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«    June 2017    »

Andrei Chibis: a vast market of utilities is open to foreign investors

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Andrei Chibis: a vast market of utilities is open to foreign investors

In connection with the policy of sanctions against Russia, some foreign investors have (quite understandable) reservations about the safety and success of their investments in the Russian construction complex and utilities sphere. The Deputy Minister of Construction, Housing and Utilities and Chief Housing Supervisor of Russia, Andrei Chibis, thinks their worries are not based in reality. He spoke about this and other issues in his exclusive interview with our magazine.

— Mr. Chibis, are there examples of close cooperation with foreign companies in the sphere of utilities in Russia? Can you possibly give examples of already signed (or close to being signed) agreements in the sphere of utilities within a PPP or any other model?
— At this point, there are a lot of foreign companies which have localized their production in RF territory: they produce pipes, check valves, and have accounting and regulation systems for their plants, the production of which is utilities-aimed. For example, the Dunfoss company (Denmark), dealing with heat automation systems, actively cooperates with Russian operators; or the Veolia company (France), which is involved with water services company management in Tomsk. There were some complications connected with the absence of guarantees on long-term tariff regulation, but now we have introduced such guarantees. Another example is the Grundfos company (Denmark), which produces a wide range of pumps (many people know their household products). Such pumps are also delivered to the Russian utilities sphere. The company is very much interested in mutual project implementation with Russian colleagues.
The REMONDIS International GmbH company deals with waste utilization and is willing to deal with water supply systems. There are companies providing consulting support. And there are such companies as, say, Saint-Gobain, which actively develop such trends as energy efficiency and eco-friendly tech.
Besides this, there exists the practice of foreign technology promotion — for example, PL trenchless sanitation. The German companies promoting this technology have worked with Mosvodocanal.
Our Japanese colleagues also have unique technologies for PL sanitation. A recent experience of cooperation with the Japanese company SEKISUI involved the cleaning of a sewer pipe in Saint Petersburg without switching it off. The unique technology made it possible to clean a sewer pipe built in the 19th century without stopping it working for a minute.
As you can see, all of these modern technologies are being used, and very actively, in the sphere of utilities in Russia. The priority for us is to initiate a program of capital repair. We want to do both high-quality and energy-efficient repairs. We have started cooperating with Saint-Gobain in this regard and are now discussing the possibilities offered by such energy-efficient repair.
We intend to keep down the prices people pay for capital repairs, but the quality will be quite different. Besides this, we plan to take worldwide norms of energy efficiency into consideration. And we strive for efficiency of economy in utility charges.
It is time to use different regulating systems, whereby electronic systems regulate the input of energy into the house.
If it is hot outside, the heating is automatically turned down, whereas if it is colder, the temperature automatically rises.
There are a lot of interesting solutions in this sphere. We want to learn to apply all of them and are determined to use these technologies with Russian companies and to attract foreign partners.
Thus, energy efficient repairs are our medium-term task. In the near future we’ll show a number of examples of the use of such equipment and the benefits they offer.

— How might the volatile exchange rate of the ruble influence the work of foreign companies in the utilities sphere in Russia?
— Our task is to create real competitiveness on the Russia market in the sphere of technology. Foreign companies provide such competitiveness. They are interested in having a presence on our market, as their localization here provides for the products’ primary cost decrease. At the same time, our specialists are learning to work properly.
Of course, the unstable ruble rate makes the production of the foreign companies less competitive, but on the other hand it gives a boost to Russian production, and now we can replace imported products with domestic ones in many situations. Nevertheless, there are several kinds of production where we keep using imported equipment and components - but on a large scale, there is no dependence on foreign deliveries in the utilities sphere.
I often visit different water supply objects. Many regional water supply plants have switched to Russian equipment. They say that they used to use foreign equipment but then they understood that there is a domestic equivalent available, of good quality. In particular, this is true for pumps and a number of other items.

— Are there any privileges, taxes or customs for foreign investors in the utilities sphere?
— Recently we had a discussion on utilities at the Saint Petersburg economic forum. By the way, this sphere is now one of the key items at all investment forums. The market is vast, and the efficiency growth potential is rather high.
Both our specialists and foreign companies’ representatives were present; foreigners comprised more than half the audience. And all of them were speaking about their great desire to work and develop their production in Russia. Some of them have been working in Russia for a long time.
You asked about privileges. An Austrian enterprise works in Lipetsk, where it has some privileges due to the fact that it operates in a special economic zone. All are welcome, we invite everybody. A Lipetsk enterprise has the opportunity to decrease prices and to deliver cheaper product to the Russian market.
As a rule, foreigners are very sharp - they have already noticed that the Russian utilities sphere has started updating and they want to participate in the market, independent of any overseas activity.

— Tell us, please: what steps should be taken by a foreign investor willing to enter the Russian utilities market?
— To answer this question we have prepared “A summary sheet for foreign investors entering the utilities market”. Here are some key statements from the document.
An investor may implement an investment project in the utilities sphere by concluding a concession agreement.
An investor has the opportunity to take part in an announced tender for the right to conclude such a concession agreement. It is necessary to do the following:
Step one: choose a potential object for investment.
Step two: make a claim for participation in the tender.
Step three: in case the investor becomes the winner — conclude a concession agreement.
Step four: issue contracts with consumers and set tariffs.
Step five: start to render services.
Another option is to create an object of communal infrastructure.
In this case an investor enters the market by constructing a new object of communal infrastructure. For this, it is necessary to:
Step one: send the proposal on the actualization of the cost-effective use of resources to a local government authority.
Step two: take part in public hearings.
Step three: put the object of communal infrastructure into operation.
Step four: issue contracts to consumers.
Step five: start work.
Still another scheme is buying an object of communal infrastructure.
For that it is necessary to:
Step one: register ownership of the object.
Step two: decide upon consumers.
Step three: decide upon tariffs.
Step four: issue contracts according to the scheme of resources supply.
Step five: start delivering resources.
As you see, there are no difficulties. I can only wish foreign investors who would like to enter the Russian utilities market success with their plans.

— We echo your wishes. Thank you for the informative talk, Mr. Chibis!

Alexander GUSEV, Elena MATSEIKO

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