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Where there is no law, but every man does what is right in his own eyes, there is the least of real liberty
Henry M. Robert

Investments good, orders better Will Kharkiv get a consolation prize for refusing to participate in the Bushehr project?

13 November, 2012 - 00:00

Richard Morningstar,
US presidential special aide, will arrive to Kyiv in mid-June. He will meet with the oblast leadership and management teams from the Turboatom plant, electromechanical plant, and Pivdenkabel (Southern Cable).

It is rather easy to see what interests the guest: the Ukrainian energy machine-building. This is the sector, which once constituted the basis of the industrial power of not only of Kharkiv, but of the whole Soviet Union. In practice all power plants were equipped with domestic, not imported, machinery. The Kharkiv power machinery plants also had a solid position in foreign markets, selling its wares in the Third World countries, Latin America, Finland, and former Comecon states.

Without doubt, the Morningstar visit is directly connected with the recent political scandal over the Russian order of power units for the Bushehr nuclear power plant in Iran. Then President Kuchma agreed not to supply the units to Iran under pressure of Madeline Albright, US Secretary of State. Morningstar is slated to discuss these problems in Kharkiv.

Management teams are awaiting the American guests. But every enterprise has its own interest. Pivdenkabel seeks cheap loans to launch wire manufacturing, the electromechanical plant wants to establish a joint stock holding company and needs $8 million in direct investments to manufacture electrical machinery. The plant is ready to sell a 26% share package in the holding company and 26% packages of all its subsidiaries. Turboatom does not need this kind of monetary injection because the financial damage due to canceling the Iran order considerably exceed the needs of the other enterprises together. They should be talking about satisfaction, not compensation.

One way or another, bids will be made during the visit. But if we suppose that all the needs of these enterprises be satisfied, who would buy their products? Domestic consumers? Albright had this on her mind when promising aid from the States, but she failed to take into account Ukraine’s low paying ability (purchasing power).

“We do not need help, what we need is business cooperation,” said the head of the oblast fuel and energy department of Kharkiv state administration Volodymyr Uhlov. “Small bits will do us no good. The energy projects for Kharkiv oblast presented at the EBRD annual meeting total over $1.5 billion. Among them are reconstruction of heat power supply line No. 5 and modernization of the Zmiyiv heat power station. There is also a joint project with Turboatom. The pay-back terms for such investments are different - from two to five years, which is a perfect index for the energy sector. But Americans do not invest in state enterprises. The question of energy sector privatization has been put off. We can have some help from people like Morningstar at the early stage, but later we will need our own major capital investment. Ukraine, however, is not ready for a burst in the development of the energy sector, so I do not expect much from the visit.”

According to the Ministry of Atomic Energy Sector, the equipment at the Dnipro and Dnister cascades needs to be reinstalled. The turbines and power generators are also worn out, but the generating enterprises are short of the money needed for modernization and reconstruction. The plants also fail to loan them the equipment. To be straight, machinery plants are badly in need of orders and not only investment.

 

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