“The less often the market rules change, the more stable the system works”

Energy companies have already pushed back the launch dates for thermal power plant modernization projects by about 40 GW without paying fines. According to Kommersant’s information, an annual delay until August 1, 2023 was also received by a project to modernize the coal unit of the Irkutsk CHPP-6 by 65 MW worth 1.3 billion rubles. Head of energy business En+ Group Mikhail Khardikov told Kommersant why the deadlines are being shifted and whether it is necessary to increase the prices of projects.

— Why is the company delaying the launch of the Irkutsk CHPP-6 power unit?

— Initially, the project completion date was July 2022, now we are actively completing work, and we will launch the power unit by the end of the year. There are a number of difficulties in the industry for modernization projects of this scale – these are questions for both equipment suppliers and contractors. We do not see any risks for the operation of the station.

— Did you notify the Market Council (energy market regulator) of being late?

– Notified, the entry deadline was postponed. The rules have been adopted, from the point of view of fines, there is a complete understanding of what is fined and what is not. In fact, the issue is not only about fines: the earlier you launch a project, the earlier you start receiving increased payment for capacity. Our goal is to complete all projects on time.

— Will you have time to launch Novo-Irkutsk CHPP and Irkutsk CHPP-10 by January 1, 2023?

— We are actively working on the Novo-Irkutsk CHPP. We will definitely launch the boiler before December, we plan to complete the auxiliary equipment, the electrostatic precipitator and the car dumper next year. Novo-Irkutsk CHPP is the largest plant in the city of Irkutsk, the conditions for the implementation of projects require complex engineering solutions. Under current upgrade regulations, we have 12 months to install ancillary equipment.

At Irkutsk CHPP-10, we will postpone the launch to 2023. We encountered an unscrupulous contractor, the company did not fulfill its obligations, de facto refused to continue work under the contract. We are talking about the Russian company ZiO-Podolsk (part of Rosatom). They won a turnkey contract, completed part of the design, part of the deliveries, and then refused to fulfill the obligations for the deliveries they were supposed to make. While our attempts to find a compromise are not successful, we will defend the interests of the company in courts and other instances. We plan to commission turbines at CHPP-10 by January 1, and we expect to complete the boilers in 2023.

— What happens to the prices for the equipment?

– Grow significantly. By tens of percent. Imported equipment has risen in price due to logistics. For domestic equipment, prices for many components, raw materials, and materials are rising. We passed the contract campaign for 2022 in November 2021, so the first half of the year, suppliers under the concluded contracts fulfilled their obligations at the old prices. In the second half of the year we see a serious increase in prices.

— What import components are missing?

– In the spring, the total cost of the nomenclature, dependent on imports or requiring the search for analogues, reached 1.5 billion rubles. Many suppliers have revised prices, despite the fact that tenders were held, but there were no contracts on paper yet. We have restructured the procurement process, introduced special procedures for searching for analogues in Russia and other countries. Now the total volume of work for replacement is about 300 million rubles, all without critical positions.

— Will you offer to additionally index CAPEX projects in the TPP modernization program?

We believe that the parameters need to be reviewed. I would not name any specific figure now, this issue should be discussed at the site of the Ministry of Energy.

— How is the construction of the Segozerskaya small hydroelectric power station (launched on December 1, 2022) going?

– We will postpone the entry deadlines. In the hydropower industry, it is very difficult to find contractors with the experience and resources to implement such projects. The issue is complicated by the fact that small hydropower projects are located at a great distance from large cities and construction centers. Near our object, in Karelia, there were simply no large builders capable of conducting such construction projects. There is a delay in the delivery of some of the main equipment, but today it has been resolved, the equipment is already on its way. We expect to complete the project in 2023.

— Do you plan to participate in the next RES tender with small hydropower projects?

— It is difficult to say, we will look at the economics of projects in the new conditions. There are questions with the localization of equipment: how far is it possible to go through the level of localization when some companies are no longer represented in the country. Additionally, during the construction of a hydroelectric power station, it is necessary to take into account and correctly calculate the amount of compensation payments for water resources. We very much hope that the Federal Agency for Fishery will make changes to the methodology for calculating compensations based on scientific research that is currently underway. The construction of the HPP meets the strategic priorities of the country.

— What is the situation with the loading of your HPPs?

– This year it’s different. Last year was a record year in terms of water levels for both the Yenisei and the Angara: for the first time in ten years, the Krasnoyarsk HPP opened idle discharges. This year, extreme high water on the Yenisei has been replaced by extreme low water. The inflow is 40–70% of the norm, the Sayano-Shushenskaya HPP uses the lowest possible releases, and the Krasnoyarsk HPP also has minimal costs. At the same time, the inflow in the Angara is generally close to the norm, in Baikal – 90% of the norm, in the Bratsk reservoir – 80%. The accumulated levels of reservoirs since last year allow us to load the hydroelectric power station to the maximum and provide navigational releases along the Angara and along the Yenisei below the village of Strelka. Everything to the north of the Strelka, where the Yenisei and the Angara merge, is provided today by the Angara water supply.

— What about the loading of thermal power plants?

– Consumption is growing significantly in the Irkutsk-Cheremkhovo energy district of the Irkutsk region, which is why the output of our TPPs in the condensation cycle is increasing. The flow from the north to the south of the region is loaded to the maximum. Our understanding: this trend is for a long time. Demand is growing primarily because the population increases electricity consumption. The growth in consumption of the population in the Irkutsk region has been taking place over the past two years: by 34% in 2020 and by 22% in 2021. The reason is the gray mining of cryptocurrencies among the population at preferential rates, designed primarily to subsidize utility needs. Illegal mining in rural areas of the region is growing multiple, given that the tariff is 86 kopecks. for 1 kWh. This already leads to network congestion and failures.

— The Irkutsk Region refuses to introduce tariff differentiation based on consumption volumes. How to solve the problem?

— We believe that it is necessary to introduce a differentiated tariff. In the region, at the tariff of the population, activities are carried out that are not related to domestic needs – this is entrepreneurship that does not generate income for the budget. All large businesses in the region pay for illegal mining – not only Rusal, but also Russian Railways, Ilim, Rosneft enterprises, small and medium-sized businesses. All benefits are paid for from cross-subsidization volumes, which continue to increase. The budgets of the regions are also losing: business is faced with an increase in the cost of production, which means that its profits and tax base are declining.

– What bar do you propose to set in terms of the volume of preferential consumption?

— I would not like to give specific proposals, although we have calculated them. Any change is a step towards balancing the situation. The differentiation of tariffs has nothing to do with the reduction of the social protection of the population. It is possible and necessary to establish such a volume of consumption at a low tariff that 90–95% of consumers will retain preferential status. Moreover, if necessary, it is possible to introduce a standard for electric heating of houses, but everything else on top should be paid at the rate for industrial enterprises. Gray miners have nothing to do with the socially unprotected segments of the population, mining equipment alone costs serious money. We have already filed more than 640 claims against gray miners with a total amount of claims of more than 350 million rubles. About 108 cases were closed because consumers voluntarily paid the difference in tariffs and settled debts. We will continue to fight.

— Are you fighting gray miners because you are mining yourself?

— We are not engaged in mining, but we develop industrial consumption in the region. We form platforms with infrastructure for data processing centers (DPC): we provide connection to power grids, compliance with all norms and requirements for safety and noise, stable supply of electricity. Further, open competitive procedures among interested parties, at these sites, each kilowatt-hour is paid at tariffs for industry, which, by the way, reduces the overall load on all consumers from the point of view of the “crossroads”.

— How much power do you supply to such data centers?

— In total, more than 230 MW have already been connected to the new sites, operators have reached loadings of more than 180 MW. There is also a joint venture with our partners – the Bit + site – now about 10 MW, in the near future we plan to increase it by another 30 MW.

— Does the industry increase consumption in the regions of your presence?

— The Taishet aluminum plant of Rusal, which was launched in December 2021, gives us the main growth. We expect that by the end of the year the plant will increase its power consumption to 400 MW. The rest of the industry is still in numbers no lower than last year, which is encouraging. The main industrial consumers in Siberia, in addition to Rusal, are Russian Railways, the timber industry, oil workers and chemists.

— How do you feel about the proposal to change approaches to calculating reserves in Siberia?

— The less often the market rules change, the more stable the system works both for the consumer and for generation. If there is a need to change something, then you need to work it out comprehensively. From the conditions of KOM (competitive power take-off.— “b”) depend on our investment plans. We hope that the Ministry of Energy will make informed decisions. The energy industry needs a long-term forecasting tool, because in our industry the investment cycle lasts at least five to nine years.

— In 2021, you presented a plan to achieve carbon neutrality for the group. Will you correct it?

— We believe that the topic of ecology and the focus on the ESG agenda will remain. Our strategy contained three key areas: modernization, new construction and replacement of old facilities. It is possible that the timing of the projects will be redefined, but in general we are not abandoning the goal of achieving zero emissions by 2050. In markets where En+ is present, demand for pure aluminum will remain strong.

– Are you abandoning plans to produce 133 thousand tons of hydrogen per year for export?

— These are quite ambitious plans, in the current conditions they will have to be adjusted. Now it is difficult to talk about the export of hydrogen. Markets are closed. We deal with the topic of the domestic market, for example, hydrogen transport, hydrogen-fueled buses. The issue is active work in the cities of Siberia.

— How is the program for the modernization of the Irkutsk, Bratsk and Krasnoyarsk HPPs progressing?

– The program is in the active phase, we are implementing it at our own expense. At the Irkutsk HPP in December we will commission the third hydraulic unit after technical re-equipment. We have already begun to receive equipment for the fourth hydroelectric unit, we hope that there will be no failures in the supply. There are certain negotiations with suppliers, but so far there are no critical risks.

At the Krasnoyarsk HPP, work is underway to replace the fourth new impeller, at the same time we are changing the autotransformer. All equipment is Russian: the impeller is Tyazhmash, the transformer is SVEL Group. All obligations are confirmed, the manufacturer has shipped two more impellers. At the Bratsk HPP, we have already replaced 13 impellers, and the replacement of the fourteenth is in the process. Under the contract, the remaining wheels of all eighteen will be replaced before 2026.

What is the return on these projects?

— Our internal profitability on any projects should be at least 15%.

Interviewed by Polina Smertina