Power Sector News

 December 25, 2009

·        Rosatom and En+ Group have registered AKME-Engineering joint venture, representatives of both companies have announced. The joint venture established on a parity basis will be developing a pilot energy unit with a capacity of 100 mWt based on a lead-bismuth fast reactor (SVBR-100). The power unit is expected to be commissioned in 2019, representatives of Rosatom and En+ say. (Kommersant, "En+ Promotes Nuclear Energy")

·        OGK-1 shareholders approved a supplementary share issue consisting of 38 billion shares, par value 0.7478 rubles each, at an EGM on December 22, the company said in materials. The shares will be sold for cash in a public subscription at a price to be determined in due course. The genco will also borrow up to 8 billion rubles from Inter RAO, repayable in ten years, at the Central Bank's refinancing rate plus 2.76% pa, with assets worth 24 billion rubles as collateral. Also, the shareholders approved a contract with gas producer NOVATEK. NOVATEK will deliver up to 57 billion cubic meters of gas worth 154 billion rubles to OGK-1, which is managed by Inter RAO, in 2010-2015. (Interfax, Vedomosti “OGK-1 Shareholders Approve Share Issue, Inter RAO Loan, NOVATEK Gas Deal”)

·        OGK-1 announced a two-stage tender to attract general contractor for construction of the energy block at Urengoiskaya GRES. (Interfax “OGK-1 Announced A Tender For Construction Of Urengoisk GRES”)

December 24, 2009

·        Norilsk Nickel-controlled OGK-3 sold its stake in its parent company to two offshore companies for about $100 million, OGK-3 spokesman Maxim Radetsky said Wednesday.  The utility sold its 0.4 percent stake to Corbiere Holdings and Raleigh Investments, Radetsky said, declining to comment on the ownership of the two buyers. (The Moscow Times, Vedomosti, Kommersant “OGK-3 Sells Norilsk Shares”)

·        The media outlet reports on the round table meeting “Realization of master plan of energy units placement by 2020” that was held by the Federation Council. Valentin Mezhevich, first deputy chairman of the Natural Monopolies Committee, who was a moderator of the conference, said that the aim of the master plan is to form reliable and effective energy supply, as well as to list areas for energy unit placement and to prevent capacity deficit. In his speech Mezhevich enumerated key trends in the Russian power sector, which are consumption decrease, equipment deterioration, non-payments, delays in calculations and the shortcomings of the market practices. (Energyland.Info “Realization Of Master Plan 2020 Was Discussed In The Federation Council”)

·        The eighth annual Russia Power Conference and Exhibition, organized by PennWell Corporation, will be held in Moscow on March 24-26, 2010. The conference will bring together leading executives from Russia’s electric power industry. They will discuss the most urgent and relevant topics facing the sector in 2010, including the continued liberalization and modernization of the sector following the global financial and economic crisis.  Furthermore, the exhibition will highlight the most advanced technologies and services required to manage contemporary power systems. (Energo-info.ru, Lenta.ru)

December 23, 2009

·        The Energy Ministry has drafted a list of 'good investors' for TGKs and OGKs, which will be allowed to include their expenses for investments in technological modernization in the 2010 tariffs. However, the overall assistance to the heat generation sector will be only 4.8 billion rubles, which is 5.3% of the investment component in the state-owned RusHydro and Rosatom. Moreover, OGKs' and TGKs' new facilities will still be constructed without tariff support (Kommersant “Powermen Have Investment Component Limited”).

·        The launch of the Boguchansk GES could be postponed again as the first part of the station will not be launched in 2010, a source close to RusHydro said. According to him, new RusHydro management will communicate this information to the Deputy Prime Minister Igor Sechin, who will visit Sayano-Shushenskaya and Boguchansk GES. (Vedomosti “Late Again”)

·        Power consumption in Russia could drop 4.8% this year, Deputy Energy Minister Vyacheslav Sinyugin said at a roundtable at the Federation Council. The Energy Ministry expects power consumption to rise at a moderate pace in 2010-2011. Until 2020, the rate of use will be lower than envisioned in the current version of the general scheme for locating generating facilities during the period. (Interfax “Russian Power Consumption Could Drop 4.8% In 2009 – ministry”)

·        The partners in the construction of Boguchansk GES, RusAl and RusHydro, should present an agreement on the project's management in January of next year, Russian Energy Minister Sergei Shmatko told journalists following a meeting of a governmental commission in Krasnoyarsk. "Today the format of the 'two keys' (the management of the project on a parity basis) is not operational," he said. He said that in January RusAl and RusHydro should report to the government on what company will manage the project. The company taking on this management will be accountable for the project's operational results and could be liable to sanctions in the form of fines. (Interfax, RBC Daily “Rusal And RusHydro To Determine In Jan Who Will Manage Construction Of Boguchansk HPP – Shmatko”)

·        The estimated cost of restoring the Sayano-Shushenskaya GES, which was badly damaged in an accident in August, has been trimmed from 40 billion rubles to 37 billion rubles, Energy Minister Sergei Shmatko said at a meeting of the commission set up to deal with the issue in Krasnoyarsk. The 37 billion rubles budget might yet be adjusted because the blue prints and other paperwork needed to restore the plant had not yet been finalized. (Interfax, RBC Daily “Sayano-Shushenskaya HPP Restoration Costs Trimmed By 3 Bln Rubles”)

December 22, 2009

·        Market Council has published the most conservative energy consumption forecast for 2010 - a 0.5% maximum increase. The economy will need three or four years to go back to the pre-crisis energy consumption levels, the regulator said. Despite the continued market liberalization, the growth in electricity rates in Russia's European energy zone and Siberia must not exceed the growth of fuel prices, and analysts are expecting energy companies to become less profitable. (Kommersant “Energy companies see margin profits fall”)

·        A parliamentary commission has prepared a list of persons to be sacked over the Sayano-Shushenskaya HPP accident. The list includes the HPP's ten managers and five from RusHydro. But the energy company's former executive Vasily Zubakin is not implicated, according to the commission. (Vedomosti, "Zubakin not guilty")

·        Moscow Unified Grid Company (MOESK) is expected to switch to Regulated Asset Base (RAB) tariffs. This will apply to the Moscow region from January 1, 2010 and the City of Moscow from January 1, 2011, a Federal Tariffs Service official told Interfax. A total of 19 regional grid companies from 16 constituent members were converted to RAB tariffs on December 21, and RAB tariff for another five should be approved by the end of the year, Maxim Egorov said. (Interfax “Moscow Power Co Could Switch To RAB Tariffs From 2010”)

 December 21, 2009

·        RusHydro so far has not signed the new agreement on the construction of the Boguchany HPP that was announced a month ago by Energy Minister Sergei Shmatko. It is discontent with the terms, the document is damaging for the company, RusHydro CEO Yevgeny Dod confessed to the press recently. Two sources close to the energy company say a budget of 34 billion rubles in question. It is impossible to complete the project with that sum of money - the latest estimated price of the state-owned company is 39 billion rubles, one of them added. A RusHydro spokesman did not comment on that but noted that talks on the agreement continue as some of its aspects have to be finalized. (Vedomosti, "How to fit in the Budget")

·        The Russian Federal Tariffs Service (FTS) Board Friday cleared the branches of inter-district power grid companies (IDGCs) from seven Russian regions to switch to Regulated Asset Base (RAB) tariffs from January 1, 2010. The FTS told Interfax that IDGCs from the Vladimir, Kaluga, Kursk, Yaroslavl, Novgorod and Omsk regions and the Udmurt Republic would make the switch. (RBC Daily “Grid Operators From Seven Regions Cleared To Switch To RAB Tariffs From Jan 1”)

·        The company decided to increase tariff on heat supply by 20%. Antimonopoly service of the Zabaikalsk region brought an action against TGK-14, which insists on a tariff increase. The loss-making company urgently needs funds for repair works, the newspaper writes. However, in order to increase tariffs, the region is to ask the Federal Tariff Service to review tariff indexation for the next year, Kommersant writes adding that the company is not allowed to change tariffs by itself. (Kommersant “TGK-14 Overheated”)

·        TVEL is ready to discuss joint production of nuclear fuel with India. TVEL also said it expected to sign a deal with the Atomic Energy of Canada Limited (AECL) next year to supply nuclear power plant fuel, and had completed a Justification of Investment (JoI) for a nuclear fuel plant in Ukraine or European countries that operate Russian-designed reactors. (Interfax “Russia's TVEL Aims To Step Up Nuclear Fuel Cooperation With India, Canada, Europe”)

Russia Headline News

December 25, 2009

·        The Federal Antimonopoly Service (FAS) by the end of January will draft amendments to the law simplifying access for foreign investors to strategic industries, a service official told Interfax. The changes are technical and are meant to remove the shortcomings that have become apparent since the enforcement of the law, Deputy Economic Development Minister Stanislav Voskresensky has said. The key change is the extension of the time given to a foreign investor for signing an agreement on the acquisition of an asset in Russia from 20 to 30 days after the approval of the deal by the government commission for foreign investments, the FAS official said. (Vedomosti, "Direct Access")

·        The South Stream gas pipeline route from Russia to Austria and Italy along the Black Sea bed cannot be drawn without Bulgaria's agreement to join the project. So far Sofia has been putting forward impossible demands due to which the deadline for making the feasibly study has been put off many times. Thursday saw a breakthrough at the talks - it was decided to set up a join venture of Gazprom and the Bulgarian Energy Holding in the nearest future. (Kommersant, p. 11 "South Stream links in Bulgaria")

·        United Co. Rusal, Oleg Deripaska’s aluminum maker, will seek to sell shares at a price that values the company at between $16 billion to $22 billion, Vedomosti said, citing unidentifed people familiar with the matter. Rusal expects the final price of Russia’s first initial public offering in Hong Kong to value the Moscow-based company at $20 billion, more than U.S. rival Alcoa Inc.’s $15.9 billion. Blackrock Inc. and China Investment Corp. are among the investors who plan to buy shares in the IPO, which is slated to be completed by Jan. 20. (Vedomosti)

·        OAO Ilyushin Finance Co., a Russian aircraft-leasing company, will decide whether to sell about $250 million in shares in an initial public offering in January, Chief Executive Officer Alexander Rubtsov said today. “We are looking to sell up to 20 percent shares,” Rubtsov said in a telephone interview. The company may list stock in Moscow or Hong Kong, he said. (Bloomberg, Interfax)

·        "Svyazinvest" may acquire the first major asset for establishing the fourth federal cellular operator - the GSM operator SMARTS funvtioning in the Volga region. Kommersant learned that after a dispute that lasted for four years the key shareholder of SMARTS Gennady Kiryushin and the owner of Sigma Capital Partners Leonid Mayevsky claiming to own 25%-1 share in the operator have announced readiness to stop litigation and relieve the company of encumbrances with the purpose of selling it to Svyazinvest. (Kommersant, p. 1 "SMARTS becomes Free")

December 24, 2009

·        The Supreme Court ruled Wednesday that the 2003 arrest of Yukos partner Platon Lebedev was illegal, marking the biggest victory yet for former Yukos owners in their long-running legal fight with the government. The Supreme Court decision, which follows a similar ruling by the European Court of Human Rights in 2007, does not mean that Lebedev will be freed or that investigators will revisit his 2005 conviction on tax and fraud changes, prosecutors and his lawyers said. (The Moscow Times)

·        Rusnano may borrow 30 billion to 50 billion rubles ($1.64 billion) next year to fund projects, and the borrowings will be guaranteed by the state, chief executive Anatoly Chubais said Wednesday. Russia’s nanotechnology industry may grow to 900 billion rubles ($29.5 billion) in annual revenue within five years, he said, predicting that there would be a “flow of innovative companies” to hold share sales in Moscow during the first quarter of next year.  Rusnano invested 91 billion rubles this year in 61 projects, he said. (Bloomberg)

·        The Russian Constitutional Court on Wednesday supported exporters by cancelling the limitation of their right to apply a zero VAT rate on foreign trade contracts. A taxpayer was earlier deprived of this benefit if the powers of a third party paying for the goods instead of a foreign buyer were not confirmed in strict compliance with a special Russian procedure. The Constitutional Court has allowed exporters to confirm that the money has come to their bank account from abroad by an alternative way (Kommersant, page 2, 'Exporters Allowed to Produce Any Passport').

·        Bashneft has reported that it has fully placed 50 billion rubles in debut bonds, which will be used to buy from 56% to 57% of voting shares in four oil refineries and Bashkirnefteprodukt from AFK Sistema. The deal has been estimated at 41.1 billion rubles. Sistema planned to spend the money on repaying part of its $2.6 billion loan from VTB ahead of schedule. The loan was raised exactly to buy the Bashkir companies (Vedomosti, 'Debt Circulation').

·        With oil costing $70 per barrel, Russia's budget revenues in 2010 will be the same as under the Economic Development Ministry's previous forecast of $58 per barrel, Finance Minister Alexei Kudrin said on Wednesday. "We lose a lot on the exchange rate difference. In 2009, it deducted 500 billion rubles of our February forecast from the budget. This sum will also be significant in 2010," Kudrin said. The Economic Development Ministry's last forecast for 2010 increased the oil price to $65 from $58 ($69 in an optimistic scenario) and reduced the ruble exchange rate to 28.3 rubles/1$1 from 33.9 rubles /$1 (Vedomosti, 'Development Sacrifice').

·        President Dmitry Medvedev had to remind Finance Minister Alexei Kudrin to mind his manners Wednesday after a testy debate about a national payments system with Vneshekonombank chief Vladimir Dmitriyev. Dmitriyev said a law was needed to create a national payment system that would be operated by a noncommercial entity and could include some 80 percent of Russian banks. Currently, several regional systems are operated by commercial banks, primarily state retail giant Sberbank, and these are not enough, he said. (The Moscow Times, Vedomosti)

December 23, 2009

·        The government will seek opinions from foreign investors on proposed changes to laws needed to unlock the country’s lucrative oil, gas and metals reserves and woo back companies scared off by a decade of resource nationalism. Long-awaited revisions to tough laws on foreign investment in strategic mineral fields should be ready by the end of January, when they will be presented to investors, said Igor Artemyev, head of the Federal Anti-Monopoly Service. (Reuters)

·        Russian First Deputy Prime Minister Igor Shuvalov will be in charge of all government commissions dealing with the development of the Russian economy, and nearly all ministers and deputy prime ministers will report to him. Government officials do not clearly understand how the government machinery will work after a new structure is established (Vedomosti, 'Mergers in the White House'; Kommersant, page 1, 'Igor Shuvalov Promoted to Consolidation').

·        It is unlikely that Russia and Ukraine will have a gas dispute in early 2010 similar to what happened a year ago. Gazprom has postponed the deadline by which Kyiv must pay for the gas it received in December until January 11, and there are legitimate contracts on gas supplies to Ukraine and gas transit across Ukraine. However, Naftogaz of Ukraine has once again demanded that the amount of gas it will buy in the first quarter of 2010 be reduced - this time around to 7 billion cubic meters from 8.75 billion cubic meters. Gazprom made a concession on this issue in the fall, and experts believe it will do the same this time around as well, but this would mean that the gas monopoly will lose another $600 million in revenues in the first quarter of 2010 alone (Kommersant, 'Double Reduction').

·        The Russian government plans to close one of the so-called monocities, or company towns, in the Arctic region of Murmansk and relocate its 9,500 inhabitants. The northern Russian town of Revda, whose only working factory produced just 104,000 rubles ($3,400) of souvenirs last year, is the only company town out of 27 the government said it will provide aid to in 2010. (Vedomosti)

·        Gazprom finally signed an appendix to a previous gas purchase agreement with Turkmenistan for the period up to 2028. The Russian gas giant will resume purchases of Turkmen gas in an amount of up to 30 billion cubic meters starting January 1, 2010, Gazprom said. The price formula will "fully comply with European gas market terms," it said (Vedomosti, 'Partners Again'; Kommersant, page 1, 'Turkmen Gas Cubed'; The Moscow Times, Reuters, Bloomberg).

·        The government does not plan to ease export fees on high-value refined oil products by increasing duties on other products, as was proposed as an incentive for oil companies to upgrade their refineries, First Deputy Prime Minister Viktor Zubkov said Tuesday. (Bloomberg)

·        Rosatom Corp., Russia’s nuclear holding company, received 14.2 billion rubles ($465 million) from the state to buy uranium assets abroad. The company, through its mining unit ARMZ Uranium Holding, is considering buying deposits in Namibia, Botswana, Zambia and Tanzania, Vedomosti reported today, citing an unidentified Rosatom official. (Vedomosti, The Moscow Times)

December 22, 2009

·        Russia’s credit rating outlook was raised to stable from negative at Standard & Poor’s as rising oil prices help the government achieve a narrower budget deficit. The ratings service affirmed Russia’s foreign-currency credit ratings at BBB, two grades higher than junk, according to a statement today. Russia may be able to reduce the deficit by “at least” 1 percent to 2 percent of gross domestic product, compared with an original estimate for a deficit of 8.3 percent, S&P said. (Bloomberg)

·        Russian billionaire Oleg Deripaska said he expects the global financial crisis to last another three years. “The crisis has changed everything, most importantly the Anglo-Saxon consumption model,” Deripaska said in an interview with Spain’s El Pais newspaper, according to a transript e- mailed by his Basic Element holding company. In Russia, the unemployment will continue to rise for “at least six months,” he said. (Bloomberg)

·        Sistema could buy up to 49% of shares in Russneft, AFK does not need a controlling stake because of this company's big debts, Group's main owner Vladimir Yevtushenkov said. "We are not going to consolidate this debt on us, but we are going to do efficient work with our partner to reduce this debt," he said, without specifying the partner's name and the date of a possible deal. (Vedomosti, "Debt not needed")

·        Federal Anti-monopoly Service chief Igor Artemyev confirmed to Kommersant that Gennady Timchenko's partner oil trader Pyotr Kolbin received a controlling stake in the project for developing one of Russia's biggest gas condensate fields, Yuzhno-Tambeisky. The businessman will receive $78.5 million for the shares, almost five times cheaper than what Novatek will pay for the same stake. But the latter's quotes were supported by the news that Timchenko is going to buy out 5.29% more of the company's shares on the market to bring his stake to 23.49%. (Kommersant, page 11, "State lets Pyotr Kolbin into Yamal"; Vedomosti, "Chief Investor")

·        Germany granted Nord Stream AG the right to build a 50-kilometer (31-mile) section of a planned natural-gas pipeline from Russia through its territorial waters, the OAO Gazprom-led venture said on its Web site today. Nord Stream plans to build the 1,220-kilometer pipeline from Russia across the Baltic Sea to Germany, avoiding transit countries including Ukraine and Poland. The pipeline’s planned annual capacity is 55 billion cubic meters, about two-thirds of Germany’s consumption of the fuel. (Bloomberg)

·        Russian interests may get a 50 percent share in the Samsun-Ceyhan oil pipeline linking Turkey’s Black Sea and Mediterranean coasts if Russia can supply more crude, pipeline operator Transneft said Monday. (Reuters, The Moscow Times)

·        Mikhail Prokhorov, Russia’s richest man, is asking fellow billionaires including Suleiman Kerimov and Alexander Abramov to invest in his Bank MFK. Moscow-based MFK is seeking to raise $200 million from new shareholders, Kommersant reported, citing an unidentified person familiar with the talks.Prokhorov has said he sees earnings potential in buying distressed Russian assets via MFK.(Kommersant, page 1, "Mikhail Prokhorov Club holds New Year promotion"; Vedomosti, "Bank oligarch")

·        The government is close to creating a new alliance between a domestic car manufacturer and a foreign player, Industry and Trade Minister Viktor Khristenko said Monday, indicating that Oleg Deripaska’s GAZ could be in line for a new partner. Khristenko told Vesti-24 television that the government was working on a second alliance after the partnership between the country’s largest automaker AvtoVAZ and French peer Renault, although he did not name the company involved. (Reuters, The Moscow Times)

December 21, 2009

·        President Dmitry Medvedev touted Russia as a world leader in cutting emissions at a UN climate change conference and then took the lead in ducking out of the meeting as U.S. President Barack Obama worked overtime to clinch an agreement. Medvedev, who left the talks in Copenhagen on Friday evening to attend an informal CIS forum in Kazakhstan, offered mild praise on Saturday to those who had stayed behind to draft the nonbinding Copenhagen Accord, which sets a billion-dollar program of climate aid to poor nations but does not bind Russia or other leading polluters to make deeper cuts in their gas emissions, which are blamed for global warning. (The Moscow Times)

·        Presidents Barack Obama and Dmitry Medvedev failed to clinch a pact cutting Cold War stocks of nuclear arms Friday but pledged to work for a deal next year. Obama told reporters after meeting Medvedev in the Danish capital that Washington and Moscow were “quite close” to agreement, but a senior Kremlin official later said talks would continue in January. (The Moscow Times)

·        Rosprirodnadzor environmental protection watchdog has issued a permit for the construction of the sea section of the Nord Stream gas pipeline in Russian territory. However, Germany and Finland continue to hinder the construction as they may fail to complete the procedure of documenting permits this year. The attraction of bank loans in the amount of 3.9 billion euro has also been put off for January-February 2010. (Kommersant, p. 11 "Nord Stream did not make it for New Year")

·        Moscow has warned Minsk that it is unprepared to offer sweeping discounts in oil and gas deliveries to it in 2010. Belarus was made an unprecedented offer - in 2010 it will receive only oil that it needs for domestic consumption - about 6 million tonnes - duty-free. All the rest will be delivered with "100% customs duty." So far the sides have failed to agree on the terms. The price of the difference for Russian state coffers runs to $3.2 billion. Agreement must be reached by January 1. Belarus expected more. It should be receiving 8 million to 9 million tonnes of Russian oil duty-free; its Deputy Prime Minister Vladimir Semashko said a week ago. (Vedomosti, "Before the Clock Strikes")

·        Oil trader Gennady Timchenko may become the biggest coowner of Novatek. Vedomosti has learned that his Volga Resources fund is seeking the government's authorization of the acquisition of over 20% of the company's shares. This is more than the Gazprom stake of 19.4%. Authorization is required if a non-resident investor may get control over more than 5% of voting shares in a company having mineral resources of federal significance on its balance sheet. If Volga wins the authorization, it may consolidate up to 24.99% in Novatek. (Vedomosti, "Let us to Novatek")

·        LUKoil chief executive Vagit Alekperov on Friday called on the government to ease access to big oil deposits and said his oil producer hoped it would be first in line to buy if partner ConocoPhillips was about to sell key assets. (Reuters)

·        United Company RusAl will push ahead with its $2 billion IPO in Hong Kong, even though a ban on a retail offering means the deal is effectively little more than a Russian state bailout. The world’s largest aluminum producer will proceed with marketing the IPO in January after Hong Kong’s Securities and Futures Commission decided late Friday to approve the controversial float, but on the condition that ordinary investors are left out of it, two sources told Reuters. (Reuters, Bloomberg)