Throughout the first half of 2013, confrontation continued in Nizhny Tagil between the city’s utility services and energy suppliers. The main holder of city boiler houses, MUP Tagilenergo, was increasing its debts to Uralsevergaz CJSC, which in the spring led to the disconnection of hot water supplies to city residents. Over the summer, the authorities developed a mechanism to resolve the conflict situation: the mayor's office acted as a guarantor for the payment of current payments to the energy company, and debts to NTMK, Uralsevergaz and other creditors are planned to be converted into shares of an energy holding company created on the basis of the city's heat supply assets. Experts consider the creation of such a society logical, predicting that it will be easier for its participants to agree among themselves.

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In the spring of 2013, Nizhny Tagil was left without hot water supply due to the debts of MUP Tagilenergo to Uralsevergaz CJSC

Photo: Kommersant / Alexander Petrosyan

Photo: Kommersant / Vladislav Lonshakov

Communal bankruptcy

In Nizhny Tagil, before the start of the heating season, the problem of repaying the debt of housing and communal services enterprises to energy suppliers became acute. And here the confrontation between Uralsevergaz CJSC (part of Itera, a structure of Rosneft) and Tagilenergo MUP came to the fore. As Oleg Vlasov, head of the press service of Uralsevergaz, notes, the company at the beginning of October 2013 had accumulated a debt for natural gas (taking into account the cost of gas consumed in September 2013) of 756.4 million rubles. Tagilenergo is the largest debtor of the supplier both in Nizhny Tagil (in total, city housing and communal services enterprises owe about 827.4 million rubles) and in the Sverdlovsk region as a whole.

Let us remind you that Tagilenergo went through bankruptcy proceedings, which was completed in April 2011 by concluding a settlement agreement with the largest creditors. In the event of a re-launch of bankruptcy proceedings in the city, a safety net scheme for energy suppliers was developed and partially implemented. The heat transportation functions of Tagilenergo were transferred to the Nizhny Tagil Heat Networks Municipal Unitary Enterprise, which has the right of economic management assigned to network facilities (with the exception of Gorenergo networks). “Nizhny Tagil Heating Networks have virtually protected tariffs for both generation and transportation of resources. Suppliers are very concerned about the situation that is developing around debts, and they are accumulating one way or another, but are not cleared. This means that at any moment the generation function can move from Tagilenergo to them,” notes ex-arbitration manager of Tagilenergo Vladimir Chernykh. In his opinion, at the moment, according to the financial analysis of the enterprise, Tagilenergo is in fact bankrupt. However, Mr. Chernykh notes that “instead of endless wars, there is now a working dialogue” on debt repayment.

The confrontation between USG and Tagilenergo escalated in the spring of 2013, when the supply of hot water to socially significant facilities and housing stock was stopped. In May, more than 360 social facilities and almost a thousand residential buildings were left without hot water. “The lack of hot water was caused by the cessation of gas supplies from Uralsevergaz CJSC to supply gas to eight boiler houses on the balance sheet of Tagilenergo, due to the enterprise’s debt for the supplied natural gas,” reported the press service of the Sverdlovsk Region Prosecutor’s Office. USG representatives explained that the seasonal contract (concluded only for the heating season) expired on May 15, 2013, and therefore gas supplies were limited from May 16.

The prosecutor's office of the Leninsky district of Nizhny Tagil, not agreeing with the actions of the supplier, sent a statement of claim to the Leninsky district court of the city with a demand to recognize the actions of Uralsevergaz CJSC as illegal and to oblige them to resume the gas supply to the boiler houses of the Tagilenergo municipal unitary enterprise. In June, the gas supplier was forced by a court decision to resume natural gas supplies without payment or agreement. Uralsevergaz, in turn, accused the Nizhny Tagil administration of inaction. “The administration has never taken any measures to provide city residents with hot water, avoiding solving the problem and shifting its direct responsibilities to the judiciary. Having obligated Uralsevergaz CJSC to resume gas supplies, and Tagilenergo Municipal Unitary Enterprise to accept gas, the court, contrary to expectations, did not determine the competence of the current municipal property management scheme to confirm or refute the right of Tagilenergo Municipal Unitary Enterprise to receive gas in the absence of an agreement and in the presence of a multi-month overdue debt,” Uralsevergaz noted earlier.

Debt shares

A solution to the debt repayment problem was found by the beginning of the new heating season. In August, at a meeting with the chairman of the Sverdlovsk government, Denis Pasler, the Nizhny Tagil mayor's office committed itself to fully paying for the current gas consumption of the city's housing and communal services enterprises this heating season. Also, the head of the city, Sergei Nosov, guaranteed that the debts that arose since October 14, 2012, that is, after his election as the head of the city, would be gradually repaid. “There are general approaches and preliminary decisions regarding the repayment of those debts that were formed earlier, but they have not been finalized,” the press service of Uralsevergaz said. Mr. Vlasov confirms that “now the situation with debt repayment is constructive, current gas consumption is being paid, and debts from previous periods are being partially repaid.” “However, the problem remains acute and requires close attention,” explained the press secretary of Uralsevergaz.

At that time, when the Tagilenergo municipal unitary enterprise was in the process of bankruptcy, the option of converting its debts into shares or shares of a new legal entity that could be created was discussed as one of the most effective and realistic ways to bring the enterprise out of the crisis, says Vladimir Chernykh. “As a result, the strategic position of all parties involved in the conflict would change from external to internal, and the conflict itself would not be public, but corporate, when it is no longer external creditors who are arguing, but the participants or shareholders of the company they created. This would allow the parties to find a compromise on how to distribute the money that Tagilenergo earns,” explains Mr. Chernykh. Another even more drastic option was also considered - transferring Tagilenergo’s property to the municipality as socially significant, without repaying debts to creditors.

The Nizhny Tagil administration notes that the conflict has now been resolved. “If we return to the origins of this topic, I believe that the conflict between Uralsevergaz CJSC and Tagilenergo Municipal Unitary Enterprise relates to a conflict that arose at the managerial level. Now I can say that with the change of owner and management of Uralsevergaz, the conflict has been completely resolved. We have full understanding and interaction with both the General Director of Uralsevergaz CJSC Anatoly Evdokimov and the General Director of the oil and gas company Itera Alexander Popov, which was confirmed at a meeting with the regional governor Evgeny Kuyvashev and the Chairman of the Sverdlovsk government Denis Pasler,” - said the head of the city Sergei Nosov. Since the government of the Sverdlovsk region does not plan to repay debts for energy resources to Nizhny Tagil, as is done for other supplying organizations of the Sverdlovsk region, Mr. Nosov announced an agreement with the management of Uralsevergaz CJSC to convert the debt into shares of a joint-stock company, which can be created on the basis of the assets in heat supplies owned by the city. Uralsevergaz notes that specific options for creating such a joint-stock company, the assets included in it and converting debts into shares must be developed by the end of 2013.

Reduction by calculation

The issue related to the calculation and collection of payments from residents remains unresolved in the municipality. There is a Unified Settlement Center (SSC) in Yekaterinburg, but currently there is none in Nizhny Tagil. According to Investcafe analyst Ekaterina Shishko, the creation of a single center can help reduce debts to suppliers and increase the level of collection from the population. “ERC enters into agreements with various points of payment for services (banks, terminals, Internet), thus simplifying the population’s access to payment for services. The center also allows us to fully ensure transparency and openness of payments. This is especially beneficial for resource providers who receive payments without the participation of intermediaries - management companies. Thus, the resource supplier will receive their money on time and in full, which reduces the likelihood for consumers of electricity, water, and heat outages associated with late payment by intermediaries for the services of resource supply organizations,” notes Ms. Shishko. According to the analyst’s observations, the organization of the ERC in Yekaterinburg has improved the level of payment for housing and communal services in Yekaterinburg. However, this mechanism will not allow Uralsevergaz to take control of financial flows from the population. As for the organization of a separate company that would combine the thermal assets of Nizhny Tagil and the issue of shares, the expert assesses this process as “quite long-term and labor-intensive,” although the mechanism will facilitate negotiations. “In any case, Uralsevergaz can hardly hope to quickly collect debts under this scheme: in addition to creating a joint-stock company, it will also require an assessment of assets to pay off the debt to the supplier,” the analyst predicts.

Alexey Okhlopkov

Conversion of housing and communal services