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7 Jul, 2010 07:44

Global players continue push on energy generation reform

Russia's plans to liberalize its energy sector have been hit by the economic downturn, but after almost two years, demand and prices are slowly returning to pre-crisis levels.

Foreign companies, like Italy's Enel and Germany's E-ON, which bought into Russia's electricity sector, are modernizing power generation.

But the distribution and the grid systems remain firmly in state-hands, and investors are looking cautiously at government plans to limit the prices charged to consumers, according to Carlo Tamburi, Managing Director of the International Division at Enel.

“We are very favorable to the full liberalization of the market. Today we are at 80% and at the end of this year we will be at 100% apart from households and in that context, of course, we wouldn't like caps by definition because we would like the free market, the real free market. But I don't think there will be any kind of impact on our decision. We will continue with our investment.”

When they bought power generation assets, investors committed to build new capacity. But they say they need income to justify further spending. Matvey Taits, Senior Utilities Analyst at Uralsib Capital says it's not just about money, however, and that the foreign companies can help drive reform.

“It is very good that we have foreign partner companies in the energy sector, because their lobby power, if you can call it, is protecting interests of other shareholders here and the only question is that these Western companies, their corporate governance is very high quality.”

These companies are still investing in power plants, with Enel spending $1.5 billion over three years on Yekaterinburg generator OGK-5.

Foreign companies are also helping extract the gas that fires them, and it doesn't end there – Rushydro is working with foreign companies to develop hydro-electric power.

Along with nuclear projects, that's helping expand the renewable sector – something that would further cement Russia as an energy superpower.