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Moscow Times
March 22, 2005
Chubais: UES Reform on Track
By Guy Faulconbridge
Staff Writer

Unified Energy Systems CEO Anatoly Chubais on Monday denied reports that the reorganization of the country's power sector would be delayed yet again.

Chubais, who survived an attempt on his life on Thursday, told an energy conference gathered in the Kremlin Palace that the planned breakup of UES -- the world's largest electricity company by capacity -- will be completed by the end of next year.

While Chubais gave a ringing defense of UES reform, he declined to provide further clues on the ambush, despite having said last week that he knew who was behind the attack.

The architect of the ambitious UES restructuring, Chubais says dividing, merging and selling UES assets will replace one of the leviathans of the Soviet economy with a competitive electricity market.

"We have moved onto the final stage, the last stretch, with a clear understanding of what we still need to do and a clear understanding of the fixed time period in which everything has to be done," Chubais told a motley group of assembled industrialists, journalists and students.

"The reorganization of UES, which will be accomplished in 2006 in accordance with the government decision, will place a full stop after all the theoretical and practical discussion about this. Private generation will become the foundation of Russia's developing electricity sector and nobody can stop us in this."

One of the key economic projects of Vladimir Putin's presidency, power sector reform has been delayed several times, running into opposition from regional leaders, State Duma deputies, industrial clients, minority shareholders and highly placed officials.

UES shares fell 2.1 percent Monday on the MICEX after a 1.4 percent drop on Friday.

Under the reform, UES is being split into transmission, sales and generation companies. The biggest power stations are to be merged into six wholesale thermal generation companies, over which the state will lose control, and one hydroelectric generation company, which will remain in state hands.

A state-controlled grid company will run the country's main power lines; smaller grid companies will manage regional transmission lines; and regional power stations will be merged into 14 territorial generation companies.

Since the attack on Thursday, news reports have surfaced that the government is considering postponing important aspects of the reform by up to a year.

Most moves on the reform will be carried out up to 12 months later than originally planned, Vedomosti said on Monday, citing an unidentified official and a draft plan. The paper also said that the document made no mention of a privatization directive.

Chubais slammed journalists for failing to understand the reform and said there was no delay.

UES privatization needs no directives, he said, because "in 2006 UES will be reorganized by separation and proportional distribution of assets among shareholders. ... In essence that is privatization."

Chubais said the result of that would be private control of wholesale and territorial generation companies, though he didn't say how. Auctions for wholesale generation companies were now "secondary" questions he said.

The main tasks were keeping state control over the grid and putting generation in private hands, he said. "While the first question is being decided, the question about auctions is secondary for us."

Yet if the government wants to hold an auction for "one or two" generation companies before the end of 2006, he said, "then we are fully prepared for it, and we can do it."

As for the attack on his cortege on a road west of Moscow last week, Chubais gave only cryptic answers. An explosive device was detonated and his armored car was strafed as he was driving to work Thursday. Nobody was hurt.

Police have detained Vladimir Kvachkov, a retired and highly decorated former special forces commando, in connection with the attack.

Chubais said "only time will tell" when asked by reporters about the arrest.