[cdn-nucl-l] OMZ Acquisitions Boost Its Nuclear Know-How in Russia

["Adam McLean" <adam.mclean@utoronto.ca>]

Posted in the Moscow Times on March 28, 2003 and at:
http://www.themoscowtimes.com/stories/2003/03/28/047.html

Adam

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OMZ Acquisitions Boost Its Nuclear Know-How

By Torrey Clark 
Staff Writer United Heavy Machinery, the country's leading engineering
company, announced the purchase of significant stakes in two nuclear power
engineering companies Thursday, making it one of world's largest
contractors.

United Heavy Machinery, or OMZ, this week finished the first stage of
corporate restructuring intended to focus the company's business on two
areas: nuclear power plant equipment and oil, gas and shipbuilding.

"We intend to further develop this segment by strengthening our engineering
base in the nuclear sector and expanding OMZ's export opportunities," OMZ
general director Kakha Bendukidze said in a statement.

Nuclear power plant equipment accounts for about 18 percent of the company's
sales. OMZ in January bought a 19.9 percent stake in Atomenergoexport, or
AEE, the country's largest exporter of nuclear power plant equipment and
services, and a 50.94 percent stake in the smaller Zarubezhenergoproekt
research and development institute.

OMZ did not disclose how much it paid for the stakes. 

AEE, a near monopoly on exporting turnkey solutions in the nuclear power
plant sector, has been one of OMZ's largest customers and handled all of
OMZ's nuclear export sales. AEE has representative offices in Europe, China,
Iran and India. 

OMZ is currently involved in three major nuclear power plant projects
overseas -- in India, China and Iran -- and is participating in a consortium
to build a power station in Finland.

AEE together with its subsidiary Atomstroyexport, one of the country's
largest contractors in the nuclear power industry, had $640 million in
exports in 2002 and expects that exports will reach $800 million this year.
The two companies had $2.9 billion worth of future projects on their order
book as of March 15.

OMZ said it may increase its investment in AEE to a controlling stake.
Though formally its stake is under 20 percent, OMZ effectively owns 40
percent of AEE because just over half of the export firm's shares are held
by AEE's subsidiaries, OMZ said. 

OMZ promised to release details of the AEE deal in May, after Ernst & Young
completes due diligence to estimate how the acquisition would affect OMZ's
bottom line.

Analysts said the acquisitions looked good but reserved final judgement
until the price tag is announced.

"Previously, OMZ has been quite thrifty in its purchases," said Vladimir
Savov of Brunswick UBS Warburg. "OMZ is moving away from the pure production
of equipment, which is not the highest margin business in the sector, and
... closer to becoming a provider of turnkey solutions, services and
know-how for nuclear power plants."

"They're buying a solid management team and a going concern, which is
important for a smallish business like OMZ that are expanding rapidly," said
Rob Edwards of Renaissance Capital.