Russian companies have for many years been engaged in the construction of power plants abroad and are believed to be successful in this business.

Analysts believe that the Asian, Eastern European, and Latin American markets are the most attractive for Russian companies, while entering the U.S. and Central and Western European markets comes with significant commitment requirements and is unlikely. The majority of contracts are made for the construction of nuclear power plants abroad, as Russia has a wealth of expertise in building these types of power plants. In addition, making contracts to build power plants abroad often depends on certain political factors. Analysts also believe that Russian companies will intensify their work to build and maintain nuclear power plants abroad.

At present, the majority of projects are being implemented by nuclear power engineering company Atomstroyexport, a subsidiary of state nuclear power corporation Rosatom, and engineering company Technopromexport, a subsidiary of state-owned industrial conglomerate Rostekhnologii.

Technopromexport, which focuses on building thermal power and hydropower plants, has built a series of power stations in Southeast Asia, the Middle East, Eastern Europe, Latin America, and Africa since it started operating in the 1950s. Atomstroyexport, specializing in the construction of nuclear power plants, was established in 1998 after the union of Atomenergoexport and Zarubezhatomenergostroy, which had already been operating for 25 years.

Analysts believe that Russian companies operating on the global power plant construction market are quite successful. “In terms of building nuclear power and hydropower plants Russia stands on quite a good level in the global arena,” said Mikhail Rasstrigin, an analyst covering the electric power sector at VTB Capital. Russian companies have proved themselves to be competitive in building these types of power plants as compared to companies from other countries, he said. “Rosatom’s positions on the global nuclear power market are quite strong, especially in India and China,” said Mikhail Safin, an analyst at Renaissance Capital. Rosatom announced in November 2010 that it planned to build up to 35 nuclear power units in 15 countries in the near future and has already signed intergovernmental agreements for 19 of them.

Atomstroyexport has already implemented a number of foreign projects, including the construction of the first stage of the Tianwan nuclear power plant in China, the construction of the Kozloduy nuclear power plant in Bulgaria, the Paks nuclear power plant in Hungary, the Bohunice nuclear power plant in Slovakia, and the Bushehr nuclear plant in Iran. The company is currently building the Mochovce nuclear plant in Slovakia, preparing to build the Belene nuclear plant in Bulgaria, planning to build a nuclear power plant in Vietnam, and has signed a contract to build two more power units at China’s Tianwan plant, as well as planning to cooperate with the Russian power utility Inter RAO UES in building the Akkuyu nuclear plant in Turkey. Rosatom is also expected to build at least 18 nuclear power units at three sites in India, including at the Kudankulam site in the southern state of Tamil Nadu and in West Bengal, Rosatom CEO Sergei Kiriyenko said in late 2010. Atomstroyexport also said earlier that it planned to take part in a tender to build two power units at the Temelin nuclear power plant in the Czech Republic.

In addition, Russia and China are holding talks over the construction of a demonstration nuclear power plant in China powered by a fast neutron-based reactor, Russian Prime Minister Vladimir Putin said in late 2010.

The values of contracts to build nuclear power plants abroad are often not disclosed. The estimated cost of building a nuclear power plant in Turkey consisting of four units is USD 20 billion, Kiriyenko said earlier.

The average cost of construction of a nuclear reactor starts at 2 billion euros, as estimated by Andrei Cherkasenko, general director of the Atompromresursy group of companies, a private company supplying materials and providing engineering services to nuclear fuel cycle companies.

Russian companies have rich experience in building nuclear power plants and are able to carry out turnkey construction, and are supported and guaranteed by the Russian government, which is why they are often chosen to build power plants abroad, said Safin from Renaissance Capital. Moreover, Russian companies are often chosen because of political factors, he said, adding that Russia, for example, has close relations with India. Rasstrigin from VTB Capital agreed that Russian companies making contracts to build power plants abroad often depended on the political climate. Russia’s positions on the Asian market is stronger than those of companies from other countries, Safin also said. In Latin America, Russia’s position is also quite strong, he said.

Safin named Asia, in particular India, China, Vietnam, and Turkey; Eastern Europe; and Latin America as traditionally attractive regions for Russian companies in terms of building nuclear power plants. “Russia is unlikely to lose its position in these markets in the future,” he said. Meanwhile, Russian companies are unlikely to build nuclear power plants in Central and Western Europe and the U.S., as these regions have their own strong market players, Safin said. However, Russian nuclear fuel producers plan to start the production of fuel for western-type reactors and increase their global market share, he said.

“I believe it is difficult (for Russian companies) to enter the (Central and Western) European and U.S. markets,” said Sergei Beiden, a senior analyst covering the electric power sector at Otkritie Financial Corporation. There is strong competition among domestic players in Europe, he said. Russian companies could possibly supply fuel to the U.S., he also said. Asian countries, Eastern Europe, Turkey, and the countries of the Commonwealth of Independent States (C.I.S.) are attractive for Russian companies now and are likely to remain attractive in the future, Beiden said.

Meanwhile, Rasstrigin from VTB Capital said he believed there was no strict peg to regions and everything depended on how much the contracting country was ready to pay for power plant construction.

While a high volume of contracts to build nuclear power plants abroad have been made, there are only a few projects to build thermal power and hydropower plants. Among other projects, Technopromexport in early 2010 signed a contract worth approximately USD 100 million to build the 22-megawatt Polotsk hydropower plant on the Western Dvina River in Belarus. In addition, Inter RAO UES and Chinese company IVEC are jointly going to build the Toachi-Pilaton hydropower complex in Ecuador. In late 2010, Inter RAO UES signed a turnkey agreement for more than USD 100 million to carry out electrical and hydromechanical work at the hydropower complex. Moreover, Russian hydropower monopoly RusHydro in late 2010 signed an agreement to buy a controlling stake in a project to build a hydropower plant in Vietnam.

Russia is a “nuclear empire,” it has a good scientific base, and plenty of experience in building nuclear power plants, while global competition is strong in the construction of thermal and hydropower plants, and it is more difficult to enter foreign markets in these segments, Safin from Renaissance Capital said.

“Russian companies are competitive in building nuclear power plants, as they are able to provide a vertical chain – from fuel (supplies) to (the construction of) power plants,” said Beiden from Otkritie Financial Corporation. Thermal power plants are more sophisticated, and Russian companies fell behind Western companies in this sphere, Beiden said. “I believe it is very difficult to promote our technologies (in building thermal power plants) on foreign markets,” he said.

After building nuclear power plants abroad, Russian companies usually supply fuel to these plants at the initial stage, analysts said. However, a tendency to replace Russian companies with local producers is now being seen, said Safin from Renaissance Capital. For instance, Chinese companies entered into a contract to produce fuel themselves with the use of Russian technologies, he said. In addition, contracts for repairs and maintenance of power plants can also be made with Russian companies.

Rosatom’s new contracts for constructing nuclear power plants abroad allow it to increase its role in global construction of power plants, Safin said. In addition, Russian nuclear company TVEL plans to increase its share on the global market of fuel supplies to 25 percent by 2025 from 17 percent currently. This also indicates that Russia has large-scale plans for the construction and maintenance of nuclear power plants abroad, Safin said. Russia is likely to intensify its work to build nuclear power plants abroad, while there are no such vast plans for the construction of hydropower plants, Rasstrigin from VTB Capital said.