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. Last Updated: 07/27/2016

UES: Grid Will Need $5Bln a Year

LONDON — Russia's aging electricity grid will need up to $5 billion in investment every year for the next five years to keep power generation in line with needs, utility monopoly Unified Energy Systems said Wednesday.

"Our working capacity is not more than 115,000 megawatts as compared to total capacity of 215,000 megawatts," UES's head of research and development, Yury Kucherov, told a conference on Russian gas in London.

"To augment this in the near term, we shall need investments of $4 billion to $5 billion per year up to 2005."

The figure seems large since foreign direct investment last year equaled $4.4 billion. Kucherov said UES would be able to muster a fraction of this through amortization and borrowing. He said the problem would become worse after 2005, when investments of $8 billion to $10 billion will be needed each year.

"Rapid consumption growth but a lack of additional capacity could lead to a situation where there is insufficient electricity for industry," Kucherov said.

"After 2005, investments must be doubled or we shall end up facing a situation like in the United States, where consumption grew faster than generation capacity."

This is tough as Russian consumers pay a mere half cent per kilowatt/hour for electricity, preventing the company from improving its revenue flows.

Kucherov's remarks come days after UES chief executive Anatoly Chubais said power plant capacity was going offline five times faster than new capacity is coming on line.

UES is long overdue for a massive restructuring, analysts say, but the move is resisted by some shareholders who say it will lead to the firm being split off and sold on the cheap to vested parties.