Chinese to rescue Russian coal-fired power expansion

By Simon Shuster and Jacqueline Cowhig - Analysis

MOSCOW/LONDON (Reuters) - Chinese engineers are coming to the rescue of the Russian electricity sector, as outgoing President Vladimir Putin backs a five-year expansion plan that will rival Lenin's drives to electrify the nation.

An estimated 41,000 megawatts of new generating capacity is to come on line by 2011, much of it coal-fired rather than gas, a goal that is way out of reach for Russian machine builders, and even threatens to swamp the order books of global giants such as General Electric Co (GE.N: Quote, Profile, Research) and Siemens AG (SIEGn.DE: Quote, Profile, Research).

In search of an alternative supplier, Russian power producer OGK-2 OGKB.MM turned to a consortium of Chinese engineering firms, led by Harbin Turbine Co., granting them a tender to build two 660 MW coal-powered turbines by 2012. It was the first such deal in the sector between Russian and Chinese firms.

"It is simply a necessity for us to work with the Chinese. We will not get the capacity built otherwise," said Stanislav Neveynitsyn, executive director of OGK-2, Russia's third biggest fossil fuel-run generator.

Power producers TGK-12 KZBE.MM and TGK-13 TGKM.MM -- which are together installing 2200 MW by 2011 -- have also visited engineering plants in China.

"I can tell you they liked what they saw," Neveynitsyn said. "Our colleagues are watching our experience with the Chinese very closely."

Russia's former electricity monopoly Unified Energy System (UES) (EESR.MM: Quote, Profile, Research) designed the ambitious growth programme for the sector, which it says needs $135 billion of investment by 2015 if Russia is to avoid a critical shortage of power.

The sector has not seen such an overhaul since Soviet leaders Vladimir Lenin and Josef Stalin pushed to industrialise the country in the 1920s-1940s with little foreign help.