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. Last Updated: 07/27/2016

Falling Prices May Hinder Power Firms' Growth Plans

Power consumption and output fell sharply in most of the country last month, official figures showed Thursday, signaling an economic slowdown that will force power firms to slash their expansion plans and cut prices.

In central Russia, where industry and population is most concentrated, power consumption fell year on year by 8.9 percent in November while output fell by 12.8 percent.

"First of all, this shows that economic activity is clearly in decline," said Derek Weaving, chief utilities analyst at Renaissance Capital investment bank.

Power Prices Across Russia
RegionOutput% changeConsumption% change
Far East3.
Source: Reuters

He calculated that unusually warm weather accounted for about 1 percent to 2 percent of the decline but that it did not have as much impact as the global financial crisis, which has forced many industries to idle their production lines and cut back growth.

Electricity-intensive sectors such as metals, coal and cement have been particularly affected. Observers were waiting for power consumption data to see just how deep the slowdown had been in November.

The average nationwide decline in electricity consumption was 5.1 percent, in line with some of the more pessimistic forecasts.

The former state electricity monopoly, Unified Energy System, had predicted growth of 4 percent to 5 percent on an annual basis.

All of the country's electricity producers, formerly subsidiaries of UES, had drafted their expansion plans based on this growth forecast. These plans will now have to be cut or delayed.

"It's inevitable. If you don't have demand, then you don't need the assets," Weaving said.

"[Electricity] prices are going to be much lower than they would otherwise have been."