* State to buy 50 billion roubles of share issue
* Capital-raising move seen as mini-nationalisation
* High pricing turns off private investors
* Concerns raised over planned use of funds
(Recasts lead, adds detail, analyst comments)
By Sonia Elks
MOSCOW, Dec 19 Russian hydroelectric power
company RusHydro started a share placement on
Wednesday in which the state was expected to be the only
significant buyer, effectively turning the capital-boosting
exercise into a mini-nationalisation.
RusHydro is offering 110 billion shares at 1 rouble apiece
to fund projects in Russia's far east, meaning that if fully
sold the offering would raise $3.6 billion.
Analysts predicted much of the stock would go unsold, as
investors are turned off by the new issue's overpricing in
relation to the market and concerns over the profitability of
the planned capex projects it will fund.
The government will inject 50 billion roubles ($1.6 billion)
plus equity stakes in other power companies, which could up its
stake to as much as 66 percent from the current 60.5 percent.
A RusHydro spokesman admitted: "We do not expect much
interest from minority shareholders."
The recapitalisation of RusHydro, the world's second largest
hydro-electric power producer, has been championed by Russia's
powerful former deputy prime minister, Igor Sechin, now CEO at
state-controlled oil major Rosneft.
Sechin, who heads President Vladimir Putin's strategic
commission on energy policy, has faced opposition from some
government ministers who want to defend the competitive private
power sector that was created in sweeping reforms last decade.
In another sign of resurgent state capitalism, Rosneft is
taking over Anglo-Russian oil firm TNK-BP in a $55
billion deal, Russia's largest ever, that would put two-fifths
of the country's oil production under state control.
New shares in RusHydro are priced significantly above the
market price of 75 kopecks. Under Russia's power sector reforms
of the past decade, companies were floated with very low share
prices in a bid to make their stock liquid.
"There's absolutely no reason why investors would pay a
premium to the current market price," said Vladimir Sklyar, head
of utilities research at Renaissance Capital.
He added the company may offload around 1-2 billion shares
via swaps for shares in a number of smaller companies, such as
Dmitry Bulgakov, a utilities analyst at Deutsche Bank, said
RusHydro's plans to invest the sale proceeds on four coal-fired
power stations in the Russian Far East were 'quite concerning'.
Expected costs for the projects are high, while tariff
structures in the region mean there is no incentive to become
more efficient. "These investments are frankly more political
than economic," he said.
"If the Russian government was willing to invest there it
could have done so directly instead of through their publicly
traded company. "Minority shareholders will suffer as a result."
RusHydro's board has been divided over the additional share
issue, and five of its 13 board members recently offered to
resign over the issue.
The current subscription is limited to shareholders, with an
open subscription due to start by March 2013, the company said.
($1 = 30.7959 roubles)
(Additional reporting by Megan Davies; Editing by Douglas
Busvine and David Cowell)