The board of directors of Unified Energy Systems on Friday ended years of often acrimonious debate and tinkering by finally agreeing on a blueprint for how -- and to whom -- the assets of the world's largest utility will be parceled out over the remaining five years of its existence.

Anatoly Chubais, the company's chief executive, could barely control his glee as he emerged from the meeting to announce that, contrary to assertions by his critics, only current shareholders of the company will be able to inherit the monopoly's highly prized assets in the breakup.

In other words, the shenanigans that occurred the last time Chubais presided over a mass privatization drive -- the rigged loans-for-shares auctions of the mid-1990s that created the oligarchy -- will not be repeated.

"It is ... clear that opponents of the revamp, including civil servants, have been dealt a crushing defeat both morally and professionally," Chubais said, referring to Andrei Illarionov, President Vladimir Putin's outspoken economic adviser, who has repeatedly urged the government to sack Chubais.

Under the so-called 5+5 plan, which refers to the five years Chubais spent preparing to break up the company and the five years it will take for him to do so, UES's assets will not be sold for cash.

Instead, shareholders of UES will be able to swap their shares on a pro rata basis for direct stakes in the highly coveted national generating companies, or gencos, that will soon be created. Since the government, which owns 52 percent of UES, will not exercise its pro rata rights, whatever stakes in the new generating companies left up for grabs will be auctioned off, with UES shares being the only legal tender. "The company will go to the annual meeting with an approved strategy," Chubais told reporters.

The board approved the plan by a vote of 14-1, and Chubais said directors suggested only minor amendments that would be formally approved during a meeting headed by board chairman Alexander Voloshin, the Kremlin chief of staff, ahead of Friday's annual shareholders meeting. "There are some localized changes, not major ones," he said.

Deputy Prime Minister Viktor Khristenko, who chairs the state commission in charge of power sector reform, said Chubais could expect little or no resistance from the government from here on in. "On the whole I am in favor of 5+5," Khristenko told Interfax after his commission met to discuss the document Friday. Any differences between the government and UES "are not critical to carrying out this strategy."

Deputy CEO Vyacheslav Sinyugin said that board members had no objection to the shares-for-shares auctions, but that directors representing minority shareholders wanted more clarification on the swap scheme and the mechanisms for consolidating UES assets into larger companies in order to attract investment.

However, independent board member Alexander Branis of Prosperity Capital Management said Sinyugin's remarks were not completely accurate.

"I was the only one to vote against the plan because I am concerned about several things -- the sale of assets ... and how the auctions will work. All the old concerns remain," he said.

"Portfolio investors might be squeezed between the government, which will be increasing its stake in the national grid company, and industrial giants, who will be acquiring stakes in the wholesale generating companies."

The 5+5 document calls for the creation of 10 wholesale generating companies that will each consist of fully owned UES assets located in different parts of the country in order to encourage competition. Six of the companies will be made up of thermal power plants, and four of hydroelectric plants, which the government intends to retain full control of for strategic and safety reasons.

The six thermal wholesale generating companies, or gencos, will become fully private as the government withdraws from the generation business and increases its stake in the new Federal Grid Co., which will retain a monopoly on electricity transmission.

"Maintaining control over the grid is the government's No. 1 task in the reform," said Khristenko, adding that the government may allocate budget funds as early as next year to acquire grid assets now belonging to partially privatized regional utilities.

Details of the new scheme were leaked to the press in bits and pieces throughout the week, stoking demand for the company's stock and pushing its share price up 30 percent and its market capitalization over $10 billion for the first time since the economy imploded in 1998. Still, the stock is trading at roughly half its all-time high of 46 cents, which it hit in July of 1997.

Chubais, who recently had his contract renewed for another five years, took credit for "increasing the value of the government's assets in UES by $3.5 billion since Jan. 1, 1999." His first year as CEO, 1998, "doesn't count" he said, because "it was a crisis year."

The surge in share price, he said, started as soon as "the long-standing dispute over the company's reorganization was over."

"I am aware of what is now going on on the stock market. This is quite symptomatic. [The company's] capitalization has exceeded all expectations."

One worry, Chubais said, is that the "free float," or liquidity, of UES shares is shrinking dramatically as major financial and industrial groups with interests in aluminum, coal and even oil rush into the market to snap up sizeable chunks of UES shares so they can participate in the upcoming auctions.

"This process doesn't please us, but it is inevitable as large minority shareholders emerge," he said. "I don't think it has reached the critical point where it can allow direct manipulation by the market."

Renaissance Capital said in a research note Friday that UES, "which was for the first decade of Russia's dalliance with a market economy the country's most liquid stock, now has a free float of roughly 8 percent, down from 45 percent just six months ago. The mopping up of the final shares will likely squeeze the stock higher, even following today's board meeting."

It was a year ago that Chubais first promised to present what would become the 5+5 blueprint to minority shareholders for their approval. It was originally billed as the 3+3 plan, but conflict and controversy surrounding the restructuring, the protracted time it took the State Duma to pass the raft of bills needed for the restructuring, and the government's decision to postpone market liberalization until 2006 forced Chubais to push back the timeline.

(The Moscow Times 26.v.03)