Get the latest updates as we post them — right on your browser

. Last Updated: 07/27/2016

Interros, French Join for UES Tender

French power giant Electricite de France and Vladimir Potanin's empire Interros on Monday signed a memorandum for collaboration in Russia's power sector that includes joint participation in the tender for managing Northwest heat and power plant and other Unified Energy Systems generating assets.

"This memorandum identifies both groups' mutually beneficial qualities and announces their readiness to combine forces and become active participants in the industry restructuring process initiated by UES," EDF and Interros said in a joint statement.

The memorandum was signed by Interros deputy CEO Andrei Bugrov and the head of EDF's European department, Marc Boubier.

French Prime Minister Jean-Pierre Raffarin, in Moscow for a meeting with President Vladimir Putin, and Interros chief Vladimir Potanin attended the ceremony.

Interros owns the country's top power engineering company Siloviye Mashiny and is investing in the public utilities business.

EDF had recently became very interested in the Russian power market because UES reform had "matured," Bugrov said in a telephone interview, and the Russian and French sides had a mutual interest in collaborating in the power industry.

An EDF spokesman with the delegation in Moscow declined to comment, directing all inquiries instead to Interros.

EDF's move to participate in the tender "is rather surprising," Zenit bank's Sergei Suverov said. "Despite its long presence in Russia, EDF has never been involved in big power projects here."

Interros has long been interested in participating in the power industry, and the market expected this kind of move because rumors that Interros has acquired a significant stake in UES.

An industry source, who asked not to be identified, said Interros holds a 2 percent stake or more in UES. "This is not just a rumor," he said.

Bugrov refused to comment on this information.

"We are very attentively following the reform of the power sector and believe that the reform plan is very promising," Bugrov said.

More important than their Northwest tender plans, Bugrov said Interros and EDF are planning to take part in auctions of wholesale generating companies slated to be spun off from the UES monopoly structure as reforms move forward.

EDF and Interros will compete for the Northwest management rights against the team of Italy's ENEL and Russia's ESN-Energo. Germany's E.ON Energy has expressed interest in participating and is in search of a Russian partner. Lenenergo, a key shareholder in the plant, said it also plans to place a bid together with a Western partner. Finland's Fortum is considered a likely candidate.

Yet "there are many Russian peculiarities like pricing and other difficulties. That's why foreign companies looking for a Russian partner," said Seppo Remes, the director of Vostok-Nafta and a member of the UES board.

"This tender in a sense is a marketing move [for UES]," he said, meant to show off UES's ability to attract foreign capital.

Hartmut Jacob, power analyst at Renaissance Capital, said this model of attracting managing companies that have not yet invested in the sector will not be replayed with other UES assets. "There are shareholders who invested a significant amount of resources and count on getting something in return."