Russia Power Sector News 2010

Power Sector News

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)