OVERVIEW - Russian investors seek to pull out of energy projects

Amid the troubles of Russian currency, the ruble, and, therefore, higher borrowing costs, a number of Russian investors are seeking to bow out of renewable energy investments, a source in a Russian sector company told SeeNews Renewables.

“The Russian economy is going through a major slump and, with the issues plaguing the conventional energy market, the authorities are not eager to pour money into the heavily state-supported renewable energy sector. For investors, loans are just too expensive and the prospects of (investment) payoff are gloomy as never before,” said the source, who spoke on the condition of anonymity. He added: “A number of green investors have addressed Soviet Rynka (Market Council) to help them abandon certain projects across the country, or put them on hold, without being penalised.”

Soviet Rynka is a nonprofit organisation set in 2008 by Russian Government to organise the efficient system of trading at wholesale and retail electricity and capacity market.

ON HOLD OR ABANDONED

According to the source, RusHydro has asked to pull out of three 20-MW hydro power projects in the Russian Far East, Stavropol and Karachay-Cherkessia Republic. The Russian energy giant won these projects in the renewable energy capacity distribution competition in 2014 and was supposed to install the plants no later than early 2017. Failing to do so, RusHidro faces a heavy fine which it wants to avoid, according to the source.

Meanwhile, MEK Engineering, another Russian energy company, is asking to put on halt two solar power projects in the republic of Dagestan, each of 9 MW. As part of the 2014 tender, the company had to erect these this year, but the schemes have hit a snag because of insufficient funding.

Neither RusHydro, nor MEK Engineering confirmed the reports, referring to the Russian Ministry of Energy for comments. Minenergo did not return SeeNews’ journalistic query, either.

That situation does not surprise Mikhail Krutikhin, a partner of Russian consulting company RusEnergy.

“Let’s just face it: Russia’s entire market has been hit hard because of the troubles on local financial markets and because of the global trends. As I focus more on gas and oil segments, the construction of a major oil-refining plant has been halted in the Samara region, for example,” the expert told SeeNews.

Objectively, there are enough signs pointing to the issues that Russia’s renewables market deals with.

„Indeed, Market Council has reviewed a proposal for the introduction of a 12-months’ non-penalty period [for failing to meet deadlines of renewable capacity installation] and found it reasonable,” Ivleva Elena, the head of Market Council Communications, told SeeNews. “[The company] is engaged in the development of only three relatively small hydro power plants,” she noted, without saying whether the decision has been passed following a request from RusHydro, or another player.

GOVERNMENT RESPONSE

Turning an ear to renewables sector players’ complaints over the hardships they are encountering, the Russian Government has passed this autumn an ordinance which envisions the introduction of gradual penalties for those failing to meet contractual obligations only from 2017. But not all in Russia are happy with that approach, though.

Soobchestvo Potribiteleij Energiji, or Energy Consumer Community, has lodged in a request with Russia’s Anti-Trust service asking it to unleash the force of law on all unable to meet strict deadlines. “If the Government’s decision is enacted, the consumers will lose RUB 38.5 billion (USD 626m/EUR 551m) in undelivered capacity [coming both from conventional and renewable energy sources],” argues Vasilij Kisiliov, director of Energy Consumer Community.

The Russian Government has heeded the energy sector’s pleas and it passed in mid-October regulation on the conservation of energy projects unable to deliver the capacities. The idea is that these will be put on hold indefinitely, until better economic times.

Arkadij Dvorkovich, the Russian deputy PM, has ordered to work out a conservation mechanism until February 2016. The first selection for conservation of too-expensive energy projects, including those in the green sector, is expected in the beginning of 2017. How much of the renewables capacity will be affected remains to be seen.

(RUB 100 = USD 1.627/EUR 1.431)

Choose your newsletter by Renewables Now. Join for free!