14 June - Russia's protracted power reform process has received a significant boost with government approval last week for the mechanism that will allow private investors to enter the power generation sector and permits generating companies to hold IPOs to raise funds necessary to finance modernization.
Russian President Putin said that the inability of power monopoly RAO UES to meet demand from commercial consumers was impeding annual GDP growth. He told the government to approve the proposals made by RAO UES chairman Anatoly Chubais. He added that Russia lost 5 per cent of its GDP growth because RAO UES could not provide 50 TWh to business enterprises.
Industry and Energy Minister Viktor Khristenko said that the government had reached a decision that would lead to progress in the power sector reform. "This is to develop a system that will manage the liberalization of the electric power market," he said, quoted by RIA Novosti.
The minister said that the new liberalization plan has two main goals: to attract private investment into the thermal power sector and to gradually increase the share of private traders on the domestic electricity market. Khristenko said that the government expects to raise 70bn rubles ($2.6bn)from additional share issues held by Russia's generating companies in 2007. "Private investment will not harm thermal power sector and UES will remain an active player in the sector," he said.
The government is to allocate over 600bn rubles ($22.1bn) of investments and state guarantees to RAO UES. It is to invest 204bn rubles into RAO UES subsidiaries - FSK, GidroOGK, and System Operator. Second, it will allocate some 420 billion to eliminate cross-subsidization in the energy sector.