Power Firms to Ask For Billions in Loans

A partnership of electricity producers said Wednesday that its members were planning to ask the government for tens of billions of dollars of cheap loans to finance their efforts to build up capacity amid the global liquidity crunch.

The request would be the latest addition to a growing choir of pleas for government help from a number industries, including carmakers and oil and gas producers.

The electricity companies backing the idea of government loans include OGK-5, controlled by Italy's Enel, Viktor Vekselberg's power holding Integrated Energy Systems, Oleg Deripaska-controlled EuroSibEnergo and seven other members of the nonprofit partnership Council of Electricity Producers.

Igor Mironov, director of the partnership, announced the decision in a statement e-mailed by the group's press service.

"Generators could encounter the danger that the investment projects they began will not have sufficient funds for completion," IES president Mikhail Slobodin said in a statement e-mailed by a company spokesman.

The sector needs to invest a combined 4 trillion rubles ($154 billion) to expand capacity, an obligation they accepted when buying assets of the former electricity monopoly, Unified Energy System. The government recently created a special commission chaired by Deputy Prime Minister Igor Sechin to oversee their compliance with the investment plans.

The generators issued additional shares in hopes of raising half of their investment budgets, but growing construction costs have meant that budgets are now only met by one-quarter, Slobodin said. In addition, the financial crisis "substantially" reduced their chances of taking out cheap, long-term loans from banks, Slobodin said.

Tens of billions of dollars -- but not more than $50 billion -- in government loans will be needed, a spokeswoman for the nonprofit partnership said.

Most of the facilities that the companies want the government to finance are already under construction or ready for construction to start, Slobodin said.

En+, a subsidiary of Deripaska's Basic Element holding that controls EuroSibEnergo, also backed the idea of enlisting government help.

"If measures are not taken to support the investment projects ... at the state level, their implementation will be called into question," En+ chief executive Vladimir Kiryukhin said in a statement e-mailed by a EuroSibEnergo spokeswoman.

Dominique Fache, chairman of OGK-5, said the efforts to construct new generating facilities were essential for economic development. "It's a key program of building new capacity that is necessary for reliable development of the industry," he said, Interfax reported.

Calls to an OGK-5 spokesman went unanswered Wednesday afternoon.

The government must help the companies finance their investment in exchange for equity stakes, said Dmitry Skryabin, an analyst at VTB.

"These private investors, who thought they would make money, accepted a market risk, and it materialized," Skryabin said.