Russia to tender multi-billion-dollar hydro deals

Russian electricity reforms advanced November 22 with word of Russia’s first multi-billion-dollar tender to build new hydroelectric power stations.

The landmark tender, to build hydropower stations in the Far East at an estimated cost of up to US$15 billion, is planned for early 2007 and will be a major test of investor appetite for Europe’s fastest-growing electricity market.

A senior official at Russia’s HydroOGK said the tender would be to build the 8,500-MW Yuzhno-Yakutsk (or South Yakutia) hydropower complex at an estimated cost of US$12 billion to US$14 billion, and the Nizhnye-Zeyskaya and Nizhnye-Bureyskaya (or Nizhnezeiskaya and Nizhnebureyskaya) stations, with combined installed capacity of 600 MW, at a cost of US$1 billion. (HNN 8/9/06)

“We will announce the public tender at the beginning of 2007 and we will decide in the first quarter of next year,” Yevgeny Druzyaka, HydroOGK’s head of strategic communications, said. �We expect to start construction in greenfield investments probably in the summer of 2007.”

HydroOGK cites interest by foreign investors

HydroOGK, one of the world’s largest producers of hydroelectric power, said Austrian utility Verbund, Norway’s Norsk Hydro and Statkraft, U.S. Alcoa Inc., and Russia’s newly merging aluminum giant Rusal-Sual were among the companies interested in the projects.

“There are huge opportunities for foreign investors,” Druzyaka said.

Druzyaka said investors in the tenders were being offered stakes of up to 50 percent minus one equity share. Foreign investors jointly building a plant also will be offered a long-term fixed price for electricity, for example for up to 25 years, he said.

“For the time being, they are ready to work with us on this basis,” he said.

Smaller hydros offer 100 percent investor ownership

The mega-hydro plants must stay under state control under strategic sector reforms, along with the federal grid company. But investors may own up to 100 percent of the smaller hydro plants, Druzyaka said, adding the plan is to build a total of 120 MW of such plants by 2010, mostly in the north Caucasus.

Verbund and HydroOGK recently agreed to evaluate possible projects in a joint working group, and Verbund spokesman Gerald Schulze confirmed the company was interested in the projects by taking a minority stake of up to 49 percent. (HNN 11/15/06)

Alcoa’s country manager for Russia, William O’Rourke, recently said talks were “going well” with Russian officials on the possibility of building a hydro station in the Far East to supply a proposed smelter. (HNN 8/22/06)

HydroOGK has signed a memorandum of understanding with SUAL, Russia’s second-largest aluminum producer, and Norway’s Hydro Aluminium to supply hydropower for a proposed new smelter in the Russian Far East. (HNN 8/9/06)

Hydro OGK was spun off from Russian electricity monopoly Unified Energy System (UES) under sector reforms aimed at introducing competition. Once the UES restructuring is complete, HydroOGK will be the world’s second largest hydro generating company after Hydro-Quebec, with installed capacity of 23,300 MW. Currently 40 hydropower plants have been incorporated into the company, with an installed capacity of 21,000 MW.

For information, contact HydroOGK, 8a Prospect Vernadskogo, Moscow 119311 Russia; (7) 495-5403012; Fax: (7) 495-5403014; E-mail: office@gidroogk.ru.

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