State will need to support private power generators

Russia's private power generators are defaulting on existing debt to finance new generating facilities.

Energy Minister Sergey Shmatko says the state will have to intervene to support the sector, which needs up to $50 Billion dollars of investment by 2012.

“Private electricity generation is facing serious problems.  We know that, and the companies involved talk about it openly.  At the moment we are working closely with them to figure out how much new generating capacity they should be looking to build.  And we have to conclude that significant financial support is necessary.  It's something we hadn’t considered before, and that's why we had to implement reforms, to make private electricity generation more attractive to investors.  But the crisis is showing us that a certain amount of help will be needed.  Of course, not all companies will need it…

The current market conditions make almost any project unprofitable.  And a cost of 16-20% per year to build large generating facilities certainly negates any profitability.  So we will be discussing infrastructure development projects with the government.”