Hydro OGK eyes top renewables stock spot

By Olga Popova and Dmitry Zhdannikov

MOSCOW (Reuters) - Russia's Hydro OGK aims to become the world's largest listed renewable energy company next year when it floats its stock and plans to double generating capacity by 2020, its chief executive said on Monday.

Vyacheslav Sinyugin told the Reuters Russia Investment Summit that Hydro OGK, already the largest power producer in Russia, was on track to list its shares on local Russian bourses in February 2008 and float abroad in mid-2008.

"Hydro OGK positions itself as a global company. ... We don't want Hydro OGK to become a speculative stock. It is a long-term game," he said, adding that Hydro OGK will become only second by installed capacity after Canada's state Hydro-Quebec.

Russia is undergoing power sector reform, which will be completed in the middle of 2008 when the former power monopoly RAO UES EESR.MM will cease to exist, having been divided into private generation and distribution units and a state grid.

The reform, which has been a copy of European power sector reforms, is designed to bring in competition and raise much needed money to upgrade aging equipment meet the country's rising electricity demand amid robust economic growth.

Hydro OGK, which generates 20 percent of power in Russia, will remain under state control, however, as Sinyugin said it played too big a role in regulating major rivers and helping developing poor regions to become fully private.

Minority shareholders in UES and Hydro OGK's units will get the remaining 49 percent of the stock and will be free to keep their stakes or resell them on the secondary market when Hydro OGK's listing is cleared.

Hydro OGK is currently not considering a secondary stock offer via a new share issue, said Sinyugin. He declined to predict the company's possible free float and market value.

PENSION FUNDS AS SHAREHOLDERS

Russia has 10 percent of global hydro power resources, but the rate of their use stands at only 20 percent compared to 65 percent in Canada or 95 percent in France.

Hydro OGK, which runs 49 power plants in Russia with 27.3 GW capacity, plans to double it by 2020 through joint projects in Russia and abroad. The company, with revenues of $1 billion a year, plans to invest more than $2 billion in 2007 alone.

Sinyugin said his firm was in talks with several Russian and foreign metals firms to form ventures similar to its Boguchany venture with aluminum giant Rusal. (For more, click on ID:nL10801287.)

Companies are being attracted by stable and cheap hydro power. But time represents the key downside risk.

"At the first stage it is a loss-making business," Sinyugin said. "It is only after you get through the first period that such a company can become the most profitable in this business."

"For private investors this sector doesn't offer quick returns, but in the long-term it can be attractive to pension funds, for example," he said.  Continued...