North West Thermal Power Plant

concluded

On February 24, 2003, an Italian/Russian consortium Enel ESN Energo won a contract to manage the North West Thermal Power Plant (NWTPP) in St. Petersburg, Russia. The NWTPP, the most technologically advanced thermal power plant in Russia, was located near St. Petersburg in the Northwest region of Russia and utilized combined cycle gas turbine (CCGT) technology. The plant, a 450MW combined cycle unit producing 3.4TWh per year, supplied electricity to the Russian wholesale electricity market and Fortum, the Finnish energy group. The main shareholders of NWTPP were RAO UES (46.7%), OAO Lenenergo (13.8%), Lentransgaz (12.3%), the St. Petersburg State Property Management Committee (7.5%) and the state-run company Technopromexport (3.7%). Unified Energy Systems (UES) held a competitive tender for the management of Russia's North-West thermal power plant in February 2003. UES was looking for a European utility to manage the power plant as part of Russia's attempt to lure private investment into the country's aging electricity sector. Fortum, the Finnish energy group, and Enel, the Italian utility, submitted their bids. The Germany's RWE and France's EdF, both of which expressed an interest in the management tender, decided not to bid. The requirements for the bidders for the management rights on the North West thermal power plant were set the UES Board of Directors in September of 2003 as follows: (i) annual turnover of $5 billion (ii) a generating capacity of 5,000 MW (iii) a credit rating from S&P and Fitch not lower than BBB-, and not lower than Baa3 from Moody's. Enel ESN Energo LLC (EEE) - a 50-50 joint venture - won the tender to manage NWTTP for three years, with the possibility of a one-year extension. In June 2004, RAO Unified Energy System of Russia (RAO UESR) signed a three-year management contract with Enel ESN Energo. Under the terms of the management agreement the consortium would become the management company for the NWTPP, assuming responsibility for day-to-day management and operations, overseeing the development of the plant’s second generating unit, and arranging for the financing of up to US$125 million to complete its construction. The power plant’s first unit, which had an installed capacity of 450 MW, was commissioned in December 2000. The second unit, which was planned to have an installed capacity of 450 MW, was under construction and was expected to be completed in 2006. The management tender held by RAO EUS in February 2003, was part of Russia's general reform of the power sector, which aimed to restructure national utility Unified Energy System (UES) and to attract foreign capital to the industry. With a market capitalization exceeding US$11 billion and FY03 revenues of US$19.6 billion, RAO UES operated Russia’s unified power system, controlling more than 70 percent of the country’s electric power grid. The capacity was calculated as 450 of existing capacity and 450 MW under construction at the time the management contract was signed.