UC RUSAL approves the JSC Boguchanskaya HPP procurement programme for 2009.
Yesterday, 9 June 2009, a meeting was held of the Board of Directors of JSC Boguchanskaya HPP, at which the procurement programme for 2009 was approved. Moreover, UC RUSAL, a partner of JSC RusHydro in construction of the Boguchanskaya HPP, remitted 256 million roubles for construction needs. By the end of June, RUSAL plans to transfer another 551 million roubles. In this case, to redeem all the debts to its partner and continue construction, it will be necessary to remit another 896 million roubles in July 2009 for construction of the Boguchanskaya HPP, sign statements of work performed by the main contractors and release payment to contractors. In addition, also by the end of June 2009, RUSAL should sign a coinvestment agreement setting out in detail the payment timeline and amounts for construction of the Boguchanskaya HPP.
"We are pleased to note that RUSAL has backed off from its proposal to freeze construction of the Boguchanskaya HPP completely, and once again sees the project as a strategic and priority one for itself and has started paying off the construction debts," stresses Alexander Toloshinov, member of the Management Board of JSC RusHydro. "We hope our partner would confirm its public position by its deeds: before the end of June, our partner should sign an investment agreement on construction of the Boguchanskaya HPP up to 2012, which will specify the timeline and amounts for financing the construction. The signing of a legal document on the financing procedure will allow the partners to focus on construction and guarantee prompt payment to all participants therein for services rendered."
The draft agreement envisages a monthly timetable for payments up to the end of the project and does not hamper raising of outside financing. Each partner, being aware of the payment schedule, can, if necessary, apply for bank credits in advance and raise project finance. In addition, at the demand of the banks, if they are prepared to allocate funds for the BoHPP project, it will be possible to adjust the pattern, volume and mechanisms for financing the work. The draft Coinvestment Agreement also sets out explicitly the penalties to be imposed on a partner that violates the payment schedule. If, however, the partners intend to finance the construction in due time and in the required amount, fines are of no concern to the parties: if the obligations are duly discharged, it will not be necessary to pay them.
The existing partnership agreement proved to be inadequate, under the conditions of the financial crisis, with respect to payment of the work on the Boguchanskaya HPP, since it allows any partner, virtually with impunity, to halt the financing and wait for financing from the other partner first. Given the extremely intensive construction schedule, with only 18 months remaining until start-up of the first phase of the HPP, such "vague" obligations entail a high risk of start-up delay.
JSC RusHydro agrees that RUSAL's obligations to provide full financing for the BoHPP by the end of construction should be approved by RUSAL's creditors and shareholders. This will preclude any possible subsequent disputes by creditors with respect to the investment agreement or blocking by them of the financing for the BoHPP on the part of RUSAL in the event of a further drop in aluminium prices.
Let us recall that, on 25 May 2009, a meeting was held of the Board of Directors of JSC Boguchanskaya HPP, the agenda for which included the item on approving the procurement plan for the Boguchanskaya HPP for 2009. The representatives of UC RUSAL voted against approval of the procurement plan, thereby blocking procurement procedures for continued construction of the Boguchanskaya HPP during the current year. The lack of any approved procurement plan for 2009 put in jeopardy the schedule for implementation of the Boguchanskaya HPP construction project, since, from this time, purchase of materials and services from contractors has ceased.
Since the beginning of 2009, UC RUSAL has blocked resolutions to make payments to contractor organizations and suppliers of building materials participating in construction of the power plant. Representatives of RUSAL on the Management Board of JSC Boguchanskaya HPP have refused to sign statements of work performed and ensure payment for the services of contractor organizations and suppliers of building materials to the tune of 500 million roubles as of May 2009. The aggregate debt to contractors today stands at 1 billion roubles (including the cost of work performed for which the partner has not signed statements since the beginning of the year).
In accordance with the conditions of the partnership agreement, the project is financed on the "two keys" principle: payment is made for all work connected with construction of the power plant only once relevant resolutions have been adopted by both partners - RusHydro and RUSAL.
Previously, representatives of JSC RusHydro repeatedly declared the need to resolve the payment situation by the end of June 2009. If the construction continues to be blocked beyond June 2009, the construction schedule may be breached. In particular, there is already a delay in erecting two travelling cranes with a lifting capacity of 525 tons on the headrace of the power dam required for installing the hydropower equipment of the HPP. Delayed traveling cranes erection puts off installation of the first turbogenerator unit by 2 months. Owing to the blocking of payments to suppliers of building materials, there were short deliveries of cement, mineral powder and rolled metal to the site already in the first quarter of this year.
Even in the absence of funds and a shortage of building materials, contractors are still conscientiously fulfilling their obligations with respect to construction of the power plant, but continued failure to observe the financing schedule might have an adverse impact on the project's implementation. RUSAL's blocking of payments and the absence of a clear position with respect to the project finance scheme up to its conclusion in 2012 cast doubt on whether the current construction rates can be maintained and will lead to failure to meet the preset deadlines for commissioning the first turbogenerator units in 2010.
The builders are concerned that the lack of timely and full project financing will prevent work being launched on erecting the HPP building and might also greatly increase the volume of hydropower and hydro-engineering equipment installation and structural steel erection required for commissioning the start-up complex in 2010.
By January 2010, it is planned to carry out the following construction and installation work at the Boguchanskaya HPP: to lay 245,575 cubic metres of in-situ concrete and 5,235 cubic metres of precast reinforced concrete; to erect 6,533 tons of structural steel and install hydro-engineering equipment and 2,752 tons of hydropower equipment; to lay 24,000 cubic metres of bitumen concrete; to carry out 2,692,819 cubic metres of drilling and blasting operations; to carry out 6,195 running metres of cementing of the foundation of the rock-fill dam; to install 2,618 tons of gate equipment at the power the dam and spillway No. 1 and 432 tons of hydraulic cylinder equipment at the headrace of spillway No. 1; to install 500 tons of gate equipment at the HPP building; to erect 2 travelling cranes at the HPP building with a lifting capacity of 525 tons each and two gantries with a lifting capacity of 500 tons and 140 tons, respectively, at the headrace of the power dam and at the tail bay of the HPP building; to install 1,420 tons of hydropower equipment at turbine sectors No. 1 and 2 of the HPP building.
At a meeting of the Russian Federation Government on 9 April 2009, chaired by Vladimir Putin, a resolution was adopted to observe the construction rates and deadlines for start-up of the 600 MW first phase of the Boguchanskaya HPP in 2010. All parties to the project were instructed to ensure construction was under way as soon as possible and to determine the final project financing scheme for the entire construction period. It is planned for all nine turbogenerator units of the Boguchanskaya HPP to reach full capacity (3000 MW) by 2012.
Shares / ADR