Energy giant RusHydro has announced the signing of two agreements with Chinese businesses that could lead to the development of five hydroelectric power projects in Russia.
The first, signed by RusHydro (LSE: HYDR) CEO Evegny Dod and Power Construction Corporation of China Ltd. chairman Fan Jixiang, calls for the Russian utility and PowerChina to cooperate in the development of the 1,560-MW Leningradskaya pumped-storage plant.
The US$3.025 billion plant would be located near St. Petersburg and could be the first of several pumped-storage projects to be developed jointly in Russia and other countries.
"The agreement marks a major milestone in cooperation between Russia and China in attracting Chinese investment, technology and expertise into the Russian power sector," Dod said. "We strongly believe that this cooperation will create value for our shareholders and benefit the Russian electricity sector, as the development of highly maneuverable pumped-storage capacity in Russia is a key to improving reliability of the power system and electricity supply."
RusHydro will hold a 51% interest in the joint venture, with PowerChina controlling the remainder. The companies plan to raise between 70% and 75% of the funds required for Leningradskaya via Chinese and Russian lending institutions, following reviews of feasibility studies and economic parameters, and the selection of an engineering, procurement and construction contractor.
"PowerChina attaches great importance to Russia's electricity, infrastructure and road development," Jixiang said. "Today the largest companies of China and Russia -- PowerChina and RusHydro -- joine their efforts to pursue the construction of the largest pumped-storage plant in Russia. I am confident that our project has great prospects and will be a success."
The companies previously signed a number of agreements in May calling for cooperation in developing an unspecified number of small hydropower projects in Russia's Far East region.
The second preliminary agreement could see RusHydro develop four hydropower projects in Russia's eastern region with China Three Gorges Corporation.
The plants could have a cumulative output capacity of up to 2,000 MW and would also serve help control flooding in Amur Oblast and Khabara Kray. Included in the plan are the 400-MW Nizhne-Zeyskaya, 300-MW Selemdzhinskaya, 462-MW Giluyskaya and 600-MW Nizhne-Nimanskaya projects.
"By signing this agreement, I hope that China and Russia can achieve a stronger cooperation in clean energy development and a closer Sino-Russian strategic partnership, bringing benefits to the people in the Russian Far East and along Helongjiang River in China," CTG chairman Lu Chun said.
RusHydro will have a 51% share in the joint venture and CTG a 49% share. The total cost of the projects is estimated at $5.03 billion -- 70% of which would be raised from Russian and Chinese institutions via long-term power-purchase agreements.
"We have signed not just a protocol of intent, but comprehensive practical documents, describing specific measures aimed at the development of large-scale energy projects in the Russian Far East," Dod said. "Our Chinese partners will be actively involved on all stages of the projects' development -- engineering, procurement and construction.
"In addition to protecting vast territories -- both on Russian and Chinese banks of the Amur River -- from catastrophic floods and contributing to the development of modern power infrastructure in the region, the projects will provide additional stimuli for economic growth and job creation."
The companies signed an agreement this past October expressing their interest in construction projects along the Amur River that could benefit both countries.