Russian wholesale generation company OAO OGK-1 (OGKA.RS) said Friday its board of directors has approved an agreement with TNK-BP Holding (TNBP.RS), which will enable the oil company to use its associated gas and enter the wholesale electricity market.
Russian wholesale generation company OAO OGK-1 (OGKA.RS) said Friday its board of directors has approved an agreement with TNK-BP Holding (TNBP.RS), which will enable the oil company to use its associated gas and enter the wholesale electricity market.
According to the agreement, TNK-BP will later in 2008 acquire a 25%-plus-one stake in an OGK-1-owned, Cyprus-based company, which in turn owns the 1,600 megawatt capacity Nizhnevartovsk GRES power station.
It was reported earlier TNK-BP will pay $320 million for the stake and will also finance the construction of a new 800MW capacity combined-cycled gas-fired block at Nizhnevartovsk, which is located close to its core oil production area.
TNK-BP will supply associated gas to the station, which with a thermal efficiency ratio of 57% is considerably more efficient than any other in the region.
The deal will allow TNK-BP a rare opportunity to sell some of the associated gas from its oil fields at a commercial price, and comes at a time when the Russian government is cracking down on gas flaring.
TNK-BP aims at 95% utilization of its associated gas by 2011.
The company will use some of the electricity from the station to power its core projects and sell the rest on the wholesale market.
OGK-1 is one of six wholesale generation companies to be spun off from the federal power stations by RAO Unified Energy System of Russia (EESR.RS). It is the only one left which doesn't either already have a strategic investor or have one earmarked for it by its parent company.
The new strategic investor is expected to be chosen in the first days of March.
People familiar with the matter told Dow Jones Newswires that Electricite de France (1024251.FR) and Finnish power company Fortum OYJ (FUM1V.HE), along with Russian company TransNeftServis-S, have filed separate applications to Russia's antitrust body to bid for a controlling stake in the company.
The antitrust body confirmed Thursday TransNeftServis-S has filed the application, but said it would need two more months to study it.
This can be regarded as either a form of refusal, or an indicator the sale will be postponed, a person familiar with the matter said.
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