September 04, 2007

Russian tycoons to replace Siemens

15:41 | 04/ 09/ 2007



MOSCOW. (RIA Novosti economic commentator Oleg Mityayev) - The Russian authorities want domestic big business to make strategic investment into the power generating industry.

On Friday August 31, Unified Energy Systems of Russia (RAO UES) announced a decision to sell its 25% stake in Silovye Mashiny (SM or Power Machines) to a Russian investor on a competitive basis. SM is Russia's biggest producer of turbines for power plants. On the same day, the Federal Anti-Monopoly Service granted Russian aluminum billionaire Oleg Deripaska and steel tycoon Alexei Mordashov permission to establish control over SM.

Somewhat earlier, Interros Group announced its intention to sell its 30.4% stock in SM. He who is able to acquire SM shares from both RAO UES and Interros will gain control of the company, and its 37% share of the Russian turbines market.

Interros had earlier announced that it had found a strategic buyer for its stake, and many experts were convinced that it was Mordashov. Last Friday's announcements changed all that, and launched a race between the two tycoons for control of SM.

It is hard to predict the winner, but the laurels will obviously go to whoever produces the better development program for the company. On the one hand, SM has guaranteed multi-billion dollar orders for many years ahead, largely thanks to the national program for modernization of the energy industry. On the other hand, the company also requires huge investment.

The Government is keen to see private capital shoulder this burden, and Mr Deripaska ($16.8 billion) and Mr Mordashov ($12.1 billion), both harbor serious ambitions in the energy sector. Previously considered a potential buyer, Mordashov has almost lost his advantage. Deripaska has more money, and has recently been aggressively expanding his portfolio. His company Basic Element has acquired assets from car-making and pulp-and-paper plants to building companies, airlines and agro-holdings. In addition, this year Deripaska has merged his company's main asset RUSAL with Viktor Vekselberg's SUAL and the Swiss Glencore to form the world's biggest aluminum producer. Needless to say, he holds the controlling interest in this giant.

Mordashov has not been so lucky of late. Last year, he wanted to merge his main asset, Severstal, with the European Arcelor - but lost the race to the Indian-born tycoon Lakshmi Mittal. As for his side business - Severstal-Avto, he decided to get rid of it himself.

No matter who wins the race for SM, the strategic investor will be Russian. In 2004, the German firm Siemens, which still has a 25% stake in SM, was trying to establish full control over it but did not receive the required permit from the Russian authorities. Now the Germans are likely to sell their stock to whichever Russian oligarch buys SM shares from both Interros and RAO UES.

The opinions expressed in this article are the author's and do not necessarily represent those of RIA Novosti.

No comments: