Investors in Russian energy seek higher profits

Russia’s leading electricity provider RAO UES expects private energy firms to invest about 60 billion euros into new generating facilities in the next 15 years. But market players say hidden costs have cut into the profitability of investment in the secto

An RAO UES board member, Yury Udaltsov, says investment in the sector is about to grow.

“We expect the inflow of capital to double in the next 15 years if demand increases as forecast,” Udaltsov said.

RAO UES has already managed to get 23 billion euros in guaranteed investment into the sector, and another 4 billion will be raised from assets to be sold in May.

However after UES is dissolved in July, it will be up to generators to decide how much to invest into the development of generating facilities.

Fees for joining the electricity distribution network have already added 20% to project costs and it is still unclear to what extent tariffs will be liberalised.

With unclear future earnings, investors may be reluctant to commit more cash.

“It will be interesting to see whether the government is able to impose higher electricity prices on domestic consumers,” says Nigel Blackaby from Pennwell Corporation.