Alfa-Bank's Fridman Interprets Results of Struggle with MDM-Bank Over Konversbank, Minatom Accounts
CEP20020703000001 Moscow Vedomosti (Internet Version-WWW) in Russian 03 Jul 02
[Report by Svetlana Petrova: "Fridman Hasty in Transferring Atomic Energy Money For Servicing To His Bank" (Internet Version-WWW)]
[FBIS Translated Text]
Yesterday, the head of the board of directors of Alfa-Bank, Mikhail Fridman, gave his interpretation of the results of the war with MDM-Bank over Konversbank. A large part of the Minatom [Ministry of Atomic Energy] accounts has been transferred to Alfa-Bank. However, Minatom officials believe that Fridman was hasty, and that no single bank services more than 15 percent of the sector's financial flows. And, as Vedomosti has learned, the passports for the $12 billion VOU-NOU contract were transferred to the state-owned Vneshtorgbank.
As Interfax interprets Fridman's words, the transfer of the atomic energy accounts to Alfa-Bank was performed for the purpose of not allowing a monopoly in the fiscal flows of the sector to be held by a single bank. And specifically, by MDM-Bank.
Konversbank has always been considered a choice object for acquisition, specifically because of the sector's financial flows. And up until Fall of 1999, this bank serviced the VOU-NOU contract (processing of highly enriched uranium into low enrichment fuel for AES [atomic power plants]), which is effective until 2010. However, Yevgeniy Adamov, who headed up Minatom in 1998, transferred the passports for this mega-deal to MDM-Bank, but then the contract was once again returned to Konvers (they say that this was because of a protest by the American side).
In December of 2000, MDM-bank co-owner Andrey Melnichenko came to head up Konversbank, and announced plans to merge the two banks, concentrating up to 70 percent of the sector's financial flows. Although these plans did not work out, Melnichenko did not relinquish control over the bank, despite all the efforts of Alfa-Bank. MDM recently managed to consolidate 85 percent of the shares in Konversbank and to emerge as the winner in this many-month war.
"We are absolutely satisfied with the situation, and do not consider ourselves the losers. ...If Melnichenko is also satisfied with it, then we may say that this deal [acquisition of almost all of Konversbank by MDM] has been concluded to everyone's delight," Mikhail Fridman, the head of Alfa-Group, told journalists yesterday.
But even though each of the opposing sides has supposedly achieved its goal, the money of the atomic energy producers has been dispersed throughout different banks, including state banks (specifically, Sberbank and VTB [Vneshtorgbank]). And the passports for the deals under the VOU-NOU contract did not go to any of their competitors. As First Deputy Minister of Atomic Energy Vladimir Vinogradov told Vedomosti, servicing of this contract, "in coordination with Minfin [Ministry of Finance], was transferred to Vneshtorgbank. "After all, these are state deliveries, and all the money should go to treasury accounts right away," explained Vinogradov. "Therefore, we were given a choice of two banks authorized by Minfin, where it holds accounts--Vneshekonombank and Vneshtorgbank. The operation on transfer of the contract began around 4 months ago, and was concluded at the beginning of June, after receiving the consent of the American side." Yet, according to Vinogradov, Alfa-Bank traditionally services enterprises which carry Russia's contracts with Iran and China.
"Other accounts of Minatom enterprises are held in a rather large number of banks. These are primarily commercial, and not state banks (with the exception of the VOU-NOU contract)," he noted. "And Alfa-Bank is not a monopolist here. Even in its best years, Konversbank, together with the VOU-NOU contract, serviced no more than 30 percent of the sector's financial flows. Therefore, even in this period it was impossible to speak of monopolization, let alone now." Vinogradov announced that Minatom enterprises are now working with over 100 banks, but declined to name the main ones: "We have not collected data about banks which service accounts [of Minatom enterprises] for a long time, but I believe that there is no more than 15 percent concentrated in any one bank today."
[Description of Source: Moscow Vedomosti (Internet Version-WWW) in Russian -- Business paper published jointly with The Wall Street Journal and Financial Times; reportedly friendly with Kremlin.]
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Document ID: CEP20020523000276
Entry Date: 05/23/2002
Version Number: 01
Russian Gas and Power Industries React to Minatom Representative Bulat Nigmatulin's Claim Nuclear To Account for More Generation by 2005
CEP20020523000276 Moscow Izvestiya in Russian 23 May 02
[Article by Yekaterina Kravchenko: "11:00 AM: Spiting Chubays" -- taken from HTML version of source provided by ISP]
[FBIS Translated Text]
The Russian nuclear power industry will be capable of replacing oil and natural gas in our country's fuel mix by 2005, declares Bulat Nigmatulin, deputy minister of atomic energy. By 2010 the nuclear power industry will be lightening Gazprom's load by at least 70 billion cubic meters of gas annually. This is roughly half of current consumption of the "blue fuel" by RAO YeES, and it will bring in at least $1.4 billion to Rosenergoatom. Rosenergoatom is also laying claim to one-fifth of all funds received from greenhouse gas quota trading ($10 billion). The Ministry of Atomic Energy's ambitious plans have been greeted very calmly by RAO YeES; according to promises from company head Anatoliy Chubays, that structure will no longer be in existence in 2004. So it will be the customer who will be voting to buy energy from nuclear power plants.
It will take substantial investment to implement Rosenergoatom's idea, and that means that the Ministry of Atomic Energy is prepared to compete with RAO YeES for the world community's money. In the opinion of exports representing pension funds in the European countries and the United States, the Russian nuclear power industry is an attractive investment. However, Rosenergoatom still has to convince financiers that investing in "the peaceful atom" is preferable to investing in RAO YeES's operations.
According to Ministry of Energy figures, in Russia's central regions natural gas accounts for up to 80% of individual regions' fuel mix, and the national average is 50%. While the export price of gas is over $100 per thousand cubic meters, the domestic price for that same amount of "blue fuel" is a mere $20. It remains profitable for the regions and RAO YeES systems customers to burn gas because it is cheap relative to other fuels, for example coal or oil.
The Ministry of Atomic Energy claims that, at a time when gas production is declining, export volumes could be maintained by increasing power generation by nuclear power stations, and that by 2005 the nuclear power industry will be able to replace oil and gas as the linchpin of Russia's fuel mix. According to Rosenergoatom plans, by 2010 nuclear power will be able to replace more than 70 billion cubic meters of natural gas each year, and by 2020 that figure will be over 100 billion cubic meters. In order to reach this goal Rosenergoatom is planning to extend the service life of existing nuclear power stations and build a number of new ones. By 2010 Russia's annual nuclear power production will have increased by 84 billion kilowatt-hours relative to 2000, reaching 212 billion kilowatt-hours. The Rosenergoatom investment program for 2002-2010 envisions spending R517 billion in the process. "World market trends indicate that the developed countries are intent on developing nuclear power," says Aleksandr Katsay, Rosenergoatom chairman. "Yet currently Russia's nuclear power plants generation no more than 15% of our electricity. However, over the next few years that should increase to 20%." According to Ministry of Atomic Energy assumptions, the nuclear power industry should also get a share of Russia's income from greenhouse gas quota trading. "It should be proportional to our power production," says Katsay.
Paul Rodzyanko of Access Industries believes that part of the money made trading greenhouse gas quotas should go toward investment in the environmentally clean nuclear industry precisely because development of a "peaceful atom" industry holds down emissions. "Around the world a pervasively positive perception is forming of nuclear energy as an inevitable means of reducing greenhouse gas pollution of the atmosphere," says Rodzyanko. According to projections done by Access Industries, nuclear power will become the basis upon which to satisfy increasing demand for electricity during an energy boom. According to Rosenergoatom data, by 2010 the world should have 100 new generating units in addition to the 430 that currently exist. Specifically, the United States is planning to build 50 units over the next 20 years, and Japan another 12.
In Russia attitudes toward the nuclear power industry's initiatives remain unclear. The Ministry of Atomic Energy's desire to increase generation by nuclear plants has been greeted positively by Gazprom. "That would be good, because we are stretched to the limit," said a Gazprom representative. RAO YeES is not afraid of greater competition from the nuclear industry. "At the present time electricity generated by nuclear plants is more expensive than the average FOREM [Federal Wholesale Power and Capacity Market] rate. And by 2005 there will be a market in the power sector, and it will set everything right. RAO YeES Rossii will no longer exist. The customer will decide what kind of energy to purchase," said RAO YeES representative Yuriy Melikhov.
[Description of Source: Moscow Izvestiya in Russian -- One of Russia's most prominent dailies; controlled by Vladimir Potanin although Lukoil owns a minority share.]