Can you tell us about the main objectives for creating the company Femec?

Our company for the present day combines and manages several types of energy. There are two complexes of energy potential on the territory of Far East: "Dalenergo" and JSC "LuTEC"- one of the most powerful energy companies of Siberia and Far East. It was organized 4 years ago and included an electric power station and open-cast-mine.

The conditions for these energy complexes were regulated by the state last year. The regulation of energy through social ownership led to a situation where we began to lose our fixed assets. We were in need of new technology and modernization and that is why we could not be in that situation. After the crisis in 2000, Primorsky Krai started reforms within the management of the energy complex and orientated it towards business rather then social commitments. The company "Femec" was organized by the decision of board of directors.

Today the energy complex of Primorie is one of the largest taxpayers as it is one of the biggest companies in Far Eastern region. That is why we pay great attention to its stability and reliability. The company has two different directions for its activity- firstly this is to find a way out of this difficult situation, and the secondly is the preparation of a platform for investment. This target was set in front of me by Anatoly Chubais, Chairman of UES (Unified Energy System of Russia) to end the crisis and stabilize the energy supply in the region. This must be the initial platform where we should start to invest money.

Are "Dalenergo" and "LuTEC" that are managed by Femec now stable companies from a financial point of view? Is profit growing and is the situation with fixed assets also improving?

We have been going through a crisis for 10 years but everybody wants to get out of it as soon as possible. The results of this company's work over the last year have shown that both JSC's will not be unprofitable according to the final results of the year. For both JSC's this is great. We are sharply reducing internal expenses that restrain our growth in our prices and on our output. We have developed managerial programs inside the system of management. These programs will lead to the staff reduction for unfortunately more than 4 thousand of people.

Last winter passed successfully - there were no long blackouts. What about this winter?

Everything will be all right.

In order for investors come here they should know that there is reliable energy sources. When we were speaking with the governor Darkin he told us about construction of "Aluminum plant" which will demand great energy resources. When will you be ready to meet the main investors for such projects as aluminum plant?

New people such as Darkin motivate us to think about new business opportunities.
Our attitude towards this project is positive, but in our opinion this plant cannot to be built with the present basis of our energy complex. The new base with a cheaper energy complex has to be built for this plant. As it simply will not work in the present conditions as the prices that we can offer now will not be profitable to the business.

That is why we offered to build on the base of Partizansk Regional Power Plant a new station with new technologies, or rebuild Ussuriysk Thermoelectric station separately for such kind of projects.

What further steps will you take to attract foreign investors and to strengthen the ties with foreign partners, especially within Asia, as they are your nearest neighbors?

First of all this is cooperation with partners and we have started talks. We are preparing abase for attracting investors, different kinds of projects are being prepared by us in accordance to international standards. Our main task however is that out projects must not be 100% dependable on foreign investors this is due to the previous experience of foreign investors in Russia that shows that they move very cautiously, and if we had to wait for projects ripen we would lose that momentum. This is a base on which we will further move. We will go in the direction of free way participation. We will not offer projects to our investors if we are not sure that they are protected in accordance with the Russia laws of proprietorship.

It is very good as you have the support of Mr. Chubais, the Krai Administration, and support of your employees who are ready to get through these reforms together with you.

As far as internal support is concerned not everything is so smooth. When full reorganization and restructuring is in process. 100% support is impossible. We do not delude ourselves about it.

We understand that you are a sportsman and that you have wide shoulders. Are these shoulders ready to bear this pressure to make company flourish, to make it grow?

We are ready to work together with the company, with the people and with the assistants who have even wider shoulders. My task is also to use other shoulders, those wider than mine!

What has been your largest accomplishment in the position of general director?

My work is many-sided. The biggest accomplishment is that company after crisis has been working for 2 years and the fact that shareholders of both JSC-s have concluded the treaty with us for more 3 years.

Our technology in comparison with last year has been significantly modernized by means wisely distributing invested money and our fixed assets will have risen by no less than by 5 %. All our activity is based on the work of up-to-date developments with Moscow consulting companies. These companies have developed the conceptual approach both to the system of development and to the system of business.

That is why such reduction of staff does not influence the mechanism of management as well as maintaining the reliability of our equipment and our companies. On the contrarily we are sharply turning to high technologies as in management as well as in the company activity. I think that what we are doing is right, and we pay for this good money - the budget of organization is planed in such a way that this is of priority importance.

Can you tell us about investment projects that will promote the increase of electric energy output and coal extracting?

Our head company RAO EES of Russia is developing big projects that are connected with the modernization of Partizansk Regional Power Plant. We estimate that this program will cost no less than for 700 millions rubles. We are finishing the program of construction for the Ussuriysk Thermoelectric Station that had been built by the state and by us. We are going to finish the construction of this complex and are ready to offer it on an external level to foreign investors as a private property or as a joint venture.

We also have a set of social programs; including the transfer of city systems to thermofication, which is cheaper by means of investments and by means of management. We are ready to give the opportunity to investors who will work with us to help heat and manage our cities. We are even ready to give our enterprises for private ownership under the right investment conditions. We must do this as the future of energy resources in the region lies in competition, and not monopolization. We have to create a competitive ability for our output but also for sale of energy and heat. Ultimately all our investment attractiveness has to lead to this. For this we must have different laws for the ownership of energy enterprises. We have good attitude towards it, as well as our head company RAO EES, and after passing the relevant laws it will be understood and welcomed by the state. This is the main approach to the to the difficult situation in energy sector.

I have an interview dated 1998, where press secretary of "Dalenergo" said, that external management assumed the bankruptcy and the sale of the company. Is your task is to make "Dalenergo" and "LuTEC" partly privatized?

The understanding of external management in 1998 and the understanding of management now are two different things. The external management is the efforts made by the state to manage the process in accordance with the law of bankruptcy, which is now working in Russia. It practically led to the crisis. When shareholders gave us the right formula of management things have greatly changed, these are shareholders who tell us what they see as being the future of Primorsky krai energy. They want to see the energy in competition, and competition assumes different types of ownership. If it is profitable, if it leads to the growth of fixed assets and the lowering the cost price of our output it will lead to the attractiveness of its purchasing.

Today it is not so easy to do this as psychologically it is difficult for people to understand that not one company will be responsible for energy complex but several and that it will lead to competition. Russia psychologically is not ready for market conditions. That is why we set the task for ourselves, to improve the company in technical efficiency and to make it more stable, to overcome the fear of further reforms and to move on further.