The forming of Atomenergoprom established two years ago has been completed on the whole by now. Today, one of the company’s key priorities is the program of construction of nuclear power plants (NPPs) in Russia. Director of Atomenergoprom Vladimir Travin told about the building a system of engineering in the industry, plans for the coming years, as well as perspectives of the international cooperation in his interview with Interfax news agency. 
   
- As far as I understand, today, in view of the large-scope NPP construction program, one of the key tasks of Atomenergoprom is to build an effective system to manage engineering activities. What is the progress of this work? 
   
- In fact, the NPP construction is one of our largest programs. It is very important for the State. Yes, there is the crisis today; we observe a decrease in energy consumption in the country. But the decrease will change to an increase, i.e. the demand for electricity will come back; it is just a delayed issue. 

Key players of the NPP construction program are Atomenergoprom’s enterprises, such as Energoatom Concern, as the customer-developer, three Atomenergoproekt institutes, and design organizations. Our task is to line them up and ensure maximum efficiency of their work as a comprehensive whole. So the concept to create engineering companies in the design institutes has become one of essential elements of this work.
   
Having established the engineering companies at Atomenergoproekt institutes, we have consolidated the management of working documentation development, procurement of equipment and construction and installation works. So the NPP construction processes which previously took much time and required extensive changes and approvals are managed within one and the same structure now. Thus, deviations from construction schedules are nearly always predictable and compensated for, if necessary, and this is very important.
   
Having such division of responsibilities, the customer-developer – Energoatom Concern – concentrates such areas of importance as quality control, in the first place, as well as the support of all construction preparation processes like land-related issues, licensing etc.
   
We have the interests of the concern [Energoatom] and Atomenergoproekt institutes divided. Disputes arise between them, very serious ones. This is normal. They say, truth is born of arguments. We actively participate in them and find the most optimal solution. Let me give you one example: on the one hand, engineering companies are interested in releasing the facility as soon as possible, but, on the other hand, Energoatom wouldn’t accept the work done with inappropriate quality.
  
In turn, Atomenergoprom is involved in planning, forecasting, control and it also assesses risks and assists to minimize them. We also develop and establish the most up-to-date and effective standards for procurement, facility cost management etc. 
   
- Do you plan for any structural changes in the Atomenergoproekt institutes? A merger or exchange of assets, for instance? 
   
- Some organizational changes are possible. Moreover, today our engineering companies’ work efficiency is different. For example, the outmost attention was paid to activities of Nizhniy Novgorod Atomenergoproekt at the first stage, and it is quite natural because this company was awarded to develop two priority sites – Rostov-2 and Kalinin-4. These power units have to be completed within a tough schedule and solve a certain set of problems. The Rostov nuclear power unit is a longstanding construction; it started as back as the Soviet Union times. Besides, there is an equipment integration issue; some equipment of the NPP uncompleted in Bulgaria in the soviet times is used at Kalinin NPP site. The integration is a task that is different from the building from scratch.  
   
- Have NN Atomenergoproekt solved the problems? 
   
- I think we have solved the problems that had faced us. In the recent years there has been skepticism that we won’t see Rostov-2 earlier than 2012. We’ll see it! Its first criticality is planned to achieve this year. Meantime, there are no any short-lived campaigns there and no one is to neglect safety. All equipment will be thoroughly tested; all processes will comply with norms and requirements.  
   
- What about Moscow and St. Petersburg Atomenergoproekt institutes? 
   
- These companies are building plants from scratch to new projects: Moscow-based Atomenergoproekt is dealing with Novovoronezh NPP Phase Two (NVNPP-2) and St. Petersburg-based one is dealing with Leningrad NPP Phase Two (LNPP-2). In this respect, note, we have consciously allowed the competition of construction projects by having achieved similarities in basic solutions. Projects being undertaken by these ATOMENERGOPROEKTs differ and each has its own development prospects and competitive advantages. I am certain this competition has brought solutions of maximum efficiency to us by present.
   
Now, even if there are certain deficiencies, which, however, we manage to do away with promptly, there is no doubt that the NVNPP-2 and LNPP-2 projects will be implemented within the established deadlines and the Atomenergoproekts will come about as full-fledged engineering companies. 
   
However, Atomenergoproekts need to compete not only between themselves, in terms of price, in the first place, but they have to be competitive in the world market. Therefore, today there is a decision to open St. Petersburg Atomenergoproekt to the international cooperation. We are making the company ready for this.
   
In December 2008, the Board of Directors of St. Petersburg Atomenergoproekt approved the decision to set up an international engineering company with the involvement of a foreign strategic partner in the institute. 
   
- In other words, it will share, in a certain sense, markets with Atomstroyexport, which is a traditional Russian contractor for the building NPPs abroad? 
   
- I would term it in a more extensive way. We are ready for the international cooperation, for setting up a JV at St. Petersburg Atomenergoproekt, to have more effective competition abroad. A mutually beneficial effect of such cooperation is the technology exchanges, expansion of sales markets at the expense of traditional sales markets of potential partners and, certainly, joint struggle for the market. It doesn’t mean, however, that only St. Petersburg Atomenergoproekt-developed projects will be sold in the international market. This is to be decided upon by a corresponding joint company through identifying the most effective approaches.
   
In general, the internal competition is very important for us. Being a domestic monopolist in many respects, nearly without a competition in the country, it is very easy to find oneself in a trap of unlimited growth of costs. That is why if it is necessary and possible to create the competition, we create it.
   
As to Atomstroyexport, it is involved in our engineering system already today. For example, we have made a decision to purchase monopoly-made long-lead equipment only through Atomenergoprom’s branch, the Integrated Procurement Directorate. The matter is the equipment for all NPPs being constructed by both Atomenergoproekts and Atomstroyexport. Our goal here is clear; by approaching vendors through different organizations we could create a competition of demand that would allow monopoly producers to raise prices significantly. 
   
It is not a great secret to reveal to say there were even complaints against us filed to the government as regards discussions with equipment vendors concerning reduction of costs of their products. It’s good that the government supported us. Since the ultimate result of this work is the price of electricity for our citizens and industry.
   
I would add that we also consider the unifying engineering companies as one structure within Atomenergoprom and, no doubt, it will be implemented in a certain form. Given our plans to operate in international markets, including with partners, specific decisions on how this is going to be organized will be made jointly. 
  
- Speaking about the potential JV of St. Petersburg Atomenergoproekt with a foreign partner, do you mean also the arrangements with Siemens, which are under discussion now? Is it one of possible paths of development? 
   
- Yes, it is. It is one of the options. The negotiations with Siemens have started and we believe they are a very interesting partner with which we supplement each other.  
   
- Do you admit emergence of relatively new private players in the NPP construction market in Russia? 
   
- Without our participation and especially in the NPP construction market – I doubt it very much. It is nearly unrealistic situation due to objective reasons, level of technology, competence. On the other hand, our projects are not limited to building of plants. For example, we involve engineering companies in life extensions of the existing NPPs.
   
Also, one has to keep in mind that the NPP construction projects are financed by the State and spending effectiveness of the allocated funds is an acute issue. However, if there had been an entity in the market which could spend these funds in the most effective way, we could have started working with such partner. At the same time, the NPP construction process is not possible without design institutes, engineering companies but these competencies are available to Atomenergoprom only.
   
I do not exclude that in future our engineering companies will be open for private capital. Another matter is that this should become necessary for solving the tasks and improving efficiency. An investor may add a new competence, open a new market or invest cash needed for development in the project. However, in the current situation, it is professionalism and competences constitute the prerequisites of success.
   
I will reiterate, we don’t exclude the involvement of a private capital. The same way we don’t exclude the emergence of private partners in nuclear power. The partners which could own a part of the company-owner of a nuclear power plant. In particular, we hope to implement this scheme for the first time in Russia while building Kaliningrad NPP.  
   
- What are the NPP construction project cost constituents? Could you give an estimate of the cost of one kilowatt in Russia? 
   
- The pricing of nuclear electricity doesn’t differ in principle as compared to other energy generation technologies. Features of nuclear generation, to a greater extent, associate with the duration of the plant construction. Prices which are used at the project approval stage are the reference prices. Then, we add several years for the construction, inflation, currency exchange rates (to say the truth, I’d like to note that the equipment we buy abroad makes not more than 10% of the plant costs). Besides, projects involve a large scope of construction and installation works where a substantial share goes for wages.
   
So to determine a NPP cost is rather a problem of long-term forecasts of its various constituent changes. Competitiveness of Russian projects as compared to foreign plants is a guide for us here, in the first place. We continuously analyze, monitor the situation and submit our assessments to relevant governmental bodies. In our opinion, today the domestic projects are very effective and competitive that is proven by our successes abroad, by the way.
   
Recently, the US market data have been published; there is price statistics on French Areva’s projects. Most close comparison gives us at minimum 30% advantage before our competitors in terms of the cost of one kilowatt of installed capacity. With that, I don’t take into consideration the US market at all, land-related issues are costly there; in the long run the NPP construction cost is higher than in our case, by many times. 
   
- Has the crisis led to a reduction of NPP construction cost in Russia? 
   
- Speaking about the current year, there is a price drop and we count on reducing NPP construction costs, at least, by 10-15% of our plans for this year. But there are other conflicting trends. So the materials and equipment are actually becoming cheaper, vendors are ready to reduce prices and we actively use this trend. But construction and installation works make a substantial share in the project costs, as I already said. And the workers’ wages are tied to inflation. 
   
Speaking about what would happen in 2010 and beyond, certainly, we count on further seizing our advantages of the reliable partner who signs long-term contracts supported with funding. However, I would like to note that the material and equipment price reduction we observe today is mainly linked to the resources which have already accumulated in warehouses. In the background of low liquidity producers sell out these inventories cheaper. But taking account of the current low demand for their products, we understand that an average cost will increase in future. A half-loaded plant won’t produce cheaper, since it won’t cover all expenditures. Also, a price balance which will form in the market next year could be quite different. 
   
- Could you name main parameters of Energoatom’s, or even Atomenergoprom’s, investment programs? 
   
- This year consolidated investment program of Atomenergoprom is more than RUB280bn and includes very many areas. These are uranium business, development of enrichment technologies and many others. State Corporation Rosatom controls this process; it also approves main parameters and Atomenergoprom is entitled with the investor functions.
   
The Energoatom’s program is a part of the consolidated investment program. It has certain features associated, for example, with large federal budget allocations for the NPP construction. The State controls and closely monitors this process. In addition to the budget, there is an investment constituent in the [electricity] tariff, which is subject to the state body approvals.
   
During the recent years the Energoatom Concern’s investment program has been approved by the government for the coming three years. There is a state investment program for 2009-2011 which amounts to RUB224.5bn. The 2010-2012 program is being drafted. On the whole, total investments of the concern for this year have been approved in the amount of RUB165bn. If all sources of investment are considered.
   
I would emphasize, at the governmental level we approve not only budget spending parameters and tariffs but also justify what we are going to spend any investment program’s cash for, in particular, raised through operations in the free electricity market. With that, the concern’s program takes account of not only NPP construction but also life extensions and upgrades of the existing plants, safety issues and projects to renovate fuel storage facilities. 
   
- Do you plan to attract external funding for the investment programs? Specifically, in mid April at the meeting on the [nuclear] industry development program the head of Rosatom turned to the government for an approval to issue Atomenergoprom’s bonds under the State Corporation’s guarantee. Could you elaborate on these plans? 
   
- In fact, we worked on this issue and now we are ready to submit the materials for approval to the Rosatom Supervisory Board at any time. We are closely tracing the market situation and if we make a decision that the situation is adequate, the bonds will be placed. The issue will be at the level of about RUB100bn. It is a big number. For us loans of RUB10bn-RUB15bn are easier to settle directly with banks through crediting.
   
Naturally, the raised funds will be channeled to affiliated organizations. I would like to remind that Atomenergoprom performs the functions of investor only; we prefer not to do projects ourselves because there are constraints on the circulation of Atomenergoprom’s shares and it wouldn’t be correct to subject such organization to large market risks. 
   
I would also note that Russia’s nuclear power and industry complex cannot be called a horizontally integrated or vertically integrated organization. In fact, our affiliated companies form a cluster. And their investment activity areas are so different that the monitoring and control and efficiency assessment of this work should be carried out both separately and in combination. 
   
- The formation of Atomenergoprom finished relatively not long ago. Are you satisfied with the results? Has everything come about as it was initially planned? 
   
- Today we have exactly what we planned for, exactly what we need at the moment. With that, I consider the decision to establish State Corporation Rosatom very important. It allowed to work out an effective mechanism of setting up regulatory rules, while retaining an ideological unity of nuclear power and industry complex and nuclear weapons complex and the sphere of nuclear and radiation safety. Note, this is exactly where Rosatom is different from other state corporations. However, while having the functions of writing regulations it hasn’t undertaken the functions of nuclear supervision. This was the position of Rosatom’s top management. Safety inspection and supervision should be separated, should be outside the industry.
   
From the point of view of Atomenergoprom, to be a “daughter” of the State Corporation is the best situation today. The Rosatom’s becoming has brought new opportunities of structuring the assets and development of processes in the industry. Say, more options have appeared. And these opportunities are being actively utilized. For example, there is already a decision that the area of isotope production and nuclear medicine technologies where there are a lot of promising groundworks will be consolidated at the State Corporation level. It is also conditioned by the fact that advanced know-how related to isotopic products are featured by both Atomenergoprom’s companies and nuclear weapons complex’s enterprises.
   
Clearly, the forming of the industry’s new image is not a completed process today. Though, the industry’s efficiency had increased by an order of magnitude. And the situation should be viewed in an international context, in the first place.
   
Today, Atomenergoprom is faced by the task of identifying business units in the nuclear fuel cycle, i.e. what enterprises we are to merge and what are to exist separately. There are also issues of consolidation, redistribution, issues of responsibilities and authorities. It is rather difficult to manage the diverse structure of uncoordinated enterprises (and there are about 80 of them, adding up “daughters” and “granddaughters”) we inherited.
   
Moreover, the approach is as follows: the production should be planned looking to the maximum efficiency of the entire system rather than profits of a specific enterprise. This work is going on; we do it together with Rosatom. There are general frames of the process, there are local solutions, there are certain discrepancies which are being addressed. Given the management has been shaped, I think this work will be completed in the coming several years on the whole. I think all key decisions will be made and generally implemented within this timeframe. 
   
- Does the company have a document which determines its development strategy? What are its key parameters? 
   
- These parameters are built in the State Corporation Rosatom’s long-term activity program where a whole section is devoted to our work. However, Atomenergoprom plans include also the issue of documents which are more typical of business communities, such as investment memoranda, consolidated financial statements in accordance with the IFRS. We carry out the respective preliminary work and will start these processes shortly.
   
I believe that Atomenergoprom should be a sufficiently transparent organization for the business community. Otherwise, it will be difficult for us to compete in the international markets. 
   
- What financial results did you get in 2008? Could you outline main parameters? 
   
- Last year total proceeds of Atomenergoprom’s enterprises were about RUB454bn, while deducting the turnover between our companies which is rather high, the proceeds were over RUB290bn. 
   
- And what about profit? 
   
- Net profit of the mother company was about RUB6.2bn over the last year.  
   
- What key parameters are foreseen in the 2009 business plan?  
   
- We are faced by the task of reducing costs by 15% and increasing efficiency by 12.5%. These are very serious tasks, which are actually intense. I expect we will accomplish them.
   
The proceeds (the consolidated proceeds minus the internal turnover) is planned to be some RUB366bn. Including the growth of export proceeds which is expected to be not less than 2.6%. 
   
- Have you updated the business plan somehow, given the crisis? 
   
- Given conditions of the scenario we observe today (not the best but still not the worst), the work done over the past years, including the consolidation of assets, allows us to reduce risks substantially. If not look at extremely pessimistic scenarios, I am certain we will be able to adjust our actions so that to keep the business plan parameters.
   
For example, the optimization of expenditure budgets of our enterprises will allow accumulating, according to our estimates, own investment resources in an amount of about RUB110bn, which would provide for, among other, the first criticality of Rostov-2 this year.
   
I would like to point out one more aspect. Certainly, we purchase some foreign equipment which cost has increased because of the growth of the US dollar exchange rate. But, on the other hand, we are a sizable exporter and here we additionally gain at the expense of the currency exchange rate. The combination of these factors allows us effectively reformat our work to balance the situation. The consolidation of assets before the crisis played into our hands in this sense. Otherwise, we would have found ourselves in much more tight situation. 
   
However, one has to understand that we plan for 30-40 years ahead, half a century ahead in many areas. Naturally, our activities should be tied up to the state policy and not only to the contracted work.  
   
- Several questions more regarding the international cooperation. More than a year ago Atomenergoprom signed a memorandum with the Japanese Toshiba. And recently, the intergovernmental agreement in the sphere of peaceful atom has been signed by Russia and Japan. In this regard, would you reveal details of nearest plans of the cooperation. 
   
- Of course, the signing of the intergovernmental cooperation agreement is a great result, which includes the result of a huge diplomatic effort, the work of our colleagues from State Corporation  Rosatom. Now, Atomenergoprom and Toshiba can move further. The first plans to be implemented in near term are to set up secured inventories of uranium that would allow the Japanese companies to predict the situation and hedge their risks and allow us to broaden our opportunities in this area.
   
Further, it is possible to move to the fuel fabrication and uranium enrichment where we effectively supplement each other with Toshiba. And of course, large prospects are opening as regards the construction of nuclear power plants. Already today we interact with Toshiba in frames of effective management of the construction schedule, modeling and engineering of plants. Both our and Japanese companies have sufficient competence in this area. We do have what to share. 
   
- What about the uranium enrichment plant? A couple of months ago there were reports that you were ready to discuss such a project. The negotiations on this issue – are they reality or an idea to a greater extent so far? 
   
- It is not a hypothetical option; it is a direction which we elaborate on with our partners. Uranium enrichment is an area where the cooperation effectiveness appears sufficiently high for both us and the Japanese party. 
   
I would re-emphasize, the building of an enrichment plant is a feasible project but its details are started being worked through only now after our countries have signed the intergovernmental agreement. I would like to add that both the enrichment and fuel fabrication are closely linked issues and we strive to consider them in an integrated manner. 
   
- What is the future of Atomenergomash; what other company’s development options are possible? Whether other machine engineering assets are to be transferred there, for instance? Do you admit the involvement of a partner, maybe a foreign one, or you possibly plan to sell the machine engineering assets in long term, because this is not quite a related business for nuclear? 
   
- Atomenergomash was established to build an effective interaction with monopoly equipment suppliers, in the first place that is very important for the implementation of the state NPP construction program. We need economically feasible prices for the supplied equipment. Thus, we pursue the following policy: either we have a share in the authorized capital of the monopolists or create the competitive equipment vendor. In the first case we have an opportunity of controlling the product pricing and the investment program implementation process, which provide for the production development. In the second case – by means of the competition of two and more vendors in the market – we have best prices for the proper quality products. Atomenergomash was active in solving these tasks: ZiO-Podolsk plant joined the Rosatom system and an alternative turbine equipment supplier, Alstom-Atomenergomash, has been established.
   
At present, we put some more assets in Atomenergomash, and control over the company will be elevated to Atomenergoprom this year (today, the principal shareholder of Atomenergomash is TVEL Corporation, an affiliate of Atomenergoprom). It seems to me that further development of the company will be determined by two prerequisites. Firstly, we must be sure that we get an economically feasible price for the monopoly-produced equipment and nuclear machine engineering capacities allow implementing the set plans. The second paradigm is that the machine engineering does not exactly pertain to the nuclear cluster. It would be our great pleasure to work in conditions of high competition and multiple suppliers. 
   
We admit partnership, including with western companies, in the nuclear machine engineering segment. However, in the situation of the world crisis the market players, while discussing such cooperation, understand that one has to see some cues in the sense of the crisis depth and way out before moving to specific actions. I will reiterate, we are open for all possible alliances. 
   
- What is Atomenergoprom’s approach to the cooperation with foreign suppliers, in particular, equipment producers from South Korea, China and India? Are you ready to place orders there, for example, as regards the NPP construction to the Russian technologies, say, in India and PRC? 
   
- Yes, we do not exclude this. Some countries with sizable nuclear power programs tend to localize equipment production in their territories raising this issue even as certain conditions of access to the market. So we will certainly work in this area. Of course, scopes of these programs are of importance.
   
Still, there are other factors. We are interested in reducing the NPP construction cost. But, on the other hand, the equipment manufacture means the use of design and engineering developments. Besides, we are a Russian company, in the first place; therefore we want our producers to be competitive and successful in the world market. I think that the mere fact that through our effort of dealing with Russian monopoly producers we have succeeded in channeling their strive to reduce costs, among other, will help these companies to win foreign supply contracts.
   
Meanwhile, nothing is pre-determined and it is important to seek for the balance, like in our life. So let’s proceed from this.

Interfax