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The start of real reform

A free market for Russia's electricity is within sight as the break-up of the power sector bolts through the halfway mark. Ben Aris reports.


THE BREAK-UP of Russia's power sector and the move towards a free market for electricity has reached the halfway mark as power monopoly United Energy Systems (UES) gets ready to auction off its generating assets in one of the last big privatizations on the slate.

By this summer, UES hopes to have created 24 super-regional generating companies (gencos) out of 72 existing regional power companies (energos). These will then be auctioned off to private investors.

"There has been a lot of movement and now the energos are already in the process of restructuring in preparation for the sell-off," says David Herne, a UES board member and the head of the restructuring committee that represents minority shareholders' interests to management. "Most of the action is under the surface," he says.

UES daughter companies account for 57% of Russian power sales, with nuclear power plants controlled by state company Rosenergoatom providing the remainder.

Russia launched a trial free market for power towards the end of last year in which energos can sell between 5% and 15% of their output to customers at unregulated prices. All price controls are due to be dropped by 2006.

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