Russia’s grasp on electricity tightens

Russia’s grasp on electricity tightens

Viktor Vekselberg, the Russian billionaire, has agreed to merge his power assets into the power-generation holding of Gazprom to create a state-controlled national electricity champion that will control a quarter of the country’s electricity market.

Analysts said the merger announced on Thursday risked overturning the country’s hard-won privatisation of the sector, one of the few successful market reforms of the past decade, with state control of the sector set to increase from 50 per cent to 70 per cent as a result of the deal.

“After the merger, the state will simply dominate the market,” said Derek Weaving, electricity sector analyst with Renaissance Capital, the Moscow investment bank. “It will be impossible to have a competitive market with one player controlling 70 per cent of capacity.

“When this comes at the same time as the Russian president [Dmitry Medvedev] is calling for more privatisation, you have to wonder who is running the country.”

The move by Mr Vekselberg comes amid increasing investor uncertainty about the future of the sector after the Russian government, worried about inflation in a pre-election year, also indicated it could backtrack on electricity price liberalisation by regulating future tariff rises.

The break-up of Unified energy systems, the state electricity monopoly, had been hailed as one of the successful efforts at deregulation in a decade when the state had tightened its grip over the economy. It saw the sale of the country’s power-generation assets to a string of strategic investors, including Eon of Germany and Fortum of Finland, in a bid to raise investment to upgrade Soviet-era capacity.

But state-owned electricity company Inter RAO and Gazprom have started to consolidate assets. Vladimir Putin, Russian prime minister, in February called for electricity tariff increases to be regulated.

Mr Weaving said: “A year ago the sector was on track ... with an almost fully liberalised electricity market and a plan to fully liberalise capacity markets.

“And then first Putin and then Medvedev started saying they were going back to the old days where every year they will decide how much electricity prices are going to rise per year.”

Mr Vekselberg denied that the deal, which will merge the power-generation assets held by his company IES into the assets of GazpromEnergo Holding, marked a reversal of the privatisation of the sector, saying the merged entity would list its shares.

Mr Vekselberg’s Renova holding company will retain a 25 per cent plus one share stake in the merged entity, which will keep the name GazpromEnergo Holding.

David Herne, head of Halcyon Advisors, said consolidation in the sector was inevitable. “The unfortunate element is that the companies ... doing the consolidating are government owned.”

Usmanov builds Arsenal of shares

Russian businessman Alisher Usmanov has signalled his ongoing interest in Arsenal, spending $1.5 million on new shares despite Stan Kroenke's takeover.

Usmanov owns more than 29 per cent of the English Premier League club and is edging closer to the 30-per-cent mark that will give him access to management accounts despite not being a director.

Kroenke owns 66.64 per cent after mostly buying shares from fellow directors earlier this year. The American businessman also owns the NFL's St. Louis Rams, the NBA's Denver Nuggets and the NHL's Colorado Avalanche.

© Copyright (c) The Edmonton Journal

Activity in the Oil and Gas sector (including regulatory)

08.07.2011

Libya Courts Russia and China with ENI’s Assets

"This withdrawal happened without warning and the Libyan state has started negotiating with big Russian and Chinese oil companies to enter into a partnership in these investments," the official, who did not want to be identified, told Reuters.

08.07.2011

Bulgaria Determined to Give Up Russian Gas

http://www.oilandgaseurasia.com/news/p/0/news/11975
Bulgaria is making definite steps to achieve a fourfold reduction in the amount of natural gas it is buying from Russia, according to an extensive publication by the Russian newspaper Kommersant.

Looking at boosting its own gas production, but also at diversifying imports, Bulgaria hopes to achieve a reduction from the 2 B cubic meters of gas it buys from Russia per annum, to some 500 M cub.m in 2-3 years.

Bulgarian Minister of Economy and Energy has already declared Bulgaria's intention to give up on long-term contracts with Russian gas giant Gazprom in a bid to give his country more leeway in negotiating terms and prices.

Among recent developments, the Bulgarian state's commitment to exploring for shale gas on its territory is seen as a pressure against Gazprom.

Recently US energy giant Chevron received a permit to explore for shale gas in the north east part of the country, at a site that is believed to contain massive amounts that could satisfy the country's gas needs for decades on.

Bulgarian-American company Direct Petroleum has already made significant findings of 10 B cub.m. shale gas in central northern Bulgaria and plans to start producing in 1-2 years at a rate of some 1 B cub.m. per annum.

Shale gas has already raised controversy in Bulgaria though, with environmentalists, local authorities and the opposition Bulgarian Socialist Party alarming about its possible negative environmental impact.

Copyright 2011, Novinite. All rights reserved.

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