Moscow. June 14. INTERFAX - Russian exporters in the new conditions emphasize the need to form their own fleet, the business request for the construction of ships at domestic shipyards until 2035 is estimated at almost a thousand units. Alexey Rakhmanov, General Director of USC, spoke about the situation in the shipbuilding industry, how the United Shipbuilding Corporation copes with new challenges, the results of the corporation's work in 2022, as well as plans for the construction and delivery of ships, necessary state support measures and prospects for international cooperation in an interview with Interfax on the eve of SPIEF-2023..
- A number of Russian companies did not publish reports for the past year by government decision. Can you announce the financial results of USC for 2022 according to IFRS on revenue, net profit or loss?
- Our consolidated revenue under IFRS amounted to about 350 billion rubles. This is slightly lower than in 2021, by 8.7%, but the decrease is mainly due to the fact that some orders were postponed, and some ships were transferred late. This was due to the disruption of the supply of component equipment.
In addition, the fishing vessels were designed by foreigners - and equipped with them. Yes, they are state-of-the-art, the most technologically advanced, but, unfortunately, these are all foreign supplies, which, in the face of tough sanctions, have significantly undermined us from two points of view. Firstly, we did not receive the equipment itself. Secondly, foreigners refused to carry out commissioning.
However, we were able to regroup quickly and made several technological decisions, thanks to which we did not stop the construction, did not dismiss or reduce staff. Rather, on the contrary, we are now continuing to hire workers. At the same time, having changed the technology, we were able to contract for the same equipment in friendly economies and will soon be handing over steamships to customers.
- Can I clarify: at the end of 2022, did you receive a loss?
- We received a loss of about two tens of billions of rubles, or about 6% of revenue. This is an unpleasant situation for us, but we have discussed a lot about what happened, for example, with fishing vessels, and what was the reason for such losses.
All losses were formed exclusively on the lead vessels. Products that are mass-produced go with the expected profitability and without problems (except for sudden fluctuations in exchange rates or one-time events).
We have clearly defined for ourselves that we should not confirm firm prices in a situation where we do not know what the product will consist of at the stage of contracting. We cannot take risks beyond what is prescribed by normal business practices. Until the completion of at least 50% of the working design documentation, we should not proceed to the manufacture of the vessel. And the cost monitoring that we are conducting should be even more rigorous and detailed compared to what was proposed by my colleagues earlier.
And to exclude such situations, it is necessary to very carefully bring to an end all those proposals that were agreed with the Ministry of Industry and Trade in terms of pricing expertise for civil vessels. Ships are not at home. But if there is a Glavgosexpertiza in the construction of houses, then there should also be a certain body in the pricing of ships that determines the price or becomes an arbitrator in price disputes for specific products, and above all - head orders.
- How many vessels are planned to be commissioned in 2023, taking into account that not all vessels were commissioned in 2022?
- Since the beginning of 2023, we have already transferred 8 vessels. By the end of the year, about 20 more vessels should be given to civilian customers. The average annual number of vessels delivered was 19-20, and this year, taking into account the transfers from last year, there will be 28 or so.
This includes both large forms, such as the cruise liner Peter the Great (we hope that the act will be signed by the end of the year, the readiness coefficient is high there), and small formats - catamarans of the Kotlin project, Comets at the Sea plant, a floating crane in Sevastopol and much more.
But we do not include 52 boats for the Ministry of Emergency Situations in this number, which must be delivered by the end of the year. After all, a 6-meter and a 100-meter vessel are two big differences. By the way, as it seemed to us, in general, the leadership of the Ministry of Emergency Situations liked this boat. The Ministry of Emergency Situations imposes special requirements for speed, stability, and strength of the hulls, based on the specifics of their work. Our designer of the Almaz Central Design Bureau approached the design of this boat as the design of a warship - from the point of view of responsibility, principles, safety margin. We hope that we will pass the state tests successfully.
- Let's go back to the financial result for 2022. USC was preparing a financial recovery program for the group. What is your estimate, how much can be the amount of additional capitalization under this program?
- Let's not escalate the situation. Our financial situation is difficult, but stable. Unfortunately, we do not have an agreed position with the departments and I would not comment on the figures until this process is completed. We understand that it would be great if we received some financial support in any form. Whether it is capitalization, the use of NWF funds, the placement of bonds or some other instruments.
We are ready to use any of these financial instruments. In the current situation, the main thing is to reduce the credit burden and get sources of financing for our program of technical re-equipment of civil shipyards. We have calculated the total amount of capital investments needed to "jump up" to the level of productivity of our foreign competitors: about 200-240 billion rubles, excluding financing of the current dock program.
Work with the authorities continues. Of course, there are problems that have not been solved for a long time and half-hearted solutions that require a systematic approach.
- For how many years is the program of investments in technical re-equipment designed?
- For 7 years. If you calculate it per year, not such grandiose money - about 25-30 billion rubles a year will cover all the needs for capital investments for civil shipyards. On the other hand, we should not be lying: most of our shipyards are dual-use. The state understands that by investing in any civil shipyard, it gets the opportunity to increase mobilization capacity.
- You said that you are considering different support mechanisms. Are you considering raising funds from the NWF?
- We are talking only about one thing: to engage in technical re-equipment at the rates of commercial banks means to drive yourself into a financial hole. And this is the only comment I can give. We are ready to exit through any tool, including direct capitalization, but direct capitalization requires money from the budget. If we consider the bond program, then we need to understand that we are not very interested in the coupon rate of 8-9%. There should be special conditions and a closed subscription so that we understand who these investors are and why they invest in the corporation.
I am absolutely convinced that if the measures of state regulation of pricing on orders are implemented, we will be able to service both bond loans and other solutions in which there is a fee for money. We have a financial model: the net profit rate at the level of 8-12% will allow us not to apply for any measures of state support.
- Under what parameters are you ready to enter the stock market?
- Duration of at least 10 years and a coupon rate of 3%. It is clear that this is not a market story, which is why we are talking exclusively about a closed subscription.
- Earlier, the issue of transferring the controlling stake of Baltzavod to Rosatom was discussed. Has any decision been made on which scheme the transfer of the asset is possible? What mechanism is being discussed now?
- The mechanism has been worked out at the working level. Rosatom can be transferred 51% of the shares of Baltzavod according to a certain scheme and under certain conditions. We will have 49%, but minus the minority shareholders - 47%, which will allow us to participate in the management of the enterprise at the level of the charter. Operational activities will be in the hands of Rosatom.
There are three advantages to this solution. First, we have been able to do a lot of positive things in the production system over the past 6 years, but our colleagues from Rosatom have always been in the lead in these matters. Attracting partners with such a deep culture of attitude to efficiency and production systems is a plus for us.
Second: 97% of all orders at Baltzavod were Rosatom orders. In fact, we have a single customer, so everything that is happening now is in some way a natural development of the situation.
The third and probably the most important. Rosatom's ambitions are to create a sufficiently large number of vessels for the Northern Sea Route. Baltzavod may become the root point for the implementation of these plans, because historically it has produced icebreakers and ice-class vessels. At the same time, we understand that the program that Rosatom currently has cannot be solved by Baltzavod alone. And in this regard, there are other enterprises located in the North-West (primarily in St. Petersburg) that could help implement such ambitious tasks in the distributed shipyard mode. In any case, we are in this whole story together with Rosatom, and we see a two- or even three-fold increase in revenue at the Baltic Plant over the next five years. Now it remains the decision of the state as our shareholder.
- Will it be a monetary scheme of asset transfer?
- Now we are considering a monetary scheme, while I can't tell you any other details.
- And the timing of the completion of the process?
- Everything will happen this year, most likely in the summer.
- Is the transfer of the Baltzavod share to Rosatom connected with the construction of a new large-tonnage shipyard?
- Of course. To close the need for a large-tonnage fleet, we need some kind of new large-tonnage shipyard, or some kind of modernization program. If the decision to create such a large-tonnage shipyard materializes, we will act as its technological and personnel partner. We hope that approximately in the same percentages USC can become the owner of a new large-tonnage shipyard.
- Less than 50%?
- Yes, at the level of 49%. It will be a completely different level both in terms of quantity and quality of production processes. So in the matter of transferring 51% of the shares of Baltzavod to Rosatom, we see a two-way road. And we clearly understand that it will allow us to make a breakthrough, which, for various reasons, we and Baltzavod failed to the extent that we expected.
- The portfolio of orders until 2035 is estimated by the Ministry of Industry and Trade at almost a thousand civil vessels. What volume of orders from them falls on the USC shipyards, will the shipyards cope? And how balanced is this portfolio of orders, taking into account the interests of various industries and shipbuilders?
- The question of whether or not certain steamships will be ordered and built rests on another question - is there a main engine for them or not, is there deck ship equipment, factories, or not? To answer it, we have created competence centers. There is a company "USC-Movement", which is engaged in propulsion. There is a competence center dealing with interior design, another one will be engaged in painting ships. There will also be a competence center on machine-building topics, which will allow us to optimize the costs of creating one or another digital machine-building products, practical things and everything else from which ships and vessels are created. And, of course, the very investments with which we started the conversation with you.
We need to further modernize and automate the processes of metal cutting, welding of blocks of sections, to complete the sudometrics program (this is dimensional control, the production of sections in pure size). This is, of course, a question of increasing labor productivity and hiring people for full-fledged second shifts, because now we work in two shifts, on some defense orders - in three shifts. But it is quite obvious that the volume of orders that will have to be fulfilled will require work in at least 2.5 shifts.
- About another measure of state support. Was it possible to finalize the estimate of the amount of equipment not delivered at the shipyard? In what amount do you still estimate this volume and how much is the state ready to compensate you for non-delivery of equipment?
- The total amount of the so-called "frozen" advances we have now is about 7 billion rubles. We started with a different amount, but taking into account the fact that Russian intermediaries were sometimes responsible for these advances, we accordingly conducted claims work, collected this money, and from the initial figure of 15 billion rubles, we were able to reduce it to 7 billion rubles.
- It turns out that you collected 8 billion rubles from Russian or foreign suppliers?
- We had direct contracts with foreigners and there were contracts through Russian "consolidators" or intermediaries. And they returned us about 6 billion in advance. We are continuing this work, but we have almost reached a certain limit of what we can still collect from foreigners.
- There is another measure of state support - LPG, ship recycling grant.
- It is important to understand here that shipbuilding requires direct support measures, not indirect ones. LPG is an aid to the shipowner to make a decision on ordering a new vessel. We still have the 383rd resolution, which again helps shipowners to receive compensation for the cost of the money they spend on leasing. We have analyzed all indirect support measures in Russia by volume: they amount to approximately $700 million per year in total. And only direct state support, for example, to Chinese shipyards - $ 12 billion a year, Norwegian - about $ 17 billion a year.
If we look away from the current situation and move on to such a synthetic model of competitiveness, then the volume of state support in key shipbuilding countries of the world essentially determines their success. Of course, they can criticize us here: here you do nothing yourself and only rely on state support measures. This is not so, we will continue our programs: a production system, an increase in labor productivity, so that people are paid only the earned ruble. But I repeat once again - one thing will not fly by itself without the other.
- Is the limitation of the age of various types of vessels being discussed as part of the fleet renewal?
- It would not be very correct, when there is a shortage of ships, to come and say: now cut up all the old ones. Although the restriction is required not even from the point of view of economic parameters, but from the point of view of security. People and cargo cannot be risked.
- What are the latest parameters for restrictions, for example, for tankers or bulk carriers?
- We used to say that we would start at the age of 41 and then gradually go down. But we don't want a repeat of the story with the fishermen. After all, if, for example, ships older than 30 years are banned now, everyone will say: OK, but then we need 1000 bulk carriers tomorrow. And we cannot objectively build 1000 bulk carriers until tomorrow.
- Does USC see prospects for cooperation with Iran, do Iranian carriers and shipping companies need to upgrade their fleet, and are you already discussing any specific projects with Iranian companies?
- Iran is one of the largest owners of the tanker fleet. Despite all the sanctions and restrictions, they have been trading and are still trading. Plus, Iran was able to preserve its shipbuilding: there are several shipyards with which we got to know quite well. Programs are being developed that can turn into cooperation, but it's too early to talk about them yet. At the same time, we understand the importance of the North-South corridor. Its development will allow us to create conditions for the expansion of fleets from both sides. There is an excellent opportunity to create a container fleet that will be able to work connecting the Caspian Sea with the European part of the country, and thereby ensure the regularity of the supply of goods both to the south and to the north. We do not close our eyes to the possibility of shipbuilding cooperation with Iranian colleagues, but for now comments are premature.
- If we talk about the "North-South" corridor as a whole, earlier projects were discussed with Turkmenistan on cargo and passenger ferries, negotiations were also conducted with other countries. Have we already managed to agree on any specific orders from the Caspian countries?
- The negotiation process is underway. We understand that without the involvement of our colleagues from the Caspian states, the fleet for the North-South corridor will be more expensive and more difficult to build.
- Are there any negotiations with Russian customers? Transport groups such as FESCO, Delo Group - are they interested in an order for the construction of ships for the Caspian Sea?
- Of course, interesting. But now the question is rather not this, but how to put together a financial scheme with colleagues that will become working. Because everyone has their own risks, someone has a cache, someone does not, and, as a rule, everyone is interested in preferential leasing, every single one. And the program that STLC is currently implementing is not comprehensive. Not all orders of the long-term fleet construction plan until 2035 fell within the financing perimeter of the GTLC leasing program.
- Earlier, USC's plans to buy a shipyard in India were discussed, then you withdrew from the tender. Are there still plans to buy Indian assets? And in addition to this issue, an intergovernmental agreement between the Russian Federation and India on shipbuilding is being prepared. Does USC have any proposals for developing cooperation with Indian partners?
- Of course, we have proposals on the formats of cooperation. India has very clearly declared the principle of "Make in India" from the point of view of final products, in the sense that India does not intend to simply buy the goods further. Any sale of goods is associated with certain localization goals and objectives. Nothing new: Russia is doing the same, China is doing the same. Such a requirement did not come as a surprise to us, and we are preparing for this in all segments in which we work in the Indian market.
- There was information that you intend to purchase the Vostochnaya Shipyard in Primorye. According to what scheme can you buy an asset, what investments are planned in this enterprise?
- We need the Vostochnaya Shipyard as a naval completion base. So far, our capabilities are very limited. Can you imagine what it's like to launch a ferry? It is clear that neither in Komsomolsk-on-Amur nor in Khabarovsk (these are our existing assets in the Far East) it is impossible to complete it from beginning to end. Therefore, the Vostochnaya Shipyard would be a good option for us in this sense.
But we do not have the opportunity to take on the next multibillion-dollar debts of the shipyard. They need to be settled before such a decision is made. So technologically, the Vostochnaya Shipyard is interesting to us. It can actually be a very good production asset embedded in our production chain. There is a possibility of extending the mooring wall by another 50 meters. But as an economic asset, it is in such a state that it will be long and expensive to raise it.
If the government decides to instruct us to remove the Vostochnaya Shipyard from its current state, we will, of course, undertake this task. We have been engaged in similar tasks for the last 8 years, but in fact - all 16 years since the corporation was founded. But then we need to discuss what tools we can use to do this. There is no opportunity to direct the USC dividend stream to save the Vostochnaya Shipyard right now.
- Tell us about the design and construction of the bulk carrier fleet.
- We are designing bulk carriers and I hope we will start building them soon, primarily for bulk cargo, which primarily includes grain. We know the need of the Ministry of Agriculture and are trying to prepare our production assets so that it can be built. It was important to equip this vessel with the necessary equipment, but we found all the main channels for its acquisition in friendly jurisdictions. Therefore, we hope that we will be able to show the first steamer in the next two years.
If you look at the world fleet of bulk carriers, then the lion's share belongs to the category of Handysize, that is, it is from 20 to 60 thousand tons. We are no exception and will be in this range.
- There are no agreements yet with the North Star on Arctic bulk carriers, on the export of coal along the Northern Sea Route?
- We are negotiating with everyone. But if the USC investment program remains exclusively within the framework of commercial loans and the possibilities of our own investments, then I am afraid that we will be forced to abandon a good half of the construction of such vessels. We can't move anywhere without modernization. The transition to the construction of even Handymax requires a significant revision of the composition of lifting equipment.
You don't think that customers will buy steamships from us at any price, do you? We need investments to optimize our costs, take human labor out of the brackets, and automate key assembly and welding processes as much as possible. Unfortunately, we have such a market-twisted situation in which (if you look at the price tag) we are uncompetitive. But when you start comparing how the price is decomposed into state support measures from our competitors, it becomes obvious that, by and large, there is competition not from manufacturers, but from state support measures.
- You also mentioned that Arctic container ships for Rosatom can be built at a new shipyard, the project of which is currently being discussed.
- They can also be built at the Baltzavod - the question is how we will distribute the slipway schedule.
- For fishing vessels, the construction program of which has been shifted several times. How many vessels can be delivered this year?
- We have already passed three "fishermen" and one crab this year. In total, we will hand over nine vessels this year. They are all already in a fairly high degree of readiness. These are the Severnaya Verf, Admiralty Shipyards, and crabbers at the KHSZ (Khabarovsk Shipyard).
- Can you estimate how much the costs of redesigning the "fishermen" have increased?
- This estimate was given: a total of about a billion rubles. This is still a redesign, not a design from scratch. A lot depends on what "rested". If it's just replacing the engine, there's little money, if it's replacing key fishing equipment, such as a fish factory, it will take longer, because sometimes it's difficult to squeeze a factory, for example, Chinese instead of Norwegian with other sizes.
- How many vessels in total need to be redesigned at the first stage of quotas?
- About 18. These are vessels that have not yet been supplied with ship's accessories.
- And when do you expect to complete the construction of vessels for the first stage of the "keel quotas"?
- We have 2025, we have nowhere to retreat further. There will be some exceptions, but this applies to those ships that have not yet been laid down.
- And within the framework of the second stage of the investment quota, what should be done to avoid stepping on the same rake?
- We should still stay in the existing projects. During the first stage of the "keel quotas", 7 head fishing vessels were made. These are 7 types of ships that we have never built before. For us, this is a new product, the development of which also requires effort, time and professionalism. Therefore, if we stay in the same types of vessels, then, of course, we will have more confidence in what and how to build.
Then, after all these troubles, we will have quite tough commercial negotiations. I am absolutely convinced that our shipyard directors will not get into the same water with contracts for the second time.
- Import substitution of equipment on nuclear icebreakers. The icebreakers "Yakutia" and "Chukotka" are currently undergoing legal proceedings regarding the undelivered deadwood devices and diesel generators. Was it possible to replace this equipment?
- Of course, everything has already been prepared.
- As far as I remember, 96% is the localization of the construction of icebreakers. Is there no problem with the remaining 4% of the equipment?
- It's uncritical there: these are ship fittings, sewing materials, a few devices of bridge systems. In fact, we have already replaced all the equipment from this list, or we understand which Russian suppliers will help us to implement it.
- So the construction of these two icebreakers is still on schedule?
- There are no particular concerns about delays related to import substitution for icebreakers of the 22220 project. There was a problem with Kirovenergomash, but a new head came there, the plant is being corrected, they are slowly starting to increase the pace for us.
Further, it is solely a question of the quality of performance of this equipment. After all, there is primary import substitution, and there is secondary. For example, if some product is manufactured in Russia, and its components belong to some unfriendly economy, then everything has "arrived". The gap cannot be jumped by 99%: if we are talking about localized equipment, then the degree of localization should allow local industries to cover any problems associated with the supply of components from unfriendly economies.
But at the same time, the temptation for some to switch from imports from the West to imports from the East is not a satisfactory answer for us. We believe that we should, wherever possible, make our own production in Russia.
- On the creation of robots for offshore projects, have you managed to move from design to hardware already? At what stage is this project now, are there prototypes?
- We'll show you very soon. These projects are in varying degrees of readiness. We have cooperation projects with Gazprom, and we are also working with other companies. Now we are at the stage of development and research: accordingly, ahead of time - until the completion of tests and verification of the validity and operability of all systems - we would not like to talk about the prospects. It is impossible to generalize here. All as completed.
- How many military surface ships, submarines will you transfer to the fleet this year?
- We have already handed over two ships to the Navy - after repairs at the Baltic shipyard "Yantar", the guard ship "Intrepid" and the newest corvette "Mercury" built at the Northern Shipyard.
We expect to soon hand over the frigate Admiral Golovko, built at the Severnaya Shipyard, and the corvette Sharp, built at the Amur Shipyard.
Sevmash and Admiralty Shipyards will transfer two nuclear and three diesel-electric submarines to the fleet. And the Kronstadt Marine Plant will hand over the repaired large amphibious ship Alexander Shabalin.
- And the timing of the transfer of the aircraft carrier Admiral Kuznetsov and the cruiser Admiral Nakhimov to the Ministry of Defense?
- No comment.
- Taking into account all the state support measures that you are counting on, the order portfolio, do you already have a forecast for financial results at the end of this year?
- Of course, we expect to reach 400 billion in revenue, this is indicated in our budget. I hope everything works out. But I can't say that we are 100% sure of this or any other of the figures yet. We work seeing difficulties, and when faced with obstacles, we try to overcome them in every possible way.
