Translated material
The traffic jams are out
After the liquidation of RAO UES, prices on the Russian electric field begin to rise seriously
It’s hard to believe, but tomorrow there will be no more RAO UES of Russia. And Anatoly Chubais can no longer be called the country’s main energy leader. Instead of RAO, many companies - large and small - will operate. And it will not be the market that will be responsible for the work of the industry as a whole, as Mr. Chubais would like, but the government . More precisely, Deputy Prime Minister Igor Sechin, who now oversees the entire Russian energy sector. Will he be able to cope? Anatoly Chubais, in an interview with Vremya Novostei, refused to answer this question directly. The industry still has many problems after the reorganization of RAO, and the main one is whether it will be possible to ensure uninterrupted energy supply to consumers without allowing sharp increases in tariffs.Investors are waiting for free prices
The danger of a sharp increase in electricity tariffs in 2011 , when prices should become free, is now more relevant than ever. Prime Minister Vladimir Putin recently spoke about this: “It is clear that a private investor wants to get as much profit as possible and as quickly as possible. But I encourage everyone to behave responsibly. And I will say things that are not very pleasant, but, in my opinion, necessary. Those who are irresponsible in this process, will undermine citizens' trust in what we are doing, and will create problems, guided by some short-term commercial interests, will face appropriate reactions. As for officials, these will be administrative sanctions. As for the irresponsible behavior of business, I will tell you frankly and, perhaps, rather rudely - I will take everything out of my stomach and distribute it to the poor. Please pass this on to all interested parties. So that there are no illusions here.”
Judging by the context, this statement is not addressed to the stomachs of those investors who have already invested billions of dollars in the energy sector . In any case, the prime minister has reasons for concern. The demand for electricity continues to grow, although not at the same pace as Mr. Chubais promised (he spoke about an average of 4.3% per year, but in fact it is still less than 4% per year). To meet this demand, it is necessary to build new generating capacities and networks. Almost all energy companies that remain in operation have developed their own long-term investment programs. At the same time, money was largely found for programs until 2011 - additional share issues were placed, strategic investors were attracted, as a result of which the industry received more than 800 billion rubles. But to continue the construction and modernization of capacities, almost the same amount is needed every year, Mr. Chubais has said more than once. This load in generation will fall on private investors (who, of course, will largely attribute it to the tariff), and in networks and dispatching - to the investment component in the energy transmission tariff. The question arises as to whether current tariff rates, indexed to the official inflation rate, will be able to ensure the construction of capacities. In principle, as Mr. Chubais says, now the annual volume of electricity sales is approximately 600 billion rubles. Obviously, this money is not enough.
At the same time, the cost of building energy capacity is increasing sharply. Almost all investors who purchased OGKs and TGKs say that costs in just one year have increased by at least 20-25%, and often higher. It is objectively impossible to say that this happened solely due to the increase in the price of construction services and the increase in the cost of equipment. Near many OGKs and TGKs (not to mention grid companies), while they were under the control of RAO, companies were formed whose function was to simply multiply prices by at least two, says an auditor of one of the energy companies. And it was on the basis of inflated figures that investment programs were calculated. And then the company won a formal competition for the implementation of one or another item of the investment program, although it itself was a purely financial structure, and not a general contractor, and certainly not a builder (for this, it hired small structures with at least minimal experience, because to find a structure that specializes, for example , in the construction of power plants, it is not easy now - construction is going on all over the country and there are simply not enough qualified specialists).
The interlocutor of Vremya Novostei suggests that such things could happen without the knowledge of RAO top management, which means that the schemes for implementing investment programs carry the potential for corruption. Therefore, much will now depend on the position of the new owners of OGKs and TGKs. On the one hand, they need to reduce costs by eliminating such “intermediaries”, but on the other hand, the implementation of investment programs has already been launched, and starting the whole process all over again may turn out to be more expensive - prices for equipment from manufacturers continue to rise, and much faster than official inflation .
In addition, when purchasing assets, investors were faced with the need to deliver the objects exactly within the period specified in the investment programs until 2011. Otherwise, they will face a fine of up to 25% of this program. Also, the problem of connecting generators to networks has not been removed from the agenda - the Federal Grid Company requires payment for this, while, as they say in OGK and TGK, the cost of connecting a power unit is often 15-20% of the cost of the entire construction project for this unit. Thus, plans for modernization and construction of new energy capacities will ultimately turn out to be significantly more expensive than RAO planned, and additional investments will have to be returned after 2011 in the only possible way - through liberalized, as many hope, tariffs.
State control instead of a competitive market
A similar scenario was described in 2003 by Vladimir Putin in his address to the Federal Assembly: “State-regulated tariffs on products and services of infrastructure monopolies are increasing at a rate that is faster than the growth of prices in the free sector of the Russian economy. As a result, the redistribution of economic resources in favor of the monopoly sector increases, and its share in the Russian economy increases. At the same time, this monopoly sector does not show high efficiency. Thus, monopolists are strangling the competitive sector of our economy. The government should monitor this more strictly. Continuation of such a policy is obviously the path to stagnation... Reforms for the sake of reforms are not needed. There is no need for a permanent revolution."
Apparently, in conditions where it has not yet been possible to create a truly competitive market in the electric power industry, the government for which Mr. Putin has now moved to work intends to “more strictly monitor” what is happening in the industry in the foreseeable future.
The first thing the government has already done is to block the creation of the Market Council. This non-profit organization, as conceived by Anatoly Chubais, was to become self-regulatory and consist of representatives of all market participants - consumers and energy suppliers, as well as network operators, dispatchers and the state. In principle, the state never considered the creation of a Market Council to be extremely necessary. But when amendments to the legislation were prepared last year to strengthen the government’s role in the industry after the reorganization of UES, Mr. Chubais ensured that the situation was “balanced” (also legislatively) by creating a council of market participants themselves. It is they, according to the logic of energy workers, who should set the “market methodology,” and the government should approve it and control the work. Now that the electric power industry has a new curator, Mr. Sechin, it was necessary to “shake up” the structure of the council and its functions.
“The task of the curator is to control the industry,” says a high-ranking source in the government apparatus. - At the same time, he cannot allow the rules of the game to be developed by someone else. Therefore, Sechin does not need the Market Council in the form that Chubais proposed, he needs his own Market Council. But something else is bad: from July 1 there will be no RAO, there will be no Market Council, the Ministry of Energy is not yet able to control the industry, since its employees have been working for only half a month, and during this time it is necessary to continue to generate electricity, carry out a repair campaign, and also begin work on a new market - the power market. And how will the industry work? We can only hope that there will be no failures. But the situation is difficult and, one might even say, dangerous.”
However, Anatoly Chubais strongly emphasizes that the work of the new government satisfies him: “I am not ready to comment on any personal aspects relating to Deputy Prime Minister Sechin, or any other member of the government,” he told Vremya Novostey. - I can only comment on the working part. And she is known - we received a positive answer to the questions that we posed to the government, to the deputy prime minister.”
It is clear that in the current conditions Anatoly Chubais cannot afford to say otherwise. But if the state decides to delay liberalization of the energy market, then investors who paid billions of dollars for generation will find themselves in an ambiguous position. Mr. Chubais considers the risk of refusing to liberalize the market to be insignificant: “In general, the best way to kill the market is to stop developing it. In this sense, the subsequent development of the market is the most important task. Based on what has already been done by the minister, deputy prime minister, and chairman of the government in the short time they have been working in the new composition, I do not see any promises or trends aimed at destroying the reform. I don’t think they will continue to appear... The government’s refusal to abandon the liberalization schedule is extremely unlikely, but cannot be completely ruled out.”
Long road to gas
The reason for talking about the possibility of stopping the energy reform was the sharp increase in world gas prices in recent years and the government’s plans in 2011 to switch to equal profitability for Gazprom for gas supplies to the domestic and foreign markets. It is not difficult to calculate that as a result, the price at the turn of 2010 and 2011 should almost triple. In Russia, the main consumers of gas are power plants, and in the event of such a sharp rise in prices, they will, of course, automatically increase electricity tariffs. The government, concerned about the high level of inflation, is trying to somewhat delay the transition to equal profitability of gas supplies (until 2012 for now), replacing them with a 40% increase in prices at the turn of 2010 and 2011. As soon as this became known, foreign investors who bought OGKs and TGKs began to ask questions about whether something similar would happen in the electric power industry.
However, Mr. Chubais takes this very calmly. “In my understanding, this is an example of invented fears,” he told Vremya Novostey. -- Why? Firstly, because liberalization (energy market - Ed. ) and increasing prices (gas - Ed. ) are two completely different processes. They seem the same, but their nature is completely different. Secondly, it is wrong to say that the transition to equal profitability is being postponed. Rather, we are talking about the “problem of 2011–2012,” that is, about the pace of achieving equal profitability. At the same time, no one knows the world price of gas in 2011, and if we assume that we will not reach it (by 2011 through state regulation of tariffs. - Ed. ), then the question remains: should we make a big one in 2011? a jump (in gas prices during the transition to market pricing. - Ed. ) or further extend the transition until 2012? To be honest, this whole discussion - whether in 2011 we will achieve equal profitability or in 2012 - seems to me of little significance. From a strategic point of view, it is not very significant. Here, rather, the question is the government’s ability to keep its decision. And this has no impact at all on the pace of liberalization of the electricity market. I don't see it... I think that the fact that the wholesale electricity market will be liberalized by 2011 is of fundamental importance. Further trends, whatever they may be, will be set by the market, that is, by the relationship between supply and demand. And only... As for the price of gas, we consider the decision itself to achieve equal profitability to be extremely important. I repeat once again, whether Gazprom enters it in 2011 or 2012 does not seem important to me at all from a management point of view.”
Moreover, Mr. Chubais is very concerned about what is happening in the gas industry. He, together with the head of the Institute for the Transitional Period, Yegor Gaidar, even wrote a letter to the government about the need to pay more attention to gas supplies to the domestic market, perhaps even through exports. He refused to comment on this letter in an interview with Vremya Novostey, but stated that the problem of reforming Gazprom, in his understanding, “is not something necessary.”
But the government will most likely be able to solve the gas problem one way or another. But eliminating cross-subsidization (when increased tariffs for industry make it possible to have lower tariffs for the population and public sector enterprises), which creates a conflict between sales organizations and distribution networks, will be much more difficult. According to Mr. Chubais’s optimistic estimates, this will take three to four years: “The price of the issue is 120 billion rubles. (per year - Ed. ), and the state will not cope with this quickly.” When asked where, in his opinion, this money should be taken, Mr. Chubais says that the problem requires a comprehensive system of measures, “the main directions of which are clear.” What exactly is clear to Mr. Chubais, he did not say out loud. After all, the problem is supposed to be solved through rapid growth of tariffs for the population and public sector employees until 2011, before prices are liberalized.
Thus, almost all the problems that remain in the electric power industry after the reorganization of UES are, in the end, very strongly tied to the price of a kilowatt-hour in 2011. And if it is unacceptable to consumers, then we can say that the reform has failed. Otherwise, Anatoly Chubais’s statements, which he has been making in recent days, that it was his team that was able to implement a large-scale project to overcome the crisis looming in the Russian electric power industry, are completely justified.
Most of RAO's top managers already know where they will work from July 1st. Anatoly Chubais, according to Kremlin sources, will most likely receive an offer to head the supervisory board of the state corporation Rusnanotech in mid-July. Deputy Chairman of the Board Yakov Urinson will be involved in the liquidation of the legal entity RAO UES of Russia until the end of this year. Deputy Chairman, Financial Director of RAO Sergei Dubinin, as sources say, will head one of the European structures of VTB Bank. Board member Yuri Udaltsov continues to be a candidate for leadership of the Market Council, the source says. Board member Vladimir Avetisyan, as it became known last Friday, will return to the Samara region - he will head an auto components production holding in Tolyatti, which will be created by Russian Technologies and AvtoVAZ. Member of the board, former head of the Federal Grid Company Andrei Rappoport, according to sources in RAO, is looking for a position in Rosatom that would allow him to head the board of directors of the export-import operator Inter RAO UES, which he created practically from scratch, adding last year the most modern Russian thermal power plants - Sochi, North-West and Kaliningrad. Member of the board, former head of HydroOGK Vyacheslav Sinyugin was appointed Deputy Minister of Energy.