Russia Power Report Q2 2008

The new Russia Power Report from BMI forecasts that the country will account for 47.01% of Central Eastern Europe (CEE) regional power generation by 2012, and remain a net exporter of electricity to neighbouring states. BMI's CEE power generation estimate for 2007 is 2,083 terawatt hours (TWh), representing an increase of 3.84% over the previous year. We are forecasting a rise in regional generation to 2,538TWh by 2012, representing an increase of 26.49%.

CEE thermal power generation in 2007 is estimated by BMI at 1,293TWh, accounting for 62.1% of the total electricity supplied in the region. Our forecast for 2012 is 1,577TWh, implying 22.6% growth that leaves unchanged the market share of thermal generation to 62.1% - in spite of environmental concerns that should be promoting renewables, hydro-electricity and nuclear generation. Russia's thermal generation in 2007 is estimated at 659.2TWh, or 50.98% of the regional total. By 2012, the country is expected to account for 47.43% of thermal generation.

For Russia, gas is the dominant fuel, accounting for 55.2% of primary energy demand (PED), followed by oil at 18.2%, coal at 16.0%, and hydro's 5.6% share of PED. CEE regional energy demand is forecast to reach 1,723mn tonnes of oil equivalent (toe) by 2012, representing 24.5% growth over the period.

Russia's estimated 2007 market share of 52.14% is set to fall to 49.88% by 2012. Russia in 2007 accounted for an estimated 46.94% of regional nuclear energy consumption, with a forecast market share of 46.77% by 2012.

Russia ranks equal fourth with Turkey in BMI's newly revised Power Business Environment rating.

There is arguably little threat of a challenge from Slovakia below it, but third-placed Kazakhstan is likely to remain out of reach. Russia should, however, be able to overtake Turkey for outright fourth during the next few quarters. The current score reflects the vast size of the country's electricity market and infrastructure, a high level of GDP per capita growth, plus its relatively low level of import dependence.

Country risk factors to some extent undermine the industry scores, but Russia still has the potential to leave Turkey behind.

BMI forecasts Russian real GDP growth averaging 6.14% per annum between 2006 and 2012, although the 2008 forecast is 6.5%. The population is expected to fall from 142.5mn to 140.4mn over the period, but GDP per capita and electricity consumption per capita are forecast to increase significantly. The country's power consumption is expected to increase from an estimated 905.4TWh in 2007 to 1,058.4TWh by the end of the forecast period, while exports should rise from an estimated 121.8TWh in 2007 to 134.7TWh in 2012, assuming 3.3% annual growth in generating capacity.