According to the terms of the deal INTER RAO UES will acquire up to 40% of Bashkirenergo voting shares from JSFC Sistema Group at the price within 14 billion RUB. After that Bashkirenergo is to be split into two unevenly sized new companies — JSC Bashenergoaktiv keeping power generation and other assets of Bashkirenergo (with exception of power grids) and JSC Bashkir Power Grid Company keeping grid assets of Bashkirenergo. Upon this split, INTER RAO UES will hold more than 75 % of Bashenergoaktiv (which will subsequently merge with INTER RAO UES), while JSFC Sistema will have more than 75 % of Bashkir Power Grid Company. The issues of Bashkirenergo reorganization will be considered by extraordinary general meetings of shareholders of Bashkirenergo and JSFC Sistema in June 2012.
The deal will be funded in several stages within one year since the proposed reorganization using proceeds from sale of INTER RAO UES' minority stakes in various energy assets acquired through additional stock issue in 2011, and using income from operating business. Additional debt financing should not be required to cover the deal.
The completion of the deal is expected in the fourth quarter of 2012 after the cease of Bashkirenergo operation, floating of the target companies and merging of Bashenergoaktiv with INTER RAO UES.
Financial parameters of the deal are based on report prepared by CJSC BDO, an independent appraiser. JP Morgan bank acted as an investment consultant for the deal and confirmed appropriateness of appraisal. Legal advisers for the deal were Allen & Overy and Nektorov, Saveliev & Partners. Financial and tax audit was carried out by Ernst & Young.
"Acquisition of Bashkirenergo's generation segment is an integral component of INTER RAO UES long-term development strategy and, more specifically, our expansion in thermal generation sector," said CEO of INTER RAO UES Boris KOVALCHUK. "This transaction will increase our installed power generation capacity by 4.2 GW, and operational efficiency of Bashkir generation assets will improve through synergies from merger with INTER RAO. In addition to that, INTER RAO will get significant exposure in highly promising energy market of Bashkortostan — a prominent industrial region of Russia with high concentration of large industrial consumers.