However, a large part of the world, mostly Western, is looking with a certain degree of suspicion at Rosatom, not only because it is Russian, but also because it's state owned. Especially in today’s political situation it is not easy for Rosatom’s management to claim and convince the political and industrial world that “we only do business on economic terms, we fulfil all our contracts even with the Ukraine and the US, and no EU- or US sanctions are directed against us,” as Kirill Komarov, Rosatom’s First Deputy General Director, assured recently in Moscow at the VII International Forum Atomexpo.
In Russia, Rosatom is the only supplier and operator of its 34 NPPs and it is in charge of the world’s only nuclear-propelled icebreaker fleet. Furthermore, the group is responsible for the country’s nuclear weapons complex’s facilities. However, you won't read a word about this in the company’s report Key results of 2014. Moreover, in December 2014, the international consulting company KPMG confirmed “the compliance of the activities of internal audit directorate of State Corporation Rosatom with the international professional standards of internal audit and ethical code”.
Rosatom was founded in 2007 but it all began in 1945 as the First Chief Directorate to take charge of the Soviet Union’s nuclear industry. So, this year it is celebrating its 70th anniversary. In 1953 it became the Ministry of Medium Machine Building, in 1989 the Ministry of Atomic Energy and Industry and in 2004 the Federal Agency of Atomic Energy and – finally (?) – in 2007 the State Atomic Energy Corporation Rosatom. It is neither part of the Ministry of Defence nor of the Ministry of Energy. Some in Moscow call it a state inside the state.
Rosatom slowly moved its way into the global market. In 2009, just 1 of its reports was published in English, in 2013, 11. The company “is authorised on behalf of the Russian Federation to fulfil the international obligations of Russia in the field of peaceful use of atomic energy”. The value of the 2009 portfolio of foreign orders amounted to USD 17.1 billion (€ 15.53 billion) and in 2014 USD 101.4 billion (€ 91.4 billion), up 39% from the previous year. The proceeds are expected to grow from RUB 618 billion (€ 9.9 billion) in 2014 (2013: RUB 529 billion; € 8.55 billion)) to RUB 1,629.29 billion (€ 26.33 billion) in 2020. The profitability (EBITDA) improved from 29% in 2013 to 34% (RUB 211 billion; € 3.41 billion) in 2014. By the way, Rosatom is a non-profit company. It is headed by a Supervisory Board, chaired by Boris Gryzlov, Permanent Member of the Russian Security Council. Rosatom’s CEO is reporting to the Board, The President and the Prime Minister.
At the Moscow forum, visitors, among them many journalists, to a large extent invited by the organisers, were surprised by the far-reaching efforts of Rosatom’s management to present the company as one which would like to compete at the same level as their foreign competitors and, especially, not be regarded as a political tool of the Russian government. Kirill Komarov, First Deputy General Director, stood in the forefront of what one might call a charm offensive, when he, with short notice and outside the preannounced programme, held a press conference which lasted for 90 minutes. He answered every question; one never got the feeling that he tried to avoid certain issues, and one got the impression that he is the person who is present at all the negotiations. “He is”, said a member of Rosatom’s PR-team and added that in 2014, when Russia had 247 working days, Komarov counted 112 travel days. During the press conference, he told Ukrainian journalists that he would like to visit their country, and that he has “profound respect for any nation’s right to make its own decisions”. The question was about the future of the unfinished Russian-built Khmelnitski plant. Kirill Komorov assured, “we will finish this project” and added, “after some time, when the tensions disappear and we can return from political to economic issues.” The journalists honoured his overall performance with applause.
Rosatom tries to go its own way
Quite a few delegates and visitors at the Forum noted a change in attitude and a different kind of performance by a Russian state owned company than what is usually seen. One comparison often drawn was with Gazprom. According to some, Rosatom was under strong pressure to follow the hard-line position against the Ukraine taken by Gazprom at the beginning of the Ukraine crises. Rosatom CEO Sergey Kirienko and his collegues chose another way. “We must keep politics outside the nuclear business and should stick to contracts”, so that's the Kirienko strategy, and up to now he has followed this quite successfully. Or as one foreign delegate put it, “he is still allowed to go this way, because he can show good results.”
Ariane Sains, Nordic and Baltic correspondent for Platts, a subsidiary of the US-publisher McGraw-Hill, compared last year’s forum with this year’s: “I would say that the mood at the conference this year was more upbeat. Given the situation with Russia and the Ukraine, the positive atmosphere is interesting. There seems to be a genuine feeling that Rosatom can get into Western markets in spite of the geopolitics. At the conference last year, the crisis had just started. Rosatom’s management made efforts to distance itself from the politics of the situation, but their efforts were far clearer and more far-reaching this year.”
Marja Manninen, correspondent for Finland’s public service radio YLE, and Anna-Lena Laurén, correspondent for the Finish daily newspaper Huvudstadsbladet, both based in Moscow, also see changes towards more openness, however, according to them, the platform is still the same. Laurén is of the opinion that, “Gazprom and Rosatom are very much like each other. They follow the logic of all big Russian state owned companies. As a journalist, it is very difficult to get direct comments from them, and they would prefer all communications be initiated by them.” Marja Manninen states that, “Rosatom has its own policy but it is not independent. It has a clear connection with Russia’s policy. Especially looking at today’s economic situation, there are not many businesses which perform well. Nuclear power is one of them – the defence industry another.”
Aleksej Sjtjukin, nuclear power expert working at the St. Petersburg branch of the respected Norwegian environmental organisation Bellona, says: “Rosatom is state owned. The resources for the construction of NPPs derive partly from the Russian State partly from the company. That is why foreign private companies often cannot compete over price with Rosatom. The company doesn’t answer our questions which part comes from where, that is, they claim it's confidential. It is equally difficult to get more details about international construction contracts. However, this is good business for the Russian State.”
Finland’s key role
On the international markets, Rosatom and its more than 350 subsidiaries with about 262,000 employees are represented in more than 40 countries, from China, Bangladesh and India, to Argentina, Nigeria and Iran. It is advertising itself as a company offering all stages in the nuclear cycle with a high degree of flexibility and the desire of local partnerships. It sees itself on the front line of technology, meeting the highest safety requirements, extended operational life expectancy to 60 years and providing different financing options.
However, in the Western world the Russian nuclear industry is underrepresented. Hungary, Finland, Czech Republic, Slovakia and Bulgaria are the only EU-countries with Rosatom reactors. But it just got a new chance: If everything goes according to plan, in 2024 Finland will start its Rosatom NNP. Rosatom not only got the order for the turnkey delivery of an AES-2006 PWR reactor, it has also taken a 34% share in project owner Fennovoima. The Finnish decision has not been undisputed, neither in Finland nor abroad. Two of the major arguments were, that Finland should not get into a new energy/financial dependency on Russia, and in today’s situation it would not be appropriate to enter into such an agreement. Fennovoima’s response is clear: “We chose the best option available”. Furthermore, after many decades of intense trade relations with the Soviet Union/Russia, the former President of Finland Tarja Hallonen stated once in an interview that, “we had our troubles with them, but they never violated any contracts.”
This agreement is as important for Fennovoima as it is for Rosatom and Russia. “One can say that Finland has a decisive roll”, says Marja Manninen. It is the best recommendation the Russians can get for further business in Western countries. Finland is known for its stringent safety regulations, just ask the French and Areva. The importance of this project is obviously also recognised in Moscow. The Russian minority partner of Fennovoima is responsible for the procurement of financing by loans for the whole construction phase. Recently the first allocation of approximately € 920 million out of a total of € 2.4 billion has been transferred. The State Welfare Fund, which gets its funds out of revenues from the oil and gas industry, is the source of this payment. In an email, Rosatom told EER, “we have received strong support from a pool of Russian and global financing institutions to lend into the project which indicates that the project is financially very sound”. Partly as a result of the first trench, the Russian state support volume for Rosatom projects increased to RUB 216.9 billion; € 3.5 billion (2013: 151.5 billion; 2.45 billion) in 2014.
Russia is using another tool to promote business with Rosatom. The company and Russian universities are offering extensive education and training programmes for future nuclear engineers and other experts. In Russia itself, a consortium of 14 leading universities today provides two thirds of Rosatom’s employees annually. This year, just above 1000 international students are studying nuclear sciences in Russian universities. The 2015 intake of about 300 students came from 37 countries.
Russian disarmament uranium for US NPPs
At the Atomexpo Forum one single issue of Russian-US cooperation was mentioned several times: The HEU-LEU Agreement. First signed in 1993 and renegotiated several times, it was finally completed in November 2013.
The content of this agreement, also known as the Megatons-to-Megawatts programme, stipulated that Russia extract high enriched uranium (HEU) from its dismantled nuclear war heads, convert it into low enriched uranium (LEU), then export it to the US where it is being used in nuclear power plants. When completed, Russia had converted 500 tons of nuclear weapons grade HEU and exported 14,446 tons of LEU to the US. Contrary to previous similar programmes that were financed by the US, the HEU-LEU-Agreement was based on market driven mechanisms. The economic effect from implementing the Megatons to Megawatts Programme is estimated at about USD 17 billion, 50% more than its initial estimate. These proceeds played a significant role in stabilising the economy of the Russian nuclear sector during the system-wide crises of the 1990s. The Russian supply covered half the annual demand of US nuclear power plants for enriched uranium services.
The prospects for further LEU-export are dependent on agreements between US NP operators and the Russian company Tenex. In times of growing tensions in international relations, it is worthwhile to remember the success of the HEU-LEU Agreement, said Daniel Poneman, former US-Secretary for National energy Policy, to the delegates in Moscow at the Atomexpo.
Image: The main control panel at the Leningrad nuclear power plant in Sosnovy Bor. By Alexey Danichev, RIA Novosti archive. CC BY-SA