Serbia Eyes UES Arm for Electricity Work

Inter RAO, Unified Energy System's import and export arm, said Friday that it would sign a protocol Monday with Serbian state-controlled electricity monopoly EPS that could lead to a number of lucrative contracts, a move experts said had political overtones.

Although the nonbinding document does not mention specific projects or figures, reports in the Serbian press have said Inter RAO may be enlisted to construct two 700-megawatt thermal plants in central Serbia to replace the region's dilapidated facilities, as well as several hydropower stations on the Drina River.

The talks come on the heels of Russia gaining control of Serbian oil and gas company NIS and the right to route the South Stream gas pipeline through the country. The deals, signed in January, were seen at the time as a reward for President Vladimir Putin's strong support of Serbia in its efforts to prevent Kosovo's independence.

"We have been interested in the Serbian market for quite a long time," Inter RAO spokesman Boris Zverev said Friday. "Expansion into foreign markets is a natural part of our company's strategy."

EPS declined to comment on the negotiations Friday.

The Serbian company's management will give its Russian partners a list of the power stations it wants to modernize and new sites where it would like to build, Zverev said.

"We will then choose the projects that are most economically profitable for us," he added, declining to elaborate.

Analysts, however, said the negotiations were not exclusively about potentially lucrative new projects.

"It's no secret that the economic interests of Inter RAO are linked to the political interests of the Kremlin," said Alexander Kornilov, a utilities analyst at Alfa Bank.

"Moscow's support of Belgrade on the Kosovo issue may continue to help it win profitable energy contracts."

The Kremlin has staunchly opposed the breakaway Serbian province, which unilaterally declared independence Feb. 17. Six of 11 members on Inter RAO's board are representatives of the state.

UES holds a 60 percent stake in Inter RAO, while 40 percent belongs to the state nuclear corporation, Rosatom. After the former electricity monopoly finishes spinning off its assets this summer, Rosatom will hold a 51 percent stake, and state-controlled Vneshekonombank will have a blocking stake of 25 percent plus one share.

EPS, which is currently 100 percent controlled by the Serbian government, will be privatized in the next three years.

Inter RAO posted a net profit of 1.74 billion rubles ($74.3 million) in 2006, the latest year for which figures are available. The company operates in 14 countries, including Armenia, Georgia, Kazakhstan, Latvia, Lithuania, Turkey and Romania.

n The TGK-14 board of directors has dismissed the company's general director, Vladimir Alferov. Vladimir Sosnin has been named acting general director, TGK-14 said in a statement Friday.

TGK-14 is the largest heat producer in the Chita region and the republic of Buryatia. The state's stake in the company as well as an additional share emission will be sold on May 5, TGK-14 said.