Russian PM Putin issues show of strength against power generators

25 February 2010 - Russian prime minister Vladimir Putin has reprimanded Russian power generators for failing to make investments in the electricity sector, as record demand during the severe winter puts worn-out generation capacity under renewed strain.
 
According to the Financial Times, Putin singled out Vladimir Potanin, Mikhail Prokhorov, Viktor Vekselberg and Leonid Lebedev, the billionaire owners of several of Russia’s power generation companies, for failing to upgrade capacity despite pledges to do so when the plants were privatised two years ago.
 
Russia launched a sell-off of its Soviet-era electricity sector in 2007 in an effort to raise investment and boost capacity that had then faced near overload as demand hit record highs.  The urgency of investment eased last year after the financial crisis sent gross domestic product plummeting and demand fell.
 
Moscow, acting on lobbying from Russia’s cash-strapped oligarchs, agreed to delay investment programmes pledged as part of the privatization schemes.  As Russia begins to recover, however, the severe weather in January and February has driven demand back up to the highs of 2008. Meanwhile, oligarchs’ pockets, many helped by state bail-outs, are filling again as commodity prices recover.
 
Mr Putin said investment must be boosted or infrastructure constraints would put a brake on economic growth. “During the crisis we did everything we could to support you. The crisis is fading away so I ask you to fulfill your obligations,” he said as he chaired a meeting on the power sector in Siberia.
 
“We have helped you with credits, and guarantees and moral support. You cannot have failed to notice this. We were counting on a responsible position from the owners. But unfortunately far from all have shown responsibility and have preferred to search for excuses to avoid doing any real work.”
 
Putin said that, in contrast, state companies operating in the sector, such as Gazprom, and foreign companies that also participated in the sell-off, including Fortum, Enel and Eon had managed to stick to their investment obligations in spite of the crisis.
 
An explosion last August at the Sayano-Shushenskaya hydro-electric power plant, which killed 75 workers, has highlighted how state companies also face problems stemming from under-investment.  Planned upgrades to the plant, owned by state-controlled RusHydro, took years to get off the drawing board. Prosecutors are investigating shoddy maintenance and whether contracts were handed out to crony companies.
 
Putin, speaking after overseeing the restart of the plant on 24 February, said only 38 out of 100 power stations planned for construction this year were being built while work had not started at all at 45 power plants.

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