Turbine frameup

What the scandal with the supply of turbines to the Crimea might mean for Chemezov's Rostec and Siemens. 
Origin source
The scandal with the delivery of the company "Tekhnopromexport" ("daughter" Rosteha) to the Crimea of gas turbines of the German manufacturer Siemens (Siemens), bypassing the EU sanctions, is gaining momentum. "Siemens" has created a working group that will investigate these reports. Experts believe that "Rostezh" strongly "substituted" Siemens, but to prove the Germans' guilt will be quite difficult. If it does happen, the company will face a large fine.

Degree of modernization

Tekhnopromexport, the daughter company of the state corporation Rostek, purchased four sets of gas turbine units for power facilities in the Crimea. This is done in defiance of the EU sanctions. Rostekh itself explains that the products were bought in the secondary market, then the plants were modernized by Russian factories and engineering companies. True, in "Rosteha" did not specify the name of the manufacturer and seller. It seems like the turbines are made at the joint venture of the German company and Power Machines in St. Petersburg.

The degree of modernization is assessed in different ways. Whether it is so great that we can talk about a completely new product, it's impossible to replace a large number of parts in the turbine, and in any case it will remain the products of the Siemens company. A number of experts believe that Rostech in this way is trying to take Siemens out of the way with all its might. At the same time, sources say that equipment was delivered to Sevastopol from the Krasnodar Territory. In the spring, Siemens reported that the Russian joint venture Gas Turbine Technologies, where the company has a majority stake, manufactured and delivered turbines to Taman (Krasnodar Territory) for a local power plant. It's about the model SGT5? 2000E, it produces only Siemens. And supposedly on the TPP being built, work has already been done to install and start the equipment.

Breach of contractual obligations

In turn, representatives of Siemens strongly categorically declare that they did not supply turbines to the Crimea. But one such statement to pay off the scandal is obviously not enough.
July 7, Siemens announced the creation of a working group, which should investigate reports of supplies to the peninsula of gas equipment. But at the same time, representatives of the company said that they do not have convincing evidence of turbine deliveries: "Nevertheless, we are serious about these rumors. Therefore, the working group began an investigation to find out all the facts. "

All the "redirections" to the Crimea of the recently acquired turbines in Siemens are considered a pure breach of contractual obligations. At the same time, the company said that it had repeatedly warned the customer about the need to comply with all export restrictions.

Provide needs

The construction of thermal power plants in the Crimea today is conducted in Sevastopol and Simferopol. They are extremely important for the economy of the peninsula. In the winter of this year, the historical peak of electricity consumption was recorded - 1,427 MW. The consumption of electric power in the Crimean energy system in January 2017 by 8 MW exceeded the value of the five-year maximum.

According to the branch of JSC "SO UES" "Regional Dispatch Administration of the Energy System of the Republic of Crimea and the City of Sevastopol" (Chernomorskoye Regional Dispatch Office), electricity consumption in the Crimean energy system in January 2017 amounted to 793.9 million kW / h. In the autumn-winter period of 2016/17 in Crimea the capacity deficit at peak consumption moments reached 200 MW.

The deficit of generating capacities in the territory of the Crimean energy system was covered by the flow of electricity through intersystem transmission lines (VL) from the adjacent power system of the Kuban, as well as by transferring a part of consumers to decentralized power supply from standby sources of electricity (RISE). Nevertheless, the authorities assure that the Crimea has sufficient capacities to cover the needs of electricity consumers in full.

Minister of Energy of Russia Alexander Novak said that the launch of the first blocks of the Simferopol and Sevastopol TPP will take place in early 2018. And the first stage was planned to be put into operation this autumn, the second - in the spring of 2018. But at the end of 2016, the head of Rostek, Sergey Chemezov, reported problems with the delivery of turbines, which is why the contractor does not manage to put in time the first blocks of TPPs. Rostek originally planned to purchase turbines from the Iranian company MAPNA. But "in the end, the parties did not reach mutual understanding on a number of technical and commercial issues, and the contract was not concluded."

The Ministry of Energy also acknowledged the problem with the equipment for the stations from Siemens. Alexander Novak stated that there was a search for options for purchasing equipment. The media wrote that after the decision in 2014 to build a power plant in the Crimea, Technopromexport bought turbines from Siemens, but it was not officially announced. Even after the imposition of sanctions, Siemens refused to supply the paid equipment. "Technopromexport" put them on sale, which, according to one version, would help the German company avoid undesirable consequences. However, perhaps, Rostech was not going to substitute a German company. It's just that they can not produce such turbines on their own. So far, we can speak more about the ambitious plans of the state corporation, than about significant achievements. So, last year Rostech adopted a new development strategy. In order to at least catch up with the main competitor of General Electric, Rostekh will have to grow by 17% annually in ruble terms. But even if everything goes exactly according to plan and the state corporation will be able to aggressively increase revenues, while GE will continue to grow modestly by 4.4% per year, the gap between them by 2025 will remain enormous - 17 trillion rubles from GE and 6 trillion Rubles from Rostekh.

"Let's be frank: as long as Rostech's plans sound very boldly," says Ivan Andrievsky, first vice president of the Russian Union of Engineers. - Plank for annual revenue growth of 17% - this is very much, especially given the economic background. It is possible that everything planned by Rostekh will be implemented, but, it seems, is not yet soon. "


What will end the scandal for Siemens, it is difficult to say today. Quite possibly the company can be accused of violating the sanctions regime. And also that in due measure did not interfere with the receipt of its products in the Crimea. At the same time, analysts believe that it is problematic to hold Siemens accountable. Nevertheless, if this fact is proved, violators of sanctions can expect colossal monetary penalties.

So, the oilfield services company Schlumberger for violation of the sanctions regime with Iran and Sudan was sentenced in the United States in 2015 to pay a record fine of over $ 230 million. In the EU, member countries monitor compliance with the sanctions regime. "In Germany, the violation of sanctions is punishable by monetary fines and threatens significant reputational losses," the German Ministry of Economics said. And if the violations were allowed due to imprudence, the violator will still pay.

Experts believe that even if Rostekh and Siemens had plans for such a multi-way delivery, after the leakage of information they will hardly be able to be met. For "Rosteha" the story is also quite unpleasant. In the same development strategy, Siemens was considered a state corporation as a potential partner. Now, probably, one partner will be less. And the question of where to get the turbines is still open.