15 years ago, an oil company founded by Vagit Alekperov privatized utilities in six regions of Russia. Every now and then, accidents occur there, leaving local residents without electricity, water, heat and communications. LUKOIL seems to be ready to get rid of some of the problematic subsidiaries, but is in no hurry to do this against the background of one of them receiving a soft loan from the NWF.
“The new week will begin for Astrakhan residents with the already familiar power outages,” the local news portal routinely reports. Indeed, from the very beginning of winter, reports of massive water and electricity cuts in Astrakhan have become regular. This is due to problems in the operation of the local CHPP-2, which is the generating capacity of OOO LUKOIL-Astrakhanenergo.
One by one
Due to emergency power outages, the work of water treatment facilities is stopped, and people are left not only without electricity, but also without water. But even when there seems to be electricity, Astrakhan residents complain about power surges that are dangerous for home appliances. In addition, without electricity, traffic lights do not work, which can lead to an increase in accidents on the roads, and cell towers, so that residents do not even have the opportunity to get through somewhere to report a problem.
In Rostov-on-Don, since mid-May last year, more than 800 apartment buildings have been left without hot water. By the end of June, the city authorities called the situation critical: repairs dragged on for more than a month. The Rostov prosecutor’s office issued a warning to LUKOIL-Rostovenergo, and an administrative case was initiated against its general director.
At a meeting devoted to the problems of urban water supply, the head of the Rostov administration, Alexei Logvinenko, said that the city would have to buy Rostov Heating Networks from LUKOIL. According to him, the city authorities cannot allow a repetition of such a situation.
In Saratov, OOO LUKOIL-Energoseti was fined 630,000 rubles by court order. The prosecutor’s check revealed that the company was dumping untreated sewage into the Volga. Our Version wrote about this back in 2019.
But the most egregious case occurred in Volzhsky, Volgograd region. Here, in January 2021, a pipe with boiling water burst in the city center. Four citizens were injured, two of whom died. On the fact of the tragedy, a criminal case was initiated, which, at the request of the head of the Investigative Committee of the Russian Federation, Alexander Bastrykin, was transferred to the central office of the Investigative Committee.
The maintenance of that ill-fated pipe is run by LLC Volga Heating Networks, the managing company of which is LLC LUKOIL-Volgogradenergo, and the founder is LLC Rostov Heating Networks. The founders of which, in turn, are PJSC LUKOIL and OOO LUKOIL-Astrakhanenergo.
Even earlier, in 2012, in Volgograd itself, the operation of CHPP-2, which provided water and heat to the inhabitants of the Krasnoarmeysky district, caused so many complaints that the case went to court. The energy supplier withdrew responsibility for the disruption of the heating season, citing consumers’ debts. And when the court ordered LLC LUKOIL-Volgogradenergo to resume heat supply, the company began to refer to technical difficulties. Meanwhile, residents of the southern outskirts of the city remained without water for weeks.
These are just a few of the most, so to speak, “outstanding” cases. As can be seen from the above examples, LUKOIL’s problems with generating assets are of a long-standing and systemic nature. And let’s face it: leaving tens and hundreds of thousands of people without light, water and heat is a bad habit.
Problem “daughters”
LUKOIL acquired generating assets in the south of Russia in 2008. Then, as part of the privatization of RAO UES of Russia, the oil giant bought out a number of thermal power plants in the Astrakhan, Volgograd and Rostov regions, Krasnodar and Stavropol territories and Dagestan, becoming one of the largest suppliers of energy resources in southern Russia. For example, in Rostov-on-Don, LUKOIL is the largest supplier of heat and hot water: CHPP-2 alone heats 70% of the city.
At the same time, LUKOIL periodically tries to sell generating assets. So, back in 2018, negotiations with Inter RAO were reported, but the parties did not come to an agreement. At that time, market experts estimated the value of assets at 35 billion rubles. At the same time, analysts noted that outside of power supply contracts that guarantee a return on investment due to increased consumer payments, all energy assets operate almost “to zero”.
Similar rumors circulated in 2020. At that time, it was assumed that among the contenders for the purchase of LUKOIL’s energy assets could be such large owners of power generation as Gazprom Energoholding, Rosatom, and the already mentioned Inter RAO. However, it all ended with the fact that in 2021 LUKOIL consolidated generating assets with a high carbon footprint in a new company, VDK-Energo. The new “daughter” received shares in seven energy structures in the south of Russia, as the name itself reminds of – an abbreviation for “Volga – Don – Kuban”. At the time, LUKOIL itself explained that this was done “as part of the decarbonization trend.” At the same time, VDK-Energo showed zero revenue in 2021.
And how are things now, for example, in long-suffering Rostov-on-Don? Last year, commenting on the idea of transferring LUKOIL-Rostovenergo heating networks to municipal ownership, Alexei Logvinenko, head of the city administration, noted that the transfer of a loss-making company to the balance of the city would put a huge burden on the budget. At the same time, the city authorities were determined to ask for help from the regional authorities and even get loans, but to resolve the issue. However, it seems that this time it was not possible to agree on a price.
In January of this year, Logvinenko announced that LUKOIL-Rostovenergo had received a soft loan from the National Wealth Fund. The allocated funds should be spent on the modernization of engineering networks.
“The governor of the Rostov region submitted a corresponding application, the federal government supported us, and a loan of 3 billion rubles was approved for the company. This is significant money that will allow us to significantly change the network infrastructure in two years,” the head of the city explained.
So far, “solving the issue” looks more like an attempt to delay the inevitable end. After all, even a preferential loan will have to be repaid. And how is a deliberately unprofitable company going to do it? There are only two options: either LUKOIL-Rostovenergo will be able to radically rebuild the infrastructure so that it will no longer be unprofitable, or after a while LUKOIL will still have to part with its problematic “daughter”. Similar problems of the parent company will have to be solved in other regions in the south of the country.
By the way
In April 2022, Vagit Alekperov stepped down as president of LUKOIL, which he had held since 1993, and resigned from the board of directors. The billionaire did it against the backdrop of Western sanctions. At the same time, he remained a shareholder of the oil giant. “As of March 31, 2022, V.Yu. Alekperov owned and disposed of the votes in relation to 3.12% of the shares of PJSC LUKOIL. Also V.Yu. Alekperov had a beneficiary economic interest (including through family trusts or mutual funds) in a 5.43% stake in PJSC LUKOIL, voting rights over which he does not control. Thus, V.Yu. Alekperov is not a controlling shareholder of PJSC LUKOIL, the company said in a statement. In January 2023, she was at the epicenter of a scandal over the situation in Ukraine and anti-Russian sanctions. According to media reports, the Bulgarian authorities allowed the export to Ukraine of fuel obtained from Russian oil at the LUKOIL refinery in Burgas. The State Duma did not rule out that the fuel could be at the disposal of the Armed Forces of Ukraine. The Security and Anti-Corruption Committee was instructed to verify these data.
