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. Last Updated: 07/27/2016

Diverse Group to Meet on UES Reform

In an effort to increase its say over proposals for restructuring the UES national electricity grid, the Kremlin administration has set up a working group to draw up a suggested reform program.

The group, headed by Tomsk Governor and Unified Energy Systems board member Viktor Kress, includes about two dozen people, selected to represent all lobby groups concerned with the restructuring — from local energos to the nuclear power industry to minority shareholders.

Presidential economics adviser Andrei Illarinov is a deputy chairman of the group. Economic Development and Trade Minister German Gref, who last month put forward his own UES restructuring proposal — one quite similar to that favored by UES CEO Anatoly Chubais — is also expected to play a prominent role.

The idea to set up such a working group was floated Dec. 26 by the State Council, a newly established body with vague duties, at a meeting chaired by President Vladimir Putin.

"The creation of the working group appears to indicate Mr. Putin’s desire to bring the process of developing the restructuring concept more under his control," the Renaissance Capital brokerage opined Wednesday in its Morning Monitor.

Minority shareholders will have United Financial Group’s Boris Fyodorov, Alexander Branis from Prosperity Capital Management and Vadim Kleiner from Hermitage Capital Management to stand up for their interests.

UES chairman Chubais and UES board members Valentin Zavadnikov and Vyacheslav Sinyugin represent the management team.

The group is also heavily packed with representatives of the presidential administration, scholars from the Academy of Sciences and directors of regional energo companies.

The broad composition of the new body may be a daunting obstacle to its smooth functioning: Some of the members have made caustic remarks in the past about a UES restructuring plan championed by Chubais and the company management.

The Chubais plan calls, among other things, for UES to spin its 89 electricity generation plants — the energos — and the national power transmission grid into separate companies, with the grid staying firmly under government control.

Tomsk Governor Kress has said the UES restructuring should pursue the interests of the entire nation and not just the company itself. The minority shareholders have worried aloud that the Chubais restructuring will dilute the value of their holdings.

Lenenergo director Kirill Androsov also has his own views on the separation of power production. Androsov said he was invited to the group because his proposals to overhaul the operations of Lenenergo received a welcome response both from minority shareholders and UES.

Among other things, Androsov proposes hiving off the sales of heat and power from the main body of UES. But other details of his plan are not widely known.

Branis from Prosperity hopes that the first meeting of the new group will take place at the end of next week, but said there is so far neither a schedule nor a clear game plan. "I am cautiously optimistic about [the working group’s] prospects," said Branis.

"Clearly, Chubais will have an edge at early stages," said Mikhail Seleznyov, an energy sector analyst with United Financial Group. "A lot will depend on how fast the opposition will draw in resources to draft its own proposal."

It is unlikely that the decisions of the group will be taken by a simple vote, Branis said, so it is likely that whichever factions will apply more concerted efforts and wield more weight in the discussion will have the most influence.

Originally, the group was ordered to take up a proposal by March 1, but the deadline Tuesday was set back to April 15 — giving Chubais’ opponents a badly needed respite for brainstorming and coordination of efforts.

Chubais tried to defend the old deadline at the end of December, but made compromising steps Tuesday.

"UES management is ready to cooperate with the working group on all issues related to overhaul of the power sector," a company spokesman said, according to an Interfax report posted on UES’s web site.

Branis from Prosperity said the initiative to set up such a group lay with the presidential administration and that minority shareholders were invited to get on board.

"We had been mulling over calling an extraordinary shareholders meeting," said Branis. "Then we got a proposal to join the group."