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ROSSETI

April 14, 2010

IDGC Holding creates efficient legal support mechanism

On April 14, 2010, IDGC Holding held a meeting, chaired by IDGC Holding Director General Nikolay Shvets and considered the main targets and objectives pertaining to legal support for the IDGC Holding activities.

The meeting participants included representatives of the Russian Ministry for Energy, Russian Federal Antimonopoly Service, and directors of the IDGC Holding legal and corporate divisions.

Director General Nikolay Shvets said that IDGC Holding's legal support priorities include "issues related to 'last mile' mechanisms and the consolidation of territorial grid assets, including unowned regional grids." "We consider the consolidation of territorial grid assets to be an important reserve for restraining the rate of tariff growth. Specifically, economy can be achieved by reducing management expenses," emphasized Director General.

IDGC Holding is considering different options for grid assets consolidation: bidding to buy territorial grid assets and leasing grid assets. Nikolay Shvets said that similar experience existed in France and applied by ERDF, with whom IDGC Holding had recently signed a cooperation agreement.

Vitaly Korolev, Director of the FAS Russia Department for Electric Power Industry, familiarized the meeting participants with the FAS practice for control over the business activities of Russian electric power entities.

Maxim Balashov, Deputy Director of the Russian Ministry of Energy Department for Development of the Electric Power Industry, spoke about the future regulatory control over electricity transmission and distribution.

"In 2011–2014, in addition to addressing such issues as high above-standard losses, 'last mile' problems, non-payments by customers under electricity transmission agreements, liquidation of cross-subsidization and tariff regulation for households, focus should be made on the problem related to depreciation of fixed assets," said Mr. Balashov. "In Russia, depreciation figures are 1.5–2 times as high as those in developing countries." He also emphasized that the current backwardness of distribution grids in terms of modernization of their fixed assets can be attributed to the fact that distribution grids had historically been financed on a residual basis.

IDGC Holding's strategic objective is to reduce wear and tear levels to 50%, which will enhance the operational efficiency of Russia’s electric distribution grid sector. According to Nikolay Shvets, "This objective can only be attained by implementing a program for large-scale equipment renewal and by enhancing operational efficiency of the IDGC Holding operating subsidiaries."

"The directors of our subsidiaries should locally make decisions leading to sizable economic effects and creating conditions for efficient utilization of the funds provided for the maintenance of electric grid facilities. Successful resolution of all these problems would largely depend on professionalism and consistency of the activities of the legal departments of the IDGC Holding subsidiaries and their divisions," said Nikolay Shvets.

 

 

 

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