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. Last Updated: 07/27/2016

UES to Fight Irkutskenergo's Exports to Mongolia

Russian energy giant Unified Energy Systems, seeking to quash any moves toward "separatism" among regional utilities, plans to appeal a decision by federal regulators allowing a rival company to export power to Mongolia.

"We will take that decision to the arbitration court and make the truth come out," Alexander Tarankov, a UES spokesman, said Monday.

The State Anti-Monopoly Committee, in a ruling last Thursday, required UES to allow regional utility Irkutskenergo the use of its grids to export electricity to Mongolia, which UES turned off months ago, said Sergei Kotov, deputy director of the fuel energy department of the anti-monopoly committee.

"We will keep exporting power to Mongolia," an Irkutskenergo official told Reuters. "If UES plans to protest the decision in the court, we will be there to prove that we are right."

UES argues that Irkutskenergo's cheap electricity could be better used helping the country's needy regions than exporting it abroad.

But according to Julie Kuift, a London-based analyst at MC Securities, "This was a good excuse in theory but not in practice, because the amount Irkutskenergo wants to export, which represents 2 percent of their output, is so low that it wouldn't make any difference for the other regions."

The State Anti-Monopoly Committee's decision has no direct bearing on a conflict between the Siberian producer and the energy giant over the ownership of three lucrative hydroelectric power stations now operated by Irkutskenergo. UES is contemplating ways to reassert control over those stations.

"UES is trying to provoke Irkutskenergo in all ways," said Kuift.

Irkutskenergo is one of the only two Russian utilities fully independent of UES and is one of the country's most profitable producers, analysts say.

As UES's aim is to "consolidate the whole industry," Kuift said that if it allowed Irkutskenergo to use its grids for export, it could incite others to export as well and lead to further splits among regional power companies.

Irkutskenergo's wish to export was perceived by UES as "separatism," said Alexander Goncharov, a consultant on fuel energy questions at the State Duma.

But for Russian electricity producers, exporting is synonymous with hard currency and higher revenues.

"They [Irkutskenergo] would be paid four times the average domestic tariff and paid in hard currency," Kuift said.