Russia to invest US$1.56bn in Kaliningrad power plants

21 July 2016, Week 28 Issue 819

State energy holdings Rosneftegaz and Inter RAO will invest up to 100 billion rubles (US$1.56 billion) in the construction of four thermal power plants (TPPs) in the Russian exclave of Kaliningrad.

“The total investment will amount to about 100 billion rubles,” Inter RAO’s chairman of the board, Boris Kovalchuk, said in a company report last week. He added that this sum did not include VAT or the prime interest rate on lending.

Rosneftegaz, which owns a minority stake in Inter RAO, formed a joint venture with the generating firm called Kaliningrad Generation in the spring of last year. This subsidiary was charged with installation of three gas-fired plants and one coal-burning station in Kaliningrad with a combined capacity of 1 GW.

The cost of these projects was estimated at the time at 70 billion rubles (US$1.1 billion), with the bulk of this funding to be provided by Rosneftegaz. The sum reported last week therefore represents a 43% increase on the original estimate. Cost overruns are common in Russia and devaluation of the Russian ruble in 2014 and 2015 has inflated the cost of imported materials and equipment.

Construction on the three gas-fired stations began last week, Inter RAO said. They include the 440-MW Pregolskaya TPP in Gurievsk District as well as the Mayakovskaya TPP in Gusev and the Talakhovskaya TPP in Sovetsk, which will each have a generating capacity of 156 MW. They are due for launch in 2018.

Construction on the 195-MW Primorskaya TPP, due on line in 2019, will begin later.

The projected cost of the projects will be made up by a 15-year adjustment in electricity tariffs for users in European Russia and the Urals.

Russia is eager to ensure against power supply shortages in Kaliningrad in the event of an outage at the Kaliningrad CHPP-2, which provides the bulk of the region’s electricity. A disruption that occurred at the station in August 2013 temporarily left 600,000 people without power.

Additionally, Inter RAO has said that launching new capacity in Kaliningrad will allow for the export of power to the Baltic States and elsewhere in Europe. This option may not be feasible, however, given that Lithuania, Latvia and Estonia want to disconnect from the Soviet-era BRELL circuit, which links their power systems with those of Russia and Belarus.

Last month Lithuania said it was seeking support from the European Commission to synchronise the Baltic power grids with those of other European Union member states. Government officials in the Baltics have previously estimated that the switch could be completed by 2025.

Edited by

Richard Lockhart

Editor

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