BMI's Executive Summary

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The new Russia Power Report from BMI forecasts that the country will account for 47.33% of Central Eastern Europe (CEE) regional power generation by 2011, and to remain a net exporter of electricity to neighbouring states. BMI's CEE power generation estimate for 2006 is 1,995 terawatt hours (twh), representing an increase of 3.39% over the previous year. We are forecasting an increase in regional generation to 2,398twh by 2011, representing a rise of 19.4%.

CEE thermal power generation in 2006 is estimated by BMI at 1,230twh, accounting for 61.6% of the total electricity supplied in the region. Our forecast for 2011 is 1,440twh, implying 17.1% growth that reduces the market share of thermal generation to 60% – in spite of environmental concerns and rising interest in renewables, hydro-electricity and nuclear generation. Russia's thermal generation in 2006 is estimated at 637twh, or 51.80% of the regional total. By 2011, the country is expected to account for 49.76% of thermal generation.

For Russia, gas is the dominant fuel, accounting for 53.6% of primary energy demand (PED), followed by oil at 19.1%, coal at 16.4%, with hydro having a 5.8% share of PED. Regional energy demand is forecast to reach 1,676mn tonnes of oil equivalent (toe) by 2011, representing 18.1% growth over the period. Russia's estimated 2006 market share of 49.34% is set to fall to 48.42% by 2011. Russia last year accounted for an estimated 45.62% of regional nuclear energy consumption, with a forecast market share of 45.05% by 2011.

Russia's overall business environment can be considered somewhat attractive in a regional context, with low long-term economic risk countered by high long-term political risk. Growth in energy demand and generating capacity is relatively low, but import-dependency is below the regional average. There has been relatively little progress towards deregulation and privatisation. In the BMI Business Environment Ranking matrix, Russia receives a composite score of 27, which ranks the country sixth out of nine states included in the CEE region.

BMI forecasts Russian real GDP growth averaging 5.8% per annum between 2006 and 2011, although this year's forecast is 6.5%. The population is expected to fall from 142.8mn to 139.3mn 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 871twh last year to 1,012twh by the end of the forecast period, while exports should rise from 109twh in 2006 to 124twh in 2011, assuming 3% annual growth in generating capacity.