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The only task is to develop the Far East

Sergey TOLSTOGUZOV, General Director of PJSC RAO ES of the East

The state's interest in the development of the energy sector in the Far East is high as never before - in the coming months a number of decisions can be made that will give the industry a powerful impetus to development. Sergei Tolstoguzov, General Director of the Far Eastern energy holding, spoke about the direction in which RAO Energy Systems of the East will develop as a company responsible for light and heat in the region.

The only task is to develop the Far East
- Sergey Nikolaevich, at the first Eastern Economic Forum, many initiatives were announced for the development of the Russian Far East. How will RAO ​​ES Vostoka, being an important infrastructure company, respond to the new challenges that the country's leadership sets for the region?

- There is only one task - to develop the Far East. Another thing is that the state must determine the goals and ways of how to do this. For this, a strategy for the development of the region should be prepared, where these goals and paths will be expanded to the level of specific subsectors. And RAO ES of the East should offer its solutions in response to the state's designation of priorities. Such solutions should be feasible for both the company economy and the regional economy.

We do not work on our own, we do not have tasks separate from the region. We are not engaged in commercial projects aimed solely at making a profit. The purpose of our existence is to help the region develop.

- What new construction projects does the holding plan to start in the coming years?

- The question is not what construction projects RAO ES of the East wants to start. We are not a construction company after all. As I said, the state must first of all understand itself - and what does it want to achieve from the energy sector in the Far East? Is it necessary to replace the capacities or is it enough to maintain the current level? Should we modernize outdated stations or replace them with new generation? Will demand grow as a result of the development of PDA and Vladivostok as a free port?

The answers to these questions determine what and where objects need to be implemented in terms of large generation. We also have our own proposals based on the development of cities and the need to replace retiring capacities. We believe, for example, that in the near future it is necessary to replace the Artyomovskaya CHPP in the Primorsky Territory with a new station. Vladivostokskaya CHPP-2 will also be phased out, for which the commissioning of Vostochnaya CHPP will not be enough to replace it. Here it is necessary to build steam-gas plants at the station site, as well as implement projects of local mini-gas turbine power plants. Khabarovskaya CHPP-1 also needs replacement, for which we propose the construction of a fourth city combined heat and power plant.

- The construction of the second stage of the Blagoveshchenskaya CHPP has entered the home stretch. And how are the rest of the construction projects progressing within the framework of the presidential decree on the development of RusHydro?

- Indeed, the second stage of the Blagoveshchenskaya CHPP will be launched on December 25. The rest of the stations are undergoing work: Yakutskaya GRES-2 will be commissioned in 2016, the thermal loops of the buildings have already been closed and the process equipment is being installed. And we hope to launch the TPP in Sovetskaya Gavan and Sakhalin GRES-2 in 2017.

Unfortunately, we lost the general designer for the CHP project in Sovetskaya Gavan - the Siberian ENTTs stopped the development of working documentation due to the difficult financial condition of the E4 holding. In this regard, we are conducting competitive procedures to select a new design organization. We expect to conclude an agreement with the new designer by the end of this year. Currently, the construction schedule has been updated, while the contractor is provided with documentation for the fourth quarter of this year and the first quarter of the next.

- RAO ES of Vostoka is building a modern gas power plant in Vladivostok. What stage is the project at?

- At the Vostochnaya CHPP, we have started construction of the electric power distribution scheme. The installation of cable channels and cable laying, installation and adjustment of electrical equipment is already underway at the site, which in the future should ensure the delivery of electricity from the station to the city power grid. In January we plan to start commissioning switchgears, in February - commissioning of gas equipment. In parallel with this, we must start commissioning work on gas turbine plants, which are planned to be completed in April 2016 with trial launches of gas turbine units.

In winter, the installation of internal systems of cold and hot water supply, sewerage, automatic fire extinguishing, laying of cable lines, finishing of premises and other work in the already erected buildings of the new station will be carried out. By the way, some of the equipment of the future Vostochnaya CHPP has already been connected to the existing city heat supply system. In the coming heating season, it will be used to provide residents with heating and hot water. It is planned to put the station into operation in the fourth quarter of 2016.

- How has the fuel balance of RAO ES of the East changed in recent years?

- Over the past five years, we have been actively working on gasification of capacities - the share of gas in the fuel balance has grown from 21% to 44%, and coal has decreased by almost 19%. The most important result for us was a decrease in the volume of consumption of petroleum products by more than 4 times. We expect that by 2020 gas will occupy more than half of the fuel balance. However, this does not mean that we are moving away from the use of coal - due to the construction of new capacities, the physical volume of its consumption will increase by about 18%.

In parallel with changing the fuel balance, we are taking a lot of measures aimed at reducing costs in terms of fuel supply. At the stations, trial combustion of off-design coals is carried out, followed by the expansion of the "coal basket" and increased competition between suppliers. This, in turn, helps to abandon the use of long-distance brands. For example, we are now importing Sakhalin coals to Kamchatka, and not raw materials from the mainland, as before.

- RAO ES Vostoka is preparing to restructure its debt. This step will free up significant funds for the holding. How will the company manage these funds?

- Restructuring does not mean that we will suddenly have free money, and we will think about where to put it. For RusHydro, our restructuring will mean taking certain obligations to both VTB and the Russian Federation, since the financing received from the bank will be half of the state guarantee. It is obvious that part of these obligations will be released to RAO ES of the East. We will be obliged to develop a list of measures for their implementation and annually report to the shareholder through a system of key performance indicators.

Of course, there will be savings on interest payments. It will make it possible to carry out the repair program in a more complete volume - now funds are enough only for the most basic work. Perhaps, it will be possible to direct part of the freed up funds for additional measures in terms of technical re-equipment and reconstruction. Thanks to refinancing, we will be able to reduce the pressure of interest payments on the current activities of the holding.

- RusHydro is consolidating Far Eastern energy assets in its structure. How will this help the development of the Far Eastern energy sector?

- In many ways, this will be necessary in order to make the necessary decisions faster and easier, as well as to optimize the financing of development projects.

- One of the main problems due to which the energy sector of the Far East cannot switch to market lines is the lack of return on investment. How are they going to solve this problem at RAO ES of the East?

- The lack of investment return mechanisms in the energy sector of the Far East is a complex problem that is characteristic of all industry players in the region. We would like to count on the introduction of long-term tariffs that will allow us to channel funds not only to cover production costs, but also for investment purposes. At the same time, we understand that the topic is very difficult, and in order to avoid an increase in the tariff, various proposals were put forward. One of them, and it could work, is the redistribution of an insignificant part of the payment for capacity in the first and second price zones in favor of the Far East. We are talking only about a few kopecks, but this money may become critical for the Far East and will allow us to launch the construction of new stations.

- The Russian President signed a law aimed at improving the payment discipline of energy consumers. The document introduces additional guarantees for heat and light suppliers, as well as toughens measures of influence on debtors. How will it affect the work of RAO ES of the East?

- There are several very important points in this law. Firstly, the amount of the penalty for late payments, in addition to the fact that it has doubled, it also significantly exceeds the bank interest rate - it is no longer profitable for non-payers to receive loans at our expense, which often happened before. Second, the law clearly requires “non-disconnected” consumers to provide security for the fulfillment of their obligations to pay for electricity. The introduction of administrative responsibility for violation of this and other requirements will contribute to strengthening consumer discipline and increasing collection of funds. However, there are other necessary measures, the decision on which has not yet been made: first of all, this is the establishment of the priority of direct relations between the energy producer and the end consumers. Until we begin to switch to the practice of direct payments everywhere, the struggle for payment discipline will be especially difficult.

- You said that the Sakhalin energy system has a large reserve ratio. To what extent is the Sakhalin-Japan energy bridge construction project a priority in this regard?

- The island power system, due to its isolation, is indeed forced to contain a significant reserve. As for the energy bridge, its implementation is expected primarily through the construction of additional generation. We regard the release from the existing capacities as an opportunity to efficiently load surplus capacities. This will increase the reliability of Sakhalin's power supply through the construction of the grid infrastructure necessary for export and the transfer of generation to more favorable operating modes. That is why our project is supported by the authorities of the Sakhalin Oblast. Now RusHydro and RAO ES Vostoka are negotiating with Japanese companies to identify potential counterparties from Japan.

- Back in 2013, RAO ES of the East, together with RusHydro, signed an agreement with the Japanese Kawasaki on the construction of a liquefied hydrogen plant in the Magadan Region, which will allow utilization of free capacity in the regional energy system. What is holding this project back?

- We see a fairly high level of uncertainty in the world energy markets. In this regard, we, together with our Japanese partners, are planning to conduct an additional marketing study to analyze prices and possible markets for the sale of liquefied hydrogen. In parallel with this, RAO ES of the East, together with RusHydro, began to study the possibility of implementing a project using alternative technologies for liquefying hydrogen. We hope that in 2016 it will be possible to make a decision on further steps to implement the project.

- In September, RAO ES of Vostoka signed a trilateral memorandum with the authorities of Mudanjiang and the Chinese Amur Energo-Stroy Alliance on the project for the construction of the Ussuriyskaya TPP, the need for which was announced back in 90. How relevant is this project today?

- This project is very interesting due to the fact that two countries have a need for it at once. On the one hand, the Ussuriyskaya CHPP will help solve the problems of heat supply to the city by replacing numerous inefficient boiler houses with a centralized heat supply system. At the same time, the authorities of Mudanjiang are ready to redeem the full volume of the station's power generation. Amur Energo-Stroy Alliance has expressed its readiness to finance the project and implement it on a turnkey basis using Chinese-made equipment. Operation in cogeneration mode is the most cost-effective and will help to contain tariffs for heat and hot water for Ussuri residents. The presence of foreign exchange earnings in yuan or US dollars adds to the investment attractiveness of the project, which will allow attracting cheap financing from Chinese banks.

- Recently, Asian producers have shown increasing interest in the renewable energy market in the Far East. Will the plans for the development of renewable energy sources in the region be revised against the backdrop of the changing economic situation?

- The main indicator of our renewable energy program is its economic efficiency. Therefore, communication with Asia-Pacific partners comes down to optimizing the cost of equipment and capital construction. This logic is based on a pilot project of a wind farm in the village of Ust-Kamchatsk, jointly with Japanese companies Mitsui and Komaihaltec and the Japanese government organization NEDO. It will allow evaluating equipment samples provided by Japanese colleagues and understanding how they are suitable for future facilities, including in terms of economic efficiency. Moreover, together with Komaihaltec, we are considering the possibility of localizing the production of wind turbines or their individual elements in the Far Eastern Federal District - this will also reduce costs. Equipment manufacturers from China also actively joined the selection of solar and wind generation technologies and the optimization of their cost. The pool of potential suppliers is growing, the competition between them is intensifying, so our plans to implement the renewable energy development program in the Far East remain in place.
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