24 September, 2002 – The concern of minority shareholders in Russian electricity monopoly UES over the sale of subsidiary companies on favoured terms was expressed Friday in a letter from David Herne of Brunswick Capital Management to CEO Anatoly Chubais.

In the letter to the former Kremlin administration chief he called for a moratorium on further disposals until the planned restructuring of the electricity sector is completed in 2004. He also demanded clarification of the exact proportion of shares that minorities would receive once the existing holding company is broken up.

UES is scheduled to be divided into a federal grid company with ten wholesale electricity companies and a series of regional electricity generators.

Herne warned that if allegations by some politicians of insider dealing were correct, it would “destroy the progress Russia has made and further delay its integration into the world’s mainstream security markets”.

Herne said that he had talked to shareholders representing ten per cent of UES who share his concerns about the value if their stakes. Some shareholders have even discussed calling for a resolution to replace Chubais.

Whilst politicians have raised objections to the speed of reform in the electricity sector, Chubais has argued that restructuring, designed to create a free market and encourage investment in crumbling infrastructure, needs to proceed as fast as possible.