OREANDA-NEWS. On October 18, the Board of Directors of "Southern Generation Company TGC-8" set the price and volume of an additional share offering. RAO "UES of Russia" Tender Commission had priced the stake owned by RAO "UES of Russia" in TGC-8 and entitled to the State in RAO "UES of Russia" (the so-called State's Stake), RAO UES' press service announced.

According to previous resolutions of RAO UES Board of Directors, the offering of additional shares and sale of the State's Stake are to be completed simultaneously and at the same price. The price for offering was set on the basis of competitive bids from investors. They included details on a potential investor into TGC-8 additional shares, price and volume they intend to buy. TGC-8 Board of Directors and RAO UES Tender Commission received two bids from one investor - Gatecraft Limited acting in the interests of IFD Capital. The first bid had a proposal to buy the whole volume of TGC-8 additional shares except the stake that TGC-8 shareholders will buy exercising their preemptive rights. The second bid had a proposal to buy the State's Stake of 492,756,605,505 shares. Both the bids had one price - RUB0.035 per share.

The price proposed by Gatecraft is a quarter higher than the current market price (RUB0.0289 per share at MICEX as of October 17) and includes a bonus for a strategic investor's gaining complete control over the company.

TGC-8 Board of Directors has taken a decision to price the offering at the price proposed by the investor - RUB0.035 per share. Board of Directors resolved that, considering the price of offering and emission documents, the number of additional shares to offer will total 685,714,285,715 shares or 33% of increased charter capital.

The final number of shares to place in favor of the investor and results of the placement will be drawn on October 31, 2007, after TGC-8 shareholders exercise their preemptive rights to buy additional shares.

At the same time, RAO UES Tender Commission has taken a decision to accept Gatecraft's proposal to buy the State's Stake in TGC-8. The proceeds from the placement of additional shares total RUB24 billion, or $963 million. The proceeds from the sale of the State's Stake are estimated at RUB17 billion, or more than $682 million. Hence, the total volume of funds raised by TGC-8 from additional shares placement and sale of the State's Stake makes more than RUB41 billion, or $1.7 billion.

After the sale of the State's Stake and additional shares placement, holding of RAO "UES of Russia" in TGC-8 will make up 11%. This stake will be distributed among minority shareholders of RAO "UES of Russia" during the final phase of the Company reorganization. TGC-8 will use the proceeds from additional shares placement to finance investment projects related to development of its electric power generation facilities. By 2011 TGC-8 particularly plans to commission new power units at Astrakhanskaya TPP, Astrakhanskaya CHPP-2, Volzhskaya CHPP, Krasnodarskaya CHPP, as well as a number of small HPPs with total installed capacity of 1,100 MW.

Under the resolution of RAO UES Board of Directors as of July 27, 2007, the proceeds from the sale of the State's Stake in TGC-8 will be allocated to finance HydroWGC investment programme. Southern Generation Company TGC-8" was registered on 22 March 2005 in Astrakhan. The company started its operation activities on October 1, 2005. Its total installed capacity is 3,602 MW in electricity and 13,336 Gcal/h in heat. In August of 2006, TGC-8 started trading on MICEX and RTS. In December, 2006 TGC-8 ordinary shares were admitted to quotation lists 'B' of MICEX and RTS.

So far, four wholesale generation companies (WGC-2, WGC-3, WGC-4, WGC-5) and three territorial generation companies (TGC-1, Mosenergo, TGC-5) have placed additional emissions of shares. The total volume of proceeds from these placements is more than RUB270 billion, or about $11 billion.

About RUB200 billion, or more than $8 billion, have been raised as a result of the sale of the State's Stake in WGC-3, WGC-4, WGC-5, and TGC-1. The total volume of funds attracted to develop Russia's electric power sector makes up RUB470 billion, or more than $19 billion of private investments.

On April 27, 2007, RAO UES Board of Directors resolved to combine additional emission offering and sales of the State's Stake in RAO UES thermal generation companies. Under RAO UES Board of Directors resolution as of 28 September 2007, the price to sell a share from the State's Stake in TGC-8 is to be equal to that of an additional share but no less than RUB0.035. Also on April 27 the RAO UES Board of Directors approved TCG-8's programme of additional shares placement. Under Board of Directors resolution, TCG-8 has the right to offer a maximum of 932,371,278,802 additional shares (no less than 40.2% of the Company's increased charter capital) with par value of RUB0.01 to raise up to RUB24 billion to finance its investment programme.

JP Morgan and IFC Metropol act as financial consultants of TCG-8 for additional shares placement process. IFC Metropol also acts as financial consultant of RAO "UES of Russia" for the sale of State's Stake in TGC-8.