13 April 2004 11:48
State loosens its grip on natural monopolies RESTRUCTURING: Reform of the electricity monopoly is under way but the future of Gazprom is less clear, writes Arkady Ostrovsky
Anatoly Chubais, the head of Unified Energy System (UES), Russia's
electricity monopoly, must be one of the few chief executives in the world
who wants his company to disappear.
If he has his way, the UES will cease to exist in three years time and be
replaced by a proper market in electricity generation which he regards as
crucial to Russia's economic development.
The restructuring of UES is one of the cornerstones of liberalising reforms
designed to reduce the state sector's economic influence. "The
non-market sector, dominated by natural monopolies, sends distorted signals
to other branches of the economy, artificially contributing to the creation
of globally uncompetitive enterprises and depriving them of incentives to
modernise," says German Gref, minister for economic development and
trade.
Under the reform plan, UES is to be broken into generation, transmission and
distribution parts. The transmission grid as well as the transmission system
operator will remain in state hands. For now the state will also retain
control of hydropower stations.
Remaining assets will be sold to investors, including stakes in 72 local
generation and distribution companies and 30 larger wholesale thermal
power-generation companies. Local generation stations will be consolidated
into 15-20 inter-regional companies, while wholesale power stations will be
repackaged into six wholesale companies that will compete for industrial
users.
While the government has yet to decide on the precise mechanism of selling
some of the companies, the restructuring has already started. Earlier this
month UES split the first of its 72 local companies into transmission,
generation and distribution entities. "We are like a surgeon: we have
already opened the body and all we have to do now is to operate. But one
thing we certainly can't do is to stop now," says Mr Chubais. He
sees the best proof of the advantages of competition in a recently-created
spot market for electricity, where "prices are 10-12 per cent lower than
the state prices".
He hopes the experience of UES will set the precedent for other natural
monopolies. But while the reform of the electricity market is inevitable, the
reform of Gazprom, the state natural gas monopoly and the world's
largest producer, is far from certain.
Alexei Miller, the chief executive of Gazprom installed by president Vladimir
Putin three years ago to clean up the company, says that while it is
important to make the company more efficient and transparent, it should not
be restructured or privatised in the same way as UES.
He argues that unlike UES, which serves mainly the domestic market, Gazprom
is an export-orientated company that derives two thirds of its revenues from
selling natural gas to Europe and former Soviet republics. "Gazprom is
competing with the largest suppliers of natural gas in the world. Everything
we do is to strengthen our competitive position."
For the Kremlin, Gazprom is a powerful foreign policy tool, another reason
why it is likely to stay in state hands. Indeed the government is planning to
increase its 38 per cent stake in Gazprom, by consolidating its stakes in
Gazprom subsidiaries. But while Mr Putin has ruled out a rapid move to full
market conditions, he has pledged to allow independent gas producers access
to the state monopoly controlled gas pipeline.
The government also promised this year to abolish restrictions preventing
foreign investors from buying the company's domestic shares. Although
this would increase Gazprom's market capitalisation, analysts say this
would not solve the problem of a lack of competition in Russia's natural
gas sector. State regulation of gas prices is also a problem for large
industrial companies. Alexander Abramov, who controls EvrazHolding,
Russia's largest steel producer, says: "How can I plan five years
ahead if I don't know what gas prices I am going to get?"
[FT REPORT - RUSSIA] |
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