UES Official Details Revamp Plan

Unified Energy Systems wants to propose restructuring its dozens of regional power plants into six big cross-regional thermal generators, a member of a UES reform committee said.

Redivision of regional assets has been one of the issues most hotly debated by shareholders, managers and regional leaders as UES has plotted a national utility reform.

Besides the six thermal power generators, the committee member, who asked not to be identified, said last week that UES also wanted to create two more companies that would control the country's hydro stations.

But the committee member said he saw battles ahead with the Economic Development and Trade Ministry, which oversees the utility reform, over the hydro plants, which are Russia's most lucrative power plants.

"We decided the optimal compromise between attractiveness to investors and the wish to create the best conditions for competition is the creation of six thermal generators that will sell power wholesale," he said.

UES is planning to spin off regional power generators before consolidating them. Minority shareholders want to be sure that the resulting companies will be big enough to attract investors. The current small generators' shares are highly illiquid and traded by a limited circle of investors.

This is the latest step in a sweeping 10-year sector reform, the point of which is to bring in fresh investment for upgrades at aging stations, which will be forced to compete in a planned free power market.

Thirty-three power plants have been earmarked for the consolidation, he said, adding that a few dozen combined heat and power plants will stay with regional utilities for a time, then be consolidated into regional generators.

But he said the proposals could be significantly changed in negotiations with the ministry, which wants to include the hydro stations in the six generators and disagrees with UES' plan to transfer stations to holdings before swapping shares.

UES must balance many vested interests in the reform, including major consumers such as metals companies and regional authorities used to controlling power supplies.

"We understand our recommendations will be an excuse to begin battles in which oligarchic structures and regional authorities will participate," the committee member said.

He said the regional firms that attract the bulk of investment outside UES, St. Petersburg based Lenenergo and Moscow's Mosenergo, would remain mostly unchanged.