Matvienko glows

The governor of St. Petersburg signs agreements on the development of the electric power industry every day

Governor of St. Petersburg Valentina Matvienko and head of RAO UES of Russia Anatoly Chubais are expected to sign an agreement on the development of the city's energy system today. The total amount of investments to be made in the energy sector of St. Petersburg and the Leningrad region until 2010 will be about 320 billion rubles. In addition to RAO, Smolny and the authorities of the Leningrad region want to receive a significant part of this money from large companies - Fortum, Voith Siemens, Gazprom, NOVATEK. An agreement was signed with the latter yesterday, in which the independent gas producer, among other advances to the city, promised to participate in investment projects in the energy sector. Ms. Matvienko stated that NOVATEK, in particular, could invest in the reconstruction of the large CHPP-14, which is planned to be separated from Territorial Generating Company No. 1 (TGK-1) into an independent legal entity.

Officials and managers of energy companies admit that the assets of the grid Lenenergo and TGK-1 are in a catastrophic state. And after on May 26 of this year, almost half of St. Petersburg was left without electricity as a result of an accident at the Vostochnaya substation, Ms. Matvienko does not miss the opportunity to blame RAO for the fact that for more than ten years the development of the energy system was practically not financed. Now Smolny and regional authorities want to start a new era. Large enterprises have been built or are beginning to be built in St. Petersburg and the Leningrad region - the Severstal pipe plant, metallurgical plants, Toyota, GM and Nissan car assembly plants. Ports are developing intensively, housing construction is rapidly growing. According to Lenenergo's calculations, for the normal development of the region's economy by 2010, at least 3,000 MW of new energy capacity will be additionally needed. This is almost half of what TGK-1 and the grid company are now able to produce and transport.

Initially, the St. Petersburg authorities spoke about the need to attract 160 billion rubles to the city’s energy sector. It is expected that the agreement prepared for today's signing will fix twice the amount, part of which will be spent on the territory of the Leningrad region. For example, TGK-1 wants to receive about $1 billion from Voith Siemens Hydro Power Generation for the construction of about 1300-1500 MW (of which 300-400 MW will be new capacity, the rest through modernization), and pay the investor is collected from proceeds from additional sales of energy. About 1,500 MW can be built in St. Petersburg, and not only with money from TGK-1. The head of the St. Petersburg energy committee, Alexander Bobrov, and the retiring general director of TGK-1, Andrei Likhachev, unanimously spoke about the interest in participation in the city energy sector of the Finnish Fortum and Gazprom, which can both independently build energy facilities in St. Petersburg and participate in additional share issues “ Lenenergo and TGC-1. Part of the capacity will appear in the Leningrad region. Fortum can invest tens of millions of dollars in small thermal power plants and is discussing this project with the government of the Leningrad region.

It should be noted that Moscow Mayor Yuri Luzhkov concluded a similar agreement with Anatoly Chubais on May 25. He also for a long time criticized Moscow energy workers and RAO for the fact that in the last five to seven years no money was invested in the capital's energy system, as a result of which it turned into a deficit one. As a result, after the change of Mosenergo management last year after the famous accident at the Chagino substation, the mayor began to treat energy workers more respectfully, and in response they developed a long-term investment program for the construction and modernization of the region’s energy capacities. In combination with a similar program of the Moscow government, the price of the agreement signed in May exceeded 400 billion rubles, 150 billion of which the city plans to invest - of course, through private investment.

Valentina Matvienko's ambitions are higher: at the end of last year she stated that the city should gain control over Lenenergo in order to monitor how the company spends money and not allow it to be withdrawn to RAO in the form of dividends. And Mr. Chubais promised in May that Lenenergo could become the first grid company in Russia to conduct an additional share issue, during which St. Petersburg would acquire a controlling stake. Fortum, owner of a blocking stake in Lenenergo, does not object to this. Initially, it was assumed that the mechanism for transferring control over the grid company to the city would also be fixed in the agreement between St. Petersburg and RAO. However, difficulties arose with the government of the Leningrad region: Governor Valery Serdyukov believes that the networks in the territory under his jurisdiction should come under the control of a joint company created by the regional authorities and Lenenergo, otherwise the network company should be divided between both entities. Therefore, officials and RAO will finally decide the fate of Lenenergo before the end of the year. Two options are currently being discussed. The first is that Smolny and the Leningrad region will create a joint venture with a network company, contributing municipal networks to their authorized capital, and these joint ventures will lease networks owned by Lenenergo. Secondly, the network company will carry out an additional issue of shares at the beginning of 2007, as a result of which it will have a new owner. Lenenergo and RAO consider the second option more acceptable, since it will allow the company to attract additional money, but St. Petersburg officials would most likely prefer to save budget funds. A solution will not be found so soon: only in the fall the city and Lenenergo will announce a competition to select an appraiser for the network assets of the company and Smolny.

Dmitry ANDREEV, St. Petersburg