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. Last Updated: 07/27/2016

Investment Extension Would Aid Generators

Electricity generators may get an extension on investment programs that they agreed to, while power distributors facing bankruptcy may be handed over to grid companies or generators to administer, Energy Minister Sergei Shmatko told journalists Saturday.

"We will prioritize the investment projects. We will consider each case on its own and are ready to postpone some of them," Shmatko said, in an acknowledgement that the global financial crisis was making inroads in the energy sector.

"But we do not want to dramatically change the investment programs," he said.

Foreign and domestic investors took on a 4 trillion ruble commitment to build new generating capacity by 2012, when they acquired electricity assets from the state during the privatization of Unified Energy System, which wrapped up in July, just weeks before the financial crisis struck.

The investment program extension was welcomed by generators, which are having trouble securing financing for their plans to increase capacity.

"Almost all of us have appealed to market regulators asking for an extension in almost all of our investment programs because of the slowing demand and a lack of access to the bank loans," a generating company official, who did not want to be named because of the sensitivity of the issue, said Sunday.

"So it is very positive news for us."

Shmatko's statements were less positive for distributors, some of which teeter on the verge of bankruptcy as the number of delinquent payments from private and corporate customers surges and sources of credit dry up.

"If a distributor faces bankruptcy, it may be given to a grid company or generator to administer," Shmatko said. "Some distribution companies owe generators more than they are worth themselves."

Distributors were less than thrilled with the threat.

"The logic of the reform implied that distribution and generation were to be separated," Alexander Shkolnikov, deputy chief executive of Smolenskenergosbyt said by telephone Sunday. "The investors have put a lot of money in the projects. Their companies can't be taken away."

Shkolnikov said the systematic problems like the disparity between electricity prices and production costs should be solved instead. "Otherwise, the new owners will face the same problems," Shkolnikov said.

Nor were generators particularly pleased.

"We do not need the bankrupt distributors. We want our money," said the generating company official.