Invest in Finland

RAO Nordic

At the same time that plans to liberalise the electricity market in Russia were being initiated, Finland, Russia’s border country and the only EU country with direct electricity transfer network, joined NordPool.

Establishing a subsidiary in Helsinki occurred with substantial ease also because RAO UES boasts a twenty year long tradition of effective cooperation with Finland through the Vyborg DC link, which over the years has permitted a steady increase of the amounts of electricity supplied to the Nordic countries.  

The creation of a RAO Nordic in Finland in 2002 is the consequence of a restructuring process of the Russian power giant RAO UES that started at the end of the 1990s. The main goal of RAO Nordic is to import electricity to Finland and sell it either with bilateral contracts to customers or via NordPool to the Nordic markets.

Expected to be complete by 2008, the restructuring of the parent company involves unbundling the competitive activities such as electricity generation and sales from the monopoly businesses like transmission and distribution. RAO UES, which is 52% state-owned, is one of the biggest power companies in the world. The restructuring of the company is expected to boost the investment attractiveness of the sector and create a fully liberalized electricity market.

RAO Nordic’s CEO Oleg Zakatajev considers themselves to be true pioneers: “We are gaining the unique practical experience of working on the liberalized market and can share this experience with our parent company.” This they do by sharing experience through seminars and training courses that they organize for potential participants in the liberalized Russian market.

RAO Nordic adapts quickly
In 2004 the Finnish economic magazine Talouselämä’s ranking of top 500 Finnish companies placed RAO Nordic on the list after just one and a half years of operating.

“The goals we placed for the first stage have definitely been met: we are now a company in the first 500 Finnish companies and have a substantial turnover,” says Zakatajev. “We are profitable and definitely all the initial investments are justified. We started as a trading company, now we are looking for opportunities to invest more, especially in power related assets.”

The adaptation to Finland in the beginning was very smooth. This is namely due to Finland’s excellent infrastructure, the wide use of English in the business community, and the character of the Finns, explains Zakatajev.

“The infrastructure in Finland is perfect. We managed to finalize all the preparatory work - renting this office, concluding agreements with outsourcing companies - in record time. We were able to start trading three months after arrival.”

Another plus was the ease in which RAO Nordic’s staff was integrated into the business community. One of the motives was the lack of language barriers: everyone in this business community is fluent in English, says the company’s CEO. While the working language of the company is English, Zakatajev expects that one day it will be Finnish. He already understands what Finns are talking about in negotiations when they switch to Finnish, but claims it will be some time before he’ll be able to intervene.

And finally the direct and straightforward nature of the Finns, Zakatajev regards “only as a positive feature in business.”

A bright future
The future looks bright for RAO Nordic. The company is looking for new investments all the time. “We are monitoring the market and are ready to invest in generating assets or even electricity supplying companies. Now that we are in the Nordic region a logical step would be to expand our activities towards Norway or Sweden. It is only a matter of finding attractive projects that are economically beneficial and large-scaled. We have quite a big electricity producer and trader behind us, our parent company, which is ambitious and experienced in managing assets on the Russian territory and in the CIS countries. This experience should be used on EU territory as well,” explains Zakatajev.

Up until now RAO Nordic has mainly engaged in physical or spot trading, but soon they will expand trading on the financial market. It is a new market, which does not yet exist in Russia. 

It is only a question of time, but the experience RAO Nordic has to share with its parent company is proving to be invaluable.

10/2005

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