Page 106 - RusRPTFeb19

Tver regions, and Tatarstan.
Krasnodar Territory is also the leader in terms of the share of tourist income in the region's GRP - 2.55%, analysts of Sberbank indicate. For St. Petersburg and the Leningrad Region this figure is 0.44%, and for Moscow and the Moscow Region it is altogether close to a statistical error of 0.02%.
9.1.10 Utilities sector news
Russian government approves final genco modernisation scheme
Russia’s Minister of Energy, Alexander Novak, announced that the government had given its final approval for the programme of fossil-fuel generation modernisation in Russia on 24 January. According to the minister, the plan is to last for 10 years, from 2022 to 2031, and to include 41GW of capacity, including the capacities in the Russian Far East and non-pricing zones, VTB Capital (VTBC) said in a note. The total expected investment is RUB1.9 trillion ($28,7bn). The first auction is to take place in April-May 2019, for 11GW, commissioning in 2022-2024. 100% equipment localisation is one of the key targets in the programme. The modernisation in the Far East could suggest the renewal of 2GW of capacity for RUB 200bn, with the details to be specified during the next meetings, according to the Minister. The legislation is to be published by February 3, 2019, according to the minutes of the relevant government meeting. “Overall, we see the news as strongly positive and long- awaited, unlocking the long-term value of the generation sector, adding sustainability (or even growth in the case of some companies) to long-term profits at least until 2035. The programme additionally ensures that any incremental investment undertaken by generation companies would be within the scope of economic rationality with a guaranteed return on 14% post-tax in rubles, lasting for 15 years for each ruble investment, moving a whole set of existing capacity from the breaking-even territory to meaningful ROA. We see InterRAO as the key beneficiary of the programme. The news also sounds positive for RusHydro, which was confirmed that it is to be included in the scheme and implies substantial swing to current investment policy of value- destructive capex to similar terms at par with other gencos in Russia,” VTBC said.
Russia’s Ministry of Economy has proposed a new tier system for electricity tariffs on consumers based on total consumption, effectively creating "social norms" for end-use and attempting to reduce subsidies. The proposal fits into a broader campaign likely cantered around Economy minister Maxim Oreshkin who, after losing considerable policy sway to Finance Minister Anton Siluanov, has just proposed KPIs for vice deputies in government, including Russian First Deputy Prime Minister and Finance Minister Anton Siluanov. This specific proposal is essentially a chance to renegotiate the level at which electricity consumption is subsidized by the state, with considerable impact for consumers in Russia's regions. Given stagnant or falling real wages and rising inflation from the VAT hike Siluanov backed, the proposal is a game of chicken with other ministries. Reforms cost the population, and no one wants to get tagged for it by the public.
• MinEkonomiki has called for a base tariff for consumers using up to 300 KWH per month, a second tier for 300-500 KWH per month, and a different rate for users consuming more engaged in economic activity.
• The tariff system would entail reworking relative tariff costs for different regions depending on costs of living, as well as rewriting a series of existing
106 RUSSIA Country Report February 2019 www.intellinews.com