OREANDA-NEWS. August 30, 2011. RusHydro announced its valuation of RAO Far East’s shares (VRAO). RusHydro will receive 52% of RAO Far East’s shares from the government during its new share issue. The price for VRAO shares is set at RUB0.5199/share, which is 88% higher than the current price, reported the press-centre of ATON.     
 
We would remind readers that RusHydro (HYDR) is not obligated to make a buyout offer to VRAO minorities under Russian law. However, shareholders who hold both RusHydro and RAO Far East shares can exchange shares of the latter for the new HYDR shares by exercising their pre-emptive rights (this is possible only if the previously held HYDR shares were bought before May 3; VRAO shares need to have been bought before May 5). Shareholders who choose to do so would thus receive a good price for their VRAO shares (which are priced 88% higher than the current market level).
 
Bottom line
While the valuation of RAO Far East’s shares is 88% higher than the current market price, value erosion risks for RusHydro shareholders are almost non-existent (52% of VRAO’s MktCap is set at just over \\$900mn by the new valuation, which is only 4% of HYDR’s MktCap). Even though there will be no buyout offer to minorities of VRAO, there is some positive news for shareholders of both VRAO and RusHydro, as noted above. Overall, we consider the news to be mixed and essentially neutral for both companies.