Russia to allow investors in power distribution

MOSCOW, May 26 (Reuters) - Russia’s state-run MRSK Holding, which operates local power distribution networks, is prepared to sell controlling stakes to private investors in the next three years, the deputy head of the holding company said on Monday.

“The realisation of a large-scale programme (of attracting private investors) is scheduled to take place after 2010. However, we can talk about one or two pilot experiments,” Alexander Chistyakov told an industry conference.

Under a reform of the sector, Russia's former electricity monopoly Unified Energy Systems (UES) EESR.MM is selling all of its generation assets while hydroelectric generation and the federal grid will remain under the state control.

MRSK Holding runs 11 power distribution companies, or MRSKs, which control lower-voltage distribution networks. High-voltage power lines are controlled by the Federal Grid Company (FGC) which will stay under state control.

Chistyakov said the government would discuss the issue in autumn 2008. He said distribution companies, which will first move to the regulated asset base (RAB) principle for tariff calculation, will be the first to be sold to private investors.

The RAB system provides the government’s guarantee for an average market return on the private investment but will require new legislation.

Several distribution firms in the Urals region -- SverdlovEnergo, ChelyabEnergo and PermEnergo as well as NizhnovEnergo and BelgorodEnergo -- will move to the new system from July 1, 2008. (Reporting by Olga Popova; Writing by Maria Kiselyova)