UES Declares Deal To Supply Europe

National power grid Unified Energy Systems has reached an agreement to supply energy to three leading European utilities and is to launch a wide-ranging restructure of its vast network, chief executive Anatoly Chubais said Thursday.

Chubais said at a news conference UES had Tuesday signed an agreement with two German utilities, Bayernwerk and RWE AG, and with Austria's Verbund on energy exports to Europe. The deal also calls for Ukrainian participation.

"The day before yesterday, a general agreement was signed with which we have managed to bore a hole in the united front of European energy companies," Chubais said, without going into any details.

He has spearheaded an effort to export electricity to foreign markets, from China to Western Europe, to raise sorely needed hard currency.

Chubais said UES would consider a global restructuring plan at a meeting of its board of directors in late March.

"It's a very serious and wide-scale program aimed at deregulating, restructuring and liberalizing the company's framework," he said.

Restructuring UES' huge network, called for in a 1997 presidential order, would generate competition between individual energy providers and see transport tariffs and other fees reworked.

The company controls almost every local power utility in Russia's 89 regions, as well as the national power grid.

"This is a global and strategic task that we have just begun to tackle. We have set up a working group that has only begun to develop approaches to what must be done," Chubais said.

"The basic structure of this program will be ready by the end of March."

Chubais gave no details, but the company has already begun work on increasing competition between subsidiaries in the wholesale power market. It is creating some hybrid companies that join power suppliers and end users.

UES has also worked to change its role from that of a passive holding company into a management partner in its subsidiaries.

Chubais said UES' management is discussing restructuring its regional subsidiaries with foreign investors, but he added that such changes would only be carried out with the consent of regional authorities.

Increasing private ownership in regional utilities is one of the conditions for UES to receive a World Bank structural adjustment loan.

"Everything hinges on that magic word, 'restructuring.' We are offering investors developed proposals - namely on restructuring the company - and not simply crude sales of stakes," Chubais said.