Alexander Ignatyuk, analyst of Energocapital IC

– Rosatom is an agent of the state policy to ensure high employment level

Atomenergomash OJSC (part of Atomenergoprom OJSC) and the majority shareholders of Energomash (UK) Limited (Alexander Stepanov and Aleksey Plescheev) have signed a memorandum of mutual understanding giving 50% + 2 shares of Energomash (UK) Limited to Atomenergomash. The parties have agreed to finalize the price of the shares and to sign the buying-selling contracts in a month. By that time Atomenergomash will complete Due Diligence of Energomash Group. The money earned from the deal will be spent on the repayment of the Group’s debts to commercial banks. The remaining debt will be rescheduled through an agreement with the creditor-banks. The acquisition of a controlling stage in Energomash is part of Atomenergoprom’s policy to foster competition among suppliers of NPP equipment of long manufacturing cycle. Particularly, Atommash plant is supposed to become a new supplier of reactor equipment.

Nuclear power equipment production is traditionally a closed sector in Russia and is still dominated by monopolists. This complicates pricing for specific types of equipment. The key tasks for the moment are to ensure stable supplies of components for nuclear power plants and to attain fair prices for them. The acquisition of controlling stake in Energomash (UK) Limited by Atomenergomash is aimed at creating competition on this market especially as the crisis is forcing us to optimize our expenses.

On the other hand, Energomash Group is a very attractive asset for investors. After the crisis we will again need power generating capacities to meet the growing demand of our reviving industry. Some regions will suffer acute energy shortages. So, we have no right to reduce our NPP construction program. The construction of a nuclear power plant is a long process – it takes an average of 5–6 years – and even the most pessimistic experts say that in 5–6 years the crisis will abate.
 
Energomash enjoys wide ties with foreign consumers (over 20% of its products are exported to the CIS, Europe and Asia). The Group produces a wide spectrum of goods and here we can redistribute efforts in case of changes in the demand for one or another type of equipment. This deal also has social implications: Energomash Group employs as many as 12,000 people. Some of them might lose their jobs if the Group faced financial problems. In this light, Rosatom acts as an agent of the state policy to ensure high employment rate in Russia.

This deal is beneficial for Rosatom especially as it has been made at the right time: due to the crisis Atomenergomash may enjoy certain concessions in purchasing Energomash.

Note

Energomash (UK) Limited is a company of Energomash Group. It comprises Atommash (Volgodonsk), Belenergomash (Belgorod), Chekhovenergomash (Chekhov, Moscow region), Barnaul Kotelny Zavod and Uralelectotyazhmash-Uralgidromash (Yekaterinburg) as well as a number of engineering centers and construction and installation organizations. Energomash (UK) Limited also holds a 58% stake in Energo TPP, a company building gas-turbine low-power TPPs. Energomash Group is one of the leaders of Russia’s power machine building and manufactures equipment for different types of power plants. The target markets of the company are equipment for nuclear, thermal and water power plants, oil-gas and mining industries, metallurgy, railways, construction and other sectors. Energomash exports almost 20% of its products to the CIS, Asia and Europe.

The manufacturing enterprises and engineering centers of Energomash Group are situated in eight regions of Russia and employ a total of 12,400 people. The incorporation of the Group into Rosatom State Nuclear Energy Corporation will help it to fully use its industrial capacities and to avoid personnel reduction.