Albert Karimov — about decline in mechanical engineering: a noticeable correction occurred

The minister of industry and trade of Tatarstan names the leaders of the industry 2018, predicts CDA-2 (capacity delivery agreement) for Zainskaya GRES and tells how to save the KZSK ‘’twins’’

Tatarstan Minister of Industry and Trade Albert Karimov has presented the overall growth dynamics rating for the top five key sectors of Tatarstan industry at a media briefing in the house of government of the Republic of Tatarstan. Ranking the manufacturers of all stripes, the overall revenue of which reached 3 trillion rubles, he dispassionately noted that Tatarstan enterprises were provided with the state support of only 49 billion rubles, and never discussed this topic further. What Karimov said aloud and what was read between the lines at the press conference of the head of the Tatarstan ministry of industry and trade – read in the report of Realnoe Vremya.

To break the silence does not mean to say

The Tatarstan industry experienced so many shocks last year, ranging from the anecdotal saga of moving (that never took place) of the Kazan gunpowder plant in Udmurt settlement of Kizner and unrealistic expectations of the helicopter plant to sign the Indian contract at $1 billion to the unexpected appearance of the Singapore holding Indorama in the Tatarstan gas chemical plant Ammonia, that questions were arising, as they say, on the fly. After all, every time the ministry of industry and trade of Tatarstan fenced off from the press with an impenetrable wall of silence, so journalists accumulated a lot of them. On 29 January, the ministry of industry and trade had a chance to break the unspoken taboo. Although the official topic of the press conference was summarizing the work of the industry in 2018, the head of the relevant ministry, Albert Karimov, spent more time than was allotted to answer the questions.

But, according to the observation of journalists, he still adhered to the internal policy not to disclose specific information and used only general wording, describing only the logic of the processes taking place in the industry. Nevertheless, at the beginning of the session Karimov honestly explained his position by that the publication of information in the media could affect the negotiations with partners and, accordingly, the final result. Thus, he made it clear that one should not expect full and clear information on all high-profile events in the industry even post factum.

On the last legs: the total increase of 0,2%

Starting to report on the results of the industry in 2018, the minister of industry and trade announced the achievement of positive results. The volume of industrial production reached 2 818 billion rubles, an increase of 518 billion. The growth index amounted to 102% (an increase compared to 2017 — only 0,2%, then it was 101,8%). Albert Karimov repeatedly gave to understand that this dynamics (even within statistical error) took enormous effort of Tatarstan manufacturers. Now the industry of the region provides 45% of the GRP of Tatarstan, ranking the 5th in Russia.

Among the top five, the undisputed leader was oil refining, which showed an increase of 6,4% and received revenues of more than 800 billion rubles. Photo: Maksim Platonov

After reporting on the general result, Karimov passed to its components. He named five key sectors of the Tatarstan economy that traditionally ensure the growth of GRP – it is oil production, oil refining, chemistry, power enginering and machine engineering. Among the top five, the undisputed leader was oil refining, which showed an increase of 6,4% and received revenues of more than 800 billion rubles. ''This is the highest growth index of industrial production in the country,'' the speaker said.

The second was chemistry, which achieved growth of 3,8% and revenue of more than 450 billion rubles. By the growth rate, power industry is not inferior to oil refining — the same 6,4%, but the revenue was much lower — about 100 billion rubles. Oil production showed a modest increase of 1,8% with revenues of 600 billion rubles. The outsider this time was machine engineering, which managed to reach only 92,1% of the level of 2017. The industry has not known such a decline for the last two years. Nevertheless, the volume of revenue received by it amounted to impressive 528 billion, the minister added.

Oil refining and chemistry brought to growth

Albert Karimov explained the rapid rise of oil refining by two factors. On the one hand, the industry increased oil refining to 17 million tonnes, increasing the production of diesel fuel and light gasoline by a third. On the other hand, the effect of a ''low base'' has affected, as in the previous two years oil refineries did not rise above the level of 94% by IPI. The minister said that with the launch of new facilities at TANECO the processing inside the region is going to grow to 2/3. A significant contribution to the increase in processing will be made by the completion of the Heavy Residue Conversion Complex at TAIF-NK.

Chemistry occupies 16% of the total industrial production and develops evolutionarily. At the end of 2018, the growth was facilitated by the implemented projects of TAIF. According to Albert Karimov, the enterprises of the group commissioned new pyrolysis ovens, Nizhnekamskneftekhim expanded the capacity of isobutylene, Kazanorgsintez increased the production of polycarbonates by 12%.

At the end of 2018, the growth was facilitated by the implemented projects of TAIF. Photo: Maksim Platonov

Power industry is reducing the gap; machine engineering is lagging behind

Power engineering continues to reduce the difference between the generation of its own electricity and imported from outside. According to Karimov, last year the gap narrowed by 3 billion kWh, although this deficit was 7 billion kWh. In many ways, the commissioning of Kazan CHP-3, built by TGC-16, contributed to this.

''In machine engineering, the trend is different,'' Karimov said diplomatically. In the previous two years, the industry was the driver of economic growth, showing the highest growth rates. In 2016, it was 104,5%, in 2017 — 107%. ''This year, there has been a noticeable correction,'' said the minister, without explaining the reasons for the failure. Most Tatarstan machine-building plants are part of the state corporation Rostec, so it is clear that the sad outcome is due to a lack of sufficient contracts from the holding and the ministry of defence. Probably, things are not going well with the supply of products to other customers — LUKOIL, Transneft. But all this is read only between the lines.

Nevertheless, according to Karimov, mechanical engineering continues to develop, and KAMAZ remains the flagship of new projects. He reiterated that together with the company Daimler they are completing and are going to commission the plant of car frames, it has been signed an agreement between KAMAZ and the Chinese company Weichai on the establishment of diesel engine plants in Yaroslavl Oblast. The Kazan Motor Production Association (KMPO) opened a project on gas turbine plants with a capacity of 18 MW.

Albert Karimov found it difficult to say what the projected growth of industrial production is, explaining that even these final data are obtained ''from the wheels''.

KAMAZ remains the flagship of the new projects. Photo: Oleg Tikhonov

CDA-2 for Zainskaya GRES and dances around KZSK

Answering journalists' questions, the minister of industry and trade said that he expects Tatenergo to participate in the competition for CDA-2 (capacity delivery agreement) for the modernization of Zainskaya GRES and to continue to look for ways to save KZSK.

''The main issue that we have to solve is to find a strategic investor who would join this project with his own [money] and would undertake to complete the unfinished construction project of KZSK-Silicon and KZSK plant itself,'' the minister shared, meaning that the investor will have to drag two plants at the same time. ''The plant KZSK used to work on imported raw materials, but KZSK-Silicon is the production of raw materials for this plant. Everything is considered together and depends on how quickly and on what conditions we with the federal authorities will be able to find an investor,'' Karimov said, adding that the plant did not suspend its operation. According to him, a number of important positions on the state defence order are produced here, and despite the difficulties, the state defence was performed, although with great effort. Nevertheless, customers, including the defence ministry, are being in tension, and the number of their appeals is growing.

''The main issue that we have to solve is to find a strategic investor who would join this project with his own [money] and would undertake to complete the unfinished construction project of KZSK-Silicon and KZSK plant itself,'' the minister shared. Photo:

The minister said that a meeting had recently been held, to which about 40 partners had been invited, and expressed the hope that the key issue would be resolved in the near future. Let us add that in the near future the external management plan is going to be submitted for approval of KZSK creditors. ''This plan provides for measures to restore the debtor's solvency, including the return of receivables and the sale of non-core assets, as well as a subsidy to prevent the bankruptcy of the strategic enterprise. In order to approve this plan, the external manager of KZSK OJSC plans to hold a meeting of creditors in the first decade of February 2019,'' the press service of the ministry of industry and trade of the Russian Federation added.

By Luiza Ignatyeva