Russia's RusHydro to invest $1bn in Far East solar power

Russia's RusHydro to invest $1bn in Far East solar power
Russia's RusHydro to invest $1bn in Far East solar power / Wikicommons
By Vadim Dumesh in Paris September 6, 2017

Russia is getting the renewables bug. Dubbed a petroeconomy by many, the Kremlin has for several years now been chipping away at policies designed to diversify away from hydrocarbons. Leading utilites company and hydropower major RusHydro will invest $1bn into developing solar power projects in the Far East region, deputy head of the company George Rizhinashvili told the press at the Eastern Economic Forum. 

RusHydro has a three- and a five-year plan, but the company "absolutely commits to 40-50MW of solar output at least" in the Yakutia region right in the geographic middle of the country, Rizhinashvili said. In mid-term the program could grow to 250-300MW to about $1bn, he added.

The nascent renewable energy sector has seen other deals recently, such the state-owned high-tech promotion agency Rosnano teaming up with Finland's power company Fortum to set up a wind power development fund.

Over the next five years the partners plan to invest RUB30bn ($526mn) into wind farms projects across the country that can generate several hundred megawatts of power. The investments will be made on a parity basis, with Fortum also contributing the know-how.

Fortum has already got the ball rolling with Russia’s first ever wind farm, a 35MW facility that is being constructed in the Ulyanovsk region in the Volga basin and is due to be completed by the end of this year. Other prospective sites for wind farms are near the cities of Rostov, also in the Volga basin, and Murmansk on the northwestern coast, as well as Krasnodar in Siberia and the southern Stavropol region.

More investment into renewable energy could come, as the head of nanotechnology agency Rosnano and long-time state utility bureaucrat Anatoly Chubais suggested forming a fund for Alternative Energy Development in the Far East, at the same Eastern Economic Forum this week. 

The proposed fund would guarantee the return on investment in building alternative generation facilities, the problem which currently is left unaddressed for Far East. 

While the Russian government has said it would like to diversify its energy sources and make more use of renewables, the cash-strapped Kremlin heavily cut its planned 2015-2021 budget spending plans on renewable projects at the start of this year.

Previously the government planned to auction 3.351GW worth of licences but has cut that to 250MW under the reduced plans, while the number of planned hydropower stations has been halved to 425MW of planned new capacity. 

Solar power investment was the only part of the programme that was expanded by 240MW to 1.759 GW, Prime-TASS reported.

The reduction is bad news for investors. Stepan Zvyagintsev, CEO of Italian power company Enel’s Russian division, sent a letter to Deputy Prime Minister Arkady Dvorkovich in February warning that that the cuts will “inevitably decrease the number of possible investors in Russia’s wind energy sector” and will “result in a significant deceleration of the industry”.

RusHydro reported its 2Q17 results last week, with revenues slipping -3% y/y, although EBITDA added +2% y/y. Leverage stood at a comfortable level of 0.8x ND/EBITDA.

 

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