Russia's Baltenergo eyes new power link to Sweden

STOCKHOLM Mon May 21, 2007 4:30pm BST

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STOCKHOLM May 21 (Reuters) - Russian energy group Baltenergo has met Sweden's grid operator to discuss an undersea power link across the Baltic after Finland rejected a similar plan last year, grid operator Svenska Kraftnat said on Monday.

Svenska Kraftnat spokesman Marten Norgren said the operator met the Russian company last week to discuss the project.

The talks were initiated by Baltenergo to sound out interest in a link to import cheaper Russian electricity.

Many Swedish industrial firms -- big energy consumers -- have complained of rising electricity prices in recent years, saying the higher costs were eroding their ability to compete in a global market.

"We will now look at the extensive material that they have said they will provide and after that we will answer their inquiry," Svenska Kraftnat's Norgren said.

In December the Finnish government blocked plans for an 1,000-megawatt undersea cable to carry electricity from Russia, saying the Nordic country had to become more self-sufficient and that Russian power supply might be unreliable.

In a letter to Svenska Kraftnat obtained by Reuters, the Russian firm said a power link connecting Russia and Sweden was "both technically and economically feasible".

Baltenergo said it was considering a link with capacity of up to 500 megawatts at an estimated cost of at most 300 million euros ($405 million).

Svenska Kraftnat's Norgren said discussions were at an early stage and that it was unclear who would finance the investment.

The now-adondoned plans for a Russian energy link-up with Finland were backed by both Finnish and Swedish industry firms.

BasEl, a consortium of Swedish industry heavyweights including metals group Boliden (BOL.ST) and hygiene paper producer SCA (SCAb.ST), attended last week's meeting.

"Our commission is to provide electricity to the Nordic system, so this proposal is in line with that ... We sit on the grandstand and cheer," said BasEl Chief Executive Peter Pernlof.

BasEl had agreed to import 8.7 terawatt hours of electricity via the planned Finnish power link with Russia over 15 years.

Worth 20-40 billion Swedish crowns ($2.93-$5.86 billion), that deal would have been the biggest power contract signed by Swedish firms.