Russian group, Sintez, and Chinese generating giant Huadian have agreed on Wednesday to set up a joint venture to build a new steam-electric plant in Yaroslavl.
The joint venture will be the first in Russia’s energy sector involving a Chinese company as a controlling shareholder. Huadian subsidiary, Huadian Hong Kong, will take 51% in the deal, with Sintez, which is controlled by TGK-2 acquiring the remaining 49%, according to Sintez CEO, Andrey Korolyov.
The total investement is estimated at 20 billion roubles, with 30% of it provided by the joint venture and the remainder to be attracted in form of credits, Korolyov added. The plant is planned to be finished by 2013, with the pay back period over7 years. According to the company, talks with Chinese banks are now being held but financing sources outside China are also planned to be involved.
“Sintez group plans to involve not only the Chinese investments to realize the project in Yaroslavl, but also to gain a reliable partner, capable of introducing technology experience in power savings and high ecological standards used by the Huadian corporation.”
The introduction of new equipment will solve a power generation deficiencies in Yaroslavl and boost the region’s reliability in terms of energy supply. It will also cut the prime costs of energy production.
Experts say financial problems are pushing Russian generators to look abroad for help. Alfa Bank analyst, Alexander Kornilov, told Kommersant that the transfer of control was the only choice for TGK-2, because of financing constraints. IC Sovlink analyst, Ekaterina Tripoten added that China is interested in entering Russia’s energy market, adding that the 51% stake in the joint venture will allow Huadian set rules and promote Chinese equipment in Russia.