JSC "United Shipbuilding Corporation": Looking into the Future

Interview by Olga Loskutova

JSC "United Shipbuilding Corporation", the 100 percent Government capital based company, has been established by the Order of the President of the Russian Federation in June, 2007 as part of the reforms introduced to the Russian shipbuilding industry. The management company was registered in St. Petersburg. It took almost two years to establish the structure and the authorized capital of the corporation and this process was completed in due terms - by April 1, 2009. We herein interview the President of JSC "United Shipbuilding Corporation", Mr. Vladimir Pakhomov.

- Vladimir Alexandrovich, the Corporation includes over 30 large-scale shipbuilding enterprises and design and construction bureaus located all across Russia. What does this powerful vertically integrated structure represent?
- The Corporation unites leading design, shipbuilding and ship repair yard capacities of the country. Nowadays JSC "United Shipbuilding Corporation" comprises almost two thirds of all scientific, design and shipbuilding companies and over a half of overall production capacities. The Corporation includes three sub-holdings which join factories and shipyards on territorial and geographical basis. They are: JSC "Western Shipbuilding Center" (St. Petersburg), JSC "Northern Shipbuilding and Ship Repair Center" (Severodvinsk), and JSC "Far East Shipbuilding and Ship Repair Center" (Vladivostok). These shall also be joint by four more ship repair factories of the Ministry of Defense as soon as they undergo the financial recovery procedure.
Nine design and development bureaus form a separate group in line organization with the head company.
We are currently working on expansion of the Corporation through accession of development bureaus and shipbuilding capacities located in the Volga region and Southern region. 13 to 20 more enterprises shall be integrated to become part of JSC "United Shipbuilding Corporation". We are now studying and evaluating their current condition.

- Today over 70 % of overall production of the Russian shipbuilding industry is devoted to building warships. Enterprises and design and development bureaus which have joined JSC "United Shipbuilding Corporation" are also mainly aimed at defense purposes. On the other hand, one of the key tasks for the Corporation is to create the conditions for development of civil shipbuilding industry. How viable is this intention?
- Indeed, this is a very complicated task that lies before us. Most enterprises require intense modernization. In order to construct modern civil ships, new shipyards need to be erected and a specialized design and development bureau shall be established. This is what we are going to do. A shipbuilding complex, 250 Mtpa metal structure capacity, is planned be created in the West region to cover the demand for 8-10 heavy-tonnage vessels. Project investments shall amount to RUR 65 bln and the project implementation period is 5 (five) years.
Our investment program also includes creation of an engineering center for civil design - this part of the project shall require RUR 1 bln. One of the directions of the Corporation activity shall cover design and construction of liquefied gas transportation ships for Sovkomflot. Project investments shall amount to approximately RUR 15 bln and the project implementation period is 4 (four) years.
Technical maintenance centers for marine purposes are planned for construction in cooperation with Gazprom and Rosneft in the North and Far East regions. We also plan to provide end-to-end maintenance services for the ships of the Russian Navy.
Now we basically produce the equipment intended for the Far East and the Arctic offshore platforms. Ships for technical and auxiliary purposes, ice breakers, supply ships, oil and gas platforms need to be constructed. Also required are research ships, fishing vessels, river-sea type vessels. Thus we envisage various options for using the production capacities, including future possibilities. In the years 2010-2015 we are planning to complete a universal hi-tech supership shipyard in Kronshtadt as the civil shipbuilding department of the "Admiralty Shipyards".
Another modern shipbuilding complex, 100 Mtpa metal structure capacity, shall be created in the Far East, based on the "Zvezda" plant facilities. A dry dock, 400 ? 100 m, shall also be constructed. The project price is RUR 30 bln and the project implementation period is 4 (four) years. The complex putting into operation shall enable to initially cover the demands of the home market, and then enter the world market by offering the services in the area of civil shipbuilding.
We put out plans for implementation of many objects in the future tense, which is quite understandable: in fact, the Corporation is only now initiating its activity. Besides, along with many enterprises we have incorporated, many have brought in rather large financial liabilities. Such enterprises shall require great recovery work, which in the first place means supplying them with work orders.

- What extent of Government support does the Corporation count on for the purpose of solving such major problems?
- Despite of the troubles encountered one shall not forget what scale of production base the Corporation as a whole possesses. This enables us to produce naval equipment within the government's defense order, which this year amounts to RUR 60 bln for JSC "United Shipbuilding Corporation" enterprises. The corresponding documents between JSC "United Shipbuilding Corporation" and the Russian Ministry of Defense have been signed for the year 2010 and further years.
We plan to develop leasing possibilities in the shipbuilding industry. Having studied the demand for new equipment for potential customers we have determined that we can build over 200 vessels (over RUR 50 bln) for them under the leasing scheme. We definitely count on Government support. By the end of the year 2010 overall planned state subsidies sum total shall amount to RUR 8,3 bln. The necessary documentation is undergoing coordination by the Ministries and governmental agencies.
We also seek investment opportunities from other sources of financing. We are expecting financially stable banks and their major specialized leasing companies with positive long-term work experience with substantial funds to participate in our program. We have chosen such structures as Bank for Development and Foreign Economic Affairs (VEB), VEB-Leasing, Gazprombank and Gazprombank Leasing.
We have started preparing several contracts. All projects require work for risk minimization in case financial assets are not repaid, for projects' costs are significant, where the world financial crisis could have shattered capabilities of lessees.

- Vladimir Alexandrovich, please, tell us more about the Corporation's international cooperation.
- Under the Memorandum of Cooperation established with Samsung Heavy Industries (Republic of Korea) the prospects for construction and enhancement of several Russian shipyards have been outlined. We intend to share up-to-date technologies, buy equipment and materials for production purposes and the ships under construction, to train the staff for our Corporation. We plan to establish joint ventures intended for building ships and oil and gas platforms. A common work committee for project development has been formed by the two parties.
Memorandum of Cooperation has been also concluded with the Ministry of Transportation in Cuba, wherein the third party is Vnesheconombank. Technical specifications of 15 ships for delivery have been approved. These include dry cargo carriers of 3.5 and 5.5 thous. tons DWT, 20 and 70 thous. tons DWT tankers. We plan to construct a floating drydock with load carrying capacity of 50 thous. tons. The commercial offers have been transferred to our Cuban colleagues for consideration. Financial models for these projects are developed in cooperation with Vnesheconombank.
A number of projects are under discussion with other countries. Cooperation proposals have been prepared and sent to Japan, France, Norway, Finland, Ecuador, Vietnam, Azerbaijan, Kazakhstan and Cambodia. Upon a request from Argentina our proposals regarding construction of a scientific research ship and ice breakers for Antarctic expeditions were prepared. We are analyzing possibility of building various ships at Argentinean shipyards based on Russian documentation.

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# 3(29), 2009
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