Many European companies have shown an interest in Russia's power generation, but most of them have not gone beyond statements. Foreign investors may be scared away by the sharp increase in prices for generation companies.
Following rival Endesa, Spanish Iberdrola expressed an interest in Russia's power generation market. Iberdrola is Spain's second largest energy company after Endesa and is the leading company in Catalonia. Last year it survived a takeover attempt from Gas Natural. However, Iberdrola is not alien to the consolidation processes that have swept the European generation sector: recently it acquired Britain's Scottish Power for 11.6 billion pounds.
Endesa's CEO Rafael Miranda discussed the privatization of Russian generation assets with Anatoly Chubais, CEO of RAO UES, Russia's electricity monopoly, last September. Other European companies, such as Germany's E.ON and Britain's International Power, have also been noticed eyeing Russian assets. Still many foreign companies have not gone beyond statements of interest. Only Finland's Fortum has really made a move on the Russian generation sector, becoming the largest minority shareholder in the Northwest territorial generating company TGK 1, but so far it has failed to get a controlling stake in the company.
Market players believe that foreigners as majority investors could be useful, because Europeans have extensive experience of competing in this sector. Yet many experts say that Russia cannot hope for a boom among foreign investors. The main competitive advantage of Russian assets - their cheapness - is becoming a thing of the past.
"Foreigners are unlikely to rush to invest in the Russian generation sector, because the prices keep increasing every day," said Alexander Kornilov, expert with Alfa Bank. "The price of 1 KW during the initial public offering of wholesale generating company OGK 5 last November was $320, but the price of OGK 3, which floated in March, was $600 per 1 KW."
Stanislav Kleshchev of VTB 24 said that it was better for Europeans willing to expand their presence on the Russian market to invest in smaller assets, such as TGK 5, TGK 6 and OGK 6.
Following rival Endesa, Spanish Iberdrola expressed an interest in Russia's power generation market. Iberdrola is Spain's second largest energy company after Endesa and is the leading company in Catalonia. Last year it survived a takeover attempt from Gas Natural. However, Iberdrola is not alien to the consolidation processes that have swept the European generation sector: recently it acquired Britain's Scottish Power for 11.6 billion pounds.
Endesa's CEO Rafael Miranda discussed the privatization of Russian generation assets with Anatoly Chubais, CEO of RAO UES, Russia's electricity monopoly, last September. Other European companies, such as Germany's E.ON and Britain's International Power, have also been noticed eyeing Russian assets. Still many foreign companies have not gone beyond statements of interest. Only Finland's Fortum has really made a move on the Russian generation sector, becoming the largest minority shareholder in the Northwest territorial generating company TGK 1, but so far it has failed to get a controlling stake in the company.
Market players believe that foreigners as majority investors could be useful, because Europeans have extensive experience of competing in this sector. Yet many experts say that Russia cannot hope for a boom among foreign investors. The main competitive advantage of Russian assets - their cheapness - is becoming a thing of the past.
"Foreigners are unlikely to rush to invest in the Russian generation sector, because the prices keep increasing every day," said Alexander Kornilov, expert with Alfa Bank. "The price of 1 KW during the initial public offering of wholesale generating company OGK 5 last November was $320, but the price of OGK 3, which floated in March, was $600 per 1 KW."
Stanislav Kleshchev of VTB 24 said that it was better for Europeans willing to expand their presence on the Russian market to invest in smaller assets, such as TGK 5, TGK 6 and OGK 6.
