Russia: Private generators on equal footing

23 December 2008 – Russia’s newly privatized power companies will not lack government support, according to the Deputy Prime Minister Igor Sechin and reported by the Moscow Times. Speaking on Monday he said that the state will support both private and state-owned power companies equally.

“We are quite balanced in our attitude toward companies in which the state holds a stake and those that belong to private shareholders. They will all have equal access to state resources,” Sechin said.

The power sector is in difficulty faced with declining revenues and an absence of credit to cover costs and finance planned new infrastructure projects. In many cases the wholesale and regional generating companies are majority private owned and concern was growing that the government would be reluctant to assist.

Deputy Energy Minister Vyacheslav Sinyugin said Friday that the government would earmark 146bn rubles ($5.3bn) to help state-run power companies, but he was vague on support for private companies.

The government is developing mechanisms to guarantee power companies’ debt and considering loans backed by bonds, and replenishing the firms’ operating capital, Sechin said at the opening of a new unit at a RusHydro plant in the Amur region.
“We know all the companies [in need], we are in contact with all of them,” he said.

The Council of Electricity Producers and Strategic Investors, which includes most of Russia’s private generators, had asked Sechin in October for $50bn of loans to the sector. “We are very glad to hear from Igor Sechin,” Igor Mironov, the council’s head, said Monday. “The best mechanism for us would be bank loans with an interest rate of around 11 per cent.”

According to recent estimates, Mironov said, private generators – excluding those that are foreign owned – needed only 226bn rubles ($8.1bn) to cover the deficit in their investment programs through 2011. The $50bn figure, he said, included help for state-owned companies.

Sechin also said Monday that changes were possible to the general plan for the location of power facilities. “The government has understood that neither the generators, nor itself will have enough money to build the planned number of stations under the current conditions,” said.

It is expected that private generators will now lobby actively for state support. Earlier the government had stated that the sector’s growth plans would not be scaled back and would proceed as planned.