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Russian Unified Energy Systems Directors Board member Vyacheslav Sinyugin
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July 11, 2005
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Lords of the Stations
// RAO UES and Rusal share Boguchanskaya hydroelectric power station
Authority and business
Russian Trade and Development Minister German Gref held a meeting during his working visit to Krasnoyarsk Territory on Saturday where he officially declared that RAO UES Russia and Rusal, largest co-owners of Boguchanskaya hydropower electric station, would jointly invest in the project. It means that a long-lasting conflict between the two companies, both of which insisted on their own version of the projects completion, is settled. Boguchanskaya HPP was decided to become a key object of a new industrial center in Krasnoyarsk Territory. $4.5 billion-worth venture is supposed to be financed on the basis of private-state partnership.
HydroOGK CEO Vyacheslav Sinyugin announced Saturday in Kodinsk the signing of a memorandum of understanding to jointly complete Boguchanskaya hydropower station and construct an aluminum smelter the things long debated but kept in secret so far. The memorandum envisages the creation of a special project company, a 50 percent stake in which will be owned by RAO, and the rest 50 percent by Rusal. Mr. Sinyugin said the latter would be given 100 percent stake in the future aluminum smelter and nearly 100 percent stake in Boguchanskaya HPP. These are 64 percent of the stations stocks owned by RAO Unified Energy Systems handed to HydroOGK this February, some 30 percent stocks of the station owned by companies controlled by Rusal and 3 percent of stocks belonging to the Government.

There is a long way to get down drafting a business plan, though. Vyacheslav Sinyugin said all figures both on the capacity of the station and of the new smelter had to be verified within the next four months of the work of a task force that will include representatives of the two companies.

The figures are rough so far. Some $1.2 billion is to be spent to complete the construction of the station and the construction of the smelter (the total of $2.4 billion), though the total sum might shoot up to $3 billion. Besides, the head of HydroOGK asked German Gref not to rush to shift the job in the HPPs flood zone on the commercial basis, i.e. not to exclude the state financing altogether. This decision may greatly aggravate the economic efficiency of the project, Vyacheslav Sinyugin warned.

German Gref believes that the completion of Boguchanskaya hydroelectric power station will not only make the construction of a nearby smelter possible but also will also provide gold-miners and timber merchants with electricity and ensure the stretching of a railroad, which will at once make the project of the development of the Lower Angara attractive for investors. The minister deems very important to involve Russian Railroads company in the project. He asked to view it not just as the completion of another hydropower station but as a pattern of the project funding and private-state partnership. German Gref promised that the infrastructure component of the project (the building of a railroad and a motorway) could be bankrolled by a federal investment fund now being created, which will amount to $2.5 billion by the next year.

Co-owner of Rusal Oleg Deripaska says the start of the construction of the aluminum complex and the schedule of its commissioning will entirely depend on the time of the launching of the railroad. We have a choice now: either to build a smelter in Boguchany or on the site in Karabula [200 km off Boguchanskaya HPP where a branch line ends now], he underscored hinting that the memorandum was only a declaration of intent which was to gain stable economic grounds. Russian Railroads declined to comment on the information.

RAO UES and Rusal might face more problems. For example, they may disagree on the assessment of the funds already invested into the power stations construction. Mr. Sinyugin estimates the funds RAO UES put up in Boguchanskaya HPP at $400 million, whereas Oleg Deripaska made no comments on the figure. Earlier, Rusal unofficially estimated RAOs aid at merely $60 million. Spokesperson for Rusal Vera Kurochkina refuted this figure, though, but declined to cite an official estimation either.

At any rate, the share of RAO UES in the joint company is already something material (at least one can have a look at it from a helicopter), while Rusals share is only plans to construct the smelter, which entirely depend on many more external factors, including the building of the branch line. So, the chances are that Rusal will have to buy out more of its shares in the joint company at the price coordinated with the second company.

However, some other companies may join in, RAO Russian Railways or the administration of Krasnoyarsk, according to the source of Kommersant in the administration of Krasnoyarsk territory. In this case, the source says, RAO EUS and Rusal will be still holding equal shares in the project but Russian Railways and the administration of Krasnoyarsk will become very minor shareholders of the project (up to 5 percent, according to the information of Kommersant), as they will have to provide the transportation availability for the region.

The source of Kommersant in Krasnoyarsk said, though, that Russian Railways may get interested on its own without any shareholdings. If a smelter, a pulp and paper plant are built in the Lower Angara, and new deposits of lead, manganese, iron ore and bauxites are being developed, it will be simply profitable for Russian Railways to work there on ordinary terms. This will the variant German Grefs ministry will be working on up to November 15, the source emphasized. The project will look like a real business plan by this date, Mr. Gref says.

Long Lasting Building Gets a Market Chance

The construction of Boguchanskaya hydroelectric power station was launched in 1980 and suspended in 1994 due to the lack of financing. The station is ready for 55 percent, its annual output is 17.6 billion kW per hour. The completeness of Boguchanskaya HPP will help cut the undersupply of energy in Irkutsk Region. Head of Rusal Oleg Deripaska offered to build up Boguchanskaya HPP in exchange for the control over the station which is to become the major supplier of cheap electric power to the companys smelters. Rusal motivates its assessment of the constructed section of the station at $60 million by the negative market value of the project. However, RAO Unified Energy Systems CEO Anatoly Chubais insisted on the completion of the construction on borrowings, repayment of which would be ensured by increased tariffs and profits from sale of power energy to China ($0.2 for 1kW per hour). The estimation of RAO fell from $6 billion in 2003 to $600 million in early 2005. Rusal and RAO reached a verbal agreement on the joint financing of the completion of Boguchanskaya power station on March 23.

Rosneft Eyes One More YUKOS Asset

During his visit to Krasnoyarsk, Trade and Economic Development Minister German Gref offered Rosneft to become an operating company of Yurubcheno-Tokhomskoye deposit in Evenkia, whose license is held by the East Siberian Oil and Gas Company (VSNK), 70.77 percent stake is owned by YUKOS, 28.74 percent by Unikor. The extraction at the deposit is currently suspended due to the lack of financing by YUKOS. The ministers proposal came as a surprise for Rosneft head Sergey Bogdanchikov. YUKOS holds a license there. If the company turned to us with the request, we could talk it over then, but it is not polite to intrude ourselves, he said. German Gref made a hint, though, that the second shareholder of VSNK was willing to sell its stake. He said minor shareholders propose either to resume the extraction at the deposit, or sell their packages, that is why Rosneft may become a co-investor of the project. The state is ready to help find partners to resume the extraction at the site. Perhaps, it will be a company other than Rosneft, he told the press later. Sergey Bogdanchikov promised to prepare offers on the work of Yurubcheno-Tokhomskoye deposit within the next ten days.
Alena Kornysheva, Krasnoyarsk-Kodinsk; Nataliya Grib

All the Article in Russian as of July 11, 2005

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