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. Last Updated: 07/27/2016

Chubais Promises to Resist Gazprom

Itar-TassChubais, here pictured with Alexei Miller last year, has clashed with Gazprom over its ambitions in the power sector.
Anatoly Chubais, head of Unified Energy System, insisted Thursday that he would resist Gazprom's efforts to snap up large chunks of the power sector, which is threatening to undermine the government's large-scale reform of the industry.

"It would be damaging to the power sector and economic reform as a whole if we were to have another monopoly [in the newly liberalized power sector]," Chubais said at a UBS conference.

Chubais, the country's most controversial and well-known liberal government official, is overseeing the breakup of the UES electricity monopoly in a bid to make the sector competitive and attract much-needed investment.

Scheduled to step down from UES when the power firm is wound up by July 2008, Chubais was ebullient on the achievements in the sector so far. The reform is in its final phase, and strategic investors both in Russia and from overseas have flocked to pick up assets. The government has pledged to invest $138 million in the sector over the next five years.

"We are bringing to completion what we started 10 years ago, without compromising on any of our strategic goals," he said.

But his vision has been clouded by Gazprom's emerging dominance in the sector. The gas giant has picked up controlling stakes in the key utilities that power Moscow and St. Petersburg.

"We are taking action to prevent the emergence of a new monopoly," Chubais said, stressing that his concerns were shared by the authorities, particularly by "leading government officials."

Anti-monopoly legislation in the power sector has been completely overhauled, he said, while further measures would be introduced to address transparency of fuel supplies to the power sector. The measures would be introduced by June 2008, he added.

Gazprom has pinpointed the power sector as an area of "core" interest. In February, Gazprom announced that it would pool its electricity assets with the Siberian Coal and Energy Company, or SUEK, to create a holding worth upward of $12 billion, under its control.

The merger has been stalled for months, however. The two companies are thought to be divided over the evaluation of their assets, while the Federal Anti-Monopoly Service has yet to approve the deal. Officials from Gazprom and SUEK are due to meet next month to discuss the merger further.

While strategic and foreign investors have piled in to the sector, UES has experienced muted enthusiasm for stock sales in the two assets controlled by Gazprom, OGK-2 and OGK-6.

In a sign that Gazprom's dominance threatens to derail the fundamental aim of the reform, that of raising investment, analysts have put waning investor appetite down to Gazprom's increasing clout.

The real interest has come from strategic investors. In light of disappointing market conditions for its share offerings, UES is considering going back on earlier plans to offer more stock to portfolio and strategic investors, Chubais said.

"We will not sell cheap whatever the conditions," he said. "Competition for strategic sales is looking very optimistic indeed, and we should adapt our tactics."