Gazprom Says Financial Crisis Could Help Electricity Sector

Gazprom officials responsible for the state-controlled company's utilities subsidiaries said Thursday that there was a prospective bright side to the current economic crisis: It may become cheaper to build.

The cost of existing programs for the construction of new power stations might fall by as much as 20 percent, Stanislav Noveynitsyn, the chairman of Gazprom subsidiary OGK-2 said at a news conference on Thursday.

Noveynitsyn said prices for pipes and concrete had fallen dramatically from their highs of the summer.

"As the demand falls, the prices charged by the producers of raw materials and equipment drop," Noveynitsyn said, adding that even prices for turbines, the heart of power stations, were expected to fall.

"As the construction of commercial real estate and shopping centers freezes up, engineering and development firms will move to where there is work for them — the electricity sector," Noveynitsyn said. "The rise in supply will make their services much cheaper."

The companies that bought different assets of former state electricity monopoly Unified Energy System were required, as part of the terms of purchase, to build and upgrade as part of an overall program to cost 4 trillion rubles ($145.6 billion) through 2012.

The promise of lower building costs may be scant consolation after the credit crunch has made getting the kind of loans they need almost impossible.

"So far no bank, foreign or Russian, has confirmed that they can give us a loan for next year," Noveynitsyn said, adding that his company needed 3 billion rubles for the first quarter of 2009 alone.

"All of the banks are saying: Come back in February," Denis Fyodorov, a Gazprom official responsible for its utilities business, said Thursday.

TGK-1 has faced the greatest troubles so far, carrying 6 billion rubles of loans it needs to refinance by the end of the year, Fyodorov said, adding that Gazprom was in talks with the government on "organizing financial support for its investment program for utilities."