OREANDA-NEWS. On May 07, 2008 the European Bank for Reconstruction and Development has acquired an additional stake of around 4,1 percent in OGK-5, one of Russia’s six thermal wholesale generating companies, reported the press-centre of EBRD.

The acquisition of common shares worth the equivalent of ?175 million from OGK-5’s controlling shareholder, the Italian energy giant Enel, raises the EBRD’s total stake in the Russian company to around 5,2 percent.

In November 2006, the EBRD purchased an initial stake of 1,1 percent in OGK-5 when it took part in the first international public offering launched to raise private funding on the open capital market for the Russian power sector’s vast investment programme. The additional stake of approximately 4,1 percent was sold to the EBRD by Enel Investment Holding BV, which is fully owned by Enel SpA.

The fact this is the EBRD’s largest equity transaction to date highlights both the Bank’s commitment to Russia’s power sector and its support for Enel as it embarks on a programme of investments and improvements which will allow OGK-5 to take advantage of the electricity market’s planned full liberalisation, said Nandita Parshad, Director of the EBRD’s Power and Energy team.

We are extremely pleased about the purchase of further OGK-5 shares by EBRD, a highly qualified, independent international body with an excellent track record in investments in transition economies, said Marco Arcelli, Director of the Development Department of ENEL’s International Division. We are confident that the partnership with EBRD will entail positive outcomes for all OGK-5 shareholders, as well as for the overall economic development of the region, Mr. Arcelli added.

Enel, which gained control of OGK-5 in February 2008, will remain the majority shareholder of the company and has entered into an agreement with EBRD confirming its commitment to best practice in the environmental and corporate governance spheres. OGK-5 accounts for four percent of Russia’s total generating capacity.

OGK-5 (www.ogk-5.com), the first Russian power company privatised by an international investor, operates four power stations in the fastest growing regions of Russia, which are also those which suffer from the greatest deficit of generating capacity. These areas include the Urals, the country’s traditional industrial heartland. OGK-5 generates approximately 11 percent of the Urals’ electricity.

The EBRD has played a pioneering role in the reform of this key sector of the Russian economy since providing the first restructuring loan to RAO UES, the state-controlled power holding, when the process was launched in 2001. In total it has over the last seven years invested over ?1.2 billion in 10 operations linked to Russian power reform, including this one.

The main challenge facing the newly privatised generating companies is to raise the finance needed to build new capacity and replace outdated plant in order to meet fast-growing demand in a booming economy. RAO UES estimates the sector needs capital expenditure of ?93 billion and 29 GW of new capacity to be installed by the end of 2010.