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Russia's UES board approves final reorganization scheme - 1

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MOSCOW, March 2 (RIA Novosti) - The board of Unified Energy System [RTS: EESR] has approved a final reorganization scheme for the Russian electricity monopoly, the UES press service said Friday.

As a result of the reorganization, the Federal Grid Company uniting all transmission networks, Hydro-WGC consolidating all hydropower plants' assets, the System Operator, wholesale and territorial generating companies (WGCs and TGCs) and other elements will become independent organizations and UES will stop existing as a monopoly.

UES said its reorganization could be completed July 1, 2008.

In November 2006, UES voiced plans to hold initial public offerings (IPOs) for up to 15 of its subsidiaries established in recent years through power sector reforms.

"In the next two years, we'll hold IPOs for 10-15 companies established during the reform of RAO UES," the company's CEO Anatoly Chubais said.

Chubais said then that the IPO of wholesale generating company No. 5 (WGC-5) at the beginning of November had "excellent results."

Following the IPO, WGC-5 increased its capitalization by 23-25%; at the IPO, the stock issue was oversubscribed by 10 times, Chubais said.

WGC-6 said in February it plans to hold an IPO in March-April.

Russia's power sector has undergone radical changes in recent years aimed at increasing the efficiency of power plants and developing the industry by attracting investment.

During the restructuring process, specialized structures have been created in place of the old vertically integrated companies.

By the end of the reforms, potentially competitive parts of the industry - generation, sales and repair companies - will become mainly private and will compete with each other. However, natural monopoly functions - power transmission and dispatching - will remain state-controlled.

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