Russian coal magnate expands power business with Rushydro asset swap

MOSCOW (Reuters) - Russian power company Rushydro has agreed to swap several assets in Russia’s far eastern region with its business partner Andrey Melnichenko and plans to complete the deal by the end of 2019, it said on Thursday.

As part of the swap, Melnichenko, who has been expanding in Russia’s coal power sector, will obtain the Luchegorsky steam coal mine and the Primorsk power station with 1.5 gigawatts of capacity - both in Russia’s far eastern region, where he has not had a presence so far.

Melnichenko’s SUEK, Russia’s largest steam coal producer, owns Siberian Generating Company with coal power plants that have a total capacity of 10.9 gigawatts.

“SUEK expands its coal empire, entering the new region at once with the largest asset in thermal generation and significant vertical integration,” said Vladimir Sklyar at VTB Capital said of the deal.

In exchange, Melnichenko will transfer to Rushydro his 42% stake in Far Eastern Energy Company (DEK). Rushydro, which manages most of Russia’s hydropower plants, already owns 52% of DEK.

Melnichenko bought several coal-fired power plants in Siberia in 2018 to add to his power empire and plans to complete the purchase of the Reftinskaya hydro-power plant from Enel Russia by the end of 2019.

With a capacity of 3.8 gigawatts, Reftinskaya is Russia’s largest coal-fired power plant. Its acquisition will increase SUEK’s share of the Russian power market to 6% from the current 4.5%, according to Reuters’ calculations.

This share will reach 6.7% once SUEK adds Primorskaya to its group as part of the asset swap with Rushydro.

Two sources familiar with the matter told Reuters that SUEK was also in talks with Russian gas giant Gazprom about buying Krasnoyarsk GRES-2, another large coal-fired power plant in Siberia with a capacity of 1.3 gigawatts.

SUEK and Gazprom Energy Holding, which manages Gazprom’s assets in the power sector, declined to comment. Melnichenko’s spokesman did not reply to a request for comment.

Reporting by Anastasia Lyrchikova; additional reporting by Katya Golubkova; Writing by Polina Devitt; Editing by Mark Potter