Enel looks to power into Russian future

Global power giant Enel will keep its investment promises in Russia, the government breaking a pledge to open up the power market. CEO Fulvio Conti says he's been assured that reforms will come in this year.

Multinationals pledged $30 billion in the privatization of Russia's power network on the promise of a lucrative new wholesale system called the "capacity market." Two and a half years after its rules were published, the government hasn't got it working.

Enel, which vowed to pump $3 billion in 4 years into generator OGK-5, has taken its beef to the top, according to CEO Fulvio Conti.

“I have been speaking to Minister Igor Sechin to confirm that we are committed to the investment programme that we are running, but we still want to see some improvement in the regulatory framework, and I have been reassured of this intention of the government to improve economic conditions on the market for investors.

In 2009 we will be investing in excess of 21 billion Roubles, and this will be growing up to 25 billion Roubles per year in the next couple of years. I do expect during the year 2009, this new capacity payment system to be available, to induce further investments that we would like to promote in this country."

Russian electricity use fell 8% year-on-year in January and another 5% per cent in February. Yet OGK-5 is finding so many efficiency improvements in its Soviet network, Conti revealed it will even trump last year's 11% jump in net profit.

“We're working on efficiency, we're working on re-establishing capacity improvements that will balance off the reduction in volume, and I do expect overall to still see a slightly growing overall results for OGK-5.”

That makes Russia the bright spot in Europe, where Conti predicts electricity use to fall.

“In Europe I would estimate that, depending on the economic conditions of the second half of 2009, there might be a mild reduction (in electricity use) of four to five per cent.”

On Tuesday Russia’s Deputy Economy Minister told Business RT it knows sector reforms are crucial. Stanislav Voskresensky claimed the capacity market is coming “soon.”