Prospects of Foreign Capital Raising for Russian Power Grid Companies
The power sector reform in Russia saw capital raising as one of the key objectives. Additional investments are necessary, in particular, for renovation of fixed assets which are ca. 70% worn out. The official Strategy for the development of the Russian power grid also provides for privatization of c...
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MGIMO University Press
2015-02-01
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| Series: | Vestnik MGIMO-Universiteta |
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| Online Access: | https://www.vestnik.mgimo.ru/jour/article/view/290 |
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| author | N. N. Shvets D. L. Val’Kova |
| author_facet | N. N. Shvets D. L. Val’Kova |
| author_sort | N. N. Shvets |
| collection | DOAJ |
| description | The power sector reform in Russia saw capital raising as one of the key objectives. Additional investments are necessary, in particular, for renovation of fixed assets which are ca. 70% worn out. The official Strategy for the development of the Russian power grid also provides for privatization of certain companies and foreign investors are considered among others as the target audience. Upon prospective privatization the sector is expected not only to experience a certain increase in capital expenditures, but also to benefit from foreign expertise and efficiency enhancement. At the moment, however, the privatization plans are hard to implement due to a number of obstacles. Prospective investors are mostly concerned about the lack of transparent regulation and clear development strategy of the industry. This is particularly relevant to the tariff system, which has been continuously altered in recent years. This might be explained by the need of the state support by other sectors, which is often provided at the expense of the power industry. Furthermore, the prospects of foreign capital raising are negatively influenced by the conflict in Ukraine and the corresponding negative perception of potential investors. The above factors result in the decrease in value of power grid companies as well as in the lack of visibility regarding the prospects of the sector development. Privatization thus becomes unreasonable both for the state and prospective investors. At the same time, despite the sector specifics, there are precedents of successful sale of power grid assets to private investors by international peers. Particularly, Vatenfall and Forum have recently closed relevant transactions, nothing to say about the power grid sector of Brazil, majorly controlled by private owners. Transparent regulation, clear pricing rules and well-balanced economic policy are, indeed, indispensable prerequisites for successful privatization. Those might back up a prospective increase in value of power grid companies, which will make the sale of those economically reasonable as well as enhance the business attractiveness for target investors. |
| format | Article |
| id | doaj-art-968a03e417d1450882804864383dfc67 |
| institution | Kabale University |
| issn | 2071-8160 2541-9099 |
| language | English |
| publishDate | 2015-02-01 |
| publisher | MGIMO University Press |
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| series | Vestnik MGIMO-Universiteta |
| spelling | doaj-art-968a03e417d1450882804864383dfc672025-01-30T12:16:12ZengMGIMO University PressVestnik MGIMO-Universiteta2071-81602541-90992015-02-0101(40)11512010.24833/2071-8160-2015-1-40-115-120290Prospects of Foreign Capital Raising for Russian Power Grid CompaniesN. N. Shvets0D. L. Val’Kova1Moscow State Institute of International Relations (University)Moscow State Institute of International Relations (University)The power sector reform in Russia saw capital raising as one of the key objectives. Additional investments are necessary, in particular, for renovation of fixed assets which are ca. 70% worn out. The official Strategy for the development of the Russian power grid also provides for privatization of certain companies and foreign investors are considered among others as the target audience. Upon prospective privatization the sector is expected not only to experience a certain increase in capital expenditures, but also to benefit from foreign expertise and efficiency enhancement. At the moment, however, the privatization plans are hard to implement due to a number of obstacles. Prospective investors are mostly concerned about the lack of transparent regulation and clear development strategy of the industry. This is particularly relevant to the tariff system, which has been continuously altered in recent years. This might be explained by the need of the state support by other sectors, which is often provided at the expense of the power industry. Furthermore, the prospects of foreign capital raising are negatively influenced by the conflict in Ukraine and the corresponding negative perception of potential investors. The above factors result in the decrease in value of power grid companies as well as in the lack of visibility regarding the prospects of the sector development. Privatization thus becomes unreasonable both for the state and prospective investors. At the same time, despite the sector specifics, there are precedents of successful sale of power grid assets to private investors by international peers. Particularly, Vatenfall and Forum have recently closed relevant transactions, nothing to say about the power grid sector of Brazil, majorly controlled by private owners. Transparent regulation, clear pricing rules and well-balanced economic policy are, indeed, indispensable prerequisites for successful privatization. Those might back up a prospective increase in value of power grid companies, which will make the sale of those economically reasonable as well as enhance the business attractiveness for target investors.https://www.vestnik.mgimo.ru/jour/article/view/290privatizationpower industrypower gridsinvestmentsforeign capital |
| spellingShingle | N. N. Shvets D. L. Val’Kova Prospects of Foreign Capital Raising for Russian Power Grid Companies Vestnik MGIMO-Universiteta privatization power industry power grids investments foreign capital |
| title | Prospects of Foreign Capital Raising for Russian Power Grid Companies |
| title_full | Prospects of Foreign Capital Raising for Russian Power Grid Companies |
| title_fullStr | Prospects of Foreign Capital Raising for Russian Power Grid Companies |
| title_full_unstemmed | Prospects of Foreign Capital Raising for Russian Power Grid Companies |
| title_short | Prospects of Foreign Capital Raising for Russian Power Grid Companies |
| title_sort | prospects of foreign capital raising for russian power grid companies |
| topic | privatization power industry power grids investments foreign capital |
| url | https://www.vestnik.mgimo.ru/jour/article/view/290 |
| work_keys_str_mv | AT nnshvets prospectsofforeigncapitalraisingforrussianpowergridcompanies AT dlvalkova prospectsofforeigncapitalraisingforrussianpowergridcompanies |