Siemens Seals OGK-1 Turbines Deal

MTMuller, left, and Khlebnikov speaking after the signing. Mьller said Siemens hoped to win new tenders in the sector.
German engineering giant Siemens on Friday sealed a 100 million euro ($155 million) contract to build three power turbines for OGK-1, one of the country's leading power generating firms.

The deal will see Siemens, already a major player in the country's machine-building industry through its blocking stake in turbine maker Power Machines, build two gas turbines and a steam turbine for a new unit at OGK-1's Perm power station by 2010, with a combined capacity of 850 megawatts.

"It will be one of the highest-capacity power units in the world," Siemens' vice president and Russia head Dietrich Muller said at the contract signing in OGK-1's head office Friday.

Muller said he was looking forward to winning new tenders to provide more equipment for the country's electricity sector.

Foreign engineering firms may grab the lion's share of power turbine contracts as the successors to national utility Unified Energy System seek to overhaul the country's outdated electricity network.

Power Machines, the leading Russian turbine maker, still has some way to go to match firms such as Siemens and General Electric on high-tech efficiency, analysts say.

State Duma Deputy Speaker Valery Yazev, an influential energy industry lobbyist, last week sounded alarm bells about foreign producers' dominance in winning turbine orders for the electricity industry.

"This alarming trend could lead to a serious dependency of the country's power generators on foreign companies," Yazev said.

Yazev's comments, at a Duma hearing on measures to support and modernize Russian machine-building, came as lawmakers proposed offering subsidized loans and tax breaks for domestic producers.

But OGK-1 general director Vladimir Khlebnikov, speaking after Friday's ceremony, said it was important that state support for Russian machine-building companies didn't mean that power generators were left with "no choice but to buy their equipment."

"We will use equipment from Siemens, GE, Mitsubishi and Alstom until Russian producers can make equipment of the same quality," Khlebnikov said, saying current Russian-made coal-fired turbines were particularly outdated.

E4 Group, the country's biggest engineering company, on Friday said it backed the proposal to support domestic machine-building.

"We fully support the government proposal and think it is very important to concentrate on domestic producers," E4 Group general director Pyotr Bezukladnikov said on the sidelines of the deal Friday.

n OGK-1 shares on Friday climbed 4.9 kopeks, or 2.3 percent, to 2.20 rubles, after UES chief Anatoly Chubais said in an interview Thursday that he was seeking to raise at least $5 billion from a group of Russian investors in the sell-off of UES's 75 percent stake in the power generator.

Chubais also said the door remained "open for Electricite de France and Gaz de France to come back into the bidding," Bloomberg reported.