Power Grid Companies Seek Billions in State Aid

The country's power grid companies are set to raise their investment plans by 18 percent to 909.4 billion rubles ($34.5 billion) and are appealing for urgent state help in carrying them out, industry officials said Friday.

One of the largest of the firms, MOESK, which operates electricity grids in and around the capital, is working to switch more quickly to a new pricing scheme that will allow it to make up a severe shortage of cash, an industry source said.

MOESK cannot find a source for the 104 billion ruble shortfall for its investment plans up to 2012, according to the holding company that controls all of the interregional grid companies, MRSK Holding.

By 2012, MOESK had planned to spend 370 billion rubles.

Overhauling the country's system of power lines, most of which were inherited from the Soviet Union and are now in dire need of repair, is a vital part of Russia's $1 trillion infrastructure renewal plan, without which the economy is likely to stall.

The interregional grid firms, known as MRSKs, need to switch to a new system of pricing their services, called Regulated Asset Base pricing, to make a fair rate of return on their investments.

Without the switch, the firms will remain unprofitable, likely disappointing the local and foreign investors who have pumped billions of dollars into these companies.

The government, however, has been wary of implementing the scheme, as it will raise electricity tariffs and could drive rampant inflation still higher. MOESK has been near the bottom of the list of MRSKs set to be moved to the new system.

Faced with its budget deficit, MOESK is pushing to make the change in 2009.

"They might succeed. They've taken up this challenge and are very actively working on it," an official from MRSK Holding, which controls MOESK, said on condition of anonymity.

If this and other funding options do not work out soon, it will have to review its investment plans for Moscow's aging power grids, the official said.

Companies throughout the power sector have been appealing to the government for cheap loans and other urgent help, without which they say they will not be able to meet their investment commitments.

An industry source said Friday that the government would review the possibility of cutting back these investments on or near Nov. 24, after numerous appeals from the sector.

Alexei Shlykov, the financial director of state-controlled MRSK Holding, said the 11 interregional grid companies it controls were continuing to take out loans, but cannot accept interest rates of more than 18 percent.

"We are already experiencing problems finding such loans," Shlykov said.

The government must still approve the increased spending plan of MRSK Holding, which was raised largely because of the growing cost of power lines and other equipment.