Russia Power Tenders Open Only to Big Foreign Cos

Aug. 13, 2003 – Foreign strategic investors wanting to buy or manage Russia’s new power generation companies must have at least $10 billion in annual sales, the newspaper Vedomosti reported Tuesday, citing documents from electricity monopoly RAO Unified Energy System of Russia.

In addition, potential bidders must already operate at least 10 000 MW of installed capacity and have operations in three or more countries, as well as a credit rating of Baa3 from Moody’s Investor Service or BBB- from Standard and Poor’s Ratings Group or Fitch Ratings, Vedomosti said.

Under laws governing the reform and restructuring of Russia’s electricity sector, UES’s generating capacity will be divided into new competing companies, while the power plants of its regional subsidiaries will also be spun off and reconsolidated in regional generation companies.

According to the newspaper, only ten utilities worldwide meet UES’s criteria. They include E.ON, which owns over five per cent of Russian gas giant OAO Gazprom through its Ruhrgas unit, and Finland’s Fortum Oy, which owns 15 per cent of OAO Lenenergo, one of the country’s largest regional utilities.

Enel is so far the only foreign generator to declare a public interest in the process. It will participate through a joint venture with ESN Invest, an investment company that currently manages a regional utility in the far north.

Vedomosti said that German utility RWE is considering a joint bid for a management mandate with local brokerage Renaissance Capital.