|  The
UES board celebrating the company's 10th anniversary at a conference
Tuesday.
Efforts to break up the world's
largest utility were dealt a fresh
blow Tuesday as political and commercial
interests collided to delay a key
vote needed to clear the way for the
government's most controversial
restructuring project.
In a move the government's pointman on
power sector reform called "an
act of lawlessness," the agenda-setting
State Duma Council postponed
indefinitely Wednesday's scheduled crucial
second reading of a raft of bills
needed to break up national power monopoly
Unified Energy Systems.
"Saying that another few days is
needed is avoiding making a
decision," Deputy Economic Development and
Trade Minister Andrei Sharonov
said.
The reform bills, which passed a first
reading in October, are broadly
aimed at liberalizing the electricity market
by separating the generation,
transmission and distribution functions of
UES.
Market players and observers said the
delay was due to a combination
of factors, including pressure from powerful
business groups against the
reform and trepidation by populist
politicians who would prefer to postpone
the inevitable price hikes that will result
until after parliamentary and
presidential elections.
Sharonov said the council will meet on
Monday to debate a date for the
vote, which he said he hopes could be as
soon as Tuesday or Wednesday.
Within the Duma, however, opinions
vary on when the vote should be
held -- if it should be held at all.
The Union of Right Forces was eager to
consider the bills on
Wednesday, while the pro-Kremlin centrist
factions, which have a majority,
want a few more days to discuss the issues.
The Communists want to postpone
the vote until the spring, while the liberal
Yabloko faction does not want
to vote on the bills at all -- it wants to
go back to the drawing board.
Yabloko leader Grigory Yavlinsky said
the decision by the pro-Kremlin
State Duma Council may turn out to be "a
move by President Vladimir Putin
against an economic system dominated by
criminals and oligarchs inherited
from the former president," news agencies
reported.
Kremlin chief of staff and UES
chairman Alexander Voloshin, in rare
public remarks, told a conference marking
the 10-year anniversary of the
monopoly that there was no need to rush
reforms.
"The quality of reform is no less
important to us than the pace," he
said.
"All these problems do not mean the
reform is cancelled," Voloshin
told the conference, which was attended by
UES board members, shareholders,
politicians and executives from leading
businesses, both Russian and
foreign.
"We must reach a higher degree of
consensus between society,
[lawmakers] and shareholders of the
company," he said.
UES CEO Anatoly Chubais, who has been
lobbying hard in favor of the
bills, said he believed they would still be
approved, but gave no indication
on how long he thought it might take.
Chubais said it had taken almost eight
months to get to this stage and
Tuesday's delay "was not the first, and
possibly not the last."
As for the reasons for the delay,
Chubais said, "one should understand
that restructuring on such a large scale
inevitably results in someone
losing in business, in political power."
Brunswick UBS Warburg analyst Fyodor
Tregubenko attributed the delay
to "the appearance of new and powerful UES
shareholders."
"A number of shareholders are not
interested in reforming the sector
and creating competition, fearing the tariff
increases on electricity as a
result of the reform," he said.
Market watchers estimate that a
so-called consortium of investors has
slowly accumulated between 10 percent and 20
percent of UES, a stake that is
worth hundreds of millions of dollars.
The likely buyers most often mentioned
are chemical, pipe and coal
magnate Andrei Melnichenko of MDM-Group,
Base Element founder Olge
Deripaska, and Millhouse Capital tycoon
Roman Abramovich.
If voted collectively, owning 15
percent would be enough to win one or
even two seats on UES's board.
"Whoever is buying up UES, they are
serious people; we are talking
about hundreds of millions of dollars," a
top UES manager said last month.
"It's not just MDM, there are several
companies," said the manager,
who requested anonymity. "They have
different aims, some of which are the
opposite of the ones UES management has."
"This is a different type of minority
investors -- tough -- and it
will be difficult to work with them."
Some analysts believe that the buyers
want to work sector
restructuring to their advantage so they end
up with a cheap source of
electricity.
Sergei Suverov, an analyst at Zenit
bank, said the new UES
shareholders -- "the oligarchs who have yet
to identify themselves" -- were
a major factor in delaying the second
reading of the UES reform bills.
"Any delay in the restructuring of the electricity sector
is negative and value-destroying for power utilities," Aton
said in a report Tuesday. "Postponement of the bills' passage
might force the rescheduling of the date for a liberalized market
(now set for July 2005), which would further delay the potential
unlocking of the power sector's value."
See also:
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Energy
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