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20 Feb, 2009 15:58

Government looks for circuit breaker on power generators financing woes

The Russian government has acknowledged electricity generators won’t be able to meet their $50 billion investment obligations. State officials say they are ready to review the schedule of building new power capacity.

Over the past 6 months investors in power generation have beaten a path to the energy ministry – pleading for a way out of their investment obligations. Struggling to raise funds – they face a penalty – 25% of the total investment program – if they fall behind schedule. According to Stanislav Neveynitsin, CEO of OGK-2 finding the financing is nearly impossible.

“There is no long-term money on the market, it’s even hard to find short-term money to refinance. There are very few offers and credit conditions are almost unacceptable.”

When selling electricity assets into private hands last year the state set a condition – to build 40 Gigawatts of generation capacity by the end of the decade.

While its economy was booming – Russia faced power shortages – and needed more electricity to develop.

Today industrial production is shrinking and manufacturers are consuming even less than a year ago, according to Mikhail Slobodin, President of Integrated energy Systems Holding

“Our estimation is about 5% lower than 2008. Its about the level of 2007. But in the future I think the growth of the market will be 1 or 2% per year, in the nearest 3 to 5 years.”

Generators want the government to postpone the construction of some new capacity. The ice is melting. In the beginning of March Vladimir Putin will discuss with generators possible amendments to the investment program. Electricity producers hope the government will allow them to start the construction of half of the generating capacity in no less than 3 years time.