Russia Power Sector News 2010 Archive

Power Sector News 2010 Archive

February 12, 2010

· Lithuanian President Dalia Grybauskaite has turned down a Russian proposal to join in building a new nuclear power plant in the Kaliningrad enclave, an official said Thursday. Russia said it wanted to build a nuclear power plant in Kaliningrad, sandwiched between Poland and Lithuania. Lithuania is planning its own new nuclear plant. Last September, Russia approved a plan to invest 5 billion euros ($7.29 billion) in a 2.3 gigawatt nuclear power station in Kaliningrad by 2016 to 2018 in tandem with foreign companies, the first such joint project with foreigners in its history. The project leader, Inter RAO, said Italian power firm Enel was interested in joining the project and that Russia was talking to other potential partners. (The Moscow Times, Lithuania Declines Proposal for Kalingrad Nuclear Plant)

· Siberian Coal Energy Company (SUEK) plans to invest roughly 7 billion in developing generating capacity at generating companies TGK-12 and TGK-13, the holding's general director, Vladimir Rashevsky, told Interfax on the sidelines of the seventh Krasnoyarsk economic forum on Friday. (Interfax, SUEK to invest 7 bln rubles in TGK-12, TGK-13 in 2010)

· Russia has to modernize its fuel and energy complex if it is to remain among the leading "energy powers" and not be left "by the roadside", President Dmitry Medvedev said on Friday. "The sector's development certainly depends on specific projects. But in the final analysis, the decisions you and I make will answer the question of whether we remain among the leading energy powers. Or if will we be shoved to the roadside, despite our colossal reserves, despite all our distributed and undistributed funds we are so proud of and which we so actively exploit, and find ourselves in the backyard," Medvedev said at a meeting in Omsk devoted to energy development. (Interfax, Russia needs modern fuel-energy complex – Medvedev)

February 11, 2010

· Belarus offered Gazprom control of a power generation project in exchange for a reduction in the price of gas supplies. Construction of the second block of the Berezovskaya GRES power plant, which supplies the Baltic countries as well as Belarus, may cost $490 million. (The Moscow Times, Belarus Offers Gazprom Control Of Power Plant)

· Atomenergomash, a subsidiary of nuclear giant Atomenergoprom, has acquired engineering company Petrozavodskmash. Atomenergoprom said a 7% stake in Atomenergomash and a certain amount of cash had been swapped for a stake in Petrozavodskmash held by the company’s management. Atomenergoprom is a subsidiary of state-owned Rosatom, which was set up in 2008 to take over both civilian and military nuclear companies. (Kommersant, Rosatom Exchanged Suppliers On Papers)

· Atomstroyexport (ASE) and Germany's GNS have signed and agreement to work cooperatively in the field of treating spent nuclear fuel, the Russian company said.The companies intend to work together on a range of projects, one of which is a project for setting up the Belene nuclear power plant in Bulgaria (ASE is the general contractor for its construction). (Interfax, Atomstroyexport, GNS Agree To Work On Treating Spent Nuclear Fuel)

· Moscow electrical power stations will be flooded this spring, which will lead to the pollution of rivers, the paper says citing ecologists. (Gzt.ru, Spring Floods Will Reach Power Stations)

· RusHydro will continue negotiations with banks for financing the reconstruction of Sayano-Shushenskaya GES after August 15 following the approval of the Energy Ministry's program for the company's innovation and power efficiency in 2011 and over the long term, RusHydro's deputy chairman, George Rizhinashvili, told journalists on the sidelines of the Krasnoyarsk Economic Forum. (Interfax, RusHydro to continue negotiations for financing Sayano-Shushenskaya after Aug 15)

February 10, 2010

· Anatoly Chubais took 10 years to restructure RAO UES and sell its assets, but new owners are reversing this process. Vedomosti has learned that Viktor Vekselberg's IES Holding is preparing to convert its TGKs to a single share, and the state may become a major co-owner of the new company. "We are considering the possible conversion to a single share indeed," Nadezhda Rukina of IES Holding said. She refrained from specifying what assets IES is planning to consolidate and what sum the new company could be valued at (Vedomosti, Vekselberg's State Company).

· TKG-4 minority shareholders have gotten a chance to receive money for the shares offered to Onexim, as the presidium of the Higher Arbitration Court has returned the lawsuit to the lower court, despite Gazprom's decision to drop the claim. At the same time, the concern itself said it did not plan to make an offer to the TGK-1 minority shareholders (Vedomosti, Offer Virtuosos).

· Sintez - controlled TGK-2 plans to create a joint venture with Chinese company “Khuadzyan” for modernization of Yaroslavskaya heat and generation plant № 2. The shares of the parties are not defined yet, but the total sum is estimated about 5 billion rubles. Analysts consider the budget realistic. RBC Daily notes that for now there is only one similar project in Russia. OGK-1 and TNK BP are jointly constructing Nizhnevartovskaya GRES. (RBC Daily, Sintez with Chinese)

· Minsk plans to sign an agreement with Moscow on building a nuclear power plant in Belarus by the end of the first quarter this year, Belarussian Deputy Energy Minister Mikhail Mikhadyuk said Tuesday. (The Moscow Times, Nuke Deal With Belarus)

February 9, 2010

· Federal Grid Company announced that in the first half of 2009 it restructured the promissory notes of financial corporation Otkritie. (Vedomosti, Five years without money)

· Gazprom avoided minority offers worth 25 billion rubles, enabling it to save up to 25 billion rubles this year, writes RBC Daily. The monopoly’s lawyers found a gap in the legislation, enabling them to avoid making an offer to minority shareholders in TGK-1. If an affiliated agreement exists between the companies, the obligatory offer to buyout shares is avoided. However, the largest minority shareholder Fortum, which owns 25.66% of TGK-1 has repeatedly stated that it does not want to give up its share in TGK-1. (RBC Daily, Gazprom could not pay)

· One of the versions of the long-term capacity market concept suggests using a decreasing coefficient to pay for capacity. Market Council representative Maxim Rusakov said that the coefficient is to be based on the depreciated cost of the object. This is an idea of consumers, he added. According to Market Council calculations implementing this mechanism will reduce the capacity price by 8%. (Interfax, Consumers Suggest Introducing Decreasing Coefficient For Separate Stations)

· Fortum and Inter RAO agreed to extend their contract for power supplies to Finland to the end of this year, the Russian power utility said. The value of the contract was increased to 360 million euros ($492 million) from 250 million euros, Moscow-based Inter RAO said in an e-mailed statement. (Vedomosti, To Earn More)

· China and Russia have agreed on the price for building the second generating line at Tianwan Nuclear Power Plant in Jiangsu Province. Russia's opening bid of 3.5 billion euros was knocked down to around 1.3 billion euros, mainly because of a higher degree of local production for equipment, a source with knowledge of the negotiations told Interfax. (Vedomosti, China, Russia Agree Price For 2nd Line At Tianwan Nuclear Plant)

February 8, 2010

· TAIF group, the largest industry group in Tatarstan, decided not to construct its own capacity, but to buy for 15 billion rubles and modernize Kazanskaya heating and power plant №3 and Nizhnekamskaya heating and power plant № 1, which belong to Tatenergo. (Kommersant, TAIF Refused From Construction Of Capacities)

· TGK-1's sales revenue for 2009, according to early statistics, came to 38.363 billion rubles, the genco said in a statement. TGK-1's sales revenue in 2008 came to 31.127 billion rubles. Therefore results increased by 23.2% in 2009. The increase in sales revenue was the result of growing revenue from the sale of heat energy, electricity and capacity on the open market, as well as a decrease in fuel expenditures since operations at the genco's thermal stations were replaced by hydroelectric output. (Interfax, TGK-1 Boosts Sales Revenue By 23% In 2003)

· OGK-2 will post a net profit of $28 million in 2009 under International Financial Reporting Standards (IFRS) compared with a net loss in 2008, controlling shareholders Gazprom (RTS: GAZP) said in materials. (Interfax, OGK-2 Forecast To Post $28 Mln Net Profit In 2009 Vs Loss In 2008)

· OGK-6, controlled by Gazprom, expects net profit to equal $80 million in 2009 under IFRS compared with a loss of $28 million in 2008. Revenue will decline 4% to $1.384 billion but EBITDA will increase 130% to $178 million, Gazprom said. Analysts said in a consensus forecast that the net profit would total $104.75 million and EBITDA would equal $202.25 million. (Interfax, OGK-6 Forecasts $80 Mln Net Profit In 2009 Vs Loss In 2008)

· Russia exported 15.015 billion kWh of electricity in 2009, 19.1% less than in 2008, including 0.819 billion kWh to the CIS, 80% less, the Federal Customs Service said. Exports to non-CIS countries (Finland and China) declined 1.7% to 14.196 billion kWh. In value terms, electricity exports fell 33.4% to $659.2 million, including declines of 21.3% to $621.4 million for deliveries outside the CIS and over 80% to $37.8 million for exports to the CIS. (Interfax, Russian Electricity Exports Down 19.1% In 2009; Exports To CIS Down 8%)

Russia Headline News

February 12, 2010

· Russia’s government may approve the use of cellular phones on airplanes, Vedomosti reported, citing unidentified Communications Ministry officials. A state commission on radio frequency use will discuss the issue at a meeting next week. (Vedomosti)

· President Dmitry Medvedev on Thursday ordered the Cabinet to sell off more government stakes in successful companies to private investors over the next two years. The Cabinet must submit proposals for increasing the number of “major … strategic companies that are attractive for investment” in its privatization plan by March 15, the Kremlin said on its web site. (The Moscow Times)

· President Dmitry Medvedev on Thursday called on leaders of big business to contribute to the modernization of the economy and participate in the creation of a "city of the future" to spur on innovation. Medvedev chaired a meeting of his commission to modernize the economy in Tomsk, where he met with leaders of the business community, including RusAl chairman Viktor Vekselberg, Onexim Group owner Mikhail Prokhorov, Rusnano chief Anatoly Chubais and LUKoil CEO Vagit Alekperov. (The Moscow Times)

· Russia’s government plans to increase control over exports of oil and oil products by requiring companies to provide detailed information about how they transport fuel. Specifically, officials want greater control over oil shipments via rail and road, the newspaper reported today, citing an internal government report about a meeting chaired by Deputy Prime Minister Igor Sechin last month. (Vedomosti)

· OAO Gazprom, the world’s largest natural-gas producer, won its last permit to build a $10-billion pipeline to Germany, its first link to western Europe that avoids transit countries blamed for previous supply disruptions. A Finnish regional agency today approved Nord Stream AG’s construction of the pipeline under the Baltic Sea, the final regulatory hurdle for the venture with BASF AG’s Wintershall AG unit, E.ON Ruhrgas AG and Nederlandse Gasunie NV. Zug, Switzerland-based Nord Stream AG earlier secured other permits from Finland, Russia, Germany, Sweden and Denmark. (Bloomberg)

· Lukoil President Vagit Alekperov has suggested introducing the notion of a national company in law so that private and state companies would have equal opportunities. A company that pays more taxes is "more national" for a country, he said. The government has been giving preferences to state companies - Rosneft and Gazprom - during the past few years which is limiting the opportunities of private companies, Valery Nesterov from Troika Dialog agrees. Lukoil needs new licenses but its access to resources is limited. (Vedomosti, For Equal Rights)

February 11, 2010

· Prime Minister Vladimir Putin promised Baltic statesmen Wednesday that Russia would curtail its sewage dumping and reassured them that the Nord Stream pipeline would not harm the Baltic Sea, as Finland was nearing a decision on the final permit for the pipeline. Putin, who was in Finland for a Baltic Sea environmental summit, also said Russia could extend its low duties on timber exports to Finland, an apparent attempt to encourage a positive pipeline verdict. (The Moscow Times)

· Mol Nyrt., Hungary’s largest refiner, is seeking to buy its own shares from Russian oil producers OAO Surgutneftegaz, Vedomosti reported, citing unidentified people familiar with the talks. Russian and Hungarian state officials discussed Mol’s offer for the stake two weeks ago and will continue those talks today. Surgut, Siberia-based Surgut bought 21.2 percent of Mol for about 1.4 billion euros ($1.93 billion) last spring. (Vedomosti)

· Oil from Western Siberia will not be transported via the Eastern Siberia-Pacific Ocean (ESPO) pipeline. Transneft, which has been trying for years to calculate prices making exports from this region to the east and to the west equally profitable has eventually dropped this idea. Now Transneft is confident that oil from Eastern Siberia alone will be enough to fill the pipe (Kommersant, page 12, Transneft Divides Siberia).

· Russian Prime Minister Vladimir Putin said visiting Finland that Russia might keep its timber export duties low within the next several years, contrary to what it intended to do earlier. Putin warned at the same time that the strategic decision to increase the duties remains unchanged. "We considered the possibility of introducing some mechanism separately for birch and for aspen. We don't want to do any harm to anyone, we just want to do something that's good for ourselves," he said. Businesses support the decision to preserve the current level of the duties but expect them to grow in the future (Vedomosti, Rates to be Frozen; Rossiiskaya Gazeta, page 3, Finnish Ebb).

February 10, 2010

· Russian firms nearly doubled their investment into the United States in 2008, but while U.S. assets can be a lucrative proposition, they are not for the faint of heart, said the director of a U.S. government agency that promotes foreign investment. (The Moscow Times)

· The presidential secretariat has drawn up a bill outlawing pre-trial arrests of businessmen on most economic charges, an official close to the presidential secretariat and a United Russia party member said. The bill may be submitted to the State Duma by high-ranking United Russia members, but this could also become President Dmitry Medvedev's initiative. The business community welcomes these steps but says this measure would be insufficient (Vedomosti, No to Jailing).

· NATO expansion presents a rather serious threat to Russia's national interests, the head of the security council Nikolai Patrushev says in an interview linked to the publication of the text of Russia's military doctrine by the daily. (Rossiiskaya Gazeta)

· Belarus offered OAO Gazprom, Russia’s state-run gas producer, control of a power generation project in exchange for a reduction in the price of gas supplies. Construction of the second block of the Berezovskaya GRES power plant, which supplies the Baltic countries as well as Belarus, may cost $490 million, the newspaper said, citing unidentified officials at Gazprom. Belarus is asking for the gas price to be lowered to $150 per 1,000 cubic meters from $168.80, the newspaper said. Gazprom may lose as much as $414 million in gas export revenue from such a price cut. (Kommersant)

· Despite a recent conflict with Belarus, Transneft is not planning to reduce the volume of Russian oil transited thorough that country to Europe even after the completion of the BPS-2 pipeline construction. The company plans to fill the pipeline with 30 million tonnes of oil currently being shipped to Ukrainian and Polish ports. This scenario is quite possible, but it could lead to excessive offer of Russian oil in the northwestern region, which is likely to cause its price to go down (Kommersant, page 11, Transneft to Flush Ukrainian Ports to Pipe).

· Vladimir Bogdanov, a member of OAO Rosneft’s board of directors, isn’t on a list of board nominees for the state-run company this year, Vedomosti said, citing an unidentified state official. Deputy Prime Minister Igor Sechin confirmed he received the list from the Ministry of Economic Development, Vedomosti said, adding that the deputy prime minister can add names to the list. The addition of Bogdanov, who is general director of rival OAO Surgutneftegaz, to Rosneft’s board last year was Sechin’s own decision. (Vedomosti)

February 9, 2010

· President Dmitry Medvedev on Monday nominated four candidates to replace incumbent regional leaders, including the son of Dagestan's long-serving former president, raising questions about his plan to refresh the regional leadership with new faces. (The Moscow Times)

· The conflict between Moscow and Minsk over discounts on the export duty on Russian oil is not over yet. An agreement on duty free shipments of 6.3 million tonnes for Belarus' needs, signed by deputy prime ministers Igor Sechin and Vladimir Semashko, could remain on paper if it is not ratified before February 15. Meanwhile, the spring session of the Belarusian parliament is to begin in April, and there was no indication on Monday that an emergency session could be called. If the February 15 deadline is missed, the duty will be levied in full again, and the parties will again meet at a negotiating table. (Kommersant, Page 2, Belarus May Miss Duty Free Oil).

· Uganda has invited Russia's Lukoil to work in the basin of Lake Albert. The company is weighing plans to develop several blocks, but has not made any final decision yet. The territory holds much promise, given the vicinity of oil fields with confirmed oil reserves, and the quiet situation in the country. (Kommersant, Page 12, Lukoil Invited to lake Albert).

· OAO Gazprom, Russia’s gas exporter, may gain a stake in the operator of Ukraine’s pipeline network. President-elect Viktor Yanukovych wants to boost Russian gas shipments to Europe via Ukraine to increase state revenue and plans to offer Gazprom and a group of European energy companies 33.3 percent stakes in a new pipeline operator, the newspaper said, citing an unidentified official from Yanukovych’s Party of Regions. Ukraine wants to increase the amount of Russian fuel it ships to Europe to 200 billion cubic meters a year from about 75 billion now. (Kommersant)

· Rosneft kept its grip firmly on the top spot among the world's publicly traded oil companies as it reported on Monday a 2.5 percent rise in hydrocarbon reserves for 2009 under PRMS rules. The state-controlled firm has been a chief driver behind Russia's recent surge in oil output, which last month remained above 10 million barrels per day, mainly thanks to Rosneft's huge newly commissioned Vankor field in the Arctic. (The Moscow Times, Reuters)

· The Nord Stream group said on Monday its initial schedule for commissioning a gas pipeline on the bed of the Baltic Sea “remains valid” despite the delay in development of Shtokman gas field, one of its resource bases. “Nord Stream is not dependent on Shtokman going on-stream, and the current project schedule, with the first line starting operations in 2011 and the second in 2012, remains valid,” a consortium spokeswoman told Reuters in e-mailed remarks. (Reuters)

February 8, 2010

· Prime Minister Vladimir Putin on Friday called on United Russia leaders to stay in touch with the people and warned the party against bamboozling voters by making promises it cannot keep, a week after a massive anti-government protest in Kaliningrad. "You must not promise everything to everybody all at once," Putin told top officials of the country's ruling party, which he chairs, at a meeting at his Novo-Ogaryovo residence. "You mustn't become 'promise makers,' who just make promises to throw dust in peoples' eyes so that you can get into power and start settling your own personal problems," he said, according to a transcript on the government web site. (The Moscow Times)

· Bashneft has submitted to the Federal Financial Markets' Service the mandatory offer for the buyback of common shares of five new subsidiaries - the Ufa oil refinery, the Novoufimsk oil refinery, Ufaneftekhim, Ufaorgsintez and Bashkirtnefteprodukt. In December and January it purchased them from the key shareholder - AFK Sistema paying 41.1 billion rubles. Back in April 2009 Sistema assumed control over the energy sector companies in Bashkortostan but did not make the offer stating difficulties with bank guarantees as the reason. Bashneft did not disclose the price of the offer. Its representatives do not say what the purchase of the shares of subsidiaries will cost it. (Vedomosti, Billions for the Vertical)

· Russia will cease to be the biggest market for Gazprom in 20 years. The corporation plans to boost sales by one third by 2030 with all this amount being exported. The management believes that the entire increase in domestic demand should be met by independent producers. As a result their share of the domestic market should go up to 33-40% up from 27% in 2008. (Vedomosti, Gazprom flees from Russia)

· Gazprom has been dragging for over two years out the acquisition of control over RUSSIA Petroleum that owns the license for the giant Kovykta gas field. The license may be recalled soon - the Natural Resources' Ministry has decided to check how the field is being developed. Kovykta is one of Russia's biggest fields with reserves of 2.1 trillion cubic meters. (Vedomosti, Time to recall; Kommersant, p. 11, Kovykta will go under Rosprirodnadzor)

· Shalva Chigirinsky and Ruslan Baisarov are negotiating an amicable agreement concerning a shareholder of Sibir Energy - Gradison Consultants which controls 23.35% in the oil company, a source close to Sibir has told Vedomosti. The talks have lasted for several months and may be completed before the end of March, the source said. Chigirinsky was unavailable for comments while Baisarov refused to make any comment. (Vedomosti, Peace at Sibir Energy).

· After Gazprom recognized the closure of the U.S. gas market the development of Russia's biggest Shtokman gas condensate field has been suspended. The operator of the first stage of the field, Shtokman Development AG, decided to put off the beginning of extraction by three years to 2016-2017. Experts believe that in conditions of the global financial crisis the question of raising funding for the project with a price-tag of $14 billion to $18 billion and vague prospects of gas markets remains open. (Kommersant, p. 9, Putting Brakes on Shtokman)

January 29, 2010

· 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. (www.elec.ru, ustanka.ru, www.yartpp.ru, Energetika Segodnya)

· The fall in energy consumption may cost sales companies a lot. The grids demand to be paid energy not for consumption, but for orders. Sergey Kochurov, CEO of Vologodsk Region Sales Company, wrote in a letter to Vladimir Putin that grid companies initiated court trials, demanding that sales companies pay the difference between the planned amount of services and the actual amount. He also mentioned that the initiators of the trials forgot about the real cut in industrial production in 2009, which resulted in the fall in consumption. (Vedomosti, Pay for orders)

· TGK-1 and Petersburg created a heating supply joint company, in which genco will have 70%. TGK-1 will provide the main heating systems; the city will give distributing supply lines. Analysts say the united company will find it easier to get good tariffs for heat. (Kommersant, TGK-1 and Petersburg Connect Pipes)

· The news agency reports that Alexander Negomedzyanov is appointed to a position of a deputy CEO at RAO ES Vostoka. Since May 2008 he has served as Enel OGK-5's First Deputy Director General and Managing Director Alexander Negomedzyanov. In RAO ES Vostoka Alexander Negomedzyanov will be responsible for financial and economic issues. (Interfax, Former Enel OGK-5 Top Manager is Appointed Deputy CEO at RAO ES Vostoka)

January 28, 2010

· Nornikel controlled OGK-3 lowered electricity output by 12.9% in 2009 to 29.5 billion kilowatt hours, the genco said. Sales of electricity on the wholesale market decreased by 6.9% to 42 billion kilowatt hours. Electricity output for regular contracts came to 20.2 billion kilowatt hours. (Kommersant, OGK-3 lowers electricity output in 2009 by 12.9%, sales down 6.9%)

· Fortum Oyj plans to spend 3 billion rubles in the four years through 1012 to boost energy efficiency in Chelyabinsk, Russia. The Finnish utility signed a contract with the Chelyabinsk regional administration, Fortum said in a statement. The biggest project covered by the agreement relates to the upgrade of the district heating system. (Bloomberg,Fortum to Invest 3 BLN Rubles on Chelyabinsk Energy Efficiency)

January 27, 2010

· Gazprom has halved daily gas supplies to the Krasnodarskaya power and heating plant owned by Lukoil to 2 million cubic meters, a Lukoil representative told Vedomosti. The plant is currently increasing the use of fuel oil, which is nearly three times as expensive as gas, to comply with its obligations on supplies of heat and power to consumers. Novoroscement and the Sochinskaya thermal power plant are also receiving less gas and gas supplies to the Belorechensk Mineral Fertilizers owned by EuroChem have also been reduced since Tuesday, a EuroChem spokesperson said. Gas supplies have been cut because gas consumption by households and housing and utilities companies in certain areas exceeded the gas transportation system's capacity due to extremely cold weather, a Gazprom source said. The gas monopoly has not reduced gas supplies in other regions but only recommended that consumers not take more gas than is stipulated by their contracts, the source said (Vedomosti, Gas Frozen).

· Former OGK-2 CEO Mikhail Kuzichev managed to defend himself from OGK-2 complaints, Vedomosti writes. Yesterday the Arbitrage court of the North-Caucasus district cancelled the decision of the Court of Appeal, which had stated that Kuzichev should return 446.5 million rubles to the Gazprom-controlled genco. The newspaper notes that the sides are in dispute about “golden parachutes”, the money Kuzichev received when he left the company. (Vedomosti, Reserve Parachute)

· According to sociological research, almost half of Russians are skeptical about Dmitry Medvedev’s idea to move to energy saving bulbs. Politicians see “no political reaction to unpopular measure”. Russians just act as consumers: they choose what is more profitable and practical. 45% of Russians, the majority of whom live in villages, have never used energy saving bulbs. (Kommersant, Russians Considered President’s Idea to Be Consumer Idea)

· Arbitrage court considered legal about 1 billion ruble tax claims to «Interregional Distributive Grid Company of Urals». Experts explained that the tax services tend to win in court in the majority of cases involving power sector companies. (Kommersant, Power Sector Specialists Got The First Billion)

· Shareholders of energy sales companies Donenergosbyt and Energosbyt Rostovenergo will transfer management to their main creditor – Rosenergoatom. The nuclear company intends to restructure debts of the sales companies totaling 3.7 billion rubles and to become owner of the companies in two years. (Kommersant, Rosenergoatom Solved Sales Problems)

· Russian insurance company ROSNO may accept an insurance claim by RusHydro of up to $200 million over an accident at the Sayano-Shushenskaya dam last year. The newspaper also notes that insurance money is usually paid after repair works, but in Sayano-Shushenskaya case the sides agreed on advance payments. The money will be transferred in parts. (RBC Daily, Sayano-Shushenskiy Insured Accident)

· Market Council may review the forecast for free prices on the day ahead market in February if the current cold snap in Russia continues, a Market Council source told Interfax. Whether the review will be conducted depends on the weather forecast for the second half of February, which has not been published yet. (Interfax, Market Council may review electricity price forecasts if cold snap continues in February)

January 26, 2010

· Officials calculated that power sector companies earned enough in 2009 and that is why they reduced tariffs for capacity, Vedomosti writes. The power sector is the only regulated industry where officials have not reviewed tariffs in 2009. The government is frightened of “deceiving” investors, who had invested 900 billion rubles, Prime Minister Vladimir Putin explained. In 2010 Ministry of Economic Development reduced tariffs for gencos. As a result of this the capacity tariff decreased by 4.5%. And although electric energy payment increased by 11 – 12%, gencos’ regulated prices increased by 4%. Pre-crisis tariffs in 2009 were left to gencos, electricity demand fell only by 4.6% and industry production decreased on the whole by 12%, official from the Ministry of Economic Development explains initiative to restrain prices growth. Decreasing coefficient to tariff is applied to all energy producers, he assures. In the forecast for 2010 – 2012 the ministry of economic development suggests saving salaries at the level of 2009 and decreasing fixed charges by 10%, the newspaper notes. According to the ministry’s forecast, decrease of tariff growth for genco’s is not critical. Construction becomes cheaper and gencos may earn on the free market, where prices are higher than tariffs, officials state. But gencos disagree. They say that credits, which are the main sources for investment program realization, and construction are as expensive as before. (Vedomosti, Capacity Became Cheaper)

· OGKs may boost their combined net profit fourfold by 2015 as the government deregulates prices, demand grows and generators cut costs, Renaissance Capital said Monday. (The Moscow Times, OGKs May Boost Profits)

· Atomenergomash (a Rosatom company) refused to buy a control stake in Energomash Group's parent company - Britain's Energomash UK Ltd. The memorandum for buying shares has expired, said an Atomenergprom (an Atomenergomash parent company) official: the deal cannot be closed due to the seizure of shares. In autumn 2009 a High Court in London decided to recover Energomash UK's securities pledged by its co-owner Alexander Stepanov to secure the loan from Kazakhstan's BTA Bank, the source said. The same court decided to liquidate Energomash UK, Interfax said. (Vedomosti, Deal disrupted).

January 25, 2010

· OGK-6 owned by Gazprom, failed to persuade the supervisory board of NP Market Council to set a high tariff for the turbine with a capacity of 110 mWt at State District Power Plant 24 (GRES-24). The regulator arguing that the generating unit in question was modernized but not newly built stuck to its position and set the tariff at 582,000 rubles per mWt per month. Nevertheless, analysts believe that even the lower tariff will pay Gazprom its investment back. (Kommersant, Gazprom underpaid for Capacity)

· Enel, which controls Enel OGK-5, is hoping that the government will confirm the rules for working Russia's long-term capacity market during the current quarter, Enel's acting director for Russia and CIS countries, Dominique Fache, told reporters. (Interfax, Enel Hopes Long-Term Russian Capacity Market Will Be Confirmed In Q1)

Russia Headline News

January 29, 2010

· Russia will need to borrow abroad for five years should oil prices remain at $70 a barrel, Finance Minister Alexei Kudrin said in remarks broadcast on state television channel Rossiya 24. Russia’s sovereign debt is now at about 8.2 percent of gross domestic product, Kudrin said in the interview. (Bloomberg)

· A U.S.-Russian government commission on civil society distanced itself from discussing human rights issues at its first meeting, focusing instead on corruption and the adoption of Russian children. (The Moscow Times)

· Talks on a landmark treaty to cut Cold War nuclear arsenals are nearly complete, Presidents Barack Obama and Dmitry Medvedev agreed in a telephone call Wednesday. The call, which the Kremlin said was initiated by Washington, followed comments by Foreign Ministry officials that negotiators from both countries were likely to agree on a successor to the Strategic Arms Reduction Treaty within weeks. “The heads of state in detail and objectively discussed topical issues pertaining to Russian-U.S. relations, including approaching signing, in the near future, a new treaty on strategic arms reduction,” the Kremlin said in a statement. It said the call was conducted in a “constructive” spirit. (Reuters)

· Police raided a Siberian environmental organization's office Thursday and confiscated several computers after a search for unlicensed software, a move that the group said was likely prompted by their criticism of a plan to reopen Oleg Deripaska's pulp plant on Lake Baikal. (The Moscow Times)

· Despite Kremlin denials, mounting evidence suggests that the Kremlin does indeed have links to an obscure organization overseeing the contentious construction of a luxury resort in the heart of what was supposed to be an environmentally protected nature reserve. (The Moscow Times)

· Poland's PGNiG spent several months trying to agree with Gazprom to increase Russian gas supplies. But it was not until last Thursday that Gazprom, PGNiG and Europol Gaz (the owner of the Polish site of the Yamal-Europe gas pipeline) announced the signing of a three-party agreement. The contract for gas supplies was extended until 2037, with up to 11 billion cubic meters to be supplied starting from 2010. This is about 80% of Poland's current consumption figure. In 2009 Poland received 9 billion cubic meters, Gazprom said. The parties did not disclose the price of deliveries. (Vedomosti, Warsaw Pact; Kommersant, page 11, Poland left with gas)

· Sakhalin-2's transfer to Gazprom has brought dividends to Russia too. Vedomosti has learnt that shortly after the deal the government received one preferred share in Sakhalin Energy and $1.352 billion in accrued dividend. "I want to thank our partners for the flexible approach," Russian Prime Minister Vladimir Putin said, when Shell, Mitsui and Mitsubishi agreed to cede control in Sakhalin-2's operator, Sakhalin Energy, to Gazprom for $7.45 billion. The authorities had been in conflict with foreign investors almost for two years, accusing them either of breaching the environmental regulations or increasing project costs, and threatening them with license recall and prosecution. (Vedomosti, A $1 bln secret)

· Gazprom Neft decided to gain some experience working on a shelf outside Russia. This year it is planning to start geological survey in the Equatorial Guinea on two maritime sites with resources currently estimated at 110 million tonnes of oil. It is also hoping to get a share in the geological survey project in the Gulf of Mexico in Cuba. All this will help the company to reach 10-15% in foreign production operations in a decade, Gazprom Neft said. (Kommersant, page 11, Gazprom Neft reaches a shelf)

· Gazprom Neft plans to enter Eni’s Elephant project in Libya and join projects in Iran, Cuba and Equatorial Guinea in the first half of 2010 as it seeks to surpass its Russian competitors in overseas projects, deputy chief executive Boris Zilbermints said Thursday, Interfax reported. Gazprom Neft and its partners in the Badra field in Iraq plan to spend about $200 million this year. (Bloomberg)

January 28, 2010

· As many as 1.6 million Russians lost their jobs and the unemployment level grew by one third in 2009, the Russian Federal Statistics Agency (Rosstat) has reported. Europe and the U.S. paid even more for the crisis (Vedomosti, Crisis Price).

· Unexpectedly speedy inflation growth in January has been spurred by excises on alcohol, whose increase accelerated inflation growth by nearly 25%, according to estimates by the Higher School of Economics' Development Center (Vedomosti, Drunk Prices).

· Investigators have dropped charges against a Chechen suspect in the killing of Paul Klebnikov, the former editor of Forbes Russian edition, a news report said Wednesday. (The Moscow Times)

· NATO's top officer said Wednesday that Russia had agreed to boost cooperation with the alliance in Afghanistan, including opening more transit routes for supplies to international troops and helping service Soviet-built helicopters used by the security forces. (The Associated Press)

· A customs union between Russia, Belarus and Kazakhstan is looking to create a single body that would replace the three countries' customs services, but a dispute is brewing over the distribution of customs duties, First Deputy Prime Minister Igor Shuvalov said Wednesday. (The Moscow Times)

· The government will hold a conference with representatives from oil companies in Surgut on Friday to address the filling of the Eastern Siberia-Pacific Ocean (ESPO) oil pipeline. The Finance Ministry for the first time officially reaffirmed on Wednesday that the terms and conditions of granting companies export duty benefits on oil from Eastern Siberia could be revised. However, this could threaten the implementation of ESPO's second phase, and therefore analysts believe the government will abstain from this step (Kommersant, page 2, MinFin Eyes Rosneft's Windfall Profits).

· Rosneft has discovered a new mineral field containing over 160 million tonnes of oil. The field named after N. Savostyanov is located within the Mogdinsky area in the Irkutsk region, and the company has already applied for a license, Rosneft's spokesman Nikolai Manvelov said. However, to start the field's development, the company needs guaranteed preferences, experts say (Vedomosti, One Third of Vankor; Kommersant, page 9, Rosneft Digs Down to Strategic Reserves).

· Offshore oil and gas fields belong to all Russian citizens rather than to Rosneft and Gazprom, Natural Resources and Environment Protection Minister Yury Trutnev said. In an interview with Vedomosti, Trutnev said he did not like it that the state monopolies are managing such fields on their own (Vedomosti, Interview with Yury Trutnev, Natural Resources and Environment Protection Minister).

· Russia's Urals oil blend has begun to regain its positions on international markets after its price dropped by nearly 10% from this year's maximum. On Wednesday, Urals cost $72.54 per barrel in Rotterdam, and the price on the domestic market grew even more significantly. Wednesday was probably the last day when February deliveries were sold, InfoTEK reported. The main transactions took place last week at 7,500 rubles per tonne, which is nearly 10% more expensive than the January deliveries (6,750-6,900 rubles), InfoTEK Director Natalya Shulyar said (Vedomosti, $34 per Barrel).

· The Nabucco gas pipeline running to Europe bypassing Russia will be filled with gas from Azerbaijan and Iraq at the first stage. Austria's OMV, the project's initiator, agrees to refrain from buying gas from Central Asian countries, as Russia still wields considerable influence on Turkmenistan and Kazakhstan. However, the Nabucco participants will also have to compete with Russia for Azeri gas (Kommersant, page 11, 'Nabucco to be Filled from Azerbaijan and Iraq').

· Russia and Belarus settled a nearly monthlong dispute over a new oil supply contract for this year, which came after Moscow agreed to a “series of compromises,” Deputy Prime Minister Igor Sechin said late Wednesday. (The Moscow Times)

· Gazprom may have to divert planned shipments of liquefied natural gas from its Shtokman project away from the United States to get higher prices elsewhere. Directors at Shtokman Development, which operates the Arctic project, will meet Feb. 5 to agree on a new gas-marketing plan for the offshore field, said Vladimir Dmitrov, chief technologist at Gazprom’s subsea division. They may also delay a final investment decision on the venture, he said. (Bloomberg, The Moscow Times)

January 27, 2010

· Russia will seek Western funding for a proposal to reconstruct 142 industrial and infrastructure facilities in Afghanistan built by the former Soviet Union. Russia plans to present the proposals in London tomorrow, the newspaper said, citing Russian envoy to NATO Dmitri Rogozin. Russia expects to get contracts for the projects without bidding in tenders, Rogozin told Kommersant. He added that financing the projects is a global issue. (Kommersant)

· The degree to which Russians trust businesses to do what is right dropped dramatically over 2009 — the most among the world's biggest economies, according to a survey released Tuesday. Russians’ trust toward business fell by 10 percent, according to the Edelman trust barometer, which gives a weighted sample of the opinion of an “informed public.” (The Moscow Times)

· Gazprom is losing clients because of problems facing the Hungarian gas trader Emfesz. Russian First Deputy Prime Minister and Gazprom Board Chairman Viktor Zubkov might bring up this issue at a session of a Russian-Hungarian intergovernmental commission in Budapest on Thursday (Vedomosti, Returning Market).

· Russia's Gazprom has again joined the top 10 largest companies operating on energy markets, according to PFC Energy's annual rating list of major world energy companies in terms of market capitalization. PetroChina has regained the highest position by replacing last year's leader, ExxonMobil. Investors are returning to emerging markets, which they viewed as too risky last year, experts say (Kommersant, page 11, Gazprom Returns to Energy Ten).

· Russia and Belarus will enter a third day of oil supply talks in Moscow on Wednesday as they seek an agreement on customs terms to avoid a disruption in deliveries. The negotiations, which started Monday, have not produced an accord, a government spokesman said Tuesday, adding that there are “no obstacles” to finding a solution. (Bloomberg)

· OAO GK Victoria, a Russian retailer, and OAO Russian Sea, a seafood producer and wholesaler, plan to sell shares in an initial public offering this year, Vedomosti reported, citing unidentified bankers. Victoria may sell as much as a 30 percent stake in new and existing shares in April or May. Renaissance Capital and Goldman Sachs Group Inc. plan to underwrite the sale, Vedomosti reported. Russian Sea, which scrapped an IPO plan in 2008, may also sell as much as a 30 percent stake and hired Renaissance Capital and VTB Group to manage the sale. (Vedomosti)

· The Russian Industry and Trade Ministry and the Economic Development Ministry have made the procedure of assembly of foreign cars in Russia stricter: major foreign automakers will no longer be entitled to preferences in importing components for cars assembled in Russia by the CKD method without planning to switch to their full-cycle production in the future. However, the new measure will apply only to those who have not yet started their projects in Russia, i.e. Hyundai, Peugeot-Citroen and Mitsubishi (Kommersant, page 9, Local Outcome).

January 26, 2010

§ Russian government paid $1 million to settle the Soviet Union’s remaining debt to foreign banks, a decade after restructuring $31.7 billion of obligations to the so-called London Club of creditors, the Finance Ministry said Monday. Russia made the payments under an agreement reached late last year with creditors who didn’t participate in the four debt swaps that Russia conducted after 2000, the ministry said. (The Moscow Times)

§ Federal Anti-Monopoly Service chief Igor Artemyev said Monday that the watchdog had selected five electronic trading sites that will host all tenders for state contracts beginning this year — a move aimed at stemming government corruption. As of July 1, electronic trading sites run by Sberbank, RTS, MICEX and the Moscow and Tatarstan governments will soon become the only venues where purchases by the federal government can be made, he said. (The Moscow Times)

§ Russia’s Finance Minister Alexei Kudrin has proposed reimposing a tax on oil from East Siberia fields two months after the government suspended the duty, Vedomosti reported, citing unidentified people familiar with the situation. Oil from 22 fields in Eastern Siberia wouldn’t be taxed until March 1, the newspaper added. The government may then levy a tax on oil from those fields at a lower rate than elsewhere or reduce the number of fields that are exempt from the tax, Vedomosti said. (Vedomosti)

§ Gazprom declared the disrupted transit to Europe over the January 2009 conflict with Ukraine a force majeure, which ruled out any claims by Europeans over short supplied gas. But it turned out that the liabilities of European clients to Gazprom in 2009 were reduced precisely by the amount short supplied, that is 4.5 billion cubic meters (their contracts based on the "take or pay" principle). This is done "under the contractual terms," according to the documents prepared for a meeting of the Gazprom board of directors, two sources close to the company said. ("Lost billions" Vedomosti).

§ The first shipment of oil exported through the ESPO pipeline in December turned out to be more expensive than the Urals and Brent grade, too. This year, though, traders are already offering a discount on it, not a bonus. ("Lining up with Dubai" Vedomosti).

§ On Tuesday the Gazprom board of directors will consider its marketing policy in the current financial and economic climate. The company's management believes that shale gas has turned the scarce U.S. market into a self-sufficient one, and that the surplus of liquefied gas undermines the competitiveness of the Russian gas in the EU, according to Kommersant. So far the monopoly's management failed to find any revolutionizing ideas to overcome the negative trend that jeopardizes the Shtokman field development project. (Page 1, "Gazprom closes America" Kommersant).

January 25, 2010

· President Dmitry Medvedev on Friday promised a few cosmetic changes to the political system but firmly defended the results of disputed regional elections in October and the country’s much-criticized election system. Medvedev, who articulated his allegiance to the course of his predecessor, Vladimir Putin, spoke during the first meeting on Russia's political system in at least a decade. The meeting of the State Council was attended by the leaders of all seven of the country's registered political parties and a group of governors. (The Moscow Times)

· Decline in oil and gas revenues will strip Russian state coffers of their old solid basis. Spending will contact, its effectiveness will grow and the tax system will have to be changed, the Finance Ministry believes. In the next decade oil and gas budget revenues will go down by 3.5-4% of the GDP, Russian Deputy Prime Minister and Finance Minister Alexei Kudrin said at a conference at the Academy of the National Economy - about 2.5% in the national resources' extraction tax and 1-1.2% in export duties. (Vedomosti, Taxes may be raised, Kommersant, p. 1, Alexei Kudrin promises Russia Burgeoning Economic Growth).

· Gazprom has applied the take-or-pay principle in full to one of its biggest European customers, Germany's E.On. E.On was supposed to pay $500 million to $700 million for the gas unused in 2009. However, due to the delay in the swap of assets related to Yuzhno-Russkoye field Gazprom met the Germans half way. As a result E.On is due to pay only $140 million to Gazprom by the end of January. (Kommersant, P. 11, E.On to foot Gazprom Bills)

· TNK-BP has decided who is going to replace Maxim Barsky who is leaving the post of vice president for strategy and development in order to head the company starting next year. Starting with February Stan Miroshnik who was responsible for M&A in the oil and gas sector at Morgan Stanley will be in charge of strategic issues at TNK-BP. He will be the first manager on the team which Barsky is starting to form. (Kommersant, p. 9, Maxim Barsky replaces himself with Stan Miroshnik)

· Russian companies placed Eurobonds worth $15.2 billion in 2009, analysts from Cbonds have summed up. This is almost one third less than in 2008. ($21 billion). There were more debt swaps and settlements resulting from defaults as ever, Cbonds manager Konstantin Lysenko says. (Vedomosti, From the Club to the Market)

· Central Bank First Deputy Chairman Alexei Ulyukayev expects the Russian economy to perform more impressively in 2010 than Finance Minister Alexei Kudrin - oil prices exceeding budget estimates will almost inevitably reduce by budget deficit to 5%. But starting with the second half of 2010 the pre-crisis problem of the absence of long-term domestic financing will become bad news for economic growth and the monetary and lending policy. Its solution depends on the speed and quality of institutional reforms and no breakthroughs can be expected in this respect in 2010. (Kommersant, p. 2, Crisis to be followed by Growth Ailments)

January 22, 2010

· OGK-5 will pay its shareholder for the brand, the subtitle states. Italian roots cost OGK-5 a lot. OGK-5 should pay for everything from engineering services to access to the Enel website. At the previous board meeting a deal on genco’s usage of Ene’s trade mark was approved. Experts note that similar earlier agreements with foreign parent companies attracted the attention of Russian tax services. (RBC Daily, Do It The Italian Way)

· The government has adopted a federal program on New Generation Nuclear Energy Technologies for 2010-2015 and for the period until 2020, Rosatom Director Serge Kiriyenko said.The total amount of funding for the program for the period until 2020 is projected at 128 billion rubles, including 110 billion from the state budget. In 2010, 3.17 billion rubles will be allocated for the program. The amount of funding has been agreed upon with the Finance Ministry, Kiriyenko said. (Interfax, Vedomosti, Russian govt adopts federal program on new generation nuclear energy technologies)

· Rosatom will this year start up the reactor at Iran's long-delayed Bushehr nuclear power plant, its head, Sergei Kiriyenko, said Thursday. The Russians agreed to build Iran the 1,000-megawatt nuclear power plant at Bushehr 15 years ago, but delays have haunted the $1 billion project, and diplomats say Moscow has used it as a lever in relations with Tehran. "2010 is the year of Bushehr," Kiriyenko told reporters after a Cabinet meeting. (Reuters, Rosatom Says Iran Nuclear Plant Will Start in 2010)

January 21, 2010

· The electricity sector will require $500 billion to $550 billion of investment over the next decade to meet future demand, according to a survey released by the KPMG consulting group on Wednesday. "The Russian electricity system — still essentially the result of 70 years of Soviet central-planning — is in dire need of new investment, for both a renewal of assets and an overhaul of regulations and operations, if it is to realistically meet the demands of the next decade," KPMG said in a report on a survey of 65 senior executives operating the power sectors of Brazil, Russia, India and China. "There are official plans for even bigger investment programs, but our analysis reveals that realistically Russia needs roughly 39 gigawatts of new generating capacity, plus significant modernization of the 220 gigawatts currently installed," said Andrew Korn, head of energy at KPMG in Russia and the CIS. He added that the transmission and distribution network, comprising some 3.2 million kilometers of cables stretching across 11 time zones, needs strengthening and renovation as well. (The Moscow Times, Energy Sector Needs $550Bln Investment)

· Rosatom is ready to build a medium nuclear power plant (VBER 300) without Kazakhstan, Rosatom Director General Sergei Kiriyenko said. "Kazakhstan has not made a decision, and the Kazakh ministry has not defined its priorities. If the power plant is not built there, we will find another partner," Kiriyenko said. (Interfax, Rosatom ready to build medium NPP without Kazakhstan – Kiriyenko)

· The Federal Financial Markets Service (FFMS) has registered a supplementary issue of 1.6 trillion shares in Inter RAO in closed subscription intended for Vnesheconombank (VEB), nuclear regulatory body Rosatom, and state property fund Rosimushchestvo, the FFMS press service said. (Interfax, FFMS registers Inter RAO supplementary issue for VEB, Rosatom, Rosimushchestvo)

January 20, 2010

· The presidium of the Higher Arbitration Court has ruled that Nomos Bank will have to return 710 million rubles to OGK-2, a company belonging to Gazprom. The bank received the money under the power company's option program in 2007. The ruling is not subject to revision. It might also enable OGK-2 to get back 1 billion rubles in promissory notes, which it passed to Nomos Bank in 2008 as a guarantee on the implementation of its option program (Kommersant, Gazprom Obtains Resources for OGK-2)

· The media continues reporting about Gazprom Energy Holding’s decisions concerning GRES-24. The news agency writes that the holding resold a price request for GRES-24 (block № 7 of OGK-6’s Ryazanskaya GRES) in the framework of competitive selection. (Interfax, Gazprom Gave a Request for GRES-24)

· Gazprom-controlled TGK-1 plans to cut its investment program in 2010 by 16% compared with 2009, the genco's CEO, Boris Vainzikher said. Vainzikher also told journalists on Tuesday that TGK-1's net profit according to Russian accounting standards (RAS) should come to around 3 billion rubles. “2009 was successful from a financial point of view. Net profit will be close to 3 billion rubles," Vainzikher said citing preliminary financial results. The genco's sales revenue for 2009 will come to around 37 billion-38 billion rubles and is expected to top 40 billion rubles, he said. It was earlier reported that in 2008, TGK-1 had posted around 231 million rubles in RAS net profit. (Kommersant, TGK-1 Cuts Investment Program)

· Vladimir Putin has signed an instruction to endorse the resignation of Vyacheslav Sinyugin as deputy energy minister, the government's press office said. Sinyugin, who was responsible for the power industry at the ministry, had resigned of his own accord. Putin also endorsed the appointment of Andrei Shishkin, former head of the Tyumen Power Sales Company, in place of Sinyugin. Reports that Sinyugin might step down surfaced at the start of September, in the wake of the August 2009 accident at the Sayano-Shushenskaya GES. Sinyugin was in charge of RusHydro prior to being appointed deputy energy minister, and had worked for RAO UES in his time. (Interfax, New power chief appointed at Russian Energy Ministry)

January 19, 2010

· Gazprom Energy Holding (which owns main Gazprom energy assets) may reject the launch of a new block at GRES-24 (block N7 at Ryazanskaya GRES, OGK-6) because the Market Council has not approved the price tag to pay for new capacity, Holding’s head Denis Fedorov told Interfax. Fedorov added that GRES staff had been informed that if the new block didn’t pass competitive capacity selection for 2010, new employees who should have worked on the block would not be taken on. During competitive selection, the Market Council did not believe that Gazprom Energy Holding’s price had economic foundations. Desputes between the Market Council and Gazprom arose because of capacity classification and capacity prices. The partnership considers the block at GRES-24 to a modernization, whilst Gazprom considers it new capacity. (Interfax, Gazprom May Reject Launch Of New Block At GRES-24 Because Of Market Council Decision)

· Mosenergosbyt bought Gazprom’s Mosenergo office in south-west of Moscow with total area of 1212.6 square meters for 87.8 billion rubles, genco’s representative said. (Kommersant, Gazprom’s Company Sold Office)

January 18, 2010

· Gazprom may not receive 736 billion rubles from Nomos Bank, which the former OGK-2 management has spent on the realization of an option program. The Courts of all three instances supported the monopoly, which is demanding to have the money returned, but colleges from the High Arbitrage Court decided to review previous court decisions. (Kommersant, OGK-2 Options Go to Presidium)

· Russian electricity consumption rose 6.83% year-on-year in the first working week of this year to 20.025 billion kilowatt-hour, System Operator said. Russia generated 22.43 billion kWh in the period January 11-17, up 6.86%. Consumption, mainly by households and non-stop production lines, grew 5.5% year-on-year in the holiday period of January 1-10, and output rose 5.4%. Power consumption in Russia fell 4.6% in 2009 to 964.4 billion kWh, and production fell 4.8% to 978.6 billion kWh. It was thought consumption and production would rise 4%-5% per year, but it started to fall at the end of 2008 when the crisis hit in. (Interfax, Russian electricity consumption up 6.8% in first working week of 2009)

Russia Headline News

January 22, 2010

§ Russian Technologies is preparing to sell off noncore assets beginning this year, chief executive Sergei Chemezov told Vedomosti, and the state corporation will likely start with property held by AvtoVAZ. "We have an interest in having a clear ownership structure for the state corporation's holdings, allowing them to operate effectively in their core businesses and minimize costs not related to production, which will improve the companies' financial results. Revenue from the sale of noncore assets will go toward financing and developing innovative programs and new, high-tech production," Chemezov said. "In essence, this is our modernization budget." (Vedomosti)

§ Russian Finance Minister Alexei Kudrin expects the share of oil and natural gas in gross domestic product to fall to 14 percent within a decade from about 25 percent now. Kudrin also said at a conference in Moscow that Russia’s economy will grow about 3 percent this year if the price of oil is $65 a barrel. (Bloomberg)

§ Russia must take steps to prevent an “obvious excess of liquidity” in the economy from overheating asset values in the first half of the year, said German Gref, head of the country’s biggest bank. “Today the herd instinct in the presence of an utterly excessive money supply is leading to the artificial pumping up of the price of the stock market and all types of commodities, and it’s obvious that we’re going to see another expansion of this bubble,” Gref, chief executive officer of OAO Sberbank, told a conference in Moscow today. (Bloomberg)

§ BP would like to explore for oil and gas off Russia’s Arctic coast after resolving a shareholder dispute at its biggest project in the country. The company has “been very active in the offshore Arctic regions, which represent an important new frontier for the industry” in Canada, Alaska and Norway, Chief Executive Officer Tony Hayward said in a speech in Moscow today. “Building on this expertise, we would certainly welcome the opportunity to deploy our technology and skills to explore and produce Arctic resources in Russia.” (Bloomberg)

§ The drop in oil prices and profits did not prevent TNK-BP from paying $3.3 billion in dividends to its shareholders in 2009. This amounts to a quarter of BP profits in the first nine months of last year. ("No Skimping" Vedomosti)

§ U.S. ConocoPhillips, a partner of Lukoil, is disappointed with one of its joint projects with the Russian company. Its report reflects the declining value of the JV with Lukoil that is developing the Yuzhno-Khylchuyu field because its reserves proved lower than estimated. This can reduce the term of operations at the field which extracts almost 10% of Lukoil's oil. (p. 11 "ConocoPhillips overestimated Lukoil" Kommersant)

§ Gazprom may change its partner in gas deliveries to Turkey in 2011 given the liberalization of the domestic market in that country. The $1.5 billion contract for the delivery of 6 billion bcm of gas will go to the private Turkish group Aksa instead of the state-owned Botas, the management claims. Analysts find the company a promising partner considering that together with Aksa Gazprom plans to take part in the privatization of Turkish gas networks. (p. 11 "Gazprom to give a Share to Partner" Kommersant)

§ Mikhail Shubsky, head of PGNiG, and Alexander Medvedev, Gazprom Export CEO, have temporarily come to the leadership of the managing board of Europolgaz, the operator of the Polish section of the Yamal-Europe gas pipeline. The Polish side recognized that after five years of bickering over the transit rate only this solution can help break the stalemate. According to Kommersant, the sides have sent an application indicating the tariff with all the due authorizations of the Polish and Russian sides to the local energy regulation department. (p. 11 "Gazprom and PGNiG get Transit of Confidence" Kommersant)

§ The government rejected a proposal by ExxonMobil to invest $3.5 billion this year in the Sakhalin offshore fields, putting the oil producer's plans at risk again. (The Moscow Times)

§ TNK-BP and Russia’s four other largest oil producers may spend $900 million to start developing the Junin-6 heavy oil field in Venezuela’s Orinoco Belt during the next three years. The cost would be split equally among the five members of Russia’s National Oil Consortium. (The Moscow Times)

§ Gazprom agreed to “slight modifications” to gas contract terms after discussions with European clients including Germany’s E.On. The contracts haven’t been renegotiated. (The Moscow Times)

January 21, 2010

· The government on April 15 will discuss the establishment of state monopoly on the production and circulation of alcohol, which is clear from a plan of cabinet and cabinet presidium meetings for January to June 2010. President Dmitry Medvedev on August 12 2009 instructed the government to discuss this issue by March 1 2010. (Vedomosti, Raising the Degree).

· Russian Technologies, a state holding company with interests ranging from cars to missiles, seeks to raise $2 billion to $4 billion this year selling assets. Moscow-based Russian Technologies has 443 enterprises and plans to sell some of the ones that “aren’t performing,” the newspaper said, citing Deputy General Director Igor Zavyalov. (Vedomosti)

· A Spanish initiative to ease visa requirements for Russians and EU citizens alike has enough political support among European leaders to continue even after Madrid's six-month EU presidency ends this summer, EU officials said. (The Moscow Times)

· President Dmitry Medvedev has urged his Belarusian counterpart Alexander Lukashenko to guarantee crude shipments to Europe. Medvedev sent a letter on the terms of shipments to Lukashenko at the weekend, and he proposed that the Russian and Belarusian governments make a joint statement on the "uninterrupted transit of Russian energy resources to Europe." A draft joint statement was attached to the letter. The two countries are expected to guarantee stable supplies of Russian crude to Europe, a federal ministry official told Vedomosti. (Vedomosti, How Can Europe be Appeased?)

· Beltransgaz is expecting Gazprom to announce fresh discounts on gas, and it has sent the Russian gas monopoly additions to the current contract, Beltransgaz General Director Vladimir Mayorov said on Wednesday. The letter expresses the hope that Russia in 2010 will increase the discount from the current 10% to 25%-30%, so gas for Belarus will cost about $150 per 1,000 cubic meters as last year, he said. But Gazprom is not ready to revise the contract. (Vedomosti, Minsk Haggling).

· While Russia and Belarus have locked horns over the principles of shipping oil to the Mozyr and Naftan-Polimer oil refineries, Kazakhstan has offered to act as a supplier. Kazakhstan also wants to buy into the oil refineries, which has also drawn the attention of Lukoil and Rosneft. But experts see Kazakhstan's statement as purely political, and plans for shipments unfeasible. (Kommersant, Page 11, Kazakhstan Offers to Replace Russia).

· Roman Abramovich, Russia’s second- richest man, will gain about 1.5 percent of Canada’s Kinross Gold Corp. in exchange for two gold deposits in the Arctic Chukotka region where he was governor until 2008. Kinross agreed yesterday to pay companies “related” to Abramovich’s Millhouse LLC $368 million for the rights to the Dvoinoye and Vodorazdelnaya fields across the Bering Strait from Alaska, including $203 million in new Kinross shares, Canada’s third-largest gold producer said late yesterday. (Bloomberg)

January 20, 2010

· Vladimir Mau, the chief government economic expert, has criticized one of the key government anti-crisis measures, i.e. support for the so-called backbone enterprises. Speaking about the crisis on the whole, Mau predicted ten years of turbulence (Vedomosti, Enemies of Modernization).

· The budget revenues in the second half of 2009 were higher than was previously expected, which enabled the Finance Ministry to report good implementation of the 2009 federal budget. The revenues turned out to be 9% higher than the target, and the yearly budget deficit proved to be 5.9% of GDP, which is lower than was planned. However, this success is due purely to growth in oil prices, as the revenues in other economic sectors failed to reach quite modest targets of the 2009 budget (Kommersant, page 2, Finance Ministry Does Best with Budget).

· Prime Minister Vladimir Putin on Tuesday proposed a reform of veterinary regulations that would curb corruption, protect manufacturers and cut costs. "[We] should switch over to modern, market-driven forms of control, make use of accreditation, insurance mechanisms and the capabilities of independent institutions to provide the evaluation of product quality and security," he said Tuesday chairing an agriculture meeting. "The reduction of excessive bureaucracy should be accompanied by an increase in the responsibility of all market participants." Putin said a total of 8 billion rubles ($270 million) had been spent by the agricultural sector on certificates and permissions in 2009 alone. (The Moscow Times)

· President Dmitry Medvedev on Tuesday promised to step up the fight against the country's dramatic demographic decline, boosted by the news of the first annual population increase since 1995. But Health and Social Development Minister Tatyana Golikova warned that a host of negative factors need to be tackled, including a looming drop in women in their fertile years and sky-high abortion rates. (The Moscow Times)

· TNK-BP is seeking to sell dollar bonds, according to a banker with knowledge of the transaction. The Moscow-based company hired Barclays Capital, Calyon and Royal Bank of Scotland Group Plc for investor meetings starting on Jan. 22, which may be followed by a sale of benchmark dollar bonds, according to the banker, who declined to be identified. A benchmark sale generally means at least $500 million. The sale may become the first offering of foreign-currency debt by a Russian company this year, Bloomberg data show, and the company’s first since October 2007. (Bloomberg)

January 19, 2010

· NATO is planning to rebuff a Russian proposal for a new security agreement on the grounds that it would give Moscow veto power over allied military planning, a news report said Monday. The draft treaty, which Foreign Minister Sergei Lavrov gave to NATO Secretary-General Anders Fogh Rasmussen on Dec. 4, stipulates that participants should not engage in defense planning in a way that threatens the security of other parties. (The Moscow Times)

· President Dmitry Medvedev on Monday ordered the government’s budget watchdog to audit 2.5 trillion rubles ($84 billion) in planned investments by state-run companies, Interfax reported. Medvedev told Audit Chamber officials that he is not “indifferent” to how the “astounding” amount of money is being spent, the service reported. Audit Chamber chief Sergei Stepashin told Medvedev that he already plans to audit projects by companies including RusHydro and Rusnano this year. (Bloomberg)

· Russia will have to spend hundreds of billion of roubles to meet Putin's demand to modernize systems of coordination of the armed forces. (Nezavisimaya Gazeta)

· Prime Minister Vladimir Putin lifted some restrictions imposed to reduce pollution at Lake Baikal, allowing billionaire Oleg Deripaska to restart a pulp plant at the UNESCO World Heritage Site. A government decision signed by Putin yesterday excludes pulp, paper and cardboard production from a list of activities near Baikal, the newspaper said, citing an unidentified executive at Deripaska’s OAO Baikalsk Paper and Pulp Mills, which halted production in October 2008. Russia's ecologists want to challenge Prime Minister Vladimir Putin's decision to reopen a pulp and paper plant. (Kommersant)

· Deputy Energy Minister Vyacheslav Sinyugin in charge of the electricity sector is quitting, the ministry reported. But it said nothing about when this will happen and who will replace him. A ministry spokesman only said that it is the government that will decide on this. (Vedomosti, Sinyugin Replacement; Kommersant, Page 9, Sergei Shmatko Replaces Deputy).

· Gazprom's ex-partner Dmitry Firtash has a chance to regain the Hungarian gas trader Emfesz. A court in Budapest on Monday ruled that last year's sale of the asset was conducted with violations. (Vedomosti, Firtash Chance; Kommersant, Page 11, Dmitry Firtash May Regain Hungarian Trader).

· Sberbank could become Russneft's co-owner, Vedomosti has learned. In this case, Sberbank, as the main creditor, will get a symbolic 1%-2% stake to shape parity between Mikhail Gutseriyev and another prospective shareholder - AFK Sistema. (Vedomosti, Russneft Divided into Three).

January 18, 2010

· The shadow economy remains unaffected by the crisis - while the government is registering a decline in the GDP, experts point out to the growth of the informal sector. The Russian GDP in 2009 stood at 39.2 trillion rubles (estimate of the Economic Development Ministry) with the share of the shadow economy being 7.8 trillion rubles or $247 billion which is comparable with the GDP of Portugal, or Hungary and Slovakia taken together ($243 billion, and $155 billion plus $95 billion in 2008 respectively, according to World Bank files). (Vedomosti, The Shadow of the Economy)

· Less than a month has passed since the introduction of common import duties of the Customs Union and Russia is already suggesting changes. Russia will suggest amendments in the common customs tariff introduced as of January 1 to Belarus and Kazakhstan at the January 27 session of the Customs Union Commission. There is a corresponding item on the agenda. The changes would apply to the rate on palm oils, petrochemicals, throttles, coated paper and polycarbonates, senior official from the Economic Development Ministry Alexei Likhachyov said without going into details. (Vedomosti, Rate found Unsuitable)

· If the price of Russian oil transit via Belarus soars, Belarus may be denied supplies of duty-free fuel, Russian First Deputy Prime Minister Igor Sechin has warned Minsk. His letter describes as a gesture of goodwill Russia's intentions to export 6.3 million tonnes of oil to Belarus duty-free for its domestic needs (Minsk is asking for 8 million tonnes) and reminds it that transit tariffs require mandatory coordination with Moscow. (Vedomosti, Exchange of Threats)

· Mikhail Gutseriyev, the founder of Russneft, continues to regain control over the company. According to Kommersant, he made a comeback to the Russneft Board of Directors. There is also a reshuffle within the company. Several top managers may be leaving, namely Vladimir Svaikin, the vice president for upstream operations. (Kommersant, p.1, Mikhail Gutseriyev cleansing Russneft)

· Roman Abramovich's Millhouse company is transferring its stakes in Infrastructure and Mosinzhstroy companies specializing in infrastructure construction to business partner Valery Abramson in exchange for his stakes in several Millhouse developer projects worth about $70 million. The capitalization of the infrastructure companies remains virtually unchanged because the business relies on state orders the sizes of which have contracted during the crisis, experts say by way of explaining the reasons for Abramovich's decision. (Kommersant, p. 9, Roman Abramovich turns away from Road)

· OGK-2, controlled by Gazprom, and Mikhail Abyzov's E4 group are close to settling a conflict over the construction of the Stavropol power plant. The parties plan to ink an amicable agreement soon, under which E4 will switch to the construction of Serovskaya power plant. The worth of the contract will shrink by half down to 16 billion rubles. (Kommersant, Page 11, OGK-2, E4 Strike Peace Deal).

· Inter-regional grid company IDGC Holding plans to work out a strategy for the development of a Russian distribution-grid complex for the period until 2030 by mid-year, company chief Nikolai Shvets told journalists. The main aim of this strategy will be to cut to a minimum the losses incurred in transporting electrical power and developing infrastructure, Shvets said. Issues concerning company consolidation, a possible move to a single stock, attracting a foreign investor, and other strategic aspects may also be covered, he said. (Kommersant, IDGC Holding to work out distribution-grid complex development)

· The newspaper continues speculating on Mikhail Kuzichev’s “golden parachutes”. Former OGK-2 CEO achieved cancellation of Court of Appeal decision to levy 446.5 million rubles. (Kommersant, Mikhail Kuzichev will struggle with OGK-2)

· An accident at Sayno-Shushenskaya GES helped Siberian gencos to earn a lot. For example Eurosibenergo’s electric energy output increased by 14%. This allowed the company to become second in electricity output after RusHydro. Analysts say that till Sayano-Shushenskaya GES is resored and Boguchansk GES is built, Eurosibenergo (which is a part of Deripaska’s En+) will show record results. (RBC Daily, Deripaska’s generator)

February 4, 2010

· The Russian Energy Ministry expects the long-term capacity market to begin operating next year, a senior ministry official said. The long-term capacity market will assure investors that investment to build new capacity is recovered. The discussion of the rules governing operation of the market have continued for over a year. The Energy Ministry and Market Council have prepared no less than four concepts, but so far none of them has been approved. Approval of those rules is one of the main conditions for gencos to sign contracts to provide capacity that sets out their investment commitments. (Interfax, Long-term capacity market should begin operating in 2011 – Energy Ministry)

· Siberian gencos accused UC Rusal, which consumes one third of their production, of price manipulation. As a result gencos lose 1 million rubles a day. Rusal’s strategy is simple. The company reduced the number of bids in the main segment of the market. They buy the energy they lack the next day on the balancing market, created for those whose bids have not been carried out. (Vedomosti, Bought expensive – paid less)

· The newspapers write about an accident at Mosenergo’s heat power plant which happened yesterday. The accident, which could have affected the heat supply of 1.5 thousand buildings, was caused by out of date equipment. VTB Capital analyst Mikhail Rasstrigin told RBC Daily that despite decisions taken after Sayano-Shushenskaya accident, little is done in practice. On the whole, the state of affairs in the Russian power sector remains the same, equipment is out of date. (RBC Daily, Vedomosti, Symptoms Remain)

· RusHydro boosted production of electricity by 1.7% in 2009 to 81.608 billion kilowatt hours, the genco said citing earlier statistics on last year's results. Commercial production of electricity went up by 1.8% to 80.112 billion kilowatt hours. (Interfax, RusHydro boosts electricity output by 1.7% in 2009)

February 3, 2010

· As the result of anomalously low temperatures in Russia in January electricity consumption reached record level in a number of energy systems. For example, on January 28, 2010 electricity consumption in St. Petersburg and Leningrad region totaled 7402 mega watts. The previous record was 6879 mega watts in 2006. (RBC Daily, Consumption Beats Records)

· In January electric energy production increased by 7% compared to the same period in 2009. (Vedomosti, More Electricity)

· RusHydro put aside funds for modernization of Mainsk GES, RBC Daily writes today. Project of Mainsk GES modernization, which Oleg Deripaska suggested to finance in November, will be implemented by RusHydro. 250 million rubles are foreseen in genco’s investment program, approved by the Ministry of Energy. (RBC Daily, On Deripaska Initiative)

· Pro-democracy movement Solidarity is opening a new front in its attack on the government, opposing an ambitious plan to invest $33 billion to build nuclear power stations through 2020, Vladimir Milov, one of the group’s leaders, said Tuesday. Milov, a former deputy energy minister, pounced on the efforts to construct 26 nuclear power stations, saying they endanger national security; are unnecessary because of the abundance of natural gas to power electricity generation; and brew environmental concerns in areas where they will operate. (The Moscow Times, Solidarity Will Oppose Nuclear Power Plants)

· Enel is ready to manage energy assets in Russia, Enel's Country Manager and Chief Operations Officer for Russia and the CIS Dominique Fache, told reporters. "We have received proposals from owners," Fache said. They could involve individual power stations or groups. However Dominique Fache did not specify which energy assets he meant in particular. There will be another phase of asset redistribution and consolidation in the medium term in Russian power market, he said. "In from one to three years, when some results of the previous step are known, another round of privatization will begin," he stated. Whether Enel might take on the management of new energy assets will depend on how the market stands, Fache said. (Interfax, Enel Ready To Manage Energy Assets In Russia If Market Warrants)

February 2, 2010

· Mechel Energy plans to increase the amount of steam coal used at its electric power plants by 60% by 2015, which will allow the company to almost fully spend the industrial coal product at its thermal power plants. According to analysts' estimates, Mechel will have to invest about $800 million in the construction of new capacity for burning 1.5 million tones of coal. (Kommersant, Interfax, Mechel will Burn Everything)

· Inter RAO acting chairman Boris Kovalchuk was elected head of OGK-1 board of directors. He replaced Evgeny Dod, who currently heads RusHydro. (Interfax, Inter RAO Acting chairman heads OGK-1 board)

· The news agency reports that Fortum shareholders will reelect its board of directors on March 25, 2010. Joshua Larsen, former managing director of investment group Alemar, is a nominee to the Fortum's board for the year 2010. The media outlet briefly mentions Enel as one of foreign investors in the Russian power sector. (Interfax, Investment Banker, Former Alemar’s Manager Joshua Larsen May Become Fortum’s Board Member)

February 1, 2010

· RusHydro and RusAl that together are building the Boguchany energy and metals association (BEMO) are close to settling their dispute. According to the knowledge of Kommersant, they may amend the investment agreement in February to finalize its parameters and the responsibilities of the sides. Besides, the project will get one more partner - Vnesheconombank which is meant to help with financing and offer additional guarantees of its successful completion. (Kommersant, RusHydro and RuSal fix BEMO)

· The media reports that Gazprom will pay for a purchase of 51% of SeverEnergia $1.2 billion by March 31, 2010. The media also provides the background of the deal. (Quote.Ru, Gazprom Will Pay By March 31, 2010 $1.2 Bln For 51% Of SeverEnergia)

· Ministry of Internal Affairs of Khakasia has filed a law suit against the management of Hydroenergoremont. The company conducted repair works at Sayano-Shushenskaya GES. But ministry representatives insist that this is not connected with the August accident at Sayano-Shushenskaya GES. The media notes that Hydroenergoremont had repaired the second hydro unit, which was the cause of the accident. (Vedomosti, Caught Contractor)

· Several media outlets write today about the Market Council and the long-term capacity market. Interfax reports that the Market Council prepared corrections to the concept of long-term capacity market and suggests setting price-cap for capacity building in accordance with contracts on capacity provision. Both the news agency and Vedomosti note that The Market Council will check by the end of February whether there has been price manipulation on the energy exchange in Russia. Continuing the topic RBC Daily states that the launch of the long-term capacity market, which gencos have been waiting for more than a year, may be postponed again. Not having agreed on prices, the authorities put additional ecological requirements for capacity. VTB analyst Mikhail Rasstrigin comments that the long-term capacity market is necessary for gencos, which have obligations to put new capacity into operation, and that is why despite setting new requirements, they expect quick agreement. But if the new requirements appear again, Russia may not launch its long-term capacity market for the second year in a row, RBC Daily comments. (RBC Daily, Interfax, Vedomosti, Long wait for promises)

· Belarusian electricity concern Belenergo and Russian Inter RAO signed a contract for 2010 on delivery of electricity to Belarus and its transit through that country in Moscow on Friday, Belarusian Energy Ministry spokeswoman Lyudmila Zenkovich said. The terms of the contract are not yet subject to disclosure, she said. Inter RAO's press office confirmed the deal had been signed, but declined to disclose any details. (Kommersant, Inter RAO, Belenergo sign contract for 2010 – Belarusian Energy Ministry)

Russia Headline News

February 5, 2010

· Rosneft will be selling all of its free petroleum product volumes exclusively on the mercantile exchange starting from February, the company has said. No tenders will be held from now on on the domestic market. The company has been selling much more petroleum products on the mercantile exchange than in tenders in recent months, according to Kortes analytical center expert Mikhail Turukalov. The volumes handled on the mercantile exchange account for almost 10% of all of the company's deliveries in Russia. The state company handled 1.15 million tonnes of fuel of the 8.6 million tonnes, sold at home, on the mercantile exchange in 2009. (Vedomosti, All Go to Exchange).

· Lukoil has published a list of nominations for its new board of directors, to be elected at the annual shareholders meeting. There are 12 nominations for eleven seats, as many as last year, but chairman and the main owner of Uralsib Nikolai Tsvetkov and ex-Chevron Vice Chairman Richard Matzke are missing in the list. They have been replaced by SDK Garant General Director Tatyana Yesaulkova and the 73 year-old emerging markets guru, Templeton Asset Management Executive President Marc Mobius. (Vedomosti)

· Gazprom board of directors has prepared a list of possible successors for its annual shareholders meeting. The list has contracted, compared to last year, and Bob Foresman of Renaissance Capital and Federal State Property Management Agency head Yury Petrov have been replaced by member of the Gazprom executive board Vlada Rusakova, nominated for the first time. Meanwhile, Kommersant sources expect the executive board to remain unchanged. (Kommersant, Page 11, Gazprom Gets Shorter List).

· The London High Court, where Shalva Chigirinsky has been challenging Ruslan Baisarov since the summer to win the right to a 23.35% stake in Sibir Energy, has suspended his suit and the parties are in talks on an amicable agreement. Concurrently, their relations with the oil company's third shareholder, Gazprom Neft, could be settled, too, which will help the latter to finally consolidate control over Sibir Energy (Kommersant, Page 9, Shalva Chigirinsky Asks for Peace).

· Rusal has repaid $2.143 billion of its debt using resources, drawn in an IPO, the company has announced. Of this sum, $1.46 billion went to international lenders in repayment of the $7.4 billion debt, and another $152 million in commission for restructuring. VTB, Sberbank Gazprombank, Surgutneftegazbank and Kazkommertsbank have received a total of $253 million from Rusal [of an overall debt of $2.1 billion]. Finally, $278 million went to Mikhail Prokhorov's Onexim Group. (Vedomosti, Sharing Money).

February 4, 2010

· Executives at some of the country's top consumer goods companies said Wednesday that while the crisis took a toll on their business, it also provided a number of valuable lessons about Russian consumers. But a panel at Troika Dialog's annual Russia Forum found that the lessons learned were as varied as the goods they sell. The recession taught businesses to look at their products more precisely, said Stefan de Loecker, CEO of Nestle for Russia and the Eurasia region. Consumers here are quite quality-dependent and will not switch to cheap brands so easily, said Mikhail Kusnirovich, chairman of the board at Bosco di Ciliegi, a major sports clothing manufacturer and retailer. The key for building a successful business, then, while demand is floating near bottom is to enhance your offer, Kusnirovich said. Others on the panel said they learned that even emerging markets could some day retreat. The recession made plenty of businessmen think of closing up shop, said Rostislav Ordovsky-Tanayevsky Blanco, president of Rostik Group, which owns and operates a number of restaurant chains. Alcohol — and especially the vodka market — fell amid the recession as the share of counterfeit trade increased, said Alexander Mechetin, chairman of Synergy, a major vodka producer. (The Moscow Times)

· Russia will join NATO and the EU, reduce its military, reintroduce gubernatorial elections and four-year presidential terms and disband its Interior Ministry and Federal Security Service, according to a paper released Wednesday by a think tank close to President Dmitry Medvedev. The essay, "21st-Century Russia: Reflections on an Attractive Tomorrow," published by the Institute of Contemporary Development, calls for drastic measures but also embraces modernization appeals formulated by Medvedev last fall in his "Go, Russia!" article and his state-of-the-nation address. Medvedev chairs the institute's board of trustees. (The Moscow Times)

· Cautious criticism by Federation Council Speaker Sergei Mironov of several Putin initiatives has provoked an angry squabble between two pro-Kremlin parties in what analysts called political posturing ahead of March regional elections. Mironov, leader of A Just Russia party, said in an interview with Channel One television host Vladimir Pozner on Monday night that his party "strongly objects" to the 2010 budget compiled by Prime Minister Vladimir Putin and several of Putin's anti-crisis measures. (The Moscow Times)

· Mikhail Khodorkovsky chocolate bars and coarse brown mittens that he could have knitted in prison were delivered to 1,000 celebrities and journalists around the country Wednesday by an painter who said she wanted to highlight his plight. (The Moscow Times)

· The Natural Resources and Environment Ministry said Wednesday that it may extend several no-bid licenses to Rosneft for development on the Sakhalin shelf, where Rosneft has tried to build a presence for years. "The ministry is preparing such a decision. It's possible that it will happen in the first half of 2010," said Denis Khramov, a department head at the ministry. (Bloomberg)

· The government approved a $400 million budget for the Total-led Kharyaga project this year, slightly more than last year, Pierre Nerguararian, head of exploration and production in Russia, said Wednesday. Total and Novatek plan to sign a joint venture agreement for the Termokarstovoye field in the Arctic in days, he said. (Bloomberg)

· United Co. Rusal’s listing in Hong Kong, the first by a Russian company, was “challenging, interesting and educational,” said Ronald Arculli, chairman of the Hong Kong Exchanges & Clearing Ltd. “This is the largest fundraising this year and it was a success as far as the Hong Kong exchange is concerned,” Arculli said at a conference. (Bloomberg)

· Oleg Deripaska's En+ Group is the first Russian private company to receive a license to produce uranium and market radioactive materials, a company spokesperson said. The only uranium producer in Russia is currently the state holding company Atomredmetzoloto (ARMZ). En+ has no uranium assets so far and might possibly pursue its first project together with ARMZ, he said (Vedomosti, Private Uranium).

· The SUEK coal holding is preparing to place Eurobonds worth $300 million-$500 million presumably in March and hold an IPO later. However, the market knows little about the company, as it does not even publish quarterly reports according to Russian financial reporting standards. The last data that Vedomosti managed to find were the company's 2008 consolidated earnings ($4.49 billion) and EBITDA ($764 million) according to international financial reporting standards. SUEK cannot boast a high level of profitability characteristic of western giants, but it apparently performed better than coking coal producers in 2009, in analysts' view (Vedomosti, Stable Coal).

· Russia has spent much less money on saving banks than the U.S. and the United Kingdom, the government report on anti-crisis measures says. The Deposit Insurance Agency considers the current situation in the Russian banking sector "difficult but stable." Financial recovery measures applied to banks has helped restore the depositors' confidence in banks and normalize transfers to the budget. Since the beginning of the restructuring campaign, banks aided by the agency have issued new loans worth 140 billion rubles. Most banks are currently focusing their efforts on restructuring problematic loans, a significant part of which are assets formed due to the previous bank owners' involvement in real estate development projects (Vedomosti, Eternal Savior).

February 3, 2010

· Total capital investment in the Russian economy last year fell 17 percent in real terms adjusted for inflation, President Dmitry Medvedev said. (Bloomberg)

· Russia and Georgia's breakaway province of South Ossetia agreed to visa-free travel Monday, provoking outrage from Georgia. Foreign Minister Sergei Lavrov and his South Ossetian counterpart, Murat Dzhioyev, signed the deal in Moscow as part of a bilateral friendship and cooperation agreement signed in September 2008, South Ossetia's representative office in Moscow said in a statement. (The Moscow Times)

· Russia increased gas production by 16.2% to 63.95 billion cubic meters in January 2009 compared to the same period in 2008, the fuel and energy central dispatch service has reported. This is the highest level in Russia's modern history, said Denis Borisov, a Bank of Moscow analyst. The previous gas production peak of 62.5 billion cubic meters was recorded in December 2009, and before this, the highest figure was recorded in the 2007-2008 winter. The January 2009 peak was due to cold weather, which prompted a hike in domestic consumption, as well as the restoration of exports. At the same time, Russia's principal gas supplier, Gazprom, produced only 50.8 billion cubic meters of gas in January 2010, which is 12.7% more than in January 2009 but 1.7% less than in January 2008 (Vedomosti, Cold Helps Record).

· Two weeks are left for Deputy Prime Minister Igor Sechin to find 120 billion rubles in the oil and gas sector to compensate for the shortfalls in budget revenues prompted by the reduction of the export duty on oil from Eastern Siberia to zero. Finance Minister Alexei Kudrin has proposed that up to 60% of oil produced by Rosneft at the Vankor field be deprived of tax breaks. Analysts believe that the shortfall in budget revenues will be compensated for by growth in world oil prices or growth in the collection of duties from oil exports to Belarus (Kommersant, page 1, Igor Sechin Intends to Preserve Tax Breaks for Eastern Siberia).

· Novatek, Russia's largest independent gas producer co-owned by Gennady Timchenko, has won over one more major consumer from its competitors. This year, the company will ship about 600 million cubic meters of gas to UMMC, which had received gas from Itera over the previous 11 years. Unofficial sources suggested that the Energy Ministry was among those who cleared the deal. The contract will be worth more than 1 billion rubles and will account for about 2% of Novatek's sales. Itera will lose about 3.2% of its market (Kommersant, page 12, Novatek Reaches Copper Deposits).

· State-run Aeroflot will absorb the regional aviation assets controlled by Russian Technologies to help make the country's flag carrier more competitive on the global market, Prime Minister Vladimir Putin said Tuesday. The decision essentially buries a two-year effort by Russian Technologies chief Sergei Chemezov to merge the state corporation's regional carriers with Atlant-Soyuz, an airline controlled by the Moscow city government. Aeroflot opposed the creation of a new competitor, to be called Rosavia, and many analysts questioned the logic of having competing state-run airlines. (The Moscow Times)

February 2, 2010

· A Russian consortium, comprised of Rosneft, Lukoil, TNK-BP, Gazprom Neft and Surgutneftegaz (with equal stakes), and PdVSA, signed a contract on Monday to set up a joint venture to develop Junin-6 oil field in the oil belt of the Orinoco River. The contract was signed during Prime Minister Vladimir Putin's meeting with a Venezuelan delegation, led by Energy and Oil Minister Rafael Ramirez. Under an intergovernmental agreement, signed on September 10 2009, a 60% stake in the joint venture will be held by Corporacion Venezolana del Petroleo (CVP, which is PdVSA's 100% subsidiary) and a 40% stake by the Russian National Oil Consortium (NNK). (Vedomosti, Entrenched in Venezuela; Kommersant, Page 1, Years of Solitude Coming for Russia).

· EN+, Russian billionaire Oleg Deripaska’s metals and energy holding company, may exit the oil industry after failing to win state approval to buy OAO Russneft, Chief Executive Officer Vladislav Soloviev said. The Moscow-based company may sell its remaining oil asset, United Oil Group, should it receive an offer, Soloviev said in an interview in today’s edition of the Vedomosti newspaper. His comments were confirmed by EN+ spokeswoman Elena Rollins. EN+ will also consider an initial public offering for the holding company, which includes electric utility EuroSibEnergo, or its units. One of those, the aluminum rolling mills division, might sell shares to finance improvements to its facilities, Soloviev said. (Bloomberg)

· LUKoil expects Iraq’s West Qurna oil field to produce 95 million tons of crude per year, chief executive Vagit Alekperov said Monday. LUKoil and its partners plan an initial investment in the field of $4.5 billion, Alekperov said at a meeting with Prime Minister Vladimir Putin. (Bloomberg)

· By October 1, Gazprom's debt had increased to a record 1.762 trillion rubles for July to September - an increase by almost 50 billion rubles. Compared to early 2009 the debt had grown by 396 billion rubles, or 29%. The money on the company's bank accounts has shrunk considerably with 288.7 billion rubles available by the end of September (minus 23% for the third quarter alone). As a result, Gazprom's net debt has reached 1.47 trillion rubles, up 4%, compared to early 2009. (Vedomosti, Debt Record).

· Gazprom has received the first revenue from the Sakhalin-2 project, whose operator, Sakhalin Energy, earned over 10 billion rubles, compensating losses sustained in the first half of the year. Gazprom's net profit in the third quarter grew by 33% against the backdrop of EBITDA's decrease by 41%. Instead of the traditional fall in demand in the quarter, Gazprom increased sales to countries outside the Commonwealth of Independent States by 20.5%. Analysts claim further demand will depend on Gazprom's flexible pricing policy. (Kommersant, Page 9, Gazprom Earns on Sakhalin).

· Russian billionaire Oleg Deripaska may list “several” businesses this year after the initial public offering last month of aluminum producer United Co. Rusal Ltd., the deputy chief executive officer of his investment company said. “We have several candidates for IPO in the group,” Andrei Elinson, deputy CEO of Moscow-based Basic Element, said in a Jan. 30 interview. “You might” see some listings this year, he said on the sidelines of the World Economic Forum in Davos, Switzerland. (Bloomberg)

· Russian companies will raise as much as $10 billion in new share sales this year, leading the most initial public offerings from central and eastern Europe since 2007, according to Deutsche Bank AG. Companies in the region will offer about $14 billion of new stock in 2010, including listings from Poland, Turkey and Israel, said Reinout Koopmans, Deutsche Bank’s London-based head of Equity Capital Markets for Emerging Europe. The total would be the highest amount since 2007 when companies raised the equivalent of $30 billion, Bloomberg data show. Russian companies may turn to investors in Asia after United Co. Rusal Ltd. became the country’s first issuer to list in Hong Kong, raising $2.1 billion. The London Stock Exchange and Russia’s Micex Exchange are seeking to attract more listings by starting a new joint information service. The two exchanges, which have had a joint marketing partnership since 2006, will begin a Web site tomorrow for companies considering listing, Jon Edwards, the London bourse’s senior manager for business development in the former Soviet Union, said in a phone interview. (Bloomberg)

· Nearly all major banks with foreign capital have reduced their assets in Russia. Most of them claimed that it was a deliberate policy and that they would build up their businesses this year. Foreign banks' Russian assets in 2009 shrank by an average of 20%, which was due to a drop in business activity on the market. "The drop results from a rigorous credit policy and decreasing financial capabilities of our corporate clients," Bank Societe General Vostok's Director General Pierre-Yves Grimaud said (Vedomosti, Fleeing Russia).

February 1, 2010

· Foreign investors have expressed readiness to buy all bad retail debts of Russian banks. In 2010 they are ready to spend $170 million on the assets. Experts estimate that this will be enough for all the bad loans that will be put up for sale. Bankers hope that the demand of the new investors will spur prices but collectors are sure that Western players are unlikely to use up their budgets affecting the prices of the problem-ridden assets. (Kommersant, p. 9 "Hardened Debtors")

· Russia is one of the least globalized countries among the 60 largest economies in the world, according to a report released Friday. The country ranks 55th on the list, compiled by the Economist Intelligence Unit and Ernst & Young — just above Indonesia and below Ecuador. Each of the countries was graded by analysts using a 1 to 5 scale on a number of factors, ranging from trade policy to Internet subscribers to migration. (The Moscow Times)

· The Russian National Oil Consortium will not compete for the development of Carabobo oilfield blocks in Venezuela. There are no Russian bids in the tender. Consortiums led by Chevron and Repsol will compete for the right. The Board of Directors of the National Oil Consortium decided against bidding, an employee of a consortium member-company told Vedomosti. The company will concentrate on developing the Junin-6 block. (Vedomosti, "Left with Junin")

· Gazprom is likely to keep the structure of its Board of Directors for the seventh consecutive year. No changes are planned among the executives. Professor Valery Musin who taught Dmitry Medvedev and Vladimir Putin should remain the independent director. The government clearly wants to leave the status quo at Gazprom, Alexei Navalny, a minority shartholder, believes - any change on the Board carries the risk of the redistribution of power within the concern. (Vedomosti, "Old Membership")

· Gazprom and Magyar Fejlesztesi Bank have founded the South Stream Hungary Zrt joint venture that will organize the financing, construction and operation of the South Stream gas pipeline in Hungarian territory. However, the sides failed to settle the more concrete issue of delivering additional gas volumes to Hungary. (Kommersant, p. 11 "Hungary flows to South Stream")

· A consortium grouping LUKoil and Norway's Statoil on Sunday signed a final deal to develop one of Iraq's biggest oil fields, capping an auction process key to the country's plans to boost output and generate sorely needed reconstruction revenues. (The Moscow Times)

· The need to repay over $100 billion in debts during the year no longer scares anyone - the Central Bank and the Finance Ministry want to restrict access to foreign markets with the purpose of refinancing among others. If the oil price is $70, the Finance Ministry itself will resort to foreign loans during five years to finance the budget deficit, Deputy Prime Minister and Finance Minister Alexei Kudrin has said. The volume of placements of $17.8 billion planned for 2010 has not been revised yet. (Vedomosti, "Borrow Russian")

· Shareholders of Sberbank pressed the lender on Friday to clarify ties with its biggest borrowers, after a corporate rights crusader attacked management for backing indebted aluminum giant United Company RusAl's share float. (Reuters)

· Moscow hotels cut prices by 36 percent last year, Kommersant reported, citing Hotel Price Index. Prices fell to an average of $267 a night, the newspaper said, citing the data. Hotels cut prices on lower amount of tourists in 2009, Kommersant reported, citing unidentified analysts. (Kommersant)