European Infrastructure Finance Yearbook - Investing In Bonds ...

and its subsidiaries. The majority of the new
gencos are still UES subsidiaries but are likely to
be privatized in the short term.
Some observers refer to UES’ new investment
program as ‘GOELRO-2’ (the first GOELRO was
the original Soviet plan in 1920 for national
economic recovery and development). GOELRO-
2 envisages heavy investment in new generation
capacity, which should result in an additional 34
gigawatts (GW)--the equivalent of 16% of the
current national generation capacity--by 2011.
The investment plan relies heavily on external
equity and debt financing, and consequently
most gencos are tapping the equity and debt
capital markets (see map above and table 1 on
next page).
The reform plan stipulates that the privatization
of all thermal generation will take place during
2007-2008 through IPOs, secondary public
offerings, sales of equity stakes owned by UES,
and the allocation of the remaining stakes to UES
shareholders at the end of UES’ restructuring,
scheduled for mid-2008. Between December 2006
and October 2007 generating companies WGC-3,
WGC-4, TGC-1, TGC-8, and Mosenergo (AO)
(BB/Stable/--; Russia national scale rating ‘ruAA’)
completed share issues, and WGC-5 and TGC-5
were spun off, resulting in UES’ equity interest
Russian Energy Production
STANDARD & POOR’S EUROPEAN INFRASTRUCTURE FINANCE YEARBOOK
UTILITIES
falling below 50%. Many of the gencos remaining
under control of UES already have a strategic
minority investor that is looking to acquire a
controlling stake through participation in IPOs
and stake auctions. Strategic investors include
major Russian industrial groups, coal and gas
producers, and major European utilities and
investment funds.
The Russian government, however, is likely to
remain the largest player in the power sector: It
will retain all of Russia’s nuclear generation
capacity through Rosenergoatom, most of the
hydro generation capacity through Hydro-WGC,
and a significant portion of thermal generation
capacity through OAO Gazprom (BBB/Stable/--)
and InterRAO UES (not rated). Gazprom, which
controls Russia’s gas reserves and pipelines and is
an important fuel supplier to the electricity
generators, has recently underscored its
investment ambitions in the electricity generation
sector by acquiring major stakes in Mosenergo
and TGK-1 and negotiating a swap of its 10.5%
stake in UES for controlling stakes in OGK-2 and
OGK-6. Gazprom is also playing a leading role in
the creation of a joint venture with coal producer
SUEK, which might receive most of Gazprom’s
and SUEK’s generation assets.
Standard & Poor’s views the change of the
NOVEMBER 2007 ■ 23