OREANDA-NEWS.  On 6 February 2008 the tender committee set up by the decision of the Volgograd City Council announced the results of a public tender for the right to long-term lease of municipal heating systems, as well as water supply and sewage disposal systems. OJSC Volgograd Utility Technologies Systems (OJSC VUT), a company acting on behalf of CJSC Integrated Energy Systems (IES) and OJSC Territorial Generating Company No 8 (TGC-8), acting on behalf of Lukoil. A 15 years' agreement will be signed with the tender winner.

OJSC Volgograd Utility Technologies submitted for the competition the most detailed investment proposals broken down by facility. The company was able to prepare the most detailed proposals thanks to IES and Lukoil specialists having for six months intensively worked on problems of the local utility company, resolving its financial and technological crisis.

OJSC VUT investment in Volgograd's infrastructure will exceed 800 million roubles from the company's own resources in the years to come. The total amount of investment for the period of the lease agreement will be at least 8 billion roubles.

The investment programme will start to be implemented right after the signing of the lease agreements, according to Nikolai Brusnikin, director general of OJSC VUT. "The first investment programme facilities that we have worked on in the last six months will be commissioned as soon as 2008," says he.

OJSC Volgograd Utility Technologies is the only company among the tender participants which undertook to pay the debt of the current lessee of Volgograd's utility infrastructure, CJSC Regional Energy Service, which is set forth in relevant agreements. The CJSC RES debt amounts to some 2 billion roubles. The settlement of the debt issue will save the municipal company from bankruptcy and prevent serious social implications, including growth in energy prices for city residents and the arising of problems for depositors in local banks.

The annual rent to be paid by OJSC VUT to the city budget will amount to 200 million roubles, which is 2.5 times higher than the rent paid by the current lessee of the Volgograd utility infrastructure.

OJSC VUT shareholders proceed from the advisability of the city government having a blocking interest in the company. This will enable the city authorities to control the situation in this essential social sector and be directly involved in the decision-making process on day-to-day and future activities of the utility operator. Besides, the proposal of the OJSC VUT Shareholders contains an option for sale of the city's stake in three years at a guaranteed minimum price of 1.3 billion roubles. This will ensure considerable proceeds for the city budget if necessary.

"We have proposed an optimum formula for managing Volgograd utilities. It enables using the advantages of the market economy while ensuring administrative control on the part of the government. The company will be able to operate private investment in conjunction with households' interests without any significant load on the budget," says IES President Mikhail Slobodin.

"As a power producer we welcome the decision of the tender committee to entrust management of heating systems to OJSC Volgograd Utility Technologies. In association with CJSC IES, we will be able to overcome financial and technological crisis in the city's utility sector and ensure stable and high-quality energy supply to consumers," notes Vladimir Lebedev, director general of OJSC Southern Generating Company TGC-8.