RUSSIA: Gazprom to Combine 3 of Its Power Holdings

by Simon Shuster
Gazprom plans to consolidate the electricity stakes of three of its subsidiaries in an apparent bid to maintain tight control of its burgeoning energy holdings.

Two Gazprom subsidiaries -- oil producer Gazprom Neft and petrochemical holding company Sibur -- will transfer their electricity stakes to GazpromEnergo, a power holding that now produces and transmits electricity for Gazprom, Interfax reported, citing the prospectus from Gazprom's most recent sale of eurobonds.

It is not known how much electricity assets the two subsidiaries hold, and Gazprom Neft and Sibur declined to comment. Gazprom did not immediately reply to inquiries. As state utility Unified Energy Systems continues to spin off its power generating assets, Gazprom has been aggressively expanding into the power sector.

The gas giant announced last month that it would pool its electricity assets with SUEK, the country's biggest supplier of coal, forming a joint venture that would control about one- quarter of the country's power generating capacity and close to half of the fossil fuel used to produce power.

Gazprom has not said what assets will be included in its SUEK venture, which Aton Capital estimates to be worth about $12 billion. However, the formation of a second major power holding under GazpromEnergo made the picture somewhat clearer, analysts said.

"It looks like a restructuring of [Gazprom's] electricity assets according to their functionality," said Igor Vasilyev, utilities analyst at Troika Dialog. "But really there is no information."

The business sense behind this move is uncertain, said Alexei Solovyov, electricity analyst at Metropol.

"Economically the benefit is not clear, but it has political advantages. Having one large holding company would imply some dilution of Gazprom's role in the management, and as a state company, what it wants is to maintain full control," Solovyov said.

He added that Gazprom's controlling stake in Moscow utility Mosenergo was not likely to be pooled with SUEK, and might therefore make up the bulk of the GazpromEnergo holding.

GazpromEnergo appointed Alexei Mityushov, 32, a former general director of Gazprom-controlled thermal energy firm MezhregionteploEnergo, as its new general director in January.

Mityushov replaced Nikolai Ilyakhin.
GazpromEnergo controls about 84,000 kilometers of electricity power lines and 2,300 small electric power stations, which meet less than 10 percent of Gazprom's overall electricity needs.

By producing enough power to meet its own demand, Gazprom expects to cut costs, as state-set electricity tariffs are freed up over the next four years and energy prices grow rapidly.

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