Electrosila to Invest in Engines

ST. PETERSBURG Elektrosila, Russias leading maker of generators for power stations and one of St. Petersburgs leading industrial concerns, said it will invest between $50 million and $70 million over the next two years to begin production of traction engines for use in electric suburban trains, city trams and subways.

Alexander Pasyonov, Elektrosila spokesman, said that the company hopes that this new market will become one of the companys most important.

The market for electric train engines is increasing in Russia, and we estimate their sales will account for up to 33 percent of our total sales in 2001, he said.

Such a move represents a radical change in Elektrosilas production profile. About 80 percent of the companys production is made up of massive electric generators that are used in nearly all the nations power stations.

The changes at Elektrosila are due to Railways Ministry plans to spend billions of dollars over the next decade to modernize the nations rail stock.

We decided to invest in producing these engines because of the Railways Ministrys plan to order new electric trains, said Pasyonov, adding that Elektrosila is negotiating with Sberbank for a $20 million credit to finance the expansion.

But we also plan to export such engines, he said. About 33 percent of Elektrosilas sales come from exports.

Elektrosilas total sales in 1999 were 730 million rubles ($26 million at the current Central Bank rate), or a 23 percent jump from the figure for 1998. The company also expects similar growth in 2000.

Railways Ministry spokeswoman Yelena Yuga said there is indeed a major order to rebuild the countrys train stock, but said she was unable to give details.

Railways Minister Nikolai Aksyonenko has said that the nations railways are in dire need of modernization, requiring 600 billion rubles ($21.6 billion) over the next five years. In August, the ministry approved a plan to incorporate itself, but has yet to clearly explain how it will attract investment.

There is a big order and a federal program to buy up to 20,000 such trains in the coming years, said Roman Romanovsky, who works in equity sales at Lenstroimaterialy, a local brokerage. Whether or not the government will finance the program remains to be seen, but if things go well then Elektrosila can count on receiving up to 60 percent of the engine orders.

Legendary German industrialist Karl Siemens founded Elektrosila in 1898. In 1911 it changed its name to Siemens and Schuchert after the these two giant German companies merged. After the 1917 Revolution, Siemens and Schuchert was nationalized like nearly all other factories and enterprises in Russia and soon after given the name Elektrosila. But in 1993, the former German owners returned to Elektrosila when Siemens AG bought 16.96 percent of the company during its privatization.

Elektrosilas other major shareholders are the St. Petersburg investment company Alexander V. Kostikov and Partners with a 25.4 percent stake, and the investment company DKK, with a 19.5 percent stake. Both companies are nominal holders of the shares on behalf of other investors.

In the past year, however, Interros, one of the nations leading financial-industrial groups, has increased its control over Elektrosila and other power engineering equipment makers such as Leningrad Metal Factory, or LMZ.

While Interros, which is controlled by Vladimir Potanin, does not own a direct stake in Elektrosila, the factory confirmed the group owns stakes through third parties.

Last year, Interros wrested control of Elektrosila and LMZ away from the Moscow-based holding company Energomash Korporatsiya, or EMK.