In Davos, Artem Volynets CEO of En+ talked to Caixin Journal on Sino-Russian hydropower and other issues.
Caixin:China is one of the biggest consumers of resources and energies. We have always this question, how can China secure all its resources needed when many incidents are happening all around the world right now?
The key is China is rich in some resources, and some other resources, has to import. And the key sourcing area for China is South Africa, Australia, South America and Russia. But Russia is not prominent yet in the major resource exports to China. We do believe that it will become a major, major supplier, and the bilateral trade will increase very substantially, because Russia is a stable economy with a stable political structure. Just across the border from China, Siberia, which is the closest part of Russia that is next to China, has more mineral resources than one can possibly imagine. It’s a major Canada that it has not been developed, has all the possible elements that China needs. So, the key is close economic preparation, long-term contracts, offtake contracts, mutual investment, cross-border investment to secure the long-term offtake contracts. And that is starting to happen already.
I have to ask another particular mineral. It’s about aluminum. Aluminum prices just recently dropped further. How do you see this phenomenon? This is temporary or this is a trend?
Again, China plays an enormous role in aluminum. Aluminum is nothing else but a solidified form of energy. China produces roughly and consumes roughly 40 percent of aluminum globally. At the same time, it doesn’t really make sense for China to produce as much because, given China’s need for energy, producing aluminum in China is a wasteful way of using energy. It is much better to supply its downstream plants using aluminum exported from Russia. We do see that there is a strong shift in the plant closures in China. So far, we’ve seen announcement of around 1.5 million tons. They have, it will increase further as tariffs in China increase, as tariffs for energy increase, because energy is a key source for production of aluminum. Once China starts shutting down production, that will have an immediate effect on aluminum prices. In fact, aluminum prices have started to recover from the lows we’ve seen at the end of last year.
Another thing is that people are talking about the BRIC countries, including Russia. But other economies seem to be more diversified than Russia. Russia, of course, has a lot of minerals and energies. But do you think there is a shift or restructuring of this economy?
I think one shouldn’t drop what he’s doing in order to diversify, right? The question is what you do with the revenues that you get for selling raw materials, oil, gas or metals. That is the key element and Russia has made some important steps in investing those revenues in new economy and modernization and innovation, etcetera. And that trend will continue. But it doesn’t mean that Russia will stop producing oil or stop producing metals. That element will always be there.
So one of the subsidiaries of En+, the ESE, has had joint venture, joint project, with China Yangtze Power. Why these two powers get together on this project, and how is that going?
It’s very logical. We are the largest hydropower company in Russia. Yangtze Power is the largest hydropower company in China. We have lots in common, we understand how the hydros work. We had, over the last two years, we had a number of meetings and discussions and decided that we trust each other and we can do business together. We are currently doing a feasibility study on the first project in Russia, with a view that that project and some other projects we’re looking at will eventually supply China with clean hydropower from Russia. As China industry needs are growing fast and yet, at the same time, 70 percent of Chinese energy mix is coal-fired power stations. And with the state goal of reducing CO2 emissions by 45 percent, Chinese government needs to look into other sources of energy, alternative energy, renewable energy. And they are doing a lot, investing in wind turbines, investing in nuclear, etcetera. But the bit which we bring to the table and which is very important is hydropower which is just across the border in Russia, which can be delivered to the center of consumption in China. For example, from Siberia straight into Beijing, if a power line is to be built, and if all the economic ingredients are in place to do that. And recently, given that reapproach we’ve seen in political sphere between Russia and China, the political ingredients are there as well. So this is something we believe that will happen.
So RusAl, Russian Aluminum, has been listed in Hong Kong. Do you have any similar plan like them?
Of course. RusAl was the first Russian companyto list in Hong Kong. They are very happy with that experience. We do believe that Hong Kong will be a place for many other Russian or emerging-market companies as the BRIC companies that will come to that market. Because Hong Kong has the benefit of a massive inroad into the Chinese financials, of a billion plus of Chinese people, that eventually will be allowed to invest in the stock market like in Hong Kong. Also, the story of RusAl is well understood there because it’s an aluminum producer which is supposed to supply China with aluminum. Yes, we have other plans for other companies in the group and perhaps even the group itself that may list in Hong Kong at some point in the future. That decision is not taken yet. We need to be prepared. But, yes, we are very happy with our experience and look forward to continuation of that.
RwB has to admit that Mr,Volynets” rethorics has not changed despite obvious demonstration that hydropower development in Russia does not produce “environmentally clean energy”, but is associated with many severe social and environmental impacts. Week of actions to stop Trans-Sibirskaya Hydro,which is likely “the first project in Russia” referred to in this interview, will likely make En+ to think about less damaging means to meet its business goals.