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. Last Updated: 07/27/2016

UES: Grid Firm to Be Created In January

VedomostiNewly appointed deputy chairman of UES Sergei Dubinin.
Unified Electricity Systems said Friday it would form a state grid company in January as part of moves to reshape the power sector.

The formation of the Federal Grid Company is part of plans to restructure UES, the world's biggest power firm by capacity, and eventually introduce a competitive electricity market.

"The creation of the FSK [grid company] will strengthen UES' integrating role and guarantee cooperation between producers and consumers of electricity on a competitive wholesale market," the company said in a statement.

The company added in a separate statement that its pilot restructuring scheme at a tiny regional utility unit, Belgorodenergo, had been approved by the company's board of directors. This is the first step in a restructuring plan that envisages the monopoly spinning off its generating plants and keeping the national grid under government control.

UES' grid assets, worth more than 42 billion rubles ($1.41 billion), will be transferred to the new unit, which will be wholly owned by UES.

The grid company would be formed in stages and be completed by 2004, when the firm would become independent from UES but remain under state control.

The majority of seats on the board of the new company would be taken by representatives of the government, although minority shareholders would also be present.

The board also approved a code of corporate conduct for UES, making it one of a few Russian blue-chip companies to lay out governance standards in writing. The move is aimed at pleasing minority shareholders and increasing transparency at the firm.

Also Friday, the board appointed former Central Bank Chairman and Gazprom deputy chairman Sergei Dubinin as deputy chairman, Interfax reported.

The company said the move was part of its "instructions to carry out large-scale investment projects by upgrading and developing generating enterprises and network facilities, and attracting strategic investors," Interfax reported.

Last week UES CEO Anatoly Chubais said he saw more potential interest in urgent power plant projects from domestic investors than from foreign investors.

"In my understanding, the proportion of foreign to Russian investors might tip in favor of Russians," Chubais told a news conference.

Chubais was just back from an international roadshow at which he met with potential strategic investors to hawk 10 power plant construction and completion projects together costing more than $1 billion, as well as an underwater cable to export electricity to Japan estimated at $9.6 billion.

Of the power plant projects, the cheapest is the completion and re-equipment of the Upper Volga Hydro Plant cascade, put at about $31 million.

The most capital intensive will be a station in the western exclave of Kaliningrad, estimated at $437 million because it requires the construction of a gas pipeline and reservoir.

(Reuters, MT)