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The Moscow Times, June 25, 2003

RCS Sets $200M Profit Target

By Alla Startseva

RCS chief Sergei Yashechkin
It didn't officially exist before last month and won't actually start working until next month, but the nation's newest big-ticket consortium is already expecting to net a tidy profit of up to $200 million next year.


Sergei Yashechkin, the head of Russian Communal Systems, a new consortium of powerful financial industrial groups created to run housing and utility services across the nation, said in an interview published Tuesday that the new company expects to earn a 7 percent to 10 percent profit on sales of $2 billion next year.

"[We expect sales] of 60 billion rubles next year out of a total volume of sales in the sector of 550 billion rubles," he told Vedomosti. "Our share of the market will not exceed 15 percent."

Yashechkin said RCS will establish regional subsidiaries that will take over all local housing-service functions, ensuring supplies of water, power, heat and gas, television and radio access, garbage collection, sewage service and general building maintenance. The first of the 12 subsidiaries to be established this year will begin operating next week, he said, although he did not specify where.

The brainchild of Unified Energy Systems CEO Anatoly Chubais, the consortium includes Gazprom, through its pocket bank Gazprombank, Interros, Renova, Evrofinance bank, YevrazHolding and Kuzbassrazrezugol. UES and Gazprombank each own a 25 percent stake in RCS, while the other five members of the consortium each have 10 percent.

RCS, which was officially registered last month, plans to spend $700 million overhauling the badly neglected sector in the areas it operates over the next five years, $200 million of which will come from shareholders.

Yashechkin said RCS was surprised at the interest regional administrations had taken in the project and that the number of regions with which the new company is negotiating has ballooned from an initial 10 two months ago to more than 30 now.

Yashechkin denied reports that RCS will acquire housing assets owned by regional administrations in exchange for the debts to UES and Gazprom that many regions have amassed over the past decade. He said RCS will be managing assets under long-term rental agreements.

"This variant is the basis for RCS," he said.

However, he said he found "no contradictions" with the fact that UES's official corporate restructuring strategy says that one of the measures the national power monopoly is exploring to resolve its payment problem is acquiring assets in exchange for debts.

UES and Gazprom are owed a collective 46 billion rubles ($1.5 billion) from the communal housing sector.

Yashechkin said some UES and Gazprom assets might be included in the charter capital of RCS or some of its subsidiaries "if it is economically justified." If that happens, UES and Gazprom would likely get stakes in those subsidiaries directly.

"I don't exclude that in some of our subsidiaries we might become minority shareholders."

Opponents of Chubais say RCS is nothing but another attempt to grab power.

"A large supermonopoly structure is being created that is trying to replace the state monopoly with a private monopoly," Yabloko leader Grigory Yavlinsky said Sunday. "[Bills] will grow and prices on services will increase, but the quality will not get any better just because one monopoly is being replaced by another."

Vladimir Ryzhkov, an independent State Duma deputy, said he is not against the creation of RCS, but he finds the project "risky" because Russia might end up with one company "that controls electricity tariffs, gas tariffs and housing fees."


See also:

the original at

Housing and Utilities Reform

The Moscow Times, June 25, 2003

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