Mosenergo Spending Gets Miller's Support

Gazprom chief Alexei Miller backed Mosenergo's plans to spend billions of dollars to substantially boost output Tuesday, several weeks after taking criticism for delaying the investment.

Making his first visit to a Gazprom-controlled electricity company, Miller launched a Mosenergo power unit, saying the electricity generator still planned to raise its capacity by one-third by 2011.

Miller's appearance at the power station means that Gazprom is showing a keen interest in its electricity assets, even after failing to create an industry champion by banding them together with those of coal miner SUEK earlier this month, said Dmitry Terekhov, an analyst at Metropol brokerage.

Unified Energy System in April accused Mosenergo, Moscow's main electricity supplier, of "unsatisfactory" progress in building new capacity. A delay in approving the needed investment by the board jeopardized further growth of the region's rapidly developing economy, UES said at the time.

Speaking after a ceremony to open Mosenergo's newest generating unit at Moscow's Heat and Electricity Station No. 21, Miller sought to allay those fears, saying the company still intended to build generators to produce an additional 3,500 megawatts by 2011, Interfax reported. The 450-megawatt unit came on line after Mosenergo put into operation a similar unit at its other station in November.

The other electricity assets where Gazprom is a strategic investor — OGK-2, OGK-6 and TGK-1 — will also boost capacity by a combined 6,500 megawatts, Miller said. "Gazprom is implementing a large-scale program in electricity," he said.

Gazprom has emerged as one of the biggest players in the electricity market, as former monopoly UES spins off its assets. The company has or is on track to have control in four of the 20 generating companies that are being spun off.

Electricity prices will keep rising before they are set free in 2011, prompting Gazprom to further develop its electricity business, said Terekhov, of Metropol.

Gazprom's branching-out into electricity has drawn so much attention that one of its top executives, Kirill Seleznyov, had to field questions about possible further acquisitions in the sector at a Tuesday news conference dedicated to a different topic — last year's domestic gas sales.

Seleznyov, Gazprom's marketing chief who is also heading the company's drive into electricity, said it was negotiating to buy an interest in the Volga region generator, TGK-7, from Viktor Vekselberg's holding Integrated Energy Systems. TGK-7 serves several Gazprom units, he said, adding that the talks had been "constructive."

He also said Gazprom was not looking at buying power generator OGK-1 but might consider bidding for its separate stations should its parent firm, UES, offer such an option.

UES dropped plans in May to sell OGK-1 to a strategic investor after getting no bids and has said it may float one-third of the firm's stock instead.

On local sales, Seleznyov said they were not profitable enough to recoup investment in production and pipelines, despite rising by 15 percent last year.