| Other Photos |
 |
|
 |
System Shutdown
RAO “UES of Russia” has entered the last stage of its existence. The energy giant’s shareholders gathered on October 26; its liquidation as such was on the agenda. The company headed by Anatoly Chubais is to exist no more since July 1, 2008.
While reforming RAO, the company’s CEO Anatoly Chubais faced the results of his previous work experience in the government: Chubais deals with electric energy issues two times more than with general economic and political reforms.
RAO “UES of Russia” officially began its work one day before the beginning of 1993. It is to exist for 15 years and a half. The company’s shareholders gathered last Friday with the only purpose – to approve the measures which will lead to liquidating the Russian joint-stock company of energy and electrification “UES of Russia” on July 1, 2008. Hardly anyone remembers why energy is separated from electrification in RAO’s name. Meanwhile, Chubais, who then was one of the main ‘young reformers’ in Egor Gaidar’s government, knew what this tiny difference was in 1992 when the Fuel and Energy Ministry was transferring all electric energy assets to the new company, 100-percent state-owned back then. By summer 1994, 20 percent of the company’s shares was sold at check auctions, and Chubais had some relation to it. Yet, he hardly knew he would spend ten years of his life on chopper switches, power plants, and other energy utilities, -- twice more than on the rest of his career in the Russian government. However, that is exactly what happened.
Meanwhile, the basis of Chubais’ career in RAO was laid in 1992. Deputy Fuel and Energy Minister Anatoly Dyakov, a professional power engineer, did not have high rating 15 years ago. He could be called neither a ‘red director’ nor a ‘reformer’. He resembled LUKOIL’s current head Vagit Alekperov, and was expected to have nearly the same fate: privatization, maneuvering among Viktor Chernomyrdin and his liberal opponents in the government, and eventually – a large financial and industrial holding based in the energy sector and spreading its tentacles towards all others. That is where everything was going: RAO was the major creditor of Russia’s industry already by 1995.
If Chubais had managed to see something unusual in Dyakov, the history could have been different. Yet, Dyakov gave up tycoon’s path, and went another way. Unified Electric Energy Corporation (UEEC) was created under his leadership. He was spending nearly more time in its office than in RAO UES. In fact, UEEC became the issuer of alternative money, -- bills of exchange of UEEC structures. By 1996, they secured over 40 percent of payments in Russia’s energy sector. During the crisis of payment arrears, caused by the failure of Chubais’ associates in the struggle against their opponents for an adequate financial policy, UEEC turned into the second issuing center, alternative to the Central Bank of Russia. In early 1997, everyone got so used to Dyakov’s ‘energy money’ that there even were offers to introduce ‘energy ruble’ for industrial payments.
When Chubais became Russia’s deputy prime minister, he headed a governmental structure which was to resolve the payment arrears issue along Chubais’ favorite strategy of ‘storm and stress’. It was to create the All-Russia Emergency Commission on arrears. However, it turned out soon there was not much what the Commission could do. Meanwhile, it became evident that the UEEC financial system was likely to ‘implode’: Chubais took his first step into the energy sector in March 1997. Not with his own feet, though. First Deputy PM Boris Nemtsov recommended, and his associate Chubais lobbied with political methods, the appointment of Nizhny Novgorod’s banker Boris Brevnov as Dyakov’s deputy.
Theoretically, everything was correct: Chubais should not deal with local issues, there are associates for that purpose. Brevnov showed his different sides already by early summer of 1997. The war broke out around UEEC itself and Brevnov’s spending the company’s money on personal needs. Open hostilities began on January 17, 1998. RAO’s board of directors dismissed Brevnov. Fuel and Energy Minister Sergei Kirienko canceled the decision. Dyakov was dismissed from RAO’s board in February. The meeting of shareholders got frustrated in March. Brevnov asked for resignation himself in April. The system of state rule, created with Chubais’ participation, did not work.
RAO did not work either. The year of 1997 brought failure to the company, from all points of view. On April 30, Chubais headed the company instead of Dyakov. RAO’s collapse would have led to distress comparable to that which the entire economy suffered in the early 90s.
It seemed at first that Chubais would stay in the energy sector for 2 or 3 years. In 1998’s second half, RAO was removing the consequences of the payment arrears and UEEC crisis. Yet, the August default hampered the work for untying the knot of non-payments. Sergei Kirienko (who had become prime minister), Central Bank head Sergei Dubinin (who later became RAO’s financial director), and Chubais’ constant opponents, primarily new Prime Minister Evgeny Primakov, all had a hand in it. Trench war went on for one year and a half. In December 1999, with new Prime Minister Vladimir Putin, RAO formed a group for developing the concept of reforming the company and the energy sector at large.
One would think it was simple. According to Chubais, the sector needed to be privatized, and private investors were to come. In the previous years, Chubais’ activities in the government seemed to have been creating a system in which reforms should have gone smoothly. Alexander Voloshin, new CEO of RAO and head of President Vladimir Putin’s staff, held a council in the Kremlin on April 5, 2000. RAO’s reform developed by Chubais’ team was approved, but sent to follow-up revision. As it turned out, the reform had both overt (for instance, Presidential Advisor Andrei Illarionov) and covert (for instance, the subordinates of Fuel and Energy Minister Viktor Khristenko) opponents. The reform was expected to be over in 2002. However, it was only in July 2001 that another prime minister, once quite friendly with Chubais, -- Mikhail Kasyanov, -- signed the reform’s draft worked out in RAO. Chubais had always won, and he won that time as well. What did it take? Primarily time and people.
Coordination of the reform was repeatedly putting off its implementation. Reforming of regional energy companies began just in 2003 (instead of 2001 as it was scheduled in 1999). OGK-5, the first wholesale generating company, was set up only in 2004. Mikhail Fradkov’s government, which included just 2 reformers and colleagues of Chubais (Finance Minister Alexei Kudrin and Economic Development and Trade Minister German Gref, hardly considered liberals anymore), ratified a new plan of the energy sector reform. The reform’s end was put off to 2006. However, by late 2005, Chubais acknowledged it is impossible to implement the reform earlier than in 2007. Moreover, the reform entered its final stage by that time, and the resistance to it also became maximal. In February 2006, Vladimir Putin had to be involved in promoting the reform. Putin literally bawled Fradkov’s cabinet out for the delays in coordinating the documents. Yet, it did not help much either. The launch of a new model of NOREM competitive market of electric energy was postponed several times, and capacity trading has not been launched at NOREM still.
In this decade, Chubais has already partially lost the image of “the country’s chief privatizer”, eventually becoming “the chief energy official”. Bills of exchange are almost forgotten by the nation, just as rolling blackouts, energy debts beating out, polemics with Illarionov on the reform’s strategy, energy battles with Primorye Territory authorities (who, naturally, were dismissed by Chubais), creation of RAO UES’ new management team, and its gradual destruction. State Duma repeatedly attempted to remove Chubais from his position in RAO. There were multiple rumors it had already happened. There was a meeting of shareholders that determined the exact date for it to happen.
Privatizing just one company, a project which seemed in 1997 to be just a common task of the economic reform, is coming to its end in 2007. RAO “UES of Russia”, the last but one stronghold of Soviet authority in the economy after Gazprom, should have a grave with an epitaph: “Created by Lenin, liquidated by Chubais”. Apparently, it was worth it, if Chubais spent at least twice as much time on solving that task.
&
Fifteen Years with RAO
Russian joint-stock company of energy and electrification “UES of Russia” was established on December 31, 1992. It united all energy assets of the Fuel and Energy Ministry: the unified energy system, 70 regional energy systems, 100 hydroelectric stations, over 600 heat power plants, and 2.5 million kilometers of electric power lines. RAO’s registered capital is 70 billion rubles. The company was headed by Deputy Minister Anatoly Dyakov.
In 1994, 20 percent of RAO’s shares was sold at two check auctions. In November 1994, 1.81 percent more was sold at the first money auction. By late 1996, 52.7 percent was in the government’s property, 27.8 percent was owned by foreign companies, 10.9 percent – by Russian companies, 8.6 percent – by Russian individuals.
On April 1, 1997, Nizhny Novgorod’s banker Boris Brevnov was appointed RAO’s vice president, upon the recommendation of First Deputy Prime Minister Boris Nemtsov. On May 5, 1997, Brevnov took the position of RAO’s president and chairman of board. On April 3, 1998, Brevnov announced his resignation from the position.
On April 4, 1998, Anatoly Chubais was elected into RAO’s board of directors, and appointed as chairman on April 30. In December 1999, RAO decided to form a working group for developing the concept of restructuring RAO. On April 4, 2000, upon the initiative of the new RAO chairman Alexander Voloshin, the board of directors gathered for a council in the Kremlin. Chubais said the only way to save the energy sector is to attract private investors.
On July 11, 2001, Prime Minister Mikhail Kasyanov signed enactment “About reforming Russia’s electric energy sector”. Accordingly, RAO was to be divided horizontally into united generating companies (OGK), territorial generating companies (TGK), and inter-regional distributing network companies (MRSK).
In January 2002, two 100-percent subsidiaries of RAO were formed: the Federal Network Company of the Unified Energy System (FSK) and the System Operator – Central Dispatcher Department of the Unified Network Company ( CDU). In 2003, regional energy companies began to be reformed. In May, the board approved ‘The Concept of RAO “UES of Russia” Strategy for 2003-2008”.
In September 2004, RAO’s board adopted a decision on forming the first wholesale generating company (OGK-5) and two territorial generating companies (TGK-9 and TGK-14). In October, the formation of inter-regional distributing network companies began.
On April 19, 2005, the government issued an enactment on the new variant of the reform’s plan. It determined the deadline for reorganization: late 2006. On November 25, 2005, Chubais said the reform should pass in two stages and end only in 2007-2008.
On February 10, 2006, Vladimir Putin demanded that the government should solve the issues which prevent RAO from attracting investments into the energy-generating capacities. First IPO under the reform took place on October 31: 14.4 percent of OGK-5 was sold for $459 million. On December 5, RAO approved the strategy for extra emission of shares of five generating companies. By July 30, 2007, the shares of OGK-3, OGK-5, Mosenergo, TGK-5 were placed.
On September 4, 2007, the first stage of reforming RAO was over. OGK-5 and TGK-5 became separated from the company, becoming first private generating companies in Russia.
Dmitry Butrin
All the Article in Russian as of Oct. 29, 2007
|
|
|
