President of Russia Dmitry Medvedev: Mr Sechin, yesterday we both participated in a meeting of the Commission for Modernisation and Technological Development of Russia's Economy where we discussed energy efficiency.
Energy efficiency is a multifaceted concept and the situation in our nation regarding energy efficiency ultimately depends on our overall energy situation – whether our power engineering industry is sufficiently modern, what kinds of machinery are being manufactured, and how we are replacing various previously manufactured machines as they are aging, as this leads to a variety of repercussions, including some unfortunate ones. That is why I see the revival of Russia’s power plant industry as a possible way to promote a new, modern, energy efficient economy.
Please tell me about the Government’s plans in this respect, especially since I will certainly be signing instructions to the Government as a follow-up to our yesterday’s meeting. This will be one of your tasks.
Deputy Prime Minister Igor Sechin: Yesterday, at the meeting of the Commission for Modernisation (and Technological Development of Russia's Economy), you identified several energy efficiency related tasks. We began working on these tasks after you signed the corresponding executive order over a year ago.
Clearly, energy efficiency is closely linked to the need to modernise Russia’s energy industry and energy networks; the state of our energy industry directly depends on the state of our power plant industry. Thus, based on your instructions, in the next few days we will step up our work in this area. We will carry out a comprehensive review of these problems at one of our nation’s power plants and report back to you on the results.
Dmitry Medvedev: Ok. In addition to the energy sector and energy efficiency issues, we generally need to work on developing our manufacturing industry. In spite of the crisis, a certain slowdown in economic development, and even a drop in production in some areas, we still have to plan for the future, especially since all crises end sooner or later. We are already seeing some clear signs that our economy is beginning to grow.
One of the key, important sectors of our economy is shipbuilding. We have created a special company – The United Shipbuilding Corporation, or USC – to combine all assets in this sector and build modern ships that we can sell on the domestic and foreign markets. How do things stand with the USC, and what projects are currently being implemented?
Igor Sechin: Following your instructions, a report was prepared on the USC’s activities.
The Executive Order to Create the United Shipbuilding Corporation was signed on March 21, 2007. We are ready to report that we have completed the integration of 37 companies and three shipbuilding and ship-repairing centres under the United Shipbuilding Corporation. We have completed work to return state property and some previously lost assets, including 26 percent of Dalzavod shares.
Dmitry Medvedev: How were they lost? What happened to them?
Igor Sechin: Some shareholders were not very conscionable in holding these assets; these assets were transferred and funnelled out. This was not conducive to attracting orders or modernising the shipyards.
It must also be noted that the ship-repairing and shipbuilding facilities in the Far East have been particularly hard-hit. The work level at these companies has been below 13 percent, and based on experiences elsewhere in the world, we know that if workloads at shipbuilding companies fall below 80 percent, production costs increase three- or four-fold – there is a direct link between the two. Depreciation of fixed assets in companies in the Far East has reached nearly 80 percent.
As a result, the USC’s board of directors has developed a concept geared toward restructuring and developing the Far Eastern shipbuilding centre. This would involve combining a number of enterprises and creating new high-tech shipyards, also by engaging leading global companies. We would also increase companies’ work levels through order placements, including orders from oil and gas companies, as well as fishing companies (we gave instructions on this matter, asking all our oil companies to place orders and provide a portfolio of orders to Russian shipyards). We would reduce the number of workers in the non-productive sphere, at the same time increasing the number of staff in the main professions. We would work on the management system, which must ensure corporate transparency, enhance control over these companies, and remove any possibility of funnelling assets out. And naturally, we would prepare suggestions, including ones for making amendments to the legislation in order to create better conditions for this sector to develop.
Dmitry Medvedev: I have visited the Sevmash company; you participated in that meeting as well. Naturally, it is very important for us to have large facilities, but at the same time, this entails many difficulties. I gave a number of instructions. How are they being fulfilled?
Igor Sechin: I can report that the situation at the Sevmash company has stabilised. The company received significant financial support to fulfil its orders. Its order portfolio is being optimised, new technologies are being purchased, new orders are coming in, including the construction of drilling rigs currently underway there.
Dmitry Medvedev: From what I see those rigs have very good characteristics and technical parameters. We should definitely further develop this segment, but we must not forget about our obligations to foreign contractors, particularly our Indian colleagues, and we must fully carry out the obligations undertaken by the Russian side earlier, while also dealing with existing difficulties. I would like for you to monitor these matters carefully.
IGOR SECHIN. Yes, we will certainly pay attention to these matters.