Modernization of Primorskaya GRES will cost the market 200 billion rubles

The cost of modernizing the Primorskaya State District Power Plant (1.5 GW) of the Siberian Generating Company (SGK, part of SUEK) has almost doubled in three years, exceeding 50 billion rubles. As a result, the wholesale energy market, according to preliminary estimates from the Market Council, may pay more than 200 billion rubles for the capacity of the updated station. in 15 years. The project, according to SGK, has become more expensive due to the rising cost of domestic equipment and an increase in the volume of work. The industry considers it fair to minimize the profitability of the project and attract budget co-financing. And the Ministry of Energy is already developing additional measures of responsibility for failure to complete commissioning of modernized units, noting the delay in work schedules at the site.

The government approved the total CAPEX for the modernization of nine power units of the coal-fired Primorskaya State District Power Plant (1.5 GW, owned by SGK) at the level of 50.377 billion rubles, follows from the published government resolution (document dated December 28). The modernization project will be paid for through increased payments for energy capacity. The payback period is 15 years. The basic yield is 12.5% ​​with an OFZ rate of 8.5%.

The Market Council (the energy market regulator) told Kommersant that the energy market payment for the capacity of the modernized power units of Primorskaya GRES for the entire payback period may exceed 200 billion rubles. “if it is confirmed that all modernization measures have been completed and the requirements for equipment localization are met.” The price will also be affected by inflation and the OFZ rate. The Gazprombank Center for Economic Forecasting calculated that the maximum payment for the market is expected after 2026 at a level of more than 7 billion rubles. in year. The main payment will be made by industrial consumers in the European part of the Russian Federation, the Urals and Siberia.

The actual CAPEX approved by the government turned out to be 1.8 times higher than SGK’s estimates from 2021, when the company reported the cost of modernization at RUB 28 billion. (VAT included). SGK Asset Development Director Igor Sorokin told Kommersant that the price change was influenced by several factors, including inflation and “the increase in the cost of domestic equipment, which significantly exceeded the consumer price index as a whole.” In addition, there was an increase in the volume of work due to the need to comply with design standards – in particular, work to bring the building of the main building of the state district power plant to modern standards. Igor Sorokin told Kommersant that the company submitted a technological and price audit (TPA) of the project to the Ministry of Energy. “The regulatory framework does not provide for public discussion of TCA,” he noted.

SGK must complete the modernization of all nine power units by the summer of 2026. At the same time, in December 2023, at a meeting of the government commission for the development of the electric power industry, the lag of work at three power units of the Primorskaya State District Power Plant (the fifth, eighth and ninth) from the modernization schedule was discussed, Kommersant’s interlocutors say. The start date for power supply of the eighth power unit of Primorskaya GRES is September 1, 2023, the fifth is January 1, 2024, and the ninth is February 1, 2024. The Ministry of Energy told Kommersant that as of January 15, after modernization and testing, power is supplied by the first and eighth power units, the fifth has not yet been commissioned. SGK’s shift in the commissioning dates for the fifth power unit “creates risks of disrupting the reliable energy supply to consumers in the Primorsky Territory and the functioning of the Eastern energy system as a whole, but this lag did not have a direct impact on the energy supply to consumers,” the Ministry of Energy noted.

The System Operator (SO, energy system dispatcher) told Kommersant that as of January 15, six units with a capacity of 832 MW were operating at Primorskaya GRES. They added that a “rather complex regime-balance situation” is developing in the energy system of the East, which is caused, among other things, by the high level of unscheduled repairs, including the delay in the withdrawal from modernization of the fifth and ninth units of the Primorskaya State District Power Plant.

Now the investor does not pay fines for delays in launching facilities in the Far East, but the term of the contract is shortened, and if the commissioning is delayed for more than a year, the price for capacity decreases, the Market Council explained to Kommersant. The Ministry of Energy told Kommersant that the government commission instructed the ministry to develop additional mechanisms to encourage compliance with the deadlines for the start of power supply. The Market Council did not rule out that regulators may introduce fines.

“When upgrading generation by order of the government, without a competition, on an equipped site with guaranteed demand, payment and minimal risks, it would be fair to minimize profitability and use budget co-financing,” believe the “Community of Energy Consumers” (unites industrial consumers of electricity). This is not the case in practice, just as there is no responsibility of the station owner for achieving the stated goal of the project – increasing the reliability and volumes of electricity generation.”

According to Kommersant’s information, in 2022, the installed capacity utilization factor (IUR) of Primorskaya GRES was 44%, and generation was 5.69 million kWh. It is expected that after modernization, the capacity of the facility will increase to 74%, and generation – to 9.5 million kWh. Now the station can operate for a maximum of 4.5 thousand hours using the installed capacity, and after modernization the figure should increase to 6.5 thousand hours. The SGK did not answer substantively Kommersant’s question whether the facility would be able to achieve these indicators after modernization.

Polina Smertina