Russia Power Report Q3 2008

The new Russia Power Report from BMI forecasts that the country will account for 47.50% of Central Eastern Europe (CEE) regional power generation by 2012, and remain a net exporter of electricity to neighbouring states. BMIs CEE power generation estimate for 2007 is 2,103 terawatt hours (twh), representing an increase of 4.83% over the previous year. We are forecasting a rise in regional generation to 2,562twh by 2012, representing an increase of 21.80%.

CEE thermal power generation in 2007 is estimated by BMI at 1,318twh, accounting for 62.7% of the total electricity supplied in the region. Our forecast for 2012 is 1,585twh, implying 20.28% growth that reduces the market share of thermal generation to 61.86% in spite of environmental concerns that should be promoting greater use of renewables, hydro-electricity and nuclear generation. Russias thermal generation in 2007 is estimated at 684.1twh, or 51.92% of the regional total. By 2012, the country is expected to account for 47.65% 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 hydros 5.6% share of PED. CEE regional energy demand is forecast to reach 1,735mn tonnes of oil equivalent (toe) by 2012, representing 21.0% growth over the period.

Russias estimated 2007 market share of 51.98% is set to fall to 50.15% by 2012. Russia in 2007 accounted for an estimated 46.19% of regional nuclear energy consumption, with a forecast market share of 47.99% by 2012.

Russia now ranks outright fourth in BMIs updated Power Business Environment rating. There is arguably little threat of a challenge from Turkey just one point below it, but joint second-placed Kazakhstan and Poland may remain out of reach. The current score reflects the vast size of the countrys 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 pull further ahead of Turkey.

BMI now forecasts Russian real GDP growth averaging 6.82% per annum between 2007 and 2012, although the 2008 forecast is 7.1%. 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 countrys power consumption is expected to increase from an estimated 912.6twh in 2007 to 1,088.5twh by the end of the forecast period, while exports should ease from an estimated 134.5twh in 2007 to 128.3twh in 2012, assuming 3.5% annual growth in generating capacity.

Between 2007 and 2018, we are forecasting an increase in Russian electricity generation of 30.87%, which is towards the lower end of the range for the CEE region. This equates to 10.41% in the 2013-2018 period, down from 16.21% in 2007-12. PED growth is set to fall from 16.71% in 2007-12 to 14.24%, representing 38.01% for the entire forecast period. An increase of 61% in hydro-power use during 2007- 18 is a key element of generation growth. Thermal power generation is forecast to rise by 15.8% between 2007 and 2018, with nuclear demand up almost 58%. More detail of BMIs long-term forecasts can be found in the Appendix of this report.