Yevstafyev Makes a Power Call

Arkady Yevstafyev, the newly appointed head of Mosenergo, assured investors Tuesday that he was firmly in control of the company following the ouster of its former head.

Yevstafyev last month replaced Alexander Remezov, who has been trying to cling on to his job with the help of the Moscow city officials. City Hall has opposed a restructuring plan for Mosenergo and the rest of the power industry, which is backed by Mosenergo's main shareholder, Unified Energy Systems.

In an apparent move to boost investors' confidence, Yevstafyev said that no reshuffle would follow Remezov's sacking.

"I can with full authority say that there would be no reshuffles," he said during a conference call late Tuesday night.

He said that he had held a meeting with the company personnel, and they had approved a plan he proposed to enhance Mosenergo's efficiency.

The plan includes spinning off noncore subsidiaries, cutting the company's debt and receiving payments from debtors, he said.

Andrei Trapeznikov, a member of the UES board, told The Moscow Times that under the former management, noncore businesses and excessive social spending were among the main factors eating away at the utilty's profitability.

Trapeznikov said he hoped the new management would be able to streamline Mosenergo and leave behind the perceived wrongdoings and mistakes of former managers, citing as an example irregularities uncovered by the Moscow audit chamber in a probe of Mosenergo.

Analysts say Remezov's departure and Yevstafyev's appointment meant Moscow city officials have partially lost control over Mosenergo. The city owns a minority stake in the power firm.

Luzhkov may argue that it would be difficult for the city to control power supplies if UES brought its restructuring plans to Mosenergo. UES's plan calls for energy systems to be split into generating companies, transmission networks and sales.

The government, which has approved the UES plan, is ordering that a grid operator be created as a full subsidiary of UES by the end of 2001. The government wants to buy out the regional utilities' grid properties or exchange them for debts later on. Generation and distribution are to be privatized.

However, Fedor Tregubenko, an analyst with Brunswick UBS Warburg, said that Moscow authorities are still likely to maintain a "colossal" influence on Mosenergo, much as they do on most Moscow-based businesses.

Kaha Kiknavelidze of Troika Dialog agreed that Moscow at this stage is likely still to exert control over Mosenergo. What could indeed lessen Moscow's influence would be the introduction of a single tariff authority, a plan that the government has approved, he said. Regional leaders are currently often able to dictate to local energy commissions, which set the tariffs.

Tregubenko said that minority shareholders could still have concerns over the UES restructuring plan, which is short on details and leaves UES with much room for maneuvering during implementation.

Mosenergo is the oldest and the largest of Russia's 74 regional energos, providing 8 percent of all electricity produced in Russia. It carries energy to about 16 million residents in Moscow and the surrounding region, or about 10 percent of the Russian population. With 23 power plants, Mosenergo has an installed capacity of 15,000 megawatts.

The utility's revenues this year are expected to reach $1.5 billion, compared to about $1 billion last year. Its post-tax profit in the first half of 2001 is close to $100 million after $40 million in the whole of last year.

About one-third of the energy produced by Mosenergo is sold to industrial consumers and one-fifth to individuals, according to company data. Mosenergo produced 20.6 billion kwh of electricity in the first quarter of this year, slightly more than the 19.5 billion kwh it cranked out in the same period last year.

The company is also a supplier of energy to the national wholesale electricity market, or FOREM, which is largely controlled by UES.

Mosenergo was founded in 1887 and owned the country's first power plant, GES1, which has become a Moscow landmark, based across the river from the Kremlin. In 1931, the company says, Moscow became the first city in the world to introduce a central water-heating system. Mosenergo now provides 80 percent of heat in Moscow.

Mosenergo is controlled by UES, which holds just under 51 percent. Foreign companies have about 28 percent, and Russian firms have 10 percent. Individuals hold 8.5 percent and the Moscow authorities have 3 percent.

Mosenergo shares trade on the RTS and have been steadily climbing since the management shakeup. The shares closed down 1.13 percent Tuesday at $0.031, a 7 percent increase from two weeks ago.