currently undervalued, said Sergei Beiden, a senior analyst at Metropol.

“The state already spent 4.3 billion rubles improving the water discharge system at Sayano-Shushenskaya dam, and it is not surprising that it will not participate in the future emission,” he said.

“However, this emission could be interesting to certain investment funds, as the company is currently undervalued and some investors may want to increase their stakes in it.”

The government invested 4.3 billion rubles in the construction of a water discharge system on Sayano-Shushenskaya in October.

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