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Abu Dhabi, UAEMonday 18 June 2018

Cresent Group to strengthen Russia ties on energy

Sharjah's Crescent Group plans to enter the MENA region's power sector through an alliance with Russia's state-controlled Inter Rao.

Sharjah's Crescent Group has expanded its ties with Russia through an alliance with the country's biggest power company.

This week in Abu Dhabi, Crescent Investments, a unit of Crescent Group, signed a strategic co-operation agreement with Inter Rao, as the Russian state-controlled electricity generation and trading enterprise opened a regional office in the UAE capital.

"We can broaden our footprint through a series of projects in the Mena region," said Boris Kovalchuk, the chief executive of Inter Rao. The project would be run from the new Abu Dhabi office, he added.

The deal promises to catapult Crescent into the power sector, expanding the group's existing regional energy interests, which it mainly pursues through its oil and gas unit Crescent Petroleum and its publicly traded affiliate Dana Gas.

"Working with Inter Rao is an important partnership for Crescent Investments, enabling us to catalyse private-sector development of downstream gas utilisation," said Badr Jafar, the chief executive of Crescent Investments.

The deal would strengthen Crescent Group's "already burgeoning ties with Russian partners", said Mr Jafar, who is also the executive director of Crescent Petroleum.

Those include alliances formed last year with two other huge state-controlled Russian entities, the oil producer Rosneft and Rostekhnologii, the industrial technology conglomerate.

Crescent and Inter Rao hope to capitalise on more than US$200 billion (Dh734.62bn) of spending expected this decade to shore up overloaded national power systems in the Mena region. Rapidly expanding GCC countries would spend $160bn to add 180 gigawatts (gw) of generating capacity by 2019, while Iraq would seek to rebuild up to 16gw of power capacity in the next five years at a cost of $25bn, Crescent estimated.

The drive to address inadequate power supplies in many Mena states is gaining new urgency amid the wave of anti-government protests in parts of the region.

Sharjah is among several Gulf states that have experienced summer power cuts in recent years. Crescent Petroleum and Dana are partners in a long-delayed project to import Iranian gas to supply the emirate's power sector.

In Iraq, where Crescent affiliates have a long operating history, the electricity ministry is rolling out a plan to offset expected power shortages this summer in response to weeks of popular protests, according to an article published yesterday on the Iraq Oil Report website.

The success of the plan could prove essential for Iraq's fragile coalition government to stay in power. Last summer, similar protests linked to severe power shortages in Iraq's southern Basra province turned violent, prompting the country's electricity minister to resign.

Inter Rao, chaired by Igor Sechin, who is the Russian deputy prime minister and the top energy official, has aggressive foreign expansion plans after receiving billions of dollars of state assets as Moscow sought to consolidate its power generation interests. Last month, it agreed to acquire 49 per cent of the UK gas producer Northgas from the Russian billionaire Farkhad Akhmedov.

"Our aim is 40gw of installed capacity … About 75 per cent of that we'll generate in Russia, and 10gw abroad," Mr Kovalchuk told Russia's Kommersant newspaper. Reaching that target would more than double the 18gw gross installed capacity of Inter Rao's existing power plants.

Mr Kovalchuck said the company would also consider an equity swap of up to 25 per cent of its shares with a "strategic investor", which could be a Russian energy or fuel company or a foreign company able to provide suitable co-operation. The proposed deal structure would mirror the recent agreement between BP and Rosneft, of which Mr Sechin is also the chairman.

tcarlisle@thenational.ae