Far East | Energy, utilities | Industry, manufacturing

Hyundai plugs into RF Primorsky power grid program worth “dozens of millions”

17 Nov '10
Oleg Kouzbit, Online News Managing Editor

S. Korea’s Hyundai is joining forces with Russia’s FSK UES in a new switchgear and transformer project worth “tens of millions of dollars” in the Primorsky region. Starting late 2012 the future plant is expected to supply electrical grid equipment to energy distribution projects both within and far beyond Primorsky. With FSK, the main buyer, eyeing numerous multimillion-dollar grid renovation projects scheduled for the time the new Hyundai facility comes on-line it looks like the Koreans bet on a sure thing.

S. Korea’s Hyundai Heavy Industries has shaken hands with Russia’s federal electrical grid firm, FSK UES, in a deal that is expected to help upgrade the Primorsky region’s electrical supply networks. The Primorsky administration brokered the agreement that calls for construction of a high-voltage equipment plant in Vladivostok.

The Korean company will reportedly pony up at least $15m to build the facility and is going to run it when completed; FSK will kick in, too. According to Primorsky Governor Sergei Darkin, the plant will be commissioned in late 2012 and the cost will “…amount to a few dozens of millions of dollars.”

The prospective factory will focus on production of SF6 gas insulation switchgear with a voltage range of 220-500kV to distribute electricity between substations. Plans are to start making transformers at a later stage as well. The future site is expected to create as many as 300 new jobs.

The project also reportedly includes the design and construction in Primorsky of so-called ‘smart networks,’ a Hyundai-developed technology to save energy and cut electricity losses on power lines.

According to the project planners, the projected capacity of the Vladivostok plant is 350 compartments a year, each capable of supporting the operation of one power line.

Eyeing local, slashing imports

FSK will buy most of the new plant’s yearly production, the Russian firm said. Its $330m 2013-2014 investment program calls for re-equipment of electrical networks with 346 new SF6 gas insulation 110-500kV switchgear sets; the Primorsky factory is likely to cover more than 50% of FSK’s annual renovation plan.

The federal energy company reportedly expects to step up purchases at further investment stages as the Hyundai factory gathers steam. The plan is part of a broader policy aimed at decreasing FSK’s dependence on imports, the FSK management emphasized.

The energy firm has been buying switchgear with a voltage range of 220kV and more from overseas suppliers, predominantly Hyundai and France’s Alstom, it said, as Russian manufacturers don’t make high-voltage equipment of this kind.

Korean money favors Primorsky

That the Koreans have chosen Primorsky for their new Russian investment is not exclusively a matter of geographical proximity. It’s also an investor-friendly environment strongly supported by the government’s focus on infrastructure modernization.

South Korea accounts for a reported 22% of Primorsky’s direct foreign investment. Just a year ago, for example, Marchmont reported on Daewoo Shipbuilding and Marine’s $200m mega-dockyard project in the town of Bolshoy Kamen.

Of 150 projects built with foreign money in the region, 24 are South Korean, regional officials said.

Regional macroeconomics provides yet another incentive for international majors to come and set up production there. This year’s regional GDP is forecasted to grow an officially estimated 7.5% on a year-on-year basis aided by a max. 4.3% inflation rate (one of Russia’s lowest) and just 2% unemployment over the last ten years.

With an eye to Russian-wide energy renovation

Hyundai’s Vladivostok site has reported plans to sell across Russia. The immediate market will be the Primorsky region where an across-the-board upgrade of its electrical grids is currently under way with tens of millions of dollars worth of new power lines and substations coming on-line each year.

As FSK UES and other energy transportation majors announce big-ticket renovation programs in various Russian regions, like a $560m Tomsk regional grid upgrade and energy efficiency project or a $280m power line and substation construction program for Dagestan (both slated for completion by late 2014), the investor should be sitting pretty.
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