MOSCOW. (RIA Novosti commentator Marina Pustilnik). Bulgaria's privatization agency recently put three thermal power plants up for sale: Varna, Ruse and Bobov Dol.
Russia's state-run electric monopoly, Unified Energy Systems (UES), won the tenders for the Varna and Ruse plants, while Greece's Public Power Corporation acquired the third facility.
The tender attracted the world's leading electricity companies. Ten of the 14 companies that applied to bid in the tender were selected. Apart from the Russian monopoly and the Public Power Corporation, the other companies were Italy's Enel, the Czech republic's CEZ, Austria's EVN AG, Japan's Mitsui and J Power, Germany's Energie, Britain's International Power Global Development Ltd., France's Dalkia International, and America's AES.
Some market watchers are inclined to believe that these famous rivals made UES bid far more for the assets than they are really worth. The Russian company offered 389 million euros for Varna, which has an installed capacity of 1,250 megawatts, and 120 million euros for Ruse, which has an installed capacity of 400 megawatts. CEZ offered only 192 million euros for the former, half the UES bid. Enel valued the plant at only 150 million euros. UES made an even bigger mistake when it came to putting a price on Ruse. The Czech company was only willing to put 24.3 million euros on the table, whereas the Italians offered a miserly 4.8 million euros.
After the winning bids of the tender were announced, a detached onlooker might have taken the view that UES had won a Pyrrhic victory. The Russian giant's shareholders took the upcoming purchase in different ways. Private shareholders have already said the purchase of the Bulgarian thermal power plants will be of little benefit to them. And Alexander Branis, the director of Prosperity Capital Management, told the RusEnergy agency: "It is an immense sum. At least acquisitions in Georgia and Armenia would have been cheaper." Branis also said it remained unclear who would get the foreign assets after the Russian energy company is reformed and UES is liquidated.
However, Mikhail Matytsin, the deputy director general of the Integrated Energy Systems Holding, told RusEnergy, "It is a strategic purchase that allows UES to be present in the Balkan region, which will develop rapidly." Meanwhile, a source in Gazprom added: "Bulgaria occupies an important place on the map of Europe, and it is logical and correct to buy such assets." Gazprom representatives also said that the location of these power plants opened up the Balkan and Turkish markets for UES.
Although it may be considered a bitter victory for UES, it is nevertheless a victory. The Russian company is continuing to successfully implement its strategy of expanding to neighboring countries. With the Varna and Ruse plants, UES will have hitherto unknown access to the European market. In 2003, it did not get through the screening of companies for the privatization of Bulgaria's distribution networks and in 2004, lost a tender for the privatization of the Slovak electric company, Slovenske Elektrarne.
Many analysts accuse UES of failing to pursue economic interests in conducting its aggressive expansion but following the political instructions of the government, which is still the company's main shareholder. Perhaps there is some truth in these charges, and the Kremlin is trying to obtain economic levers of influence in countries that recently fell out of the zone of its political influence. But it would be more reasonable to presume that UES is simply following the worldwide practice of consolidation in accumulating foreign assets.
The Russian company wants to be a global operator on the global electricity market, and so its strategy of acquiring foreign assets and expanding to overseas markets is the only correct option.
