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Fortnightly Magazine - February 15 1995

under 10(a) does not preclude . . . license conditions that render a project uneconomic."

Or, as APPA puts it, "Licensees are in never-never land. . . . [T]hey have no assurance that their licenses are worth a dime."

Walking Around Money

Suppose one of the newly independent Soviet states hires you to come up with a plan for restructuring and privatization of the state-run electric utility? What do you do? If you are RCG/Hagler Bailly, Inc., an international consulting firm, you agree to take on the job and brace yourself for surprises. Here's an example. Your client, an executive at a Ukraine electric generating plant, in all sincerity asks this innocent question: "How can we arrange it so the government will buy us out?"

Obviously, the word "privatization" has lost something in translation during its migration eastward.

The consultant in this case was Alain Streicher, senior vice president at Hagler Bailly. Last month I heard him give a talk at a late evening "dinner/ symposium" at a downtown hotel in Washington, DC. Streicher can tell a story. And he's heard a raft of them after working a while overseas, trying to deliver Ukraine's electric generation industry into the 21st century. (Assuming, of course, that Streicher can first rescue Ukraine's electric industry from the brink of total collapse, where it now rests.)

Streicher observed that back in the old days, the central government used to allow 30 days' grace before forwarding any bill collections to Moscow after payment for electric service was first received in Kiev. So, what to do with all that money? According to Streicher, rumor has it that various officials at the local Ukraine utility occasionally earned a little walking around money by playing the float, personally lending out utility cash at distinctly non-Socialist interest rates, and then calling back the debts just in time to repay the Kremlin. At that time, notes Streicher, the Soviets actually designed and built the Chernobyl nuclear plant specifically to earn hard currency by exporting power to the West.

What about the future for Ukraine? Well, in case you're curious, Streicher notes that Ukraine has issued a Presidential Decree mandating the complete restructuring of the nation's electric utility industry within a single calendar year.


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