Page 108 - RusRPTFeb19

measures, such as tax relief, subsidies and an increase in export, which are aimed at lowering the cost of production to make renewables competitive. The optimal level of renewables is 3-5% out of 250GW capacity.
Minister of Energy Alexandr Novak has confirmed that the government decree on the modernisation stimulus package, the so-called DPM-2, will be adopted in late December-January. According to the minister’s forecasts, the decree would allow up to RUB 2tn of investments into modernising fossil- fuel generation in Russia. Elsewhere, Novak confirmed that the Ministry aimed to finalise the required legislation base for launching the long-term tariff regulation in the regulated electricity sectors from 1 July 2019. The adoption of DPM-2 is long overdue: gencos had anticipated the actual auction for selecting the projects up for modernisation to take place in November 2018. However, the legislation has still not been fully adopted. Nevertheless, Novak’s confirmation at such a respected forum of the tight deadlines indicates there is little chance of further delays. We view the second investment cycle in fossil- fuel generation as value-creative, with InterRAO being one of the biggest beneficiaries of the process (see our Russian Utilities - Genco modernisation handbook, of 28 June 2018). The adoption of a long-term tariff methodology for regulated businesses (predominantly for grids - both MRSKs and FSK) is a more challenging issue. The concept does not currently give a clear answer on what economic rationale would back up electricity grids’ current investments and how dividend payments fit into the tariff build-up within the long-term tariff mechanism as this component is not envisioned, with grids offering to distribute cost savings as potential dividends. Thus, besides the predictability and transparency of long-term reveunes, the methodology has significant barriers to further unlocking shareholder value in this deeply discounted sector.
9.1.11 Metallurgy & mining sector news
Russia’s gold production rose around 3.4% on the year to 243.06 tonnes in January–September, the Union of Gold Producers of Russia said on Tuesday in a statement. Mined gold production increased 3.4% on the year to 194.857 tonnes, while by-product gold production fell 12.8% to 11.689 tonnes, gold scrap production went down 3.8% to 25.103 tonnes, and gold concentrate production increased more than 50% to 11.411 tones. Silver production decreased 1.6% on the year to 1,204.71 tonnes in the period. The union confirmed its forecast for gold production to grow 3.3% to 328 tonnes in 2018 and for silver production to increase 2% to 1,600 tonnes.
9.1.12 Transport sector news
Russian Railways (RZD) will invest RUB1.7 trillion ($25bn) in infrastructure until 2024, First Deputy CEO Vadim Mikhailov said during the Gaidar Forum in Moscow on January 17. “The combined amount of investment stands at RUB2.4 trillion, of, which Russian Railways is to contribute RUB1.7 trillion,” he said as cited by Prime. The list of infrastructure projects includes quadrupling container transit until 2024, upgrades of the Baikal-Amur Mainline and the Trans-Siberian Railway to the Pacific ports that start receiving 180mn tonnes of cargoes in 2024 and 210mn tonnes in 2025 with coal accounting for the bulk of the amount, he said.
With pressure rising from the financial-economic block of ministers and officials in Moscow, a final decision on the Moscow-Kazan high-speed
108 RUSSIA Country Report February 2019 www.intellinews.com