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Construction Project of the Power Plant Leaves Fewer and Fewer Unknowns
2009-03-12
The project for the construction of the new power and heat power plant in Kaunas is gaining momentum and, any moment now, it will get clear who becomes the winner of the competition for the technical supervisor of the construction of the power plant.
The Russian gas concern GAZPROM, who owns Kaunas Heat and Power Plant (KHPP) that produces heat to the city, intends to invest more than one billion litas to the new power plant. The new power plant will produce heat to the city and electric power to satisfy the needs of the whole Lithuania.
Recently, Kaunas politicians and the public have had doubts why the new power plant will be constructed not by KHPP, but the newly established company KAUNO ELEKTRINĖ. Will the future power plant ensure reliable heat distribution to the city and are the prices not likely to rise to the residents?
Recently, Kaunas politicians and the public have had doubts why the new power plant will be constructed not by KHPP, but the newly established company KAUNO ELEKTRINĖ. Will the future power plant ensure reliable heat distribution to the city and are the prices not likely to rise to the residents?
Interview concerning the above issues with Rimandas Stonys, the Director General of KAUNO ELEKTRINĖ and the Member of the Board of KHPP, currently producing heat to the city.
- How you, being the manager of the gas import company DUJOTEKANA, appeared in this project and why is it executed by your managed company KAUNO ELEKTRINĖ and not by GAZPROM or KHPP?
- In 2003, when Kaunas City Municipality was selling the power plant, which belonged to KAUNO ENERGIJA, it was sold as property, but not as a joint stock company. The property was acquired by a consortium, which established KHPP. The consortium agreement expressly defines that the power plant is purchased not by GAZPROM only, but by DUJOTEKANA as well. The given agreement also laid down that GAZPROM would hold 51 % of portfolio of the power plant, whereas other consortium partners would own 49 % of the shares. Following the agreement with GAZPROM, we were supposed to buy out the mentioned 49 %.
Thus, both of the shareholders were believed to become investors in the course of restoration of the power plant, but in the light of economic studies made, it has become clear that there was no point in reconstructing the old power plant and the new one needed to be constructed instead. Therefore, it was resolved that there was no need in buying out 49 % of the part of the old power plant, but to construct the new one by maintaining the given proportion (51 % - subsidiary companies of GAZPROM, 49 % - subsidiaries of DUJOTEKANA). For the mentioned reason the new company KAUNO ELEKTRINĖ was established. In this company part will belong not only to KHPP, managed by GAZPROM, but also by one Western investor, with whom the shareholders’ agreement is being coordinated. Moreover, it will not be my company, as some people are trying to imply.
- Together with KAUNO ENERGIJA, managed by the Municipality, KHPP has not yet invested the funds, estimated under the contract, into the development of the power plant, however, it is already now that you have been talking of an investment, reaching a billionth, into the new power plant. Isn’t that an attempt to evade the obligations?
- Following the investment agreement, concluded between KAUNO ENERGIJA and KHPP, the latter one is falling slightly behind the approved schedule. By no means could it be said that there had been no investment done. Investment was brought in from the first year when the power plant was purchased. According to the adjusted investment agreement, 162 billion was supposed to be invested before January 2009, whereas the remaining amount (238 billion litas) – before 2018. Yes, we are falling behind the schedule, but after long deliberations with the Municipality, the Mayor and KAUNO ENERGIJA, we have chosen the project with thrice-bigger investment into Kaunas.
The new power plant will produce the electric power, as well as heat. The more energy we produce and sell, the more heat production costs will be likely to go down. Should our colleagues in KAUNO ENERGIJA manage to rationally supply and distribute heat, the heat would be likely to get cheaper to the consumers.
The new power plant will produce the electric power, as well as heat. The more energy we produce and sell, the more heat production costs will be likely to go down. Should our colleagues in KAUNO ENERGIJA manage to rationally supply and distribute heat, the heat would be likely to get cheaper to the consumers.
- Relatively speaking, why is the new power plant necessary considering that the current one demonstrates quite reliable performance?
- KHPP, which produces heat to Kaunas, distributes up to 95 % of overall heat demand to the integrated urban heating network. It is almost the sole heat generation source but the equipment of the power plant is 34 years old. Taking into account the age, the two Russian turbines, which generate the energy and heat, demonstrate quite satisfactory performance. Nevertheless, considering the technical parameters and as things stand, when the gas stays at an expensive level, they are hardly efficient and reliable.
Thus, in 2003, when the sales contract of the power plant was signed, it was considered what investment projects should be undertaken by the consortium, which was establishing KHPP. The feasibility study considered 17 options. Based on the calculations and the assessment of risk factors, it was clarified that the optimum option would be the construction of an entirely new power plant, which would generate heat and electric power.
Following the assessment of specialists, in the beginning of 2013 the new power plant should start its operation. In the short run it will be announced who has won the competition for the technical supervisor of the construction of the power plant
- The global market witnesses the cheapening of oil, the prices of natural gas are likely to drop thereon. Will KHPP reduce the heat production price?
- As the gas prices are really losing ground, we are reviewing our price and we believe that since 1st April we will give the proposal on making the price lower by 2 cents per kilowatt-hour. The lower price will remain valid also in October when the new heating season will commence.
- Lately, it is more frequently likely to deliberate on the fact that urban heating network, i.e. KAUNO ENERGIJA, demonstrates inefficient performance and may be transferred into private hands. Are you not aiming at taking over KAUNO ENERGIJA too?
- It is the matter of the city municipality into whose hands the network will pass over and we will not interfere into that. The way the municipality will decide, namely to give the network and production over to one hands or leave separated, the way it will be. I would refrain myself from criticising and saying that the current heat economy in Kaunas is satisfactory or not, but for us, as heat producers with the production of heat for Kaunas reaching over 90 %, reliable and solvent customers are of highest importance.
- After selling the city power plant, KAUNO ENERGIJA, which was sunk in debts, received over 116 billion litas. It has been for five years that it was not imposed the higher heat price, but the company continues to show poor results and the heat lines have not been renewed so far. What reasons do you see?
- I would like to refrain myself from criticising and saying that KAUNO ENERGIJA drew insufficient focus on the maintenance, repair works and renovation of lines. However, it seems strange that heat production price in Kaunas appears to be the lowest in Lithuania (14.67 cents per kilowatt-hour), whereas the distribution price is one of the highest. The final price to city consumers appears to be also one of the highest in Lithuania, though, I would like to emphasise that heat production in Kaunas is cheaper as compared to that in the other towns.
So a lot needs to be done by Kaunas municipal government, as the owner of KAUNO ENERGIJA, and us, as heat producers. If our plans aim at one billion investment into the construction of the new power station, the city must deliberate on how to invest into making its economy more efficient and avoid the situation when Kaunas would have the most modern power plant in Lithuania, but the most archaic heat distribution economy.
© Kauno diena