Head of Turboatom Viktor Subotin: We are not giving up the Ukrainian market

Kharkiv Turboatom JSC is a unique representative of power engineering. One of the largest in the world, the company creates turbines for thermal, nuclear and hydraulic power plants, and in a full life cycle – from drawings to manufactured goods. Kosatka.Media talked with the General Director of Turboatom JSC Viktor Subotin to find out how the plant managed to survive the pandemic, its consequences, and the situation in the Ukrainian power engineering industry.

- Now is the time, to sum up, the results of 2020. Tell us how the company faced this year?

 - Turboatom's orders allowed us to ensure the terms and contracts for delivering manufactured products to our customers.

Turboatom manufactures turbines for all types of power plants. And this gives a diversified market. Every year our order book is different from the previous one.

At the beginning of last year, we worked on those orders that required the nearest shipment to our partners for thermal, nuclear and hydroelectric power plants in Ukraine. We managed to fulfil them in full.

Foreign customers took a break. They also had restrictive measures on visits; production processes were suspended.

There were few potential customers due to quarantine restrictions, and our visits to them were cancelled. For instance, in March a delegation from the Hungarian NPP Paks was supposed to come to us. But they only visited Ukraine last week. And in mid-February, they will return to us to negotiate specifically on the supply of equipment.

Last summer, we, in turn, could not fly to Kazakhstan. We will discuss contracts and agree on signing in the first quarter of this year.

Several promising contracts for Tajikistan and Uzbekistan were also postponed.

We have worked effectively with Indian partners and continue to work with the transition to 2021.

Regarding the team's issue, today, the average number of employees at the enterprise is 2,700 people. This is lower than it was five years ago. But this is since a radical modernisation was carried out and modern equipment was installed.

- Let's talk about the financial results of 2020. With what indicators does the enterprise pass into the new year?

  - Net income from product sales in 2020 amounted to UAH 1.466 billion. This is less than it was in 2019 – 2.823 billion. However, at the same time, net profit amounted to 227 million in 2020 against 314 million in 2019 – not much less, given how difficult 2020 was.

In 2020, Turboatom paid taxes to the state and local budgets of UAH 526 million (and in 2019 – UAH 1.1 billion).

In 2021 we plan to receive more than UAH 2 billion of net income and UAH 341 million net profit.

The average salary at the enterprise starts at UAH 13 thousand. And for industrial personnel – machine operators, welders, and people employed in essential professions – UAH 18 thousand.

 - What projects did you manage to implement in a year? And what's in the pipeline?

  - Last year, we shipped products in Ukraine, as export supplies were frozen. Half of the products were shipped to Ukrhydroenergo. And more than 30% - to Ukrainian nuclear power plants.

This year we are increasing export deliveries, they will amount to about 20%.

- Tell us more about cooperation with Ukrhydroenergo and Energoatom.

 - We have contracts with Ukrhydroenergo, financed by the EBRD and the EIB, for more than UAH 5.5 billion. We manufacture and supply turbines and equipment for HPP/PSPP in Ukraine.

These are vital orders that we have been working on over the past years and will continue to fulfil in the next two years. It will provide a download with a reasonable prospect of over five years.

The EBRD and the EIB tendered these contracts. In addition to Ukrainian factories, foreign competitors participated: Andritz Hydro (Austria, Germany), manufacturers from China. First, the questions of price were discussed, then the questions of construction.

We won five contracts, Andritz Hydro won one. In addition to a large order, this gave us experience in international trading.

Another critical customer is Energoatom. The Ukrainian NPPs have five 1,000 MW units with a capacity of one million, the Russian manufacturer Power Machines JSC. This is the critical equipment of nuclear power plants, it requires a certified supplier, and at the same time makes the domestic power industry dependent on it.

But this is our market, Ukrainian; we are fighting for it. And we need to provide the Russian units with all the necessary Ukrainian-made products.

We must free the nuclear power industry from dependence on a Russian manufacturer. To this end, we have developed an import substitution program: we fully provide repair and modernisation of nuclear power units with a population of over one million. Up to 20% of the volume of deliveries over the past year is import substitution. We plan to annually increase the volume of supplies to nuclear power plants in Ukraine.

 - Equipment for KhNPP power units No.3 and 4 – what are the standards for their creation? What innovations will distinguish the new units from the existing ones? What is the current status of the project?

 - The first and second power units of KhNPP are equipped with Russian-made turbines of Power Machines JSC. And the foundations for the 3rd and 4th were also laid back in Soviet times, under a Russian-made block. The readiness of the third block, according to experts, is more than 75%, but ours will install the turbine, Ukrainian, this decision has been made, and it is clear to all participants. According to experts, reworking the foundation will not cost a lot of money. And our turbine has proven itself much better than the Russian one. We are already proactively producing this 1000 MW turbine, our flagship millionaire for the KhNP.

- What does it mean?

-We have three rotors ready. We process cylinders from those blanks that are already available at the factory. We have ordered specific equipment, castings and forgings, and they are already in operation on the machines.

Yes, we still do it “to the warehouse” because highly skilled machine operators must stand at the machines and produce products. After all, the plant must work. If we stop, if there is a long pause, we will lose both people and the level of professional capabilities.

Therefore, we have produced 70% of the equipment for the third block of KhNPP and have already demonstrated it to our customers. Including, acting President of NNEGC Energoatom Petro Kotin. This impressed him, and the company became more active in promoting the project. When in September last year, President of Ukraine Volodymyr Zelenskyy was at the KhNPP, he was shown the third power unit's readiness, including that Turboatom JSC produced the million-strong turbine. And this is very important for the development of both the energy and mechanical engineering of the country.

 We are not stopping, and now we have taken the initiative to start production o fifth turbine of the Dniester pumped storage (the fourth pumped storage turbine was experimentally launched at the end of last year). Being at the Dnistrovska PSPP and assessing the progress of the construction of the station, the President of Ukraine saw our equipment. I had the opportunity to report to the President of Ukraine on the technological development of Turboatom and our capabilities. At a meeting, the President decided to complete the construction of the Dniester pumped storage station. The 5th, 6th, 7th hydroelectric units will be built, and they will be created by Ukrainian factories: Turboatom and Electrotyazhmash.

After this meeting, we purchased raw materials and materials. We began manufacturing a turbine with a unit capacity of 400 MW of pumping mode for the fifth hydroelectric unit of the Dnistrovska PSPP. Yes, formal tender procedures for procurement by Ukrhydroenergo have not yet begun. But, again, we cannot stand; we have to load machines, equipment, people. Moreover, our plant also produced turbines for the first four hydraulic units. This is a series - just like our million-plus turbine, which we will install at the KhNPP. This is an understandable proven technology, this is complex high-tech equipment, these are super highly qualified specialists, and they must be loaded with tasks of the appropriate level.

 - Mr Subotin, there is an opinion that the 3rd and 4th power units of the KhNPP, when completed, will be already technologically obsolete...

- No, it’s not. Firstly, this turbine will be more potent than installed in the first units; this is already 1100 MW. We have added 100 MW, which is an additional 10% to the design capacity due to the change in the flow path of the turbine - a new blade profile, a new diaphragm profile, and other design solutions.

The turbine has a service life of decades. Today in the world there are 20 million-strong turbines of our production. There was not a single case of an emergency stop during this time, not to mention accidents. This is reliable equipment that will work for decades without failures. The whole world knows that the design of a low-speed, million-strong turbine is the best globally, so this is an up-and-coming product.

- You mentioned the visit of Hungarian specialists to Ukraine, tell us more about the project.

 - They came to Khmelnytsky nuclear power plant to see how our equipment works – the fifth stage titanium blades on a high-speed Russian turbine.

We made these blades under the import substitution program. It began because we proactively began to produce titanium blades for a Russian turbine. We didn’t manufacture them before, only steel blades. And so the Hungarians came to see how wear-resistant our titanium blade is after 40,000 hours of operation. This is the kind of equipment we offered the Hungarians to put on their turbines at the Paks NPP. There, the unit capacity is not 1000 MW, but 200, the power units are smaller. But the rotation speed is 3,000 rpm, the same as on a million. Therefore, the titanium blade will allow the turbine to be even more reliable and durable. The new design also improves efficiency and power.

 Our solution is revolutionary - nowhere in the world has a titanium blade on 200 acres been installed. Putting a proven edge on a lower power turbine is an exciting solution.

Our Hungarian colleagues are interested, and in February they will come to us with a large landing party for a week to take apart our proposal and its realism.

We are confident that we will convince them of our proposal and sign a revolutionary contract in its essence for the modernisation of the Paks nuclear power plant.

- Do many foreign companies order equipment from Turboatom?

 - We work with Kazakhstan on two thermal power plants, Aksu and Ekibastuz, at least two turbines for each station.

A pretty exciting job and a great perspective on the Indian market. I hope that on February 1 we will submit documents for an Indian tender: together with the Indian company L&T, this will be the production and modernisation of a 200 MW turbine for two blocks of the Indian thermal station Ukai. This is also a matter of import substitution. We have developed a 200 MW turbine installed on the foundations that already exist at the station to not disassemble them brick by brick. We have developed and installed ten such turbines at thermal power plants in Ukraine. They have proven themselves excellently, and power engineers from all over the world know this.

There are about 70 similar turbines of 200 MW in India, they were installed in the last century and now the time has come for modernisation. Indian power engineers, knowing that Turboatom has excellent experience in modernisation of Russian-made turbines, invited us to participate in this competition. It is assumed that we will work together with the Indian manufacturer L&T.

We are also working closely with Finland, Loviisa station; there is up to $ 20 million; with Bulgaria, Kozloduy station, we plan to sign a contract in the first half of this year.

These are real contracts. Looking ahead, we assume orders for ten years of $ 1.2 billion. These are the needs of customers that we already see and understand. $750 million – Ukraine, nuclear, hydro and thermal power plants. Kazakhstan - $200 million; Tajikistan - up to $150 million. This is our market, which we are capable and consider possible to provide.

- Let's talk about sad things. How will the issue of Energoatom's receivables be resolved?

 - Energoatom owes us UAH 750 million for shipped products; the terms of payment is due today.

Of course, this is a lot of money for our company. We turned to the Cabinet of Ministers, to the Prime Minister, with a request to resolve the payment issue for the supplied electricity to Energoatom. It, in turn, would be able to settle accounts with equipment suppliers.

Undoubtedly, tariff setting, including for green electricity, is a management issue. We hope that the Cabinet of Ministers will find a solution, and we will receive our funds.

 Perhaps it is possible to make mutual settlements within the framework of state-owned companies' work to make payments. These revenues will be used to pay taxes to the state budget because Turboatom is one of the largest taxpayers both in the country and in mechanical engineering.

Payment by Energoatom of UAH 750 million will solve all the problems accumulated at our enterprise - in particular; we took out loans for UAH 500 million so as not to stop production, purchase materials and work.

 I sincerely thank the State Property Fund of Ukraine for support in such a challenging past year, and the current interaction with banks. Having received a loan, we were able to pay off the suppliers. This is primarily the Electrotyazhmash enterprise, for the products manufactured under contracts with Ukrhydroenergo and support the Electrotyazhmash team.

The situation is not comfortable, but not critical either. It requires constant professional and responsible participation from all governing bodies.

- Besides Energoatom, do you still have debtors?

- The biggest problem is Energoatom's calculations. Yes, we have current debtors; for example, Donbasenergo owes for its products. But they have now stopped the modernisation of the Slavyanska TPP. We are completing the modernisation of an 800 MW power unit for this TPP, but the date for its installation has been postponed to the end of 2021, and possibly to the beginning of 2022. But this is not critical.

- Does the enterprise have a modernisation and development strategy?

 - Over the past ten years, more than $ 70 million have been invested in the modernisation of equipment.

This made it possible to create the most modern technological processes in the plant's shops and subdivisions. For example, a completely new foundry, where we have installed modern equipment, made in Italy, a new heat treatment plant. This significantly improved the quality of our castings and reduced considerably manual labour. Now it is possible to manufacture products for third parties.

We spent about € 2 million on the modernisation of the cutting and moulding section. We also made a new steel furnace, the thermal section - 6 completely new furnaces with computer measurements of operating modes. This is another € 1.5 million.

New five-axis machines have been installed in the metal-assembly shops.

New technologies, tools, equipment have significantly reduced the processing cycles of parts. All this has a positive effect on the reduction of manual labour in the plant's technological processes.

Today the average age of those working at the plant is less than 47 years. We have concluded agreements with specialised institutions. First of all, these are KhPI, Engineering and Economic Institute, UIPA, Aviation Institute. Every year we select young people, graduates of these universities for employment in our company. The last courses, under the contract on dual education, are already on probation at the enterprise. They know and understand perfectly what profession they will have after receiving a diploma.

 - How did you resolve the issue with people of retirement age and with those who were cut?

 - Of course, this is a socially responsible event. But the team is very healthy and accountable. Pensioners retire with understanding, knowing that we have an extensive social program to work with them. We have a council of veterans. We continually invite and collect our pensioners, labour veterans to communicate within the enterprise's walls, gifts, incentives, including material assistance, concerts for labour veterans for all holidays. People respect the team because the team respects each of the employees.

Therefore, we did not have any social grievances or statements regarding employment.

We also care about the continuity of generations; we train young guys in working professions. Mentors receive a supplement of up to 20% to their salary for this.

Everyone understands perfectly well that it is necessary to preserve the production backbone. If there is a need for additional personnel, we recruit personnel for a specific amount of work. For example, we signed a contract; the deadlines are tight; we invite those who worked at the plant for six months or a year. People come to work and do not disappear anywhere.

Tags: NNEGC "Energoatom", Ukrhydroenergo, nuclear power plant

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