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€100 million loan launches overhaul of Russia power sector
EBRD finance to set stage for unbundling of RAO UES
The European Bank for Reconstruction and Development is lending €100 million to RAO UES (Unified Energy System of Russia) to help the company set in motion a government-approved plan to restructure the country's power sector.
The restructuring of RAO UES is pivotal for the economic future of Russia. Its aim is to increase private ownership, investment and competition in the power sector. "The EBRD is embarking on what we expect will be a long process of involvement in the sector, while sending the international investment community a signal that an important first step towards reform has been taken," said Noreen Doyle, First Vice President of the EBRD.
Leonid Melamed, First Deputy Chairman of RAO UES, added: "The support of the international investment community towards reform of this key sector of the Russian economy is vital, and increasingly evident."
The loan, half of which will be syndicated to a group of international banks, will provide funding for urgent efficiency improvements for the power sector, reversing a dramatic decline in investments in the last 10 years. It will also help RAO UES reduce inter-company and inter-group debts in preparation for the imminent unbundling of its businesses, under which transmission and distribution are due to be separated from generation and supply.
A large part of the loan will be used to finance the rehabilitation of key sub-stations in the transmission network as well as to upgrading the communications system. The aim is to reduce losses and make the grid more reliable.
Finally, a small part of the 3½-year loan will be used to fund an Energy Carbon Facility. A pioneer group within RAO UES will seek to identify greenhouse-gas emission-reduction projects that could attract outside investors. The Bank's support will help the group work with the government to draft the laws and regulations needed to develop such projects.
One of the EBRD's loan conditions has already been implemented by RAO UES: the establishment of a committee to monitor the restructuring of the power sector in accordance with the government-approved plan. The committee is headed by a representative of RAO UES's minority shareholders and includes representatives from the Government of the Russian Federation, the EBRD and the management of RAO UES.
The EBRD will continue to liaise closely with the government on the restructuring of the power sector, focusing on such key aspects as development of regulation, competition and the protection of minority shareholder rights.
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