Remunerative heating

19.08.2013 — Analysis

In the next few years the Chelyabinsk Region is going to divest itself of all loss-making boiler plants.

Private business will pay the key role in upgrading the heat-generating sources. In 2011-2012 investors injected about one billion rubles earmarked for replacement of the equipment. As a result, the annual savings of the utility companies total about 170 million rubles. The RusBusinessNews reporter found out what bait was offered to investors to lure them into the South Ural housing and utility sector and what changes will be expected in the municipalities after the upgrading of the heat supply systems.

Inefficient boiler plants are a pain in the neck for utility companies. They cause sizeable losses and the service companies are unable to pay the suppliers of fuel and energy, let alone replace the obsolete equipment. As a result, the timely heat supply to the population is at risk, which is further aggravated by the higher probability of utility-related accidents. When the population refuses to pay for the "limping" heat and water supply, it means another gaping hole in the budget of the public utility companies. 

The endless circle can be broken by the upgrading of the heat supply systems in the municipalities where, first of all, loss-making boiler plants and time-worn utility systems must be replaced. The representatives of the Ministry for Construction, Infrastructure and Public Roads of the Chelyabinsk Region have told RusBusinessNews that the modernization implies considerable expenses, and no budget can bear them alone. Support from investors is indispensable. 

The regional authorities prepared numerous "baits" for business. Investors are offered long-term agreements securing unchanged utility rates within the payback period and for the next two years. In addition, the regional authorities allocate funds for laying of new heating pipelines and renovation of the existing heat transport pipelines extended to the new boiler plants. In total, 130-150 kilometers of pipelines are either replaced or revamped in the region annually. Furthermore, business can count on information and organizational support.

In 2011-2012 the cooperation started with more than 100 prospective investors. As a result, 87 inefficient heat-producing sources were renovated, replaced or decommissioned (the consumers switched over to individual heating). Previously, the losses caused by these sources amounted to 170 million rubles a year.

Private companies invested about one billion rubles in the construction of new boiler plants and renovation of the older ones. The investors who are interested in return on their investment spare no expense on advanced equipment. They install high-performance boilers, burners, pumps, automation systems, etc.

In 2011-2012, about 700 million rubles were allocated from the South Ural budget for laying and repair of the utility trunk lines. 

The flagship districts in the upgrading of heat supply utilities are the Agapovsky, Argayashsky, Satkinsky, Sosnovsky, and Kusinsky municipal districts. The most ambitious project of large-scale is being implemented in the city of Bakal. The public and private efforts resulted in construction of four up-to-date boiler plants having the total capacity of 60 MW. Three of them are already operating and supplying consumers with hot water; the fourth boiler plant will be launched by the beginning of the heating season. To attract investors the regional government invested 136 million rubles in laying of pipelines.

The old central boiler plant of Bakal was built in the 1960s and its losses in the past years totaled about 100 million rubles a year. Anton Ziganshin, the director of UralEnergoDevelopment, says that due to the new modular heat-producing sources, the gas consumption will decrease by 22%, while the electric power consumption will be reduced by 34%. The residents of the city will no longer have to take cold showers. 

Three worn-out boiler plants out of 14 were revamped in the Agapovsky District last year. In 2013, another eight heat-producing sources will be renovated. "Some of them will be revamped; the other boiler plants will be completely replaced by two coal-fuelled and two gas-fuelled modular plants. The design work has been completed; the old equipment has been dismantled. On August 19, the boilers bought with the money given by investors are expected to be delivered from Italy. This year the regional authorities have allotted us 60 million rubles for renovation of the heating networks," Alexander Zheleznov, the deputy head of the administration of the Agapovsky District, told RusBusinessNews. 

According to him, before 2012 the excess losses of heat cost the municipality 32 million rubles. After the up-to-date heat generation plants had been put into operation, the losses decreased to 13.2 million rubles. They are expected to be halved during this year. After the remaining inefficient heat-producing sources are replaced in 2014, the utility companies can reach the break-even point and set a course for profits. 

In the next few years the Chelyabinsk Region intends to upgrade all the boiler plants that are "going bust". There were 99 such plants as of the beginning of 2013. The annual damage caused by them totals about 184 million rubles. More than 2.1 billion rubles must be invested by the private sector to forget about the losses for many years. 

"In 2013 the tentative agreements were signed with private companies that agreed to build or finance the construction of 23 new boiler plants instead of 19.The regional budget allocated 250 million rubles for construction and upgrading of district heating networks. The expected result – it has already been proved on practice – improved quality of the heat and hot water supply services, trouble-free operation during the heating season," said the representatives of the Ministry for Construction, Infrastructure and Public Roads. 

According to the Chelyabinsk Region’s Governor Mikhail Yurevich, the modernization of the public utility sector must continue though attracting of private business and building long-term partnership relations. "Everyone should have a warm home," the regional head pointed out.