russia case studies

Signed projects

Board approval is the final stage in the project approval process. After Board approval, the EBRD and the client sign the deal and it becomes legally binding. Signed project lists reflect year-end data.

Signed projects  (0.1Mb)

Case studies

Industry
Micro, small and medium-sized enterprises
Municipal and environmental infrastructure
Power and energy

Trade Facilitation Programme

TFP support for Russia’s Transcapitalbank - Donor Report 2009

Moscow-based Transcapitalbank services the needs of small and medium-sized businesses primarily in the regions of Russia. As a long-time partner, the EBRD is standing by the bank at a time when the financial crisis is battering the world economy, and increasing its facility under the Trade Facilitation Programme (TFP) by US$30 million (€21 million).

In times of scarce finance, the increased amount helps Transcapitalbank to meet the demand in trade finance and support local clients, especially small and medium-sized enterprises particularly affected by the current financial crisis.

In December 2008 Transcapitalbank also received a 10–year EBRD loan of €10.7 million to strengthen its balance sheet. EBRD investment in Transcapitalbank and donor funding provided by the European Commission are helping to improve the bank’s strategic planning, credit procedures and risk management.

Designed to help banks in the EBRD countries of operations to reduce cash collateral requirements and free up clients’ working capital, the TFP receives strong donor support with €5 million committed since its creation in 1999. Funding provided by donors is usually used to cover the costs of training and advisory services for bank staff and trade finance specialists who deliver advisory services for local banks; donor support is crucial if local banks are to increase operational skills and improve their international trade finance services.

Transcapitalbank joined the TFP in 2004 and has since used it to finance over 100 foreign trade transactions worth up to €100 million. The bank has already started to use part of its increased limit for the financing of imports of electric power tools and accessories to Russia.

Industry

Bringing Russian locomotives back on track - Annual Report 2008

At its peak during Soviet times, Russian railways counted about 36,000 main-line locomotives, the world’s largest fleet. The major portion of the fleet remained with Russia after the break-up of the Soviet Union. In today’s Russia, railways remain the backbone of the country’s transportation system and also the most cost-efficient way of transportation in the long run. But the locomotives are 30 to 35 years old, and at least one-third of the fleet is overdue for replacement.

With EBRD finance, OJSC Sinara Transport Machines, one of Russia’s biggest manufacturers of freight locomotives, is making “Made in Russia” locomotives work again. The US$ 65 million EBRD loan will contribute to overcoming a shortage of rolling stock, which has been holding back the development of railway transport in Russia. In 2008, Russia’s state-owned rail operator RZD said it would need over 11,600 new locomotives between now and 2015.

This investment highlights five of the EBRD’s key priorities in Russia. It contributes to the renewal of Russian infrastructure; it reaches out to the regions of Russia which are already the recipient of 90 per cent of the EBRD’s funding; it is targeted at a private Russian manufacturing company; it is yet another deal contributing to the diversification of the Russian economy away from the commodities sector; and, lastly, it will not only help increase production, but will do so using less energy.

Of the total, US$ 5 million will finance investments in energy efficiency to enable the group’s plant-producing diesel shunting locomotives in the central Kaluga region to cut energy consumption by up to 15 per cent.

The EBRD finance will also fund the modernisation of production facilities and will support serial production of freight locomotives, particularly the new and highly performing 2ES6 model, at its UZGM (Ural Railway Engineering Plant) unit near Yekaterinburg.

This long-term loan will be repayable in one instalment at the end of a seven-year grace period, thus strengthening the capital base of the company. It will by 2013 allow Sinara Transport Machines to create a high-tech production plant capable of building over 500 locomotive units a year, set up a service centre and continue work on developing new models.

Improving working conditions for migrant labour in Russia’s construction industry - Donor Report 2007

Launched in 2006, a technical cooperation (TC) project is developing a code of conduct for the Russian construction industry to prevent labour exploitation and to promote good labour practices. Funded by the UK Department for International Development, the project is being managed by the EBRD in collaboration with the International Labour Organization (ILO).

While linked to an existing ILO initiative to combat human trafficking and forced labour in the Kyrgyz Republic, Russia, Tajikistan and Uzbekistan, the TC project specifically targets the construction industry. This is due to the large numbers of migrant workers employed in that sector, many of whom come from early transition countries and may be particularly vulnerable to abuse. This is a matter of some concern for financial institutions, since construction schemes backed by them are expected to comply with core labour standards and national law.

Consultants for this project include experts from the Analytical Centre of the Russian Coordinating Council of Employers’ Unions (KSORR), the Levada Analytical Centre, as well as independent advisers. During 2006 the consultants assessed existing labour practices and employer, trade union and government attitudes towards migrant workers in the construction industry across several regions of Russia.

Their draft report summarised their findings and discussed the introduction of an industry code of conduct to promote good labour standards. This was considered in November 2006 by a workshop of representatives from the Federal Service on Employment, the Federal Migration Service, the Ministry of Health, trade unions, business associations (general construction and road construction), the association of recruitment agencies, the EBRD and the ILO.

All were generally supportive of the concept of an industry code, with law-abiding companies in particular favouring a means to distinguish themselves from rogue employers who save on labour costs through exploitation. The project should be finalised later in 2007 with the publication of the final report, endorsed by the ILO, the EBRD and KSORR. The report will include a model code and monitoring system suitable for adoption at industry association or enterprise level.

Russia’s automotive industry moves ahead - Annual Report 2007

Kaluga was not always booming. As recently as the 1990s the town was struggling as the region’s heavy industry failed to adjust to the market economy. Thousands of residents moved the 160 kilometres to Moscow, but now they are likely to return.

One of the reasons is Kaluga’s new Volkswagen factory. The foundation stone was laid in October 2006 and the first cars rolled off the assembly line in November 2007. The factory is mostly financed by an EBRD initiative that, with 11 other banks, raised the rouble equivalent of €750 million, the Bank’s biggest rouble investment in the automotive sector to date.

It is Kaluga where Volkswagen’s foray into the Russian auto market is to begin and where the company will produce up to 150,000 cars a year by 2009.
“Volkswagen is a magnet,” says Deputy Mayor Vadim Vitkov. “Once they’re here, many more will come.” That was the message he repeatedly drove home to anyone wary of the investment.

Other carmakers, such as PSA-Group, Volvo and Renault Truck, are also preparing operations in Kaluga. During the first phase of production at Kaluga, Volkswagen cars will be assembled on site, thereby avoiding the heavy duties on importing completed vehicles; starting in 2009, cars will also be manufactured at the factory.

Volkswagen was established in 1937 and has built up an international reputation for reliability and eco-friendliness. It now has 47 production plants in 12 countries worldwide, and is the largest car manufacturer in Europe. In 2006 the company sold 5.7 million cars worldwide, and it is working hard to become Russia’s car of choice. The first of Volkswagen’s Škoda Octavias and VW Passats are already rolling out of the factory. Soon, the Jetta, the Škoda Fabia and a new model designed for future markets will enter production.

The new factory is creating massive job opportunities in all sectors around Kaluga, but the language barrier is a challenge. “We don’t have enough people who speak English and German,” says Vitkov. So the city is planning to build an education centre. Furthermore, city leaders are concerned that the area’s gastronomy isn’t up to European standards so the local government is encouraging new restaurants to open that serve European cuisine. Kaluga has also started a residential building programme to tackle the housing shortage.

“We have to become a bigger player in this huge market,” remarks Dietmar Korzekwa, Volkswagen Group’s representative for Russia. He foresees dramatic growth in the Russian automobile market in coming years. “The population is under-motorised,” he observes. While Germany has 500 cars for every 1,000 people, Russia has only 190. In Russia today there are 2.33 million vehicles sold annually. By 2010, that number will be 3 million. “Conservatively speaking,” says Korzekwa.

Volkswagen sees greatest growth for its vehicles in the €7,000 to €18,000 price range, particularly with vehicles for the domestic market that will compete directly with the Lada, Russia’s best-known passenger car brand, Korzekwa explains.

The Volkswagen project represents the third EBRD investment in a greenfield car production plant in Russia over the past six years. The two earlier projects were GM-AvtoVaz in Togliatti and Toyota in St Petersburg.

Creating a buzz in Russia’s Silicon Valley - Annual Report 2006

One company that knows there is far more to the Russian economy than natural resources wealth is JSC Concern Sitronics, in which the EBRD acquired a 3.67 per cent stake in September 2006.

Sitronics, whose production facilities are in the city of Zelenograd near Moscow – the area known as Russia’s Silicon Valley – is a conglomerate of high-tech companies making everything from microchips to phone equipment and software.

So successful has Sitronics been at building up a coherent business in a fragmented global market that it notched up €725 million of consolidated sales in 2005 and announced plans to go public in 2007 with the first initial public offering (IPO) by a Russian high-tech company.

The EBRD’s €63 million investment in new Sitronics shares, provided in advance of the IPO, is helping to upgrade technology standards in Sitronics’ microelectronics branch, which already boasts the most advanced mass production facilities in Russia for microchips and integrated circuits.

The Bank’s investment will help to show that Russian knowledge-based and high-tech companies have the potential to become competitive and are committed to improving their business practices.

Sitronics is part of the Sistema group, the largest Russian financial-industrial group outside the natural resources sector. Sistema is a blue-chip company whose shares are publicly traded on Moscow and London stock exchanges.

Sitronics was rebranded at the beginning of 2006. Before that it was known as JSC Kontsern Nauchny Tsentre. The group employs 10,000 professionals and incorporates companies in the Czech Republic, Greece, Romania, Russia and Ukraine.

Sitronics sees the rebranding and the IPO as steps towards becoming the largest high-tech company in central and eastern Europe. It aims to rebalance its businesses,
becoming less dependent on telecommunications, upgrading technology, making judicious acquisitions, and enhancing an already good record in corporate governance. It benefits not only from high-class products but also from the region’s highly skilled but inexpensive labour force and its extensive market knowledge and customer base.

Sistema has injected about €152 million of new equity into Sitronics to finance development and is committed to enhancing the quality of corporate governance in its businesses. The revival of Zelenograd as a scientific and industrial centre after the economic crisis of the early 1990s is largely due to Sistema.

“We value the EBRD as a shareholder. Its presence highlights our positioning as a European and not just a regional company,” said Sitronics President Evgeny Utkin. “It underlines our successful performance as a business and the fact that our treatment of minority shareholders meets international standards.”

Micro, small and medium-sized enterprises

Printing success with the Russia Small Business Fund - Donor Report 2006

Founded in 1994, ZAO Polygraph was set up by former employees of the printing department of Omsk Polytechnic University. The company’s original printing facility was basic with many of their 15 staff spending considerable time maintaining the ageing presses.

With orders shrinking, ZAO Polygraph approached the Russia Small Business Fund (RSBF) for assistance. A series of loans were provided by KMB Bank for the purchase of equipment and a new premises to allow the business to expand. The most recent loan in October 2005 enabled the company to buy specialised label printing equipment.

Since receiving support through the RSBF, ZAO Polygraph has become the market leader in offset and flexographic printing in the Omsk region and increased its workforce to 80 people. The company has future plans to expand into the food labelling market and to extend its range of printing services.

Municipal and environmental infrastructure

Promoting private sector participation in Russia - Annual Report 2008

It is easy to see why the Russian rail sector is key to the country’s economy. The network covers eight time zones, stretches across an 86,700-kilometre route and includes more than 127,000 kilometres of railway lines. As the second-largest rail network in the world (after the US), Russian railways handle 93 per cent of the country’s cargo transportation. To finance rail improvements, the Russian government opened the rail sector to competition in the late 1990s. Since then private railway operators and owners of rolling stock have attracted a large share of the market by offering better services. Over 34 per cent of the total wagon fleet is now privately owned, compared with fewer than 20 per cent in 2003.

But even the private sector needs finance for investments, in particular in the midst of a global economic downturn. In 2008 Globaltrans Investment, one of Russia’s leading private rail freight operators, received €31.9 million from the EBRD to purchase new rolling stock, including open-top wagons and cement hoppers. In addition, the EBRD acquired a stake of 3.2 per cent in Globaltrans Investment, as part of the company’s Initial Public Offering (IPO) on the London Stock Exchange. This is the first ever IPO by a private rail operator active on Russia’s rail freight market.

A long-term investor in Russia, the EBRD has helped to develop the Russian railways network by investing about €413 million in seven projects since 2004. This recent project underlines the EBRD’s support to expanding private sector participation in Russian’s transport infrastructure.

Reducing greenhouse gas emissions in Russia - Annual Report 2008

The flaring of gas is not only wasteful but environmentally damaging. In 2008 the EBRD signed an equity participation of up to €60 million in Irkutsk Oil Company which will, among other objectives, enable the Russian energy firm to cut greenhouse gas emissions from its East Siberian oilfields by re-injecting associated gas instead of flaring it. According to some estimates, the flaring of gas burns up to 5 per cent of Russia’s total gas output.

Irkutsk Oil will tackle the gas-flaring problem through construction of a re-injection facility at the company’s Yarakta field in eastern Siberia. This will allow 90 per cent of the associated petroleum gas produced over the life of the field to be used in enhancing oil and condensate recovery. The EBRD finance will also boost Irkutsk Oil’s balance sheet and strengthen its chances of obtaining further long-term finance for its development and exploration programmes. It will also help Russia meet its agreements under the Kyoto Protocol: the country has agreed to limit emissions of six greenhouse gases between 2008 and 2012 to their 1990 levels. This EBRD support to Irkutsk Oil is being provided under the Sustainable Energy Initiative which aims to help its countries of operations cut back on wasteful and polluting energy use.

Through the Initiative, the EBRD has invested €2.66 billion in 166 projects in 24 countries. Investments are improving energy efficiency in the industrial power and municipal infrastructure sectors, developing renewable energy supplies and supporting the development of the carbon market in the EBRD’s countries of operations.

Improving Russian trams and cutting transport pollution - Donor Report 2007

The city of Krasnodar lies on the Kuban river, less than 150 kilometres from both the Black and Azov seas. Its trams are at least 20 years old. Many lack basic comfort and safety features and 15 per cent are undergoing repair at any one time. The EBRD is consequently investing €10.4 million in the purchase of 50 new Russian -built trams to serve the city’s 800,000 -strong population, 90 per cent of whom use the tram and trolleybus system, which employs over 3,500 people.

“The new trams use 30 per cent less electricity and they are much more comfortable, with much better conditions for the drivers,” says Anatoly Panin, the Director of the municipally owned Krasnodar Public Transport Company for the last 17 years. The new tram project aims to encourage people to use public transport rather than their cars. Russia’s public transport system as a whole carries around 37 billion passengers a year, and there are 72 cities with tram networks – more than in any other country.

In Krasnodar alone, electric transport (trams and trolleybuses) have a 62 per cent market share and, at six roubles (less than one euro) per journey, Mr Panin considers them to be a bargain. “Virtually free!” The company makes €2 million a month in fares and another million in advertising on the sides of trams and banners strung above the streets.

Donor funding totalling €610,000 was provided by Austria, the European Union and Germany to assist the Krasnodar transport company with its pre-loan investment plan, restructuring and procurement.

Cleaning up the Baltic Sea through Europe’s biggest environmental project – Donor Report 2006

Sewage plant inaugurations do not normally attract international dignitaries.

However, the Presidents of Russia and Finland and the Prime Minister of Sweden came to the opening of St Petersburg’s south-west waste-water treatment plant, a model of international cooperation and a project whose impact will be felt far beyond the city’s shores.

The project is the first to be completed under the Northern Dimension Environmental Partnership (NDEP).

Of the treatment plant’s total cost of €138 million, the EBRD loaned €35 million for construction work, while another €50 million was donated by the European Community, Russia’s Nordic neighbours and national agencies. Over 850 subcontractors, mainly from Russia but also from Finland, Germany and Sweden, worked on the building of the plant, which was completed on time and within budget.

The plant will halve the amount of untreated effluent from St Petersburg being released each day into the Neva river – and consequently into the Gulf of Finland and the Baltic Sea. At the official opening in September 2005, the Russian President Vladimir Putin said that the facility would improve quality of life for the people of St Petersburg and all those living on the shores of the Baltic.

Breaking the ice in Russia’s Far East - Annual Report 2006

In the remote Arctic region of Sakha (Yakutia), where most of Russia’s fabulous diamond wealth lies buried under permafrost, getting expensive heat to the far-flung homes of the region’s 1 million residents has always been a problem.

The costs for municipal services in Sakha are the highest in Russia. Fuel and transportation account for about 75 per cent of municipalities’ operational costs. Equipment is often inefficient and in poor repair, especially in the heating sector. The potential for cost savings is enormous.

A long-term loan of 1 billion roubles (€29 million) from the EBRD could be about to change all that. The financing will help local authorities in Russia’s largest region cut costs by using coal – locally available and cheap – instead of expensive oil imports to fuel district heating, particularly in remote northern settlements, where the heating season averages 10 months of the year. Winter temperatures in Sakha routinely fall below --50˚C for extended periods of time. They have even been known to dip below --60˚C.

The 14-year loan is to Sakha’s housing entity, GUP ZhKH, which provides most municipal water and heating services. It will finance modernisation of the systems providing heat and hot water to settlements that have no year-round road links. At present, these only survive thanks to fuel deliveries during the brief summer’s ice-free weeks (known as the Northern Delivery System).

The first long-term municipal infrastructure loan to be implemented in the Russian Far East will make a number of improvements, including replacing old boilers with more energy-efficient modern ones, installing heating substations in municipal housing blocks and public buildings, and modernising distribution networks.

The loan highlights the EBRD’s commitment to helping Russia modernise its infrastructure and opens the possibility of repeating this kind of deal in other parts of the country. Financial support from Japan will also be used to reorganise GUP ZhKH into a modern, market-oriented utility company, providing efficient municipal services to local people and businesses.

“This programme of investments will allow us to improve our system of heating and electricity, making it operate more efficiently in a new and market-friendly way,” said Vassily Grabtsevich, Deputy Chairman of the Government of the Republic of Sakha.

The loan to GUP ZhKH, prepared with funds from the European Union and being implemented with the assistance of funding from Japan, is guaranteed by the Republic of Sakha. At present, the entity provides about 95 per cent of the heating, water and waste-water services in the region.

Improving Ufa’s district heating system - Sustainability Report 2006

The temperature was 40 degrees below zero in January 2006 when the EBRD and the Mayor of Ufa in the southern Urals signed a project to modernise the city’s district heating system. The heating network is characterised by frequent breakdowns and heavy losses of energy, heat and water. The EBRD’s 10-year loan of 360 million roubles (€10.4 million) will be used to modernise heating sub-stations that will provide heating and hot water for one-third of the apartment blocks in Ufa.

The project is expected to result in significant energy savings and to ensure a reliable supply of heating to householders. Estimated savings are around 8-10 per cent for energy used for heating and hot water, 20-30 per cent for electricity generation and 15 per cent for chemically treated water used in the heating pipe networks. The modernisation will also ensure that Ufa’s district heating system complies with Russian and European Union environmental standards. The city of Ufa is guaranteeing the EBRD loan.

The Bank is financing 30 per cent of the project (public finance laws in Russia limit the borrowing ability of municipalities). The EBRD has secured grants of €600,000 from Finland and Norway for project preparation and monitoring. Rosstroi (the Russian federal agency responsible for regional development and infrastructure) is making about
€100 million in grant funding available for co financing with the EBRD for the project in Ufa and for other district heating and water service projects in Surgut and Yakutia.

Sakhalin Island, Considering the environmental and social impact – Sustainability Report 2005

This complex project involves considerable environmental and social issues. Environmental concerns have focused on the effects of the development on the area’s whales, salmon and birds. Social concerns have focused on how Sakhalin islanders – and Russia – will benefit from the revenue from the project, the proposed development plan for indigenous peoples and the establishment of a mechanism for compensating people affected by the project.

Environmental impact:

The oil and gas development is close to the summer feeding grounds of the Western Gray Whale, a critically endangered species. As a result of concerns raised about the welfare of the whales, Sakhalin Energy rerouted the marine pipeline connecting the platforms to the oil processing facility in order to avoid the whales’ feeding areas.

The company is working with the world’s leading scientists under the auspices of the International Union of Nature Conservation. It has agreed to set up the Western Gray Whale advisory panel consisting of these experts and has agreed to abide by all reasonable recommendations that it makes to protect the species. Sakhalin Island also has extremely important spawning grounds for a variety of salmon species. The onshore gas and oil pipelines cross 1,084 rivers, generating sediment from river crossing construction activities. The EBRD has been working with Sakhalin Energy to understand and minimise the potential impact for the salmon spawning grounds.

The company has developed a river crossing strategy, which sets out commitments to ensure that there will be no net loss of salmon spawning habitats. It has also established an extensive monitoring system to assess the impact of each river crossing and to ensure proper construction techniques.

Together with the Russian authorities, Sakhalin Energy has assessed and categorised the environmental and commercial importance of each watercourse and has adapted the crossing method according to the respective importance of each river. Supervision and monitoring will take place for those crossings where there is a significant potentially adverse environmental impact.

Implementation of the new river crossings strategy is being monitored by the company, independent monitors and the EBRD. The monitoring must show that implementation of the new strategy has been successful for the EBRD to be able to consider making an investment.

Monitoring has continued beyond the end of the 120-day public consultation period. Sakhalin Energy has also developed conservation measures for the Steller’s sea eagle. Measures include rerouting the pipeline to avoid critical nests and avoiding site clearance activities during sensitive bird nesting seasons.

Social impact:

Local businesses are able to provide services to the fledgling oil and gas industry on the island. The project has created 17,000 jobs, mainly in construction activities. A total of €4.7 billion worth of contracts have already been awarded to Russian companies by Sakhalin Energy. Sakhalin Energy has invested €85 million in the Sakhalin Development Plan for infrastructure upgrades, improvements to the power supply and investments in health and education. Under EBRD supervision, the company has worked with indigenous peoples in the north of the island to develop a programme that will help to preserve cultural heritage and traditional ways of life on the island.

Sakhalin Energy has also established a procedure for managing complaints and grievances arising from the performance of the project. The purpose of the procedure is to ensure that complaints are addressed in an effective and timely manner and that appropriate corrective action is identified and implemented to provide for a satisfactory conclusion to both parties.

Power and energy

Charging up Russia’s power sector - Annual Report 2006

One of the most ambitious elements in Russia’s project to dismantle old state controls of its economy is the reform of a once-centralised state electricity business, splitting it into separate generation, transmission and distribution companies and turning yesterday’s unwieldy monolith into tomorrow’s multi-player market.

As the Russian economy grows, and electricity consumption rises by more than 5 per cent a year (making it ever more important to rebuild the nation’s outdated energy infrastructure), RAO UES, Russia’s largest power utility, is being split into separate generation, transmission and distribution companies.

The EBRD’s pivotal role in this giant reform is confirmed as the first shares in one of the new generation companies are sold to private investors. In November 2006 the EBRD threw its weight behind a landmark first initial public offering by one of Russia’s six wholesale generating thermal companies by acquiring a minority stake in OGK-5.This investment is part of the strategy of OGK-5’s controlling shareholder, RAO UES, to raise private funding on the open capital market for the investment programme. The Bank’s decision to take about 7.5 per cent of the equity publicly reaffirms the EBRD’s support for the latest phase of Russia’s power sector reform.

The Bank has been involved in the multiple-stage reform since 2001, when Russia’s electricity supremo, Anatoly Chubais, the Chief Executive Officer of RAO UES, asked the EBRD for help in dismantling Russia’s electricity monopoly.

Now the programme has reached its third stage, in which the state prepares to bow out and investors step in to take strategic stakes in newly separated electrical entities unbundled from RAO UES.

The strategy of the Russian government and RAO UES is to attract investors to participate in capital increases that will finance urgent refurbishment and new capacity needs. OGK-5, with two of its four plants in the fast-growing central Russian Ural region, has high investment needs. Proceeds from the November public offering of 5.1 billion shares will be ploughed back into modernisation and developing new capacity.

The equity sale brought RAO UES’s stake in OGK-5 down from 87 per cent to about 75 per cent. A second equity sale to a strategic investor, this time of 25 per cent plus one share, is planned for 2007.

The EBRD’s Strategy for Russia, approved in 2006, commits the Bank to pursuing equity investments in generating companies. “The interest of private investors in the sector will, from now on, be one of the determining factors of the overall success of the reforms,” said the CEO of OGK-5, Anatoly Bushin. “The Bank’s involvement sends supportive signals that private capital can successfully be attracted in the Russian power sector.”

The EBRD participation in OGK-5 was conditional on the company agreeing to improve environmental performance and corporate governance. A Memorandum of Understanding was signed incorporating these requirements.

Harnessing Russia’s hydro power resources - Sustainability Report 2006

Hydro power is the main source of renewable energy in Russia, providing 20 per cent of all the power produced. It acts as the backbone of the power industry, stabilising supplies and maintaining the reliability of the country’s entire system as well as generating economically effi cient electricity.

The power stations owned and run by Hydro OGK account for almost 10 per cent of Russia’s power supply. The cascade of power stations on the Volga and Kama rivers is one of the largest renewable energy sources in south-west Russia. However, the power station infrastructure is over 40 years old and in need of refurbishment.

EBRD fi nancing of 2.3 billion roubles (€66 million) to Hydro OGK will extend by at least a quarter of a century the life of nine power stations of the Volga-Kama cascade. The total cost of modernising obsolete equipment, mainly turbines, generators and transformers, is estimated at 26 billion roubles (€764 million) and is expected to take fi ve years
to complete.

The EBRD has also secured grant fi nancing of €165,000 from the Spanish government to assist Hydro OGK in the development of a regulatory framework for wind farms in Russia.

When the reorganisation of Hydro OGK is completed (including the consolidation of a large number of hydro power plants), it will become the largest power generating company in Russia and the world’s second-biggest hydro generating company after Hydro Quebec in Canada – with an installed capacity of 23.3 Gigawatts (GW).