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Russian company sweetens offer for large undersea electric cable

Baltenergo promises to build reserve power plant next to Sosnovyi Bor


United Power, a company that has offered to set up an undersea cable to deliver electric power from Russia to Finland, has amended its offer in an attempt to make it more attractive to Finland.

The company has offered to build a gas-fired thermal power plant near the Sosnovyi Bor nuclear power plant in the St. Petersburg area as a reserve power facility. It also suggests that it could set up two small cables instead of a single large one, which was previously proposed.

United Power put forward the new offer at Helsinki's Finlandia Hall on Wednesday at the opening of a two-day event focusing on the Russian economy.

United Power had proposed the construction of a large 1,000 megawatt power cable beneath the Gulf of Finland. The starting point would be near the Sosnovyi Bor nuclear facility, and it would emerge on the Finnish side in Kotka on the south coast. The largest owner of United Power is Baltenergo, and in the background is the government-owned Rosenergoatom, which runs all of Russia's nuclear plants.

The company's licence application is currently under consideration at the Finnish Ministry for Trade and industry.

Suspicions have been raised in Finland about the reliability of the electric supply. Fingrid, which runs the Finnish national electricity grid, suspects that St. Petersburg could face considerable shortages of electricity in the coming years, which would sharply reduce the amount of power available for export.

Last year, Russia cut back on its exports of electricity when cold winter temperatures led to a shortage of power.

On Wednesday, United Power's Chairman of the Board András Szép and the company's adviser Kari Nars said that Baltenergo planned to build two natural gas-fired power plants near Sosnovyi Bor with a combined output of 900 megawatts.

Nars said that the plants could be taken into operation at short notice if there are problems with other electricity sources.

Plans call for the plant to be built by the time electricity deliveries would begin through the new cable, which could take place in 2009 at the earliest.

Szép estimates that the investments into the reserve power plants would cost a total of EUR 600 million.

United Power emphasised that many other investments into the electric power infrastructure are planned in the northwest of Russia in the coming years. Rosenergoatom is planning to increase the use of nuclear power both in Sosnovyi Bor and in the Kola Peninsula. RAU UES, which runs coal-fired plants and hydroelectric facilities, has its own plans, and the natural gas giant Gazprom is planning new gas-powered plants.

United Power also noted that one of the four reactors at Sosnovyi Bor is off line because there is not enough demand for electricity in the area.

A new aspect of the proposal is that instead of a single 1,000 megawatt cable, the link to Finland could involve two cables with a capacity for 500 megawatts each. These could be hooked up to the Finnish national grid in different locations, thus placing a smaller burden on the grid than a single cable would.

Fingrid has opposed the cable project, noting that the grid in the southeast of Finland is not strong enough at present to handle such a large surge of imported electricity.

Fingrid says that the undersea cable project would require upgrades of the grid in other parts of Finland, and an expansion of connections between Finland and Sweden, so that surplus electricity could be channeled into the Swedish grid.

United Power says that it is wiling to discuss helping upgrade the Finnish electricity grid, in addition to the approximately EUR 25 million a year that it would have to pay Fingrid in transfer fees, according to present rates.

András Szép emphasized that the cable project is a pilot project both technically, and from the point of view of competition. It would establish competition in Russia's electricity exports, and would be a newcomer onto the Finnish market, where there is little competition.

Two Finnish members of the board, energy industry veteran Jaakko Ihamuotila and Ambassador Pertti Salolainen emphasize the environmental and competitive aspects of the project. According to reports, the added imports would help bring down the price of electricity in Finland, which would benefit both Finnish industry, and households.

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