Jersey fund sues for buyout as Russia power reforms

By Pratima Desai and Simon Shuster

LONDON/MOSCOW, Feb 7 (Reuters) - A Jersey-based fund said it has filed a lawsuit in Moscow against Russian firm JSC KIT for refusing to buy out minority shareholders of the power supply company it came to control in March.

Russia's former power monopoly UES EESR.MM is auctioning off 52 of these supply firms, which serve the role of middlemen in the power sector, and their shareholders have often accused the new owners of not meeting legal obligations.

The sweeping reform of the sector, undertaken in 2003, will see UES sell off all of its assets this year, introducing a free power market with dozens of competing firms.

The newly liberalised climate, however, has brought with it disputes that were unheard of under the Soviet-era monolith.

Although its $800,000 investment in the supply business is small, the Greater Europe fund said it was fighting for fair treatment for all shareholders in a market plagued by ambiguous laws and murky chains of ownership.

JSC KIT, or Kommunalniye Investitsyi i Tekhnologiyi, won a 65.29 percent stake in OJSC Belgorod Supply Co. at an auction for $37.5 million from UES in March, Denis Obukhov, portfolio advisor at Greater Europe told Reuters this week.

Russian corporate law says a company that acquires more than 30 percent of another must make a buy-out offer to all the minorities of the acquired company within 35 days.

But JSC KIT did not make the offer, because it sold the supply company on to other investors within 30 days of buying it, said Alexei Karmakov, its deputy director.