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#4 - JRL 7229
Russian govt approves power sector reform plan

MOSCOW, June 19 (Reuters) - The Russian government approved on Thursday a two-year plan to kickstart reform of the lumbering energy sector, paving the way for the country's first power market and the liberalisation of energy prices.

The government hopes the plan drawn up by the Economy Ministry, which sets a timetable for the reform of state-regulated Unified Energy System (UES), will attract foreign cash to the crumbling sector.

"The reforms will come in four phases. The task of the first phase is to create the infrastructure for a market that will generate companies and guaranteed suppliers," First Deputy Economy Minister Andrei Sharonov told reporters.

The government, which owns 52 percent of UES, provides in its plan for the creation of 10 generating companies, created from UES's own generators.

The plan also includes provision for the gradual liberalisation of energy prices, currently limited by price caps set by the government, and for Russia's first power market.

Sharonov said, however, that the first experimental power trades, expected to facilitate sale of five to 15 percent of the country's electricity, would be delayed again.

"The situation surrounding the Trade System Administrator (power exchange) is not solved. We cannot at the moment say that the administrator has resolved its internal contradictions and is ready to become a fully fledged power exchange," Sharonov said.

"The by-laws have not been agreed on yet, so trade is being delayed." UES had hoped to start trade by mid-2003.

But UES CEO Anatoly Chubais said after the meeting he was satisfied with the results.

"We have a colossal job ahead of us. We need to work on 49 statements and documents, but we are ready for this," Chubais told reporters.

UES approved last month its own strategy paper to transform itself from a state-regulated, post-Soviet monopoly into a healthy, market-run industry. Investors have focused their interest on the privatisation of UES's most valuable assets -- its power generators.

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