‘We are everywhere, except for Antarctica’

Why does Rosatom need globalization, how will the world nuclear energy market change, what is our chance of winning the tender for construction of Temelin NPP and what new contracts can Rosatom get in the nearest future. We talked about it to Kirill Komarov, Deputy Director General of ROSATOM – Director of the International Business and Development block.

- Rosatom is paying evergrowing attention to the world market. What does it give the domestic industry and producers?

- In any country of the world, indeed, the nuclear power industry is not an exclusively internal national objective. Everywhere, where there are nuclear technologies, companies try to build nuclear power plants and supply their products and services abroad. It is also necessary to understand that, to a considerable degree, our nuclear facilities are just loaded with foreign orders. That is, a new contract, for instance, for constructing a nuclear power plant abroad according to the Russian technology, gives orders, in the majority of cases, not only for our machine building and engineering companies but also for enrichment and fabrication plants. Thus, the more we are competitive, the higher the salary level at our enterprises is and the better the living conditions in our towns are.

Rosatom is undoubtedly one of the leaders of the world nuclear industry. The key condition for leadership in the nuclear industry is a high level of technologies. We have always to invest in new developments which, at the same time, are to be the most competitive ones, even, several steps ahead. The technological innovations require large financial expenditure which can only be afforded with sufficient money flow. In this sense, Russia is not a so big market – the money that we can earn domestically is not sufficient to ensure the required level of investments. Only the world nuclear energy market in its totality can give us sufficient resources for these purposes. We are therefore so active abroad. For us, working at the international market means maintaining technological potential and leadership of the Russian nuclear industry in the world.

- Rosatom is striving for being a global corporation. How do you assess the situation related to staffing? Are the people inside Rosatom ready for full-value performance at the global market?

- The notions about the Rosatom people’s conservatism are strongly exaggerated. Our employees are generally very active, they are ready for changes. The surveys that are conducted at our enterprises show that 65-70% of employees, at the minimum, would enjoy taking part in Rosatom global projects all over the world.

In fact, the Rosatom business is already global. We have more and more assets and projects outside the country where people with different culture and different business approach work.

When we come at new markets, we have to speak the same language with our clients and partners, and not only in terms of understanding of the foreign speech but also at the level of logic and business-culture. It is not enough to be a talented engineer, it is necessary to be ready for immersion in another culturological environment.

To solve this problem we use different approaches – we train personnel, either for a particular construction site or, in general, for participation in international projects. In relation to Akkuyu NPP, for example, we think just now about who will be engaged in its operation in 2020. We realize that we have to train a sufficient number of Turkish specialists. On the other hand, we have to consider who will go from Russia to Turkey.

Besides, we launched a globalization program inside Rosatom which consists of several parts. There is a leadership program under which we train future managers for international business projects. There is a program for a wider circle of employees – medium-level management, experts and specialists which allows giving skills that an employee of a global company shall have.

I want to say that we will pursue this policy persistently and purposefully. This year, for example, for a number of job positions in the State Corporation, knowledge of English as the basic language for international communication will become a compulsory condition for appointment. After conducting such an experiment at the Corporation, we will then move in our divisions. It is extremely important that each our engineer be able not only to design with talent a technological solution but also, when coming in any country, to explain in good English to our partners or clients what this decision is, why it is safe, why it is efficient and why it is interesting for them. When this is realized, Rosatom can be considered to have become a really global company.

- So the training process is already under way, isn’t it?

- Yes, we are in the process of training. There are 250 thousand employees in the industry, and it is doubtful whether we can teach each of them according to a special program. But we are striving for maximum involvement of different groups of specialists.

Now we are purposefully selecting such people who can become agents of changes so that they will show by their example and by their active life position how important for Rosatom employees is to be ready for global challenges. Today you work in Moscow, tomorrow you may fly to implement a project in South Africa, the day after tomorrow in Great Britain to license a Russian nuclear power plant, and then to Bangladesh to build the first nuclear power plant of Russian design in this country. People must be mobile and ready for globalization in all senses of this word.

- What does ‘global Rosatom’ mean for you personally?

- A global company must meet certain criteria. First, it must have the opportunity of using global pool of human resources. We have good progress in this direction. For the first time in the history of Rosatom, we stopped being afraid of inviting foreign specialists for work. Yes, the access for foreigners to close facilities is still restricted. But there are areas of business where a sufficient number of foreign citizens work. We want to develop this practice.

Second, we have to locate our production facilities so that it will be convenient for customers. A striking example is the project for construction of a fuel fabrication plant that is under implementation in Ukraine. The share of nuclear generation in this country is about 50%. After Russia, this is the largest base of Russian-design reactors. We understand that Ukraine is our key partner in fuel consumption, and we meet them halfway building a nuclear fuel fabrication plant in the maximum proximity to the customer. Now we are considering quite a number of similar projects in other countries.

Third, a global company has the possibility of attracting financial resources all over the world, not limiting itself with support from the Russian state and banks. We have already done a lot in this direction. ‘Atomenergoprom’, for example, has been producing financial reports, consistent with the international standards, for several years. The company got a second international credit rating. This facilitates access to financial markets. There are already some interesting projects, one whereof is obtaining guaranties of the French State Credit Agency COFACE for purchasing the Alstom turbines for Baltic NPP. The project is important as we will get a wider palette of financial tools rather than from the standpoint of the money as such.

At least, a global company works not only with Russian technologies but it also has the possibility of using the best world developments. And here, we also have quite good results. For instance, a joint company with Alstom in the frames of which the production of low-speed high-capacity turbines is located on the territory of Russia. The technological cooperation with a number of other big western companies, such as AREVA, Siemens, Rolls-Royce, is developing successfully. We take their best technologies and implement them in our projects.

- Can you please characterize the current situation in terms of competition at the world market of nuclear technologies? How did the situation change during, let’s say, the last ten years? What to wait for in the future?

- Competition has never been weak, and we are not alone at this market. Another thing is that the positions of competitors can change. Today we can see that Fukushima did not have a supercritical effect on the nuclear energy market. According to all predictions, in the horizon up to 2013, the rate of power increase will be reduced by not more than 8-10% as compared to the pre-Fukushima scenario. There was a short pause when a number of states considered what to do next. But all key countries and regions – drivers of the world market growth, such as China, India, South-East Asia in whole, Latin America and South Africa, keep up serious plans for nuclear energy development. So the demand in the world is as high as before.

At the same time, this situation is explained by different factors in each country. Somewhere there is simply no sufficient amount of other energy resources. For example, coal mines in Great Britain were shut down as far back as the times of Missis Thatcher. There is gas there but, mainly, on the shelf around, and there is not that much for satisfying the needs of the country. Therefore, nuclear energy for them is an absolutely compulsory element of the national energy balance.

Today, for the majority of positions, Rosatom is reckoned among the three leaders at the world nuclear energy market. As before, the key competitors for us are AREVA and Westinghouse. But don’t forget that South Korea and China are actively developing their own nuclear technologies. Korean and Chinese companies have not actively entered the international scene yet, but we understand that, some time or other, it will happen. Just for this reason we must not stand still.

Today the main line of competition passes by the cost factor for production of one kilowatt-hour of electric power at a new nuclear power plant – to what extent it is competitive as compared with the price of other producers and, moreover, with that of other types of generation throughout the all life cycle of a nuclear power plant. A nuclear power plant has serious advantages over, for example, gas or coal one. First, nuclear power plants are operated longer. Our plants have now the design lifetime of 60 years, and, with reasonable operation, it might be extended up to 80 or even 100 years. The second advantage is a low fuel component. In our case, only 10% in the electric power cost is the share of fuel. For comparison, for example, this indicator for a gas station amounts to 70%. So, in whole, we feel ourselves sufficiently confident here, and we understand that we can propose to our clients the projects that ensure a reasonable and economically sound price for electric power, although this is, undoubtedly, one of the most important areas for continuous improvement.

- And what are your expectations for the future? Will competition become stronger? Or will fragmentation of the market occur when, for example, AREVA and Westinghouse remain in Europe while Russia concentrates on South-East Asia?

- For us, there is no such geographical separation. We work all over the world. If we look at the map of Rosatom activity, we can see that we are everywhere, may be, except for Antarctica, and this is only because nobody needs nuclear technologies there. If needed, we will also come there. Another thing is that we are more active somewhere - in Eastern Europe, for example, in CIS countries, in China and India.

As to the forthcoming changes in the market picture, I think that the most important of them will concern the product. Only less than ten years ago, the most called-for in the nuclear power world was the EPC-contract for construction of a plant. This meant that the customers who understood exactly what they wanted to build paid money and received their own nuclear power plant. But during the last five years approximately, the complex product has become more and more called-for, especially in those countries that only start developing the nuclear power industry. For such countries, only the construction of a nuclear power plant is not sufficient. It is necessary to train personnel for operating this plant, assist in establishing the national legislation and contribute to development of the local nuclear surveillance. Besides, it is often necessary to find money for the plant construction. And this is just with a complex offer that we are ready today to enter the market.

With that, to my mind, another change of the market is happening now when the focus is shifting again, but this time, as I have already said, towards the cost price of a kilowatt-hour of electric power. This is the essence of our contract with Turkey. We not only build a nuclear power plant and do this within the framework of a complex offer. We have a contract with the customer, in fact, for selling electric power which will be produced by Akkuyu NPP in the future. The cost of sale is guaranteed by the Turkish party. All the rest is our area of responsibility.

Obviously, Great Britain follows the same path. The government speaks about the readiness to accept the investor who will come with his money, technologies and personnel, and to create favorable conditions for him. In this connection, the idea of concluding so-called contracts-for-difference, i.e. contracts based on the difference in price, is now under discussion by the British government. It is assumed that the level of the electric power price, sufficient for recoupment of investments, will be previously discussed with the investor who wants to build a nuclear power plant. If, by the plant commissioning date, such a price is formed at the market by itself, the investor will get back his money via selling electric power. If the price turns out to be lower, the difference will be paid from the British budget.

But I am sure that this change of the market is not the last one either. Something new is waiting for us ahead because the world economy changes and the clients have new requirements. It is important to be ready for these changes.

- The market changes but does the attitude to Rosatom also change at this market?

- I will say frankly that it is pleasant to see multiple positive changes, especially at the example of the countries that formed part of the so-called Soviet block and, then, after disintegration of the USSR, fell under the Western influence. The pragmatism all over the world is winning the victory more and more, all phobias from the time of cold war are receding into the background.

Here is the example of the Czech Republic. When I came for the first time in this country as a tourist in 1997, even those among local population who could speak Russian did not want very much to do this, so strong the old traumas were. Now, in 2013, I can say freely that even those people in the Czech Republic who cannot speak Russian try however to learn, at least, two or three words. Why? Because of the economy. Recently, we have specially requested official figures on the Czech export statistics: from the Czech Republic to the USA — $0,5 bln. per year, to Russia - $6 bln. per year, the export to our country having increased twice during the last three years. They do not supply us raw materials but high-technology goods.

People see that today Russia is not a kind of monster anymore but it is a usual partner and an enormous market that is ready to consume their goods, and, believe me, political stories recede immediately into the background.

When we started our tender activity in the Czech Republic for construction of Temelin NPP, local journalists always asked whether this would not result in reinforcement of energy dependence of the country on Russia. I had to explain patently that the plant was being built in the Czech Republic, it would be managed by the Czech company and 70% of operations during the construction of this plant would be allocated to local companies. What is the dependence in this case and on whom? So nobody asks such questions today. Although we must not create illusions, the competition in the nuclear energy world is very severe, this is sufficiently politicized business and it is no secret that a number of our competitors try periodically to use such type of arguments when those of economic nature run out.

- By the way, about Temelin. What is, to your mind, the chance of Russia to win?

- I am confident that the Russian-Czech Consortium ‘MIR. 1200’ has very good chance though we understand clearly now that the customer postpones making the decision. Initially, they wanted to announce the results in this September but now the date is put off to the second semester of 2014 or even at the end of the year. There are quite a number of clear objective reasons for that. On the one hand, this is the biggest investment project for CEZ, very heavy responsibility, and they want to wring the most from a possible contractor. We understand, take care of this and do all we can to find points of contact. On the other hand, it is very important for them to obtain guarantees for payback of the project.

By the way, I consider as a good sign the fact that the European Commission took the initiative of adopting a new directive within the European Union. This document, in fact, will enable the states-EU members to subsidize or to maintain in some other form the development of the nuclear potential by analogy with how it happens in relation to renewable energy sources, such as sun and wind. This is an absolutely logical and clear decision. You know that they decided to keep up sun and wind just because these kinds of energy sources do not increase production of CO2. In this sense, the nuclear power does not differ in any way; this is absolutely the same ‘green’ energy. Why should some kinds of energy be supported while others should not? I am very glad that the European Commission started thinking deeply about it.

- But, one should think, Germany is actively against…

- In Germany, anything is not very simple. Even before Fukushima, there were no real plans there for development of nuclear energy. Therefore, after the events in Japan, there was only one question for them: what would be the speed for shutting down those units that the country had. Frankly speaking, the decision they made seems a little strange for me: a part out of 17 units have been shut down while the other part of them are still operating. If the nuclear energy is not safe, then why are some units still in operation?

The Germans have already started paying for renunciation of nuclear energy in favour of wind and sun. Let us be frank: wind and sun are objectively more expensive than nuclear power plants, even with all state subsidies which might be paid from the budget but then they are however spread to each taxpayer, directly or indirectly.

When people begin to understand it, the situation will become the same as in Switzerland. There, in quite a number of cantons, inhabitants, especially those who live in private houses, have the right to choose a source of power supply. It is clear that an electric supply network from a particular electric station will not be run directly to a house. In fact, in such a way, the consumer is deemed to submit the application for loading the corresponding facilities. So, with all conversations about the renewable energy sources, in Geneva, for instance, 60% of inhabitants pay for being supplied from hydropower stations, 39,7% for nuclear power and only 0,3% are ready to pay for renewable energy sources. Because this is objectively more expensive!

- Coming back to the Czech Republic, according to recent news, the Export-Import Bank of the United States is ready to give a credit to CEZ to complete the construction of Temelin NPP on unprecedented conditions if Westinghouse wins the tender. Is Russia ready to some retaliatory actions?

- In fact, there is nothing unprecedented, this is a rather spread practice in the world when export-import agencies in the corresponding countries – for example, COFACE in France, HERMES in Germany, - create conditions for supporting national producers at the world market. A similar agency EKSAR has been established in Russia, and we interact very actively with it. EKSAR was already given sufficiently large resources from the government to support Russian producers at the world market. As to Temelin, we have already formed, jointly with EKSAR, a certain set of options and offers which I would not divulge now.

We implement mass of projects, based on the principles of intergovernmental funding, for example, in India, Vietnam and Byelorussia. As to Bangladesh, we have signed intergovernmental agreements on the readiness to allocate appropriate credits. And the conditions for crediting are really not worse than those proposed by the American Ex-Im Bank in support of the Westinghouse project in the Czech Republic. We know firmly that our capabilities in this competitive area are none the weaker than those of our competitors.

- What are, to your mind, the most interesting current trends from the standpoint of their influence on the industry? Shale gas, small modular reactors or the Chinese nuclear program?

- As to shale gas, a lot of things are not clear up to now. The consequences of boom in shale gas recovery for the American market are evident: quite a number of companies there start refusing to new nuclear builds. But for Rosatom, in general, this is not very critical as we did not plan at all to participate in construction of NPPs in the USA. On the other hand, today’s technologies of shale gas recovery result in very serious negative consequences for the environment. This is just for this reason that quite a number of the countries in the European Union, such as Germany, France and Bulgaria prohibited production of shale gas on their territories.

We will see what will happen if shale gas starts to be exported in the liquefied form. Gas is an article of trade, and the expenditure for its transportation from the point ‘A’ to the point ‘B’ does not surely make cheaper its cost. Judging by news-items in the open press, the cost price of shale gas production in the USA is surely higher than the price of natural gas that we produce in Russia. That is, there are no miracles and prerequisites for rendering us uncompetitive in this sense.

Each country has its own logical energy balance in which some proportion of different generation types is formed. Of course, Russia has huge reserves of coal, gas and hydraulic resources but however we develop nuclear energy in our country. This happens, to a large extent, because nuclear energy is not only a method for getting electric power but also a possibility of setting a quite different tonality in the economy and the industry of the country, in general. We performed an assessment, and it turned out that each work place when building a nuclear power plant – where up to 10 thousand specialists should be employed if two units are constructed, - gives seven work places in other industries. A colossal multiplicative effect for the country. So the basis for making decision on the construction of a nuclear power plant in any country is not only the issue of cost of a particular project.

If to speak about the Chinese nuclear program, we are very pleased to see its active development, and Rosatom participates in this process. We built two units of Tianwan NPP, we are constructing the third and forth ones. There are no complaints, problems or delays concerning this project, everything goes strictly according to the established plan. I hope that our cooperation with China will continue developing positively.

As concerns low- and medium –power reactors, indeed, this topic is called-for all over the world and such projects have a future. Russia also works in this field, and we have quite a number of developments in this area. Our key competitive advantage is that many facilities of this type have already their references since they were used before, for example, at submarines or nuclear ice-breakers. Thus, we can demonstrate a reference model to the world, and this is very important for competition.

At the same time, the main scourge of small- and medium-power reactors is their high cost. That is, for the time being, they are surely not designed for mass application. More exactly, it is necessary to search for some special conditions in which such a plant will be competitive.

- Please speak about the nearest plans of Rosatom for development of the international business. What projects or tenders are the most expected and in what countries?

- All the projects are important for us. We are participating now in two tenders: in the Czech Republic and in Jordan and we are conducting negotiations in Finland. In Finland, they are preparing the construction of the ‘Khankhiviky’ plant – an interesting project in which we have been involved quite recently, on the Finnish party’s invitation. As of today, we have good chance to get this contract. I think that the prospects of the project will be clear by the end of the year.

In Jordan, we gave a very good technical and commercial offer for construction of a nuclear power plant. But there is no doubt that a lot of problems related to investment sources for the Jordanian party are to be solved.

As I have already said, we are building successfully the third and forth units of Tianwan NPP in China, we are negotiating possible extension of the fleet of our nuclear power plants on the territory of the country. The physical start-up of the first unit of Kudankulam has recently taken place in India. The unit itself was ready for being put in operation as far back as a year ago, and if there had been no problems related to public perception, it could already have operated for a year and have produced power. Fortunately, now everything is all right there, and I hope that we will also start-up the second unit next year. I am sure that our further cooperation with India has good prospects too.

The preparation of the feasibility study for construction of the first nuclear power plant is under way in Vietnam, and all the grounds for implementation of the project have been created: the intergovernmental agreement and the agreement for granting credit have been signed. We consider starting active work on the site next year to prepare the construction of the plant.

The project in Bangladesh is developing very dynamically. Just at the beginning of the year, we came to the agreement about the start of nuclear power plant construction. The first contracts have been signed, and preliminary activities started up. The project goes rather successfully in Byelorussia where we are also constructing the first nuclear power plant for this country, based on the intergovernmental agreement and the interstate credit. We are very satisfied with this project, and the reason is as follows. Today they speak a lot in the world about the construction of nuclear power units which is often delayed, and they say that, finally, the project price grows considerably. In Byelorussia, everything has gone without a hitch so far. We are now approximately four to six months ahead of the schedule that was initially incorporated in the project, and we hope to keep up this pace.

As of today, we also have quite a number of opportunities to participate in the development of national nuclear programs in such countries as the RSA, Brazil, Argentina and Nigeria. In general, many states of the African continent show today great interest in constructing nuclear power plants.

- How does Rosatom choose the projects — where, in what country to go, where to invest? Is it theoretically possible that Rosatom would undertake to implement an unprofitable project, for example, in order to find its niche at a new market?

- When Rosatom makes a decision concerning some project, we are guided, first of all, by economic considerations. I do not know any precedent when something would drive us to accept a wittingly unprofitable project. Another thing is that due to the unique structure of Rosatom which consolidates all technological achievements in the field of nuclear energy, we can be more flexible than many of other competitors. We can make our offer the most convenient for the client, concede in something and win somewhere but, in any case, obtain a complex positive economic effect for the industry.

At the same time, we must not disregard two other factors: political and public acceptance is important for the development of nuclear energy. The protests of the population in India are striking examples of what happens when the efforts in this way are not undertaken. As the main problems are only due to lack of information, a nuclear power plant itself has nothing dangerous, the hazard is mainly in the heads of the people who do not simply have sufficient information. When people are given such information, there are normally no problems.

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