Russia orders seizure of massive UES hydro dam

The Russian government has ordered the seizure of a massive Siberian hydro dam from the state-controlled power monopoly Unified Energy System, a move UES decried as the start of de-privatisation. "Please ensure the property of Sayano-Shushenskaya Hydro is transferred into state property in accordance with the ruling of the East Siberian Federal Arbitration Court," Russian Deputy Prime Minister Alexander Zhukov said in an April 23 letter to Economy Minister German Gref, in charge of state property.

The letter was obtained by Reuters on Wednesday. Sayano-Shushenskaya has one big consumer, a giant smelter owned by RUSAL, the world's third-largest aluminium producer, which uses about 75 percent of its electricity. The governor of the region where the smelter and the dam are sited, a swathe of Siberia called Khakasia, successfully sued earlier this year to overturn the 1993 deal that transferred the dam from state control to UES.

Governor Alexei Lebed protested that the region was not consulted in the deal, in a violation of its rights. "This is the beginning of de-privatisation," a UES spokesman said.

The spectre of nationalisation has stalked Russia's stock market since the government presented a $3.5 billion tax bill to blue-chip oil major YUKOS, whose "oligarch" shareholders are locked in a political row with the Kremlin.

YUKOS says the tax bill will not bankrupt the company, so long as it does not get any bigger, but investors have begun to fear the government is seeking a pretext to seize its core owners' shares or the oil giant's property.

Gref's deputy, Andrei Sharonov, told reporters the seizure of the hydro dam would set a major precedent. "We would have to think through the mechanisms first," he said.

UES is planning an appeal to Russia's High Arbitration Court, and Sharonov said that would likely put the previous court decision, and Zhukov's order, on hold.

Sayano-Shushenskaya is 79 percent owned by UES, which charges that if the massive dam is seized from its balance sheet by the government, the state stake in UES will decrease from 53 percent to under 51 percent, and UES will be owed compensation from the budget.

"UES has minority shareholders, and this is their property too," Sharonov said. "We would like to minimise risks and negative consequences for minority shareholders, and for the entrepreneurial climate in Russia in general."