Rostec and Shenhua to Invest Up to US$10 billion into Coal Mine Development and Building of Transport and Utilities Infrastructure in the Far East of Russia

2014-09-05 20:50 2326

BEIJING, Sept. 5, 2014 /PRNewswire/ -- Russian State Corporation Rostec, one of the largest Russian industrial conglomerates, and Chinese State Corporation Shenhua, world's leading producer and distributor of coal, have signed a Memorandum of Understanding. The parties plan to jointly explore coal deposits in Siberia and the Far East of Russia, develop industrial and transport infrastructure and build generating capacities and high-voltage transmission lines for exporting electricity to China. Total investments of up to US$10 billion are expected.

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Memorandum was signed on September 4, 2014 by the CEO of Rostec Sergey Chemezov and the Chairman of the Board of Directors of the Corporation Shenhua Zhang Yu Zhuo during the visit of the CEO of Rostec to China. According to the Memorandum, the parties plan to begin the exploration work at Ogodzhinsky coal deposit in the Amur Region of Russia and the construction of coal terminal "Port Vera" in Primorsky Krai.

This project will solve the problem of energy deficit and meet the electricity demand of the Russian Amur Region and the Northern China.

"Rostec develops cooperation with the Chinese partners in a number of areas," underlined Sergey Chemezov. "Strengthening of this cooperation is mutually beneficial. Partnership with Shenhua is a part of the comprehensive effort to expand the Russian energy presence in the Asia-Pacific region. Total investment volume in the project will be US$8-10 billion."

Comprehensive development of the deposit will include the construction of mining and enrichment facilities (open-pit coal mines, enrichment plant), power generating facilities as well as development of related social and transport infrastructure. The project is unique because it allows to produce electricity with a high added value. It is planned that high calorific value coal concentrate will be exported to Asia-Pacific countries, mainly to China. Low calorific value coal will be used for the electric power plant to be built at the deposit. That is why Rostec's specialists believe that the construction of generating capacities and high voltage transmission lines for exporting electricity to China could be the next stage of development of the field infrastructure. The decision on the volume capacity of power generation facilities to be constructed will be made, depending on the demand in Russia and potential of exporting electricity to China and other countries of Asia-Pacific.

Subsequent to the results of the meeting Rostec and Shenhua establish a joint working group aimed at coordination of activities of the parties, resolving technical issues, and preparing feasibility studies for each project. After that, negotiations on the establishment of joint ventures and approval of further areas of cooperation are planned.

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On June 4, 2014 "RT - Global Resources" (Rostec's operator and leading coordinator) closed the deal that allows sea transshipment terminal "Port Vera" to participate in the project. "Port Vera" coal sea transshipment terminal is planned to be constructed in the vicinity of Mys Otkrytyi, Primorsky Krai, in an ice-free area. It is designed for vessels with a displacement tonnage of 40,000-150,000 tons. The cargo turn-over of the port is anticipated to be 20 million tons per year, with a possibility to double this capacity. An area of 826 hectares has already been allocated for the construction of the terminal. The project has been approved with all government institutions, technical specifications for development of railway infrastructure to support the shipment of 20 million tons of coal per year have been received. Design of port facilities is in the final stages of completion. Construction is to begin in 2015. Total volume of investment is estimated at US$1 billion. It is expected that the port will become operational in 2018-2019.  Implementation of the project will allow to ensure long-term supplies of coal for domestic consumers in the Russian Far East, and to significantly improve access of Russian coal mining companies to the markets of Asia-Pacific.

Total reserves of the Gerbikano-Ogodzhinsky coal bearing district, located in the Amur Region, are estimated at 1.6 billion tons. According to geological experts the actual volume of mineable reserves can be considerably higher. Development of the deposit is stipulated in the Programme for development of Russian coal industry for the period of up to year 2030, as well as Russian - Chinese Memorandum of Understanding and Cooperation in Coal Industry, signed in September 2010. As a result of implementation of the project, estimated annual production of thermal coal will equal 30 million tons by 2019. This will allow creation of a modern mineral resource cluster in the region.

Rostec State Corporation - Russian corporation, established in 2007 with an aim to facilitate development, production and exports of high-tech industrial products for civilian and military application. It includes 663 organizations, that currently constitute 9 holding companies in military-industrial complex and 5 - in civil industries. Organizations of Rostec are located across 60 regions of Russian Federation and export products to over 70 countries. Rostec's revenue in 2013 was US$32.59 billion, net profit - US$1.25 billion. Tax allocations exceeded US$4.32 billion.

Corporation Shenhua - is the largest coal mining company in China and one of the largest in the world. It is a coal-based integrated energy company with businesses in coal production, power generation, railway, shipping, as well as production of of coal-to-chemicals and coal-to-liquids. It is headquartered in Beijing. Number of employees - over 211,000 people. Total assets - approximately US$150 billion. Total profits as of 2013 amounted to US$15 billion.

Source: Rostec