RAO UES reiterates access to Russia for foreign investors

12 September 2007 – Russia is prepared to allow foreign companies to control up to a quarter of its electricity generation industry, according to Anatoly Chubais, chief executive of state-owned electricity monopoly Unified Energy Systems (UES).

Mr Chubais is overseeing the break-up of UES and the privatisation of 20 wholesale and regional electricity generation companies.

The Russian government will retain control of the country’s power grid, the electricity distribution network, and its nuclear and hydroelectric generation capacity. In London this week to pitch the privatisation to international investors, Mr Chubais said in an interview that he wanted to raise “much, much more than $15bn” to build new power stations and upgrade Russia’s ageing electricity networks.

About $8bn had already been raised, he said, through listings of some of the electricity companies and the sale of stakes to strategic investors, including foreign energy companies such as Fortum of Finland and Enel of Italy. A stake in OGK-4, a wholesale generating company, will be auctioned on Friday in an effort to raise about $1.8bn.

Mr Chubais said that Fortum, E.ON of Germany, and possibly United Company Rusal, the Russian aluminium producer, were expected to bid.

Meanwhile OGK-2, the second biggest wholesale generating company, is due to sell new shares at the end of the month, including Global Depositary Receipts listed on the London Stock Exchange.

Mr Chubais said that he was keen to attract investment from foreign energy companies, as they would bring both money and modern technology.

“In the competitive part of the market there is no limit on foreign control. I believe that a minimum of two and a maximum of five strategic foreign companies will own Russian [power] generation businesses, that is up to 25 per cent.”

“To my mind that is quite reasonable, not only for the power sector but also on geopolitical terms.”

In June, Enel paid $1.5bn for a 25 per cent stake in OGK-5, and Mr Chubais said the Italian group had secured permission to increase this up to 100 per cent.

“Not everybody will be happy, but it is an issue of business and there is no legal prohibition [on foreign ownership of power generation companies]. The government welcomes Enel in this deal,” he said.