Enel's Chief Sees No Political Risks

bloombergConti in Cernobbio, Italy, on Sept. 5. Gazprom may take a stake in one of three Italian power stations, he said Friday.
SREDNEURALSK, Sverdlovsk Region -- The head of Italy's Enel, Fulvio Conti said Saturday that he saw no political risks facing his company in Russia, despite Moscow's weakened relations with the West after last month's war in Georgia.

"There are no reasons for the political situation to impact our projects. ... I am not concerned and not worried and don't see anything terrible. Russia is a part of Europe, and relations will develop," Conti told reporters.

The energy major plans to invest a total of $8 billion into its projects in Russia, including in the gas and electricity sectors, where some of Enel's work has been given the blessing of Prime Minister Vladimir Putin before going forward.

"When we work in this country, we feel like Russian citizens," Conti said, adding that Enel had already invested 3.3 billion euros ($4.62 billion) in Russia, and would pour in another 2.2 billion euros before 2012.

The Russian investment climate suffered a massive blow from August's war in Georgia. The conflict, fought over Georgia's pro-Russian separatist regions of Abkhazia and South Ossetia, heightened political risks as falling commodities prices and a weakening ruble were already weighing down on the economy.

Danske Bank estimated last week that increased political risk premiums have cost the Russian stock market 15 percent to 20 percent in losses out of almost 50 percent that the country's indexes have shed since May.

Conti spoke at the groundbreaking ceremony for the construction of a 410-megawatt turbine unit at the Sredneuralsk Power Station in a suburb of Yekaterinburg in the Ural Mountains.

The power station is owned by electricity generator OGK-5, which Enel acquired in February for $4 billion.

Half of the fuel for the new turbine will come from a joint gas venture between Enel and another Italian energy giant, Eni. Last April, Enel spent $852 million creating the venture to acquire gas fields previously owned by bankrupt oil firm Yukos.

"The first gas will start flowing in 2010," Conti said.

Enel and Eni are cooperating on this project with Gazprom, which has long been seeking access to European energy assets and infrastructure.

In March, Conti said Enel would give Gazprom a stake in an Italian power plant to reciprocate for gas supplies to OGK-5.

"We let Gazprom choose between stakes in three electricity stations. So far, there is no decision. Gazprom is looking at the options, but there is still enough time to make a choice," Conti said.

At the ceremony, Sverdlovsk Governor Eduard Rossel offered Enel another project in the Urals -- to increase the generating capacity of OGK-5's Reftinsk power station.

Rossel said the project would open the door for Enel to cooperate on electricity supplies to United Company RusAl, the world's largest aluminum producer, which is considering plans to build a new smelter in the area.