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Russia

Equipment for the Electricity Sector

Compiled by:

Swiss Business Hub Russia

Moscow, September 2008

1. Summary of the Content

Russia’s energy sector is in an urgent need of modernization and extension of generation


capacity. If Russia does not manage to increase the electricity output in the nearest future,
the lack of electricity will slow down the industrial growth.

Therefore, the Russian Ministry of Industry and Energy has initiated a program, which plans
to increase the generation of gas-fired power by 43%, coal-fired by 244%, hydro power by
53% and nuclear power by 154% by 2020. According to estimates of RAO EES made in
2007, its successor organizations 1 will need to put into force 100 gas turbines, 67 steam
turbines and 125 waste heat recovery boilers for gas power stations and 70 steam turbines
for coal power stations by 2011.

Due to the numerous construction projects of power electricity generating companies, there
is a growing demand for equipment in the electricity sector, which can not be met by Russian
producers alone. The prices for such equipment have already risen and this has opened the
market for foreign manufacturers, whose production is often more expensive than the
Russian one.

This report was written based on a desk research and interviews dating from the end of
2007/beginning of 2008 when the financial crisis has not yet reached Russia. In the
meantime the Russian financial sector has survived hard times and it is quite obvious that
the real economy will be affected too. However, only 2009 will show how severe the
consequences will be for the ambitious reform and investment plans in the Russian electricity
sector.

1
OGK, TGK, IDGS, FSK and SO (see next chapters for details)

1
2. General Industry Development and Policy

Russia is the world’s fourth largest generator of electricity with an installed generating
capacity of 210 GW. In 2006, the electricity sector accounted for about 5% of Russia’s GDP.
The gas-fired thermal power plants generate 43.8% of the electricity production in Russia,
coal-fired thermal power plants 22.9%, hydro- and hydro-nuclear power plants 17.8%,
nuclear plants 15.5%2. The Russian electricity network is connected by over 2.5 million
kilometers of national and regional transmission lines and local distribution lines, including
over 145,000 km of high-voltage lines (voltage between 220 and 1150 kW).

For the time being Russia’s electricity consumption is growing at a 4.2 percent rate3 reaching
about 97 percent of the total capacity. Unfortunately, the rate of installation of new electricity
plants is a lot slower than that of the growing demand, and, due to the limited generation
capacity, electricity supplies to various regions of Russia, including Moscow and St.
Petersburg, are occasionally restricted.

The Russian authorities have therefore decided to boost the investments in the electricity
sector by a reform program, which was based on the twin principles of the dissolution of the
monopoly and the privatization of the assets held directly or through regional companies by
the state-run RAO UES. Once the reform was complete, the generation, dispatching
management, as well as the transportation and distribution of electricity is organizationally
divided and managed by different companies. The generation is carried out by 14 territorial
power and heating companies (TGK) and 7 wholesale power-generating companies (OGK),
within which the state retains only a small interest. The antimonopoly service restricts the
rights of the private owners in order to guarantee that they will not dominate the market.
Therefore, a single private owner is not allowed to control more than 20 percent of the
generating capacity in one of the defined zones. The infrastructure of the electricity network
is shared between 5 interregional distributors (IDGS) and the manager of the unified
transport network (FSK), the latter responsible for the maintenance of the transmission lines.
Finally, dispatching management is conferred to a systems operator (SO). In July 2008,
when RAO UES (which in 2006 accounted for 72% of the installed capacity and 69% of the
power production) was liquidated, all except one of the power stations and energy supply
companies were privately owned. RAO UES obliged them to fulfill huge investment projects
during the upcoming years. Presumably the gradual liberalization of the Russian electricity
market, due to be completed in 2011, will allow the producers to charge commercial prices.
The state will retain control of the sector through the federal agency “Rosenergo”.4

2
Journal Profile 30.04.2007
3
According to RAO EES Rossii
4
Russia Intelligence. Nr. 65, November 8, 2007

2
Forecast of the shares of the energy holdings for the end of 2008

Energy-holdings

Gazprom + Suek (TGK-1, TGK-3, TGK-


12, TGK-13, OGK-2, OGK-6)
25% 25%
KES-Holding (TGK-5, TGK-6,
TGK-7, TGK-9)

Norilsky Nikel (OGK-3, TGK 14)

State share (HydroOGK,


Rosenergoatom)
7%
Independant energy producers
14% (Tatenergo, Bashkirenergo,
5% Novosibirskenergo, Irkutskenergo, etc.)
Foreign companies (TGK-2, TGK-4,
TGK-8, TGK-10,
TGK-11, OGK-1, OGK-4, OGK-5)
24%

Source: Brokercreditservice

Gazprom has become the biggest player in the energy generating sector after the state.
Foreign companies investing in the energy sector in Russia include E.ON, Enel, RWE and
Fortum.

Despite privatization in the sector, the existing conditions of constrained electricity tariffs,
escalating fuel costs and government support for nuclear and hydro generation are not fully
compatible with commercially driven investments. Furthermore, the entering in the market of
domestic gas and coal suppliers with the intention of creating fuel-power vertical integrated
holdings rose concerns that these companies could abuse their strong market position. At
the present time, the plans of Gazprom and Suek to build a huge energy company that will
control about 15% of the generating capacity seem to be put into practice. The future will
show to which extent the expectations of the authorities, the investors, the private and
corporate consumers can be met. But for the time being the sector can at least profit from the
huge investments to modernize and expand the production capacity. Given the rapid
development of the Russian economy, the demand for electricity will continue to grow and
the need for development in this field is therefore urgent. According to expert estimates, in
2010 a 230 GW capacity will be needed and in 2030 it will grow to more than 300 GW.

3
Source: Russian electricity sector: Reform overview and modeling issues. Evgeny Pogrebnyak.
http://www.icss.ac.ru/userfiles/File/MMCEM%202007.pdf

The Russian Ministry of Industry and Energy plans to increase the generation of gas-fired
power by 43%, coal-fired power by 244%, hydro power by 53% and nuclear power by 154%
by 2020.

The investment projects intend to modernize the out-dated equipment in use, construct new
generating capacities and implement energy saving programs. Due to the seriousness of the
problem, efforts must be made in all three areas.

According to the estimates of energy experts, the Russian electricity sector should benefit
from about 263 billion USD until 2030 to grant the sustainable development of the net.

Today the energy sector faces serious problems. Most of the power stations were built back
in 1960-1970 and have a very low efficiency ratio of 33-35% in comparison with 40-42% in
modern power stations. The equipment and materials that are worn down in the production
system account for about 55%. In the distribution system it approaches 75% in rural regions.
The modernization of the existing plants is the least expensive way to raise the capacity of
the energy sector. Depending on the situation, the equipment can either be repaired and
updated or completely renewed.

4
The Ministry of Industry and Energy has already published a scheme of investments to be
made until 2020:

Enterprise Activity Investments (bil. RUR)


TGK and OGK Energy Generating Holdings 3930
Rosenergoatom Nuclear Energy Holding 1860
HydroOGK Hydro Energy Holding 1410
MRSK Distributors 2384
FSK Transport Network 2609

The FSK, for instance, plans to build 63 and modernize 37 substations by 2010, which
account for about one fifth of the existing capacity. Furthermore, it plans to construct 11,000
km of power transmission lines (some 19,000 km more should be erected by the MRSK as
well as 19,000 km of MegaVoltAmpere transformer capacity).

Initial steps for the period leading up to 2011 are planned in the OGKs in the form of the
following investments:

Company Investments till end 2010 (bil, RUR) Capacity installation (MW)
OGK-1 66.8 2260
OGK-2 75 1060
OGK-3 76.1 1700
OGK-4 79.8 2350
OGK-5 57.3 2060
OGK-6 49.1 1820
Source: Investment company “Finam”

Experts underline the important role that new technologies such as circulation fluidized bed
plants and gas-fired combined-cycle gas turbines can play to boost the effectiveness of the
Russian energy sector.

As to energy saving, this is perhaps the most urgent issue. In Russia the loss of energy
accounts for 40% of the whole consumption - a fact that is to a great extend caused by very
low energy prices, which make energy saving efforts unprofitable. However, the rise of
energy prices, as well as the introduction of more severe energy saving regulations is
politically very unpopular. While the Russian authorities are still hesitating to take sharp
measures, the mechanisms of the Kyoto Protocol allow Russian companies to find foreign
investors and to make their energy saving projects commercially profitable. Joint
implementation of innovative technologies is becoming increasingly more popular in Russia.
The Ministry of Industry and Energy of the Russian Federation estimates the investments
needed for energy saving projects up until 2010 to be worth 50-70 billion USD. This may
seem to be a large amount, but it is clear that the construction of equal complimentary power
generating capacity would be much more expensive.

Due to the wide construction projects of the energy plants, there is a growing demand for
equipment in the electricity sector, which can not be met by Russian producers alone. The
prices for such equipment have already risen and this has opened the market for foreign
producers, whose production is often more expensive than the Russian one.

3. Domestic Production

During the Soviet times, the USSR had plants to produce all the necessary equipment for the
energy generating sector. However, during the last years of the Soviet Union and after the
Perestroika years, the plants have rarely been modernized. Therefore, their production is
often not up to date and as a rule of low quality. After the Perestroika years many factories
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operated using outdated machines with low capacity and sold the bulk of their production to
developing markets.

In addition to these plants, manufacturers of other sectors producing aircraft, train and high-
tech military equipment have started to produce for the energy sector. Usually these
companies have good technical knowledge and are surprisingly innovative. However, their
weak point may be that they sometimes do not pay the necessary attention to the machine
building for the civil sector, since it is not their core business.

Having started at a very low level, the energy equipment production has been showing a
notable growth during the last years in Russia. As the energy sector has huge investment
plans, this growth is likely to increase even more in the future.

Nevertheless experts confirm that the Russian technology for heavy duty gas turbines, ultra
supercritical steam turbines, gasification and burning of solid fuel as well as process control
systems are far behind western standards. The main problems of the sector are limited
funding for research, outdated production facilities and the lack of qualified personnel.

In addition, the plants in the energy equipment sector have to struggle with the lack of quality
components produced in Russia. For instance, the hardware components for
microprocessors and semiconductors as well as industrial rubber goods have to be
purchased on the international market.5

The position of Russian producers is more competitive with respect to the equipment for the
200-1200 megawatt power stations working with different kinds of fuel.

In recent years, the Russian authorities have tried to gain influence in the sector by buying
(directly or through state owned enterprises) the shares of several companies. In the nuclear
sector the companies were consolidated under the roof of OAO Atomenergomash. These
measures have allowed the authorities to control the enterprises in order to attempt to
optimize their production for the need of the electricity generation companies. A positive
example is the national centre for gas transport and gas turbine machine building, initiated
and supported by Gazprom. As a result, competitive small and medium gas turbine power
stations were developed and General Electrics lost its dominating position in this field.

Along with the energy reform and the growing demand of the power generation companies,
the equipment producers are trying to modernize their production. Some are attempting to do
this with the help of the big Russian industrial holdings, some in cooperation with well known
foreign machinery building companies (Pratt & Whithney / Iskra, Alstom / Atomenergomash,
Siemens / Power Machines and Technopromexport). For the time being, both ways seem to
be equally successful, due to the huge demand for power generation equipment.

Most of the Russian companies working in the electricity generation equipment sector are
part of one of the big holdings. Power Machines with a market share of over fifty percent is
the indisputable leader that unites production, supply, construction, maintenance and
modernization of equipment for thermal, nuclear, hydraulic and gas-turbine power plants.6
Many products are manufactured under a license agreement with the German company
“Siemens”.

The company profiles of fourteen important Russian players in the energy equipment sector
are listed below:

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Expert-Ural 20.05.2006
6
Expert-Ural 20.05.2006

6
Power Machines
Description
Address 25a, Protopopovsky pereulok, Moscow 129090, Russia

Contacts e-mail: mail@power-m.ru

web-site: http://english.power-m.ru/

phone num.: +7 (495) 725-27-63

fax: + 7 (495) 725-27-42

Head Igor Kostin

Export characteristic
HS CODE 84 - NUCLEAR REACTORS, BOILERS, MACHINERY AND
MECHANICAL APPLIANCES; PARTS THEREOF
Field Hardware and Machinery
Production equipment for thermal, nuclear, hydraulic and gas-turbine power plants
Subsidiaries and related companies Leningradskiy Metallicheskiy Zavod, Zavod Elektrosila, Zavod Turbinnykh
Lopatok, Kaluzhskiy Turbinniy Zavod, Zavod Reostat, CKTI im. Polzunova

OMZ (Uralmash-Izhora Group)


Description
Address Russia, Moscow, 119021, Timura Frunze str. 24

Contacts e-mail: mail@omz.ru

web-site: http://www.omz.ru/eng/overview/profile/

phone num.: +7 (495) 662 10 40

fax: + 7 (495) 662 10 41

Head Valery Chernyshev

Export characteristic
HS CODE 84 - NUCLEAR REACTORS, BOILERS, MACHINERY AND
MECHANICAL APPLIANCES; PARTS THEREOF
Field Hardware and Machinery
Production Atomic equipment, Mining equipment, Special steel, Hoisting-and-handling
equipment, Machinery Manufacturing Services
Subsidiaries and related companies OAO Izhorskiye Zavody, OAO Ural Heavy Machine-Building Plant, OMZ
SpecStal, ООО OMZ Gornoe oborudovanie i tehnologii, ZAO Komplekt
Atom Izhora, OOO OMZ Sibir, OOO OMZ Russia, Skoda JS, Skoda Hute,
Skoda Kovarny, OOO OMZ-Kran, OOO Kartex

7
PJSC EnergoMashinostroitelny Alliance
Description
Address 18, Suschevsky Val, Moscow, 127018, Russia

Contacts e-mail: info@em-alliance.com

web-site: http://www.em-alliance.com/en/holding/company/

phone num.: +7 (495) 787 31 48

fax: + 7 (495) 787 31 43

Head Oleg Golikov

Export characteristic
HS CODE 84 - NUCLEAR REACTORS, BOILERS, MACHINERY AND
MECHANICAL APPLIANCES; PARTS THEREOF
Field Hardware and Machinery
Production Coal and gas&oil boilers of steam capacity 50 to 3950 ton per hour with steam
conditions achieving ultrasupercritical values; heat recovery steam generators
of steam capacity up to 1000 ton per hour for combined cycle power plants;
circulating fluidized bed boilers; boiler island on turn-key basis
Subsidiaries and related companies Boiler-manufacturing plant Krasny Kotelshick, Taganrog Branch of the PJSC
EMAlliance, Office of the PJSC EMAlliance in Podolsk, Office of the PJSC
EMAlliance in Barnaul, Office of the PJSC EMAlliance in Ivanovo JSC ZIO-
Podolsk, JSC EC ZIOMAR

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„EM-Alliance“
Description
Address 4, Building 5, Butikovskiy Lane, Moscow, 119034

Contacts e-mail: corp@energomash.ru

web-site: http://www.energomash.ru/english/about.html

phone num: +7(495) 792-39-34

fax: + 7(495) 792-39-49


General Director First Deputy for Sales Pleschev Alexey Gennadievich
and Marketing

Export characteristic
HS CODE 84 - NUCLEAR REACTORS, BOILERS, MACHINERY AND
MECHANICAL APPLIANCES; PARTS THEREOF

Field Hardware and Machinery


Production electric machines and turbogenerators; transformer equipment; conversion
machinery; high-voltage gears; water turbines and pumps; mechanoerecting
production; pipelines; boilers; core-mold casting and forged pieces; hot-
pressed production of forming parts; expansion bellows; metalwares plant;
mechanoerecting production; recuperative air heaters and gas turbine
equipment; combustion chambers; heat-exchange case-shaped and capacitive
equipment

Iskra-Energetika Company
Description
Address 614038 Perm, Russia, Vedeneev Str., 28

Contacts e-mail: info@iskra-energy.ru

web-site: http://iskra-energy.ru/eng/

phone num.: +7 342 262 60 00

fax: +7 342 262 62 62

Head Anatoly Vasiliev

Export characteristic
HS CODE 84 - NUCLEAR REACTORS, BOILERS, MACHINERY AND
MECHANICAL APPLIANCES; PARTS THEREOF
Field Hardware and Machinery
Production 2.5-25 MW gas turbine power stations
Holding Company Pratt&Whitney

9
JSC «Saturn»
Description
State registration number 7610052644
Address CIS, Russian Federation, Central federal district, Yaroslavl region, Ryibinsk,
152903, Ryibinsk, Yaroslavl region, Lenina prospec, 163
Contacts e-mail: Saturn@npo-saturn.ru

web-site: http://WWW.npo-saturn.ru

phone num.: +7 (4855) 296-100

fax: +7 (4855) 296-000


Head Yury V.Lastochkin

Export characteristic
HS CODE 84 - NUCLEAR REACTORS, BOILERS, MACHINERY AND
MECHANICAL APPLIANCES; PARTS THEREOF

8803 - Parts of goods of heading 8801 or 8802

8411 - Turbo-jets, turbo-propellers and other gas turbines


Field Hardware and Machinery
Production Aeroengines, their spare parts, nuclear power station equipment, snowmobiles,
their spare parts, steel-aluminium sliding bearings for crankshafts of diesel
engines
Subsidiaries and related companies Saturn, Gazovye Turbiny, Russkaya Mekhanika, OAO PAO Inkar, ZAP Power
Jet, SP Volgaero, ZAO Poluevo-Invest, KK Aviator

10
Perm Engine Company
Description
Address 93 Komsomolski prospect, Perm, GSP, Russia, 614990

Contacts e-mail: pmz@jetmotors.perm.ru

web-site: http://www.pmz.ru/eng/

phone num.: +7 3422 408400

fax: +7 3422 409456


Head Sergei Y. Smolin

Export characteristic
HS CODE 84 - NUCLEAR REACTORS, BOILERS, MACHINERY AND
MECHANICAL APPLIANCES; PARTS THEREOF

Field Hardware and Machinery


Production Mass production of aero-engines for civil and military aviation and
manufacturing of industrial gas turbines for electric power stations and gas
transportation.
Subsidiaries and related companies Perm Motors Group Management Company, OJSC “Aviadvigatel”, OJSC
“Perm Engine Company”, OJSC “Reductor-PM”, CJSC “Motorservice-PM”,
CJSC “Metallist-PM”, CJSC “Instrumental Plant-PM”, CJSC “REMOS-PM”,
OJSC “Energetik-PM”, CJSC “Zheleznodorozhnik-PM”

11
Electroshield
Description
Address 443048, Samara, Pos. Krasnaya Glinka, korpus zavodoupravlenie OAO
Elektroshchit

Contacts e-mail: TLobastova@electroshield.ru

web-site: http://www.electroshield.ru/

phone num.: +7 (846) 276-28-08

fax: +7 (846) 276-29-99

Head Andrey Polovinkin

Export characteristic
HS CODE 85 Electrical Machinery And Equipment And Parts Thereof; Sound Recorders
And Reproducers, Television Recorders And Reproducers, Parts And
Accessories

Field Hardware and Machinery


Production Electrical engineering products of 220-0.4 kV are produced since 1958.
Among them are:
- complete transformer substations (CTS) for transforming and distributing of
electrical power (CTS of block modernized type 220/110/35 kV)
- metalclad switchgears 6(10) kV of various types: K-61M, K63, K59 for
indoor and outdoor installation; load breakers, isolators, switchboards,
switchyards, distribution panels, boards and units.
- complete transformer substations CTS 10(6)/0.4 kV of industrial, urban,
kiosk types, etc.
Subsidiaries and related companies OAO Samarskiy Zavod Elektroshchit, ZAO Gruppa Kompanij Elektroshchit,
ZAO Samarskiy Zavod Elektroshchit – Stroyindustriya, OOO Russkiy
Transformator, Filial Ulyanovskiy Zavod termoisolyacionnykh izdeliy, Filial
Zavolzhskij, OAO Elektrozabsibmontazh, SP OAO Uzelektroapparat –
Elektroshchit Samara, OOO Torgoviy Dom Elektroshchit Samara, Filial
Nizhegorodskoy Elektrosetproekt

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Moscow plant electrical shield
Description
Address 121596, Moscow, ul. Gorbunova, 12-2

Contacts e-mail: info@moselectro.ru

web-site: http://www.moselectro.ru/

phone num.: +7 (495) 447-14-14

fax: +7 495 447-25-85

Head Konstantin Sidenko

Export characteristic
HS CODE 85 Electrical Machinery And Equipment And Parts Thereof; Sound Recorders
And Reproducers, Television Recorders And Reproducers, Parts And
Accessories

Field Hardware and Machinery


Production Power Plant Electrical Devices: Electrical shields, Switchgear

JSC "Roselectroprom Holding"


Description
Address 7, Electropultovtsev Str., Saint-Petersburg, 195030, Russia

Contacts e-mail: elpult@lek.ru

web-site: http://www.electropult.ru/eng/

phone num.: +7 (812) 527-61-63

fax: +7 (812) 527-38-90

Head Gennadiy I. Lokotkov

Export characteristic
HS CODE 85 Electrical Machinery And Equipment And Parts Thereof; Sound Recorders
And Reproducers, Television Recorders And Reproducers, Parts And
Accessories

Field Hardware and Machinery


Production Generator
Subsidiaries and related companies JSC "Electropult-ASU", JSC "Electropult-Energy", JSC "Electropult-
Engineering", JSC "EP-Audit, JSC "Electropult-Complect", JSC "Electropult-
Metall", JSC "Electropult-Apparat"

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NPO Elsib
Description
Address 56, Sibiryakov-Gvardeycov Str., Novosibirsk, 630088, Russia

Contacts e-mail: elsib@elsib.ru

web-site: http://www.elsib.ru

phone num.: +7 (383) 298-91-10

Head Korney K. Gibert

Export characteristic
HS CODE 85 Electrical Machinery And Equipment And Parts Thereof; Sound Recorders
And Reproducers, Television Recorders And Reproducers, Parts And
Accessories

Field Hardware and Machinery


Production Turbo-generators, hydrogenerators, motors, self-oscillating mixer

OAO Elektrozavod
Description
Address 21, Electrozavodskaya str., Moscow, 107023, Russia

Contacts E-Mail: info@elektrozavod.ru

web-site: www.elektrozavod.ru

phone num.: +7-495-777-82-50

fax: +7-495-777-82-50

Head Leonid V. Makarevich

Export characteristic
HS CODE 85 Electrical Machinery And Equipment And Parts Thereof; Sound Recorders
And Reproducers, Television Recorders And Reproducers, Parts And
Accessories
Field Hardware and Machinery
Production High voltage power transformers for electrical lines 110-500 kV, Single- and
three-phase oil-immersed autotransformers for coupling of networks 500, 330,
220 and 110 kV, three-phase oil-immersed generator transformers 110, 220,
330 and 500 kV, three-phase two-winding oil-immersed 220 kV transformers,
three-phase two-winding oil-immersed 110 kV transformers, three-phase
three-winding oil-immersed 35 kV and 110 kV transformers, single-phase two-
and three-winding oil-immersed transformers 220 kV, shunt reactors 10 –
1150 kV, single-phase oil-immersed shunt reactors of 500 up to 1150 kV,
three-phase and single-phase oil-immersed shunt reactors 10 kV, 35 kV and
110 kV, transformers for electrical furnaces.

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OAO Tolyattinskiy Transformator
Description
Address ul. Industrialnaya, 1, Togliatti, Samara reg., 445601 Russia

Contacts E-Mail: tez@infopac.ru

web-site: http://www.transformator.com.ru/?lang=en

phone num.: +7 8482 269400, +7 8482 727341

fax: +7 8482 296411, +7 8482 221974

Head Igor V. PTITSYN

Export characteristic
HS CODE 85 Electrical Machinery And Equipment And Parts Thereof; Sound Recorders
And Reproducers, Television Recorders And Reproducers, Parts And
Accessories
Field Hardware and Machinery
Production Transformators

Corporation Soyuz
Description
Address Obrucheva st., 36 Moscow, 117342, Russia

Contacts E-Mail: office@soyuz-corp.ru

web-site: http://www. soyuz-corp.ru

phone num.: +7 (495) 232-20-44

fax: +7 (495) 913-30-63

Head Rodion D. Gimaev

Export characteristic
HS CODE 85 Electrical Machinery And Equipment And Parts Thereof; Sound Recorders
And Reproducers, Television Recorders And Reproducers, Parts And
Accessories
Field Hardware and Machinery
Production Production of electrical equipment, including equipment under license of
leading European producer - AREVA T&D
Subsidiaries and related companies OJSC "Neptun", OJSC "Zaporojsky Zavod "Preobrazovatel" and the CJSC
"High-voltage equipment plant "Soyuz"

15
EDS Holding
Description
Address Trubnaya str., 28, str. 3, Moscow, 127051 Russia
Contacts E-Mail: info@edsholding.ru

web-site: http://www. edsholding.ru

phone num.: +7 (495) 621-81-00

fax: +7 (495) 623-18-96

Head Ruben Gevorkyan

Export characteristic
HS CODE 85 Electrical Machinery And Equipment And Parts Thereof:

Field Hardware and Machinery


Production Production of electrical equipment
Subsidiaries and related companies The Armavir Electrotechnical Works – electrical machines, complete-set,
small capacity drives, transformers, signaling systems. The area of application:
power engineering, in industry generally and in the defense industry.

The Karpinsky Electrical Machine-Building Plant – d.c. electrical machines,


high-voltage equipment. The sphere of application: the mining industry,
railways and public transportation companies.

The Science and Production Amalgamation “Kuzbasselectromotor”– explosion


proof electric motors and electromagnetic starters, explosion-proof low-
voltage equipment. Areas of application: the mining industry, chemical and
petrochemical production plants.

The Leningrad Electromechanical Works – instrumentation, electricity control


and metering systems. The area of application: power engineering, the housing
sector.

The Riga Electrical Machine-Building Works – electrical equipment for the


rolling stock of railways and urban electric transport systems. The sphere of
application: transport machine-building, municipal transport.

The Yaroslavl Electrical Machine-Building Works – asynchronous electric


motors and complete-set drives. The sphere of application: the housing sector,
petrochemical plants, the nuclear industry.

4. Foreign Production

The big international energy equipment holdings like Siemens, General Electric, Alstom,
ABB, Skoda Power, Schneider Electric, Westinghouse Electric, Mitsubishi Heavy Industries,
Ansaldo Energia and Areva have long ago recognized the potential of the Russian market.
They are well established and have joint ventures or their own production facilities in Russia.
Jenbacher, Wartsilla, Duetz and Caterpillar are very active as well. Other important players
are the numerous Chinese companies, which try to enter the market by offering very low
prices.

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The medium foreign companies working in this field and attracted by the huge market
potential are also trying to enter the market. For the time being the medium and small
companies have mostly limited their business to importing their production to Russia.

5. Trends

The energy generating companies will have to invest considerable sums in the modernization
of their equipment over the next years. According to estimates made in 2007 by RAO UES,
their successor organizations will need to put into force 100 gas turbines, 67 steam turbines
and 125 waste heat recovery boilers for gas power stations and 70 steam turbines for coal
power stations by 2011.

The strongest and most competitive markets are concentrated in the regions of Moscow and
St. Petersburg, whereas the growing markets are located in other Russian regions with
turnover still significantly lower than that of Moscow and St. Petersburg. Western equipment
is usually installed in newly built infrastructure, whereas existing Soviet infrastructure is
manly maintained with low-quality Russian equipment and to a smaller extent upgraded with
Western devices. The private industry is, wherever possible, installing modern western
equipment.

With the planned entering of Russia into the WTO, the lowering of customs duties should
make foreign equipment more competitive.

Industry experts expect the market share of the ‘High-Tech European-Like’ segment to grow,
whereas the share of the ‘Low-Cost Made in Russia’ segment is shrinking. On the other
hand, Asian and Russian producers are expected to improve the quality of their products.
This development will lead on a mid-term basis to a shift in the competition away from quality
and towards price.

More and more private enterprises, which use a lot of electricity, are considering constructing
their own power plants. From a commercial point of view with current relatively low energy
prices, it is already today more profitable for these enterprises to build their own plants. The
main reason for this is the high price consumers have to pay to be connected to the grid.
Another advantage of a private power plant is of course the independence from the state
electricity system. But there is also a great risk - the dependence on the very few fuel
suppliers with Gazprom having the monopoly in this sphere.

As the prices for the export of gas are much higher than for coal, there are major plans to
convert gas-fired thermal power station to coal-fired ones. However, there are serious
ecological concerns and experts widely agree that coal can substitute gas only in remote
areas.

Another trend in the energy sector which is currently actively developing is renewable energy
sources such as solar, geothermal, bio-fuel and especially wind energy. As for the latter,
there is no Russian technology available yet. With the new governmental decree that came
into force in May 2007, Russia can participate in projects under the Joint Implementation
mechanism. Therefore, alternative energy and energy saving projects become attractive
despite the low prices for traditionally produced energy. Especially interesting is the
substitution of small diesel generating stations in villages, which are not connected to the
general grid, with solar, wind or geothermic stations. Geographically speaking the Krasnodar
Region is a centre for alternative energies in Russia, where several pilot projects are already
in full force.

17
In the recent years, leasing has become an important promotion instrument in the energy
sector in Russia, which is used by foreign as well as Russian companies to make their offer
more attractive.

6. Consumers

During the Soviet era the energy sector was dominated by a few state enterprises. Today
many of them are privatized. Nevertheless, it remains a field where mainly big players rule
the game.

The newly founded 14 territorial power and heat companies (TGK) and 7 wholesale power
generating companies (OGK) are planning to modernize their equipment. They will
restructure their organization and optimize their purchasing schemes, which makes this a
good opportunity to enter the market.

These successor companies of RAO UES have very informative websites, most of them with
an English section:

OGK 1: http://www.ogk1.com/en/
OGK 2: http://www.ogk2.ru/eng/index.wbp
OGK 3: http://www.ogk3.ru/eng
OGK 4: http://eng.ogk-4.ru/
OGK 5: http://ogk-5.rbc.ru/en/
OGK 6: http://www.ogk6.ru/en/
GidroOGK: http://www.gidroogk.ru/
TGK 1: http://eng.tgc1.ru/
TGK 2: http://www.tgc-2.ru:8101/en/index.shtml
TGK 3: http://www.mosenergo.ru/eng/index.php?sessid=led15f07sinilh0gjric5cam33
TGK 4: http://www.eng.tgk-4.ru/
TGK 5: http://en.tgc5.ru/
TGK 6: http://www.tgc6.ru/index.php?id=news&L=1
TGK 7: http://en.votgk.com/
TGK 8: http://www.tgk-8.ru/
TGK 9: http://www.tgk9.ru/
TGK 10: http://www.tgc10.ru/eng
TGK 11: http://eng.tgk11.com/about/
TGK 12: http://www.kuzbassenergo.ru/eng/
TGK 13: http://eng.tgk13.ru/
TGK 14: http://tgc-14.ru/eng/modules/news/
IDGC North-West: http://eng.mrsksevzap.ru/
IDGC Ural: http://www.mrsk-ural.ru/eng/company/
IDGC South: http://www.mrsk-yuga.ru/
IDGC Center: http://www.mrsk-1.ru/
IDGC Center and Volga Region: http://www.mrsk-cp.ru/
Manager of the unified transport network: http://www.fsk-ees.ru/
Rosenergoatom: http://www.rosenergoatom.ru/

The power stations have in their organisation a department dealing with technical support,
which often also tries to carry out modernization activities. Officially, they publish tenders for
some renovation tasks. But they often decide to make the changes in house, buy the
equipment, install it and to construct new power generating capacities, despite the fact that
their engineers do not have the necessary qualifications.

However, for more complicated tasks the technical support departments cooperate with
specialized engineering companies. Unfortunately, these partners are sometimes chosen not

18
due to their qualification, but due to a close relationship with the management of the power
generation company, the power station or the engineering company.

Experts hope that with the restructuring of the sector, the management of the new
companies will centralize the purchasing and tender system and make it more professional
as well as call upon the already existing specialized engineering companies, which will be
able to carry out the modernization and construction of power stations on a high quality level.

The Federal State Unitary Enerprise “Foreign Economic Association Technopromexport” is


the most important player in this sector. According to the General Director Sergey
Molozhaviy, it will occupy at least 25% of the market for the construction of power stations in
Russia in 2010:

Federal State Unitary Enterprise "Foreign Economic Association


"Technopromexport"
Description
Address CIS, Russian Federation, Central federal district, Moscow, 18/1
Ovchinnikovskaya nab., Moscow, Russia, 115324
Contacts phone num.: +7 (495) 950-15-23
fax: +7 (495) 953-33-73; 951-11-64
e-mail: inform@tpe.ru
web-site: http://www.tpe.ru
Head Molozhavy Sergey Vladimirovich

Export characteristic
HS CODE 2716000000 - Electrical energy
8504 - Electrical transformers, static converters (for example, rectifiers) and
inductors
8547 - Insulating fittings for electrical machines, appliances or equipment,
being fittings wholly of insulating material apart from any minor components
of metal (for example, threaded sockets) incorporated during moulding solely
for purposes of assembly, other than insulators of heading 8546; electrical
conduit tubing and joints therefor, of base metal lined with insulating material
8535 - Electrical apparatus for switching or protecting electrical circuits, or for
making connections to or in electrical circuits (for example, switches, fuses,
lightning arresters, voltage limiters, surge suppressors, plugs, junction boxes),
for a voltage exceeding 1 000 V
8404 - Auxiliary plant for use with boilers of heading 8402 or 8403 (for
example, economisers, super-heaters, soot removers, gas recoverers);
condensers for steam or other vapour power units
7304 - Tubes, pipes and hollow profiles, seamless, of iron (other than cast
iron) or steel
8406 - Steam turbines and other vapour turbines
8402 - Steam or other vapour generating boilers (other than central heating hot
water boilers capable also of producing low pressure steam); super-heated
water boilers
8410 - Hydraulic turbines, water wheels, and regulators therefor

Field Electric equipment


Production The core activity of Technopromexport is realization of power projects of any
complexity on a turn-key basis: construction of power projects (full service
provider from design and survey to project operation); thermal power plants
(combined-cycle, gas turbine, geothermal, diesel); hydro power plants; power
transmission lines and substations; export of electricity.

19
Other engineering companies in the sector include:

E4 Group: http://www.e4group.ru/?id=70
Engineering company Quartz: http://www.ec-quartz.ru/
Intertekhelektro: http://www.ite-ng.ru/
Piter Bell: http://www.piterbel.com/
Energoholding: http://www.energoholding.ru/
PSM: http://www.powerunit.ru/
PKF “Oksana” : http://www.geloks.ru/
Tetra Elektrik: http://www.tetra-electric.ru/

Suppliers of components can find potential clients in the “Domestic Production” chapter,
where some producers of Russian energy equipment are listed.

7. Trade Channels

There are mainly two options of doing business in Russia. You can cooperate with a local
importer or act as your own importer and wholesaler. Usually, it is easier to start your
business with the support of a local importer, as he can do all the certification and
registration work for you, which costs a lot if you are new in the market. Another advantage
of working with a Russian partner lies in the specific understanding of the Russian market.
Local distributors can contact clients directly and can also arrange information support. It is
an important advantage if your distributor is already working within the energy sector.

Of course, conducting business through your own importing company also has many
advantages. You can decide your own selling strategy and it is easier to control the
marketing and the distribution of your product. However, it is absolutely necessary to have
very experienced staff, who have been working in this business for a long time. Besides, one
should not underestimate the administrational and cultural hurdles which are often
insurmountable for foreign companies which try to enter the Russian market on their own.

A good strategy to combine the advantages of both ways is the establishment of a


representative office, which can support the importer during the process of marketing and the
process of acquiring clients.

In general, it is recommended to start with the Moscow region. As a rule, Russian distributors
continue creating vertically integrated holdings for a better cooperation with the regions,
taking into consideration the saturated Moscow market.

8. Agency Questions

Surely one of the most important factors for successful business in Russia is the important
task of finding a reliable partner, who will be able to help you deal with the authorities and
any other problems you might encounter. Having a good partner is essential, because
Russia is a country where relationships are of particular importance, and a foreigner will find
it hard to work with Russians without fostering personal contacts. In the energy sector, where
the number of potential clients is rather limited, it is essential to have good connections.

There are different ways to find a business partner. You may consider Russian or foreign
trade fairs or consulting agencies. Consulting agencies are the most expensive way to find a
partner, but they offer professional and efficient help. Consulting agencies also often help
with partner due diligence.

It is not so easy to check a potential partner’s background in Russia, because there are
almost no open sources (business directories, internet sites). It is not compulsory for Russian

20
companies to publish their financial records, or make their credit history available.
Furthermore, Russian accounting standards do not clearly indicate the key numbers and,
therefore, do not give reliable information about the past performance of prospective
partners. But consulting agencies in Russia know how to access the necessary information.
Upon request, the SBH can recommend companies which offer partner search and due
diligence.

9. Exhibitions, Conferences, Journals and Internetplatforms

Trade Fairs

Type Description Location Timing

Atomic Energy & Electrical Engineering, Inconex


Company, Control and measurements: ergonomics of
management reactor, digital monitoring systems, software,
systems of data gathering and other systems of the atomic Moscow World 7.10.2008-
Exhibition
power station Trade Center 9.10.2008
Electric systems: new systems of emergency maintenance
with power supply, new high-voltage equipment
http://www.inconex.ru/np/eng/
MIIF. EnergoTech, Bizon-95ST Company, engineering of
medium and high voltage, engineering of low voltage, Moscow
switching equipment, power condensers / components, high- 69th pavillion of 21.10.2008-
Exhibition
voltage and low-voltage equipment for distribution and All-Russian 24.10.2008
control Exhibition Centre
http://www.miif.ru/
Mashex, MVK Company, entire metalworking, machine-
Moscow 18.05.2009-
Exhibition building and machine-tools market in a single venue
Crocus Expo 22.05.2009
http://www.mashex.ru/defaulteng.stm

Conferences
Type Description Location Timing

POWERTEK, ITE Group Plc, PRIMEXPO Companies,


Exhibition Moscow
Power Transmission and Distribution, Electrotechnical 02.12.2008-
& WTC Congress
Equipment 04.12.2008
Conference Center
http://www.primexpo.ru/power/eng/
EMBIZ, Technological concepts and exemplary projects
Exhibition from the energy sector, renewable energy, peripheral energy
Moscow 09.12.2008-
& supply, energy services, sponsorship and possibilities of
Expocentr 12.12.2008
Conference financing, subject-fixed panels and special events
http://www.embiz-moscow.com/english/index.php
Russia Power, Ministry of Trade and Energy of the Russian
Federation, Company Pennwell, current state of the Russian
Exhibition
electricity sector and the roles of their companies in the Moscow 18.04.2009-
&
sector, technologies needed to deliver adequate energy Expocentr 30.04.2009
Conference
services
http://rp08.events.pennnet.com/fl/home.cfm?Language=Engl

21
Journals
Type Description Location Timing

Power Stations, a technological journal. Print run: 2’000,


Professional audience: power plants and heating industry, ISSN 0201- Russian
Monthly
Journal 4564 Federation
http://www.energy-journals.ru/elst/index.htm
Energetik, a mass market journal, print run: 4’500, 48
Professional pages, audience: diverse groups interested in the electric Russian
Monthly
Journal power industry, ISSN 0013-7278 Federation
http://www.energy-journals.ru/energetik/index.htm
Industrial Power, a technological journal, print run:
Professional unknown, audience: industrial power services, ISSN 0033- Russian
Monthly
Journal 1155 Federation
http://www.energy-journals.ru/promen/index.htm
Messages in the Electric Power Industry, an information-
Professional analytical journal, print run: unknown, audience: power Russian
Bimonthly
Journal industry. Federation
http://www.energy-journals.ru/vesti/index.htm
Energy Market, an information-analytical journal for
Professional professionals, print run: unknown, audience: power Russian
Monthly
Journal industry. Federation
http://www.e-m.ru/journal.asp
Academy of Power Generation, an information-analytical
Professional journal for professionals and interested people, print run: Russian
Bimonthly
Journal unknown, audience: diverse groups interested in the electric Federation
power industry. http://www.energoacademy.ru/ru/
Power Generation and Industry, an information-analytical
Professional journal for professionals and interested people, print run: Russian
Monthly
Journal 26’000, audience: diverse groups interested in the electric Federation
power industry. http://www.eprussia.ru/eng/epr/
Energy control, an information analytical and normative
Professional journal for professionals, print run: 26’000, audience: Russian
Quarterly
Journal professionals of the electric power industry and processing Federation
industry. http://www.en-info.ru/
Energy. Industry. Regions. Official publishing agency and
Professional information partner of the Ministry of Industry and Energy. Russian
Monthly
Journal print run: unknown, audience: diverse groups interested in Federation
the electric power industry. http://www.epr-journal.ru/
Market for electrotechnical equipment. An information-
analytical journal for professionals, print run: 15 000,
Professional audience: professionals the power industry equipment Russian
Quarterly
Journal sector. Federation
http://www.marketelectro.ru/magazine/

Internetsites

http://www.elec.ru/
http://www.celec.ru/
http://www.cogeneration.ru/
http://www.ruscable.ru/
http://www.elecab.ru/
http://www.electrik.org/

22
10. Tariff rates, other import duties

The export and import of goods may be subject to customs duty. Russia uses three types of
tariffs: the ad valorem tariff (fixed percentage of the value of the goods), specific tariffs (a
specific amount of money per unit) and combined tariffs. Ad valorem tariffs generally range
from 5% to 30%, but there are also higher tariffs. Tariffs are set for each class of goods
based on the Nomenclature of Goods of Foreign Trade Activity and are calculated based on
the customs value of the goods.

Imports are further subject to VAT (0, 10 or 18%). Certain goods such as alcoholic
beverages are subject to excise tax. A customs processing fee must also be paid. Customs
duty, VAT, excise tax and customs processing fees are collectively referred to as customs
payments.

11. Import regulations, licenses/documents/formalities

Russia uses the classical instruments to control imports and exports, which are regulated by
Federal Law No. 164 of December 8, 2003 “On Principles of State Regulation of Foreign
Trade Activity”

Although most products can be freely imported into and exported from Russia, some
products such as pesticides, weapons, self-defence items, explosives, precious metals and
stones, radioactive materials, narcotics and psychotropic substances require a license.

Foreign goods enjoy national treatment. They are subject to the same technical,
pharmacological, sanitary, veterinary, phytosanitary and ecological requirements and the
same requirements for mandatory confirmation of their compliance with Russian technical
standards (mandatory certification) as those which apply to analogous goods of Russian
origin (see below section on standard, technical regulations, labeling).

Customs regulations are one of the first and main concerns for companies doing business in
the Russian Federation.

Russian customs law was substantially reformed with the enactment of a new Customs Code
in 2003 (in force since January 1, 2004). Russia is not yet a member of the World Trade
Organization. It has signed an Agreement on Partnership and Cooperation with the
European Union (after the expiry of its initial ten-year term this Agreement, while still in force,
is waiting to be renegotiated). Russia further signed a treaty on a customs union with Belarus
(1995), which was later joined by Kazakhstan, Kyrgyzstan and Tadjikistan. In 2000, this
customs union was transformed into the Eurasian Economic Community (EurAsSec or
EAEC). Uzbekistan joined EurAsSec in 2006. Russia, Belarus and Kazakhstan recently
confirmed their intention to implement the customs union and common market within the
EurAsSec treaty framework.

The classification system used by the Russian Federation (“Nomenclature of Goods of


Foreign Trade Activity” or TNVED) is based on the Harmonized Commodity Description and
Code System (HS) of the World Customs Organization and the Combined Nomenclature of
the European Union. The Russian classification system uses ten-digit numbers.

Goods must be declared upon import to Russia in accordance with the customs regime
selected (e.g. import for internal consumption, temporary import, etc.). As a rule the goods
are declared by the Russian importer or a customs broker. When the goods cross the
Russian border the carrier submits to the border authorities basic documentation on the
goods, then under customs control the goods continue on (internal transit) to the customs
terminal at the destination where they are cleared through customs. The list of documents
required can be impressive and their correct preparation requires experience.

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The main documents are the following:

1. Cargo customs declaration (CCD):

The CCD is a uniform document used to declare the goods to Customs and contains basic
information on the goods (description, weight, number of units, etc.), the customs regime
selected, the importer, consignor and consignee, the class and customs value of the goods,
their country of origin and the transportation of the goods.

2. Declaration of customs value:

This document confirms the value of the goods which serves as a basis for the calculation of
the customs payments. There exist various methods to calculate the customs value, and
Customs may request additional documentation depending on the method used. The
customs value includes the cost of transport.

3. Transportation documents:

These depend on the type of transport (road, rail, air, sea): bill of lading, FIATA bill of lading
(combined transport bill of lading), railway bill, airway bill, truck waybill (CMR).

4. Commercial documents:

The commercial documents (contract, commercial invoice, pro forma invoice, insurance
certificate, etc.) are important for the calculation of the customs value.

5. Certificate of origin:

A certificate of origin is required to benefit from preferential customs tariffs. Certificates of


origin are issued by special institutions in the country of the manufacturer.

6. Certificate of conformity:

For a number of goods the importer needs to submit documents confirming that the goods
meet Russian safety standards and technical regulations (see section on certification below).

7. Deal (Transaction) Passport:

The deal or transaction passport is a document issued by the Russian bank of the importer
and is required under Russian exchange control regulations. Transaction passports are used
to monitor cross-border payments.

Substantial information can be found on the official site of the Federal Customs Service of
the Russian Federation (www.customs.ru).

12. Technical regulations/labeling consumer protection/standards/inspection


authorities

The Federal Agency for Technical Regulation and Metrology (Rostekhregulirovaniye,


formerly Gosstandart, www.gost.ru), an agency of the Ministry of Industry and Trade,
manages the GOST R certification system. A dozen other mandatory certification systems,
partly managed by other ministries or agencies (fire-safety, weapons, telecommunication,
airplanes, etc.), and numerous voluntary certification systems exist. The GOST R certification
system consists of hundreds of accredited certification bodies and test laboratories.
Historically GOST R standards are based on GOST standards, which were originally

24
developed by the Soviet Government. Today GOST standards are the official standards of
the Euro-Asian Council for Standardization, Metrology and Certification (EASC),
headquartered in Minsk, which is recognized by ISO (International Organization for
Standardization) as a regional standards organization for the CIS. The Russian Federation
does not recognize ISO standards. Russian standards still lack clarity and transparency, and
Russia continues to rely on product testing as the key element in the product approval
process, adhering to redundant practices of further testing of internationally accepted
certified products.

Federal Law No. 184 "On Technical Regulation" enacted on December 27, 2002, is meant to
streamline and overhaul national technical standards and to ensure the passage from a
mandatory certification system to a modern system based on self-declaration. The law is
planned to be fully implemented by 2011, which particularly means that all GOST standards
need to be replaced by published technical regulations. The latter may be enacted
exclusively in the interest of safety, health, environmental or consumer protection. The
abrogation of technical trade barriers is one of the conditions for Russia to join the WTO.

The law distinguishes between:

• mandatory certification (blue certificates);


• voluntary certification (yellow certificates).

Mandatory certification mostly takes the form of a certificate of conformity delivered by an


accredited certification body based on test results. The certificate of conformity is a pre-
requisite for the import of the relevant products to Russia and must be submitted to Customs.

Products subject to mandatory certification within the GOST R Certification System may be
marked with the GOST R sign or mark of conformity. Voluntary certification systems (as well
as mandatory certification systems other than the GOST R system) may register their own
mark of conformity.

Whether a product is subject to mandatory certification must be established based on the


Russian Product Classification (OKP), which is not fully identical to the Foreign Trade
Classification (TNVED codes). In cases of doubt, it is possible to obtain a so-called
exemption or refusal certificate to confirm that the product is exempt from mandatory
certification.

Compliance with specific safety or health standards may require additional certification (e.g.
hygienic certificate, fire-safety certificate). Such certificates may be a pre-requisite for
obtaining a GOST R Certificate of Conformity.

Under the Russian Civil Code a commercial seller must guarantee the conformity of the
goods to national standards. Non-conformity is considered a defect giving rise to warranty
claims. This applies in particular, but not only, to retail sales (Federal Law of 7 February 1992
“On the Protection of the Rights of Consumers”).

Russia participates inter alia in the following international certification systems:

• Certification of electrical and electronic equipment (IEC or International Electrotechnical


Commission, www.iec.ch, www.iecq.org);
• Certification of passenger cars, trucks, buses and other transport vehicles (the 1958
Agreement of the United Nations Economic Commission for Europe concerning the
adoption of Uniform Technical Prescriptions for Wheeled Vehicles, Equipment and Parts,
www.unece.org);
• Testing of hand guns and ammunition (Brussels Convention of 1969, www.com-i-p.com);
• OIML Certificate System for Measuring Instruments (www.oiml.org).

25
It is generally easier to certify products locally than from abroad. However, certificates
obtained in the name of a local distributor are valid only for use by such local distributor.
Therefore, if the foreign manufacturer wishes to control Russian distribution channels it may
be worthwhile obtaining the certificate in the name of the foreign manufacturer. It is therefore
important to select a professional provider of certification services.

Useful links:

SGS www.gost.sgs.com
ROSTEST www.rostest.ru
Research Institute for Certification www.vniis.ru
Standardinform, www.standards.ru

Importers should further consider legislation on consumer protection which defines


requirements for product labeling and the disclosure of other product information to
consumers and general product liability, including manufacturer’s liability.

13. Addresses of important public authorities, industry associations, other relevant


organizations

Ministry of Industry and Trade


Kitaygorodskiy proezd 7, Moscow 109074
Tel: +7 495 710-55-00
Fax: +7 495 710-57-22
info@mte.gov.ru
http://www.minprom.gov.ru/eng

Federal Energy Agency


Kitaygorodskiy proezd 7, Moscow 109074
Tel: +7 (495) 710-55-00
Fax: +7 (495) 710-57-22
info@mte.gov.ru
http://www.minprom.gov.ru/eng

Rosatom
Federal Agency for Nuclear Energy
Ul. Bolshaya Ordynka 24/26, Moscow,
Tel: +7 499 949-45-45
E-mail: npokrovskaja@skc.ru
www.minatom.ru

System operator
Kitaygorodskiy proezd 7-3, 109074 Moscow
Tel: +7 495 627-83-55
Fax: +7 495 627-95-15
e-mail secr@so-cdu.ru.
http://www.so-cdu.ru/

Union of Machine constructors


Chemezov Sergey Viktorovich
President
ul. Stromynka 27/3, 107076 Moscow
Tel. : +7 495 964-6183,
Fax : +7 495 963-2613; +7 495 964-8311
http://www.srmr.ru/about_0.htm

26
Academy of Electrotechnical Sciences of the Russian Federation
Ul. Krasnokazarmennaya 17, D-325
Tel: +7 495 673 53 11
Mail: aelsc@eti.mpei.ac.ru

14. Recommendation

After the Perestroika years, there was a lack of investment and development in the Russian
energy sector, which still has to be compensated. Furthermore, the restructuring of the
energy generating sector implies major changes at the organizational level and the supply
chain management of the power plants. This makes the current situation a favorable time to
enter the Russian market. According to experts it will take the energy generating holdings up
to five years to introduce the necessary changes, to reorganize their business and to build
new facilities.

The new foreign share holders often invite foreign engineering companies for the realization
of their projects. These companies are used to foreign equipment, while Russian engineers
still tend to use the familiar Soviet equipment.

In order to be successful and win new business partners in the Russian market, the following
competences (differentiators) are important:
- Local presence either with a subsidiary, a representative office or through a reliable partner
- Good functioning logistics, generally more important than in the West
- Consulting support capabilities for projects in order to win tenders
- Customer training

In general, the personal contacts to potential clients and decision makers are likely to take
much more time than in European countries. Detailed information material in Russian will
also be necessary to convince your business partner.

Author: Julie Bächtold, Moscow, September, 30 th 2008


Senior Trade Adviser
Author’s address: julie.baechtold@eda.admin.ch

27