OREANDA-NEWS. November 19, 2007. Tatiana Kulbakina, Head of the Corporate Management Department of JSC “IDGC of the Center” told the journalists about the restructuring taking place in the distribution grid complex of Central Russia.

As previously stated, JSC “IDGC of the Center” (till August 6, 2007 named as JSC “IDGC of the Center and North Caucasus”) was registered December 17, 2004 and is an affiliated company of JSC RAO “UES of Russia”, which owns 100 percent of the company’s voting shares.

Presently, by resolution # 250 of JSC RAO “UES of Russia” Board of Directors of April 27, 2007 11 DGCs have been transferred to the service area of JSC “IDGC of the Center”: JSC “Belgorodenergo”, JSC “Bryanskenergo”, JSC “Voronezhenergo”, JSC “Kostromaenergo”, JSC “Kurskenergo”, JSC “Lipetskenergo”, JSC “Orelenergo”, JSC “Tambovenergo”, JSC “Smolenskenergo”, JSC “Tverenergo”, JSC “Yarenergo”. The same resolution approves the increasing number of interregional distribution grid companies to 11 (not including IDGC of the Far East) with IDGC configuration, formed according to the territorial contingency principle and distribution grid companies’ balance sheet assets comparability.

IDGC formation logic in the new configuration:

- Structure is created in the industry in order to provide possibilities for comparing IDGCs in effectiveness and reliability, which will thereby allow to raise the objectiveness of market regulators’ decision making. 11 IDGCs is a sufficient number for statistical sampling;
- IDGC with a 25-30 bln rubles asset value meet investors’ expectations in attractiveness, including their perspective investment programs;
- IDGC will be formed as operational companies in order to raise IDGC managers’ responsibility to customers for reliability and service quality, and to shareholders for financial results.

Whenever possible, the existing technological connections between regional grid companies as part of IDGC will remain. The IDGC intersection with TGK territories will be minimized.

By the time the Board of Directors of JSC RAO “UES of Russia” approves the resolution the configuration had been supported by the main minority shareholders of the distribution grid companies.

Within the restructuring process, JSC “Holding IDGC” shall be founded by splitting off JSC RAO “UES of Russia”, which shall own IDGC shares.
The government will also own at least 52% of JSC “Holding IDGC” shares, and the remaining 48% will be owned by minority shareholders.

“Grid complex restructuring enters its active phase, - said Tatiana Kulbakina, - The merging of small DGCs into bigger interregional companies (IDGC) allows to make business more interesting  for institutional investors, attract funds on more favorable terms, as well as, receive additional large scale advantages.

JSC “IDGC of the Center” corporate management is presently at a sufficient level for following the legal rights and minority shareholders’ interests, and is formed in order to provide management of the major operational company. JSC “IDGC of the Center” security bidding will be held at the country’s leading exchange. The upsurge of liquidity and growth of market value of own assets in regional DGCs, which will happen as a result of stock capital diversification, will become an important company merging result for minority shareholders.

The completion of the restructuring process and DGC takeover by IDGC is planned for the II quarter of 2008. Hitherto, the company has to accomplish legal and corporative procedures, provided by RF legislation.

“November 14-16, 2007, the Committee on Evaluation of RAO “UES of Russia” will examine and probably approve the independent appraiser’s report on IDGC and DGC shares market value for calculating DGC shares’ exchange coefficient for IDGC ones during the takeover period and the issuing of a single share, as well as determine prices for redemption from DGC shareholders who voted against or did not participate in voting on DGC restructuring and demanded for the purchase of DGC shares. The evaluation is held as of June 30, 2007’, - said Tatiana Kulbakina.

Tatiana Kulbakina also said, that in the IV quarter of the current year the following key events will take place:

- it is expected, that the Russian Federation Government will adopt an Order on the management of shares of joint stock companies of power energy and electrification in the course of interregional distribution grid companies formation, which alters ecalls Russian Federation Government Order # 77-p of January 26, 2006,
- a meeting of the Board of Directors of RAO “UES of Russia” on DGC and IDGC restructuring items is to be held;
- meetings of the Boards of Directors of DGCs and IDGC on convening of extraordinary meetings of shareholders.

It is planned to hold an extraordinary meeting of IDGC shareholders on IDGC restructuring and a closed subscription in favor of JSC RAO “UES of Russia” in December of 2007, and in January of 2008 it is scheduled to hold an extraordinary meeting of DGC shareholders on DGC restructuring.
While merging, the DGC shares will be converted to additional JSC “IDGC of the Center” shares.

In case one or several DGCs shall fail to approve the resolution on restructuring as a merger with JSC “IDGC of the Center”, the JSC “IDGC of the Center” restructuring process will be held as a DGC merger, the meetings of which the decision on restructuring as a merger with JSC “IDGC of the Center” had been previously approved.

Herein, JSC “IDGC of the Center” shall place additional shares on closed concerning companies where resolution on restructuring had not been adopted).

It is planned to accomplish restructuring and make an entry at USRLE on DGC discontinuation of activities due to takeover by IDGC by April 1, 2008.

At the moment it is planned in May-June of 2008 to register JSC “IDGC of the Center” shares at the RTS and MICEX in the non-listed stocks sector, after DGC takeover is accomplished. The IDGC shares will circulate in quotation list “B” of the stock exchange in the I quarter of 2009.