Vladimir Putin meets with Rosatom State Corporation Head Sergei Kiriyenko after visiting the Kalinin nuclear power plant
12 december 2011
The transcript of the beginning of the meeting:
Vladimir Putin: Mr Kiriyenko, we have discussed this subject with you before, but I would like to take it up again: at a very dramatic moment of the crisis, when things looked hard not only for us, but also for many of our partners, we found an additional $2 billion and invested it in the industry. You used it to purchase mining assets. This prompts me to ask you: A) how was this money used and B) what does uranium production look like today?
Sergei Kiriyenko: If you will allow, Mr Putin, we have prepared a presentation for you – I will show. The really important moment was when you decided to allocate funds during this complex situation. The decision was a tough one because it involved certain risks. Our nuclear development programme had a weak point: we had 25% to 45% of the enrichment market, but produced only 9%. Anyone could hold us by the throat and say: “You may produce what you plan, but only if we permit you to.” The entire nuclear industry programme could have hung by a thread. That was what made the decision critical.
Mr Putin, the first thing we did was increase our investment in geological prospecting and uranium production in the country – by 4.5 times. You told us we should begin at home before purchasing assets abroad.
Vladimir Putin: You said foreign assets were cheaper …
Sergei Kiriyenko: By a long shot.
Vladimir Putin: Because in Russia, the deposits were in hard-to-reach areas and not near developed infrastructure.
Sergei Kiriyenko: Yes, Mr Putin, we have now finally tapped into the area where mining was started in the Soviet era. Now we have opened a new mine in Khiagda, east of Lake Baikal. But our main production is concentrated in the Argun area. Uranium has a depth of occurrence of more than a kilometre there, and there is well developed infrastructure. It is different from the fields we bought in Kazakhstan and in Africa – they are all sandstone. Uranium occurs there at 90 centimetres and lower, and its reserves are tremendous. As we reported to you, the uranium in the deposit we purchased in Tanzania occurs at 90 centimetres and all the way down to 60 metres; it can be mined with a bulldozer.
Vladimir Putin: With a shovel.
Sergei Kiriyenko: Yes, a shovel. Geological prospecting has increased the reserve estimates there by 50%. But we began with our own country. What is important is that while making purchases abroad, we at the same time were boosting production at home: investment here has grown almost five-fold. But the fields we purchased cheaply allow us to walk a thin line: the more expensive uranium produced in Russia can be combined with the cheaper mineral mined abroad, and the resultant profits ploughed back into production. The overall picture, Mr Putin, is as follows: here is where we were, and here is where we are now. We have moved into first place in the world for reserves with low production costs (less than 80%) and for output. And here are the production forecasts: in fact we have greatly increased output, our total now stands at …
Vladimir Putin: You were able to take good advantage of the global crisis, weren’t you?
Sergei Kiryenko: Yes, Mr Putin, exactly. This year alone we increased uranium production by 36%. Here is our breakdown, Mr Putin. Few could have imagined in the past that we would own 20% of U.S. reserves. We have very good deposits in Africa, Australia and, of course, in Kazakhstan, which is our strategic partner. Uranium One, a company we bought, leads the global market. It is outperforming all the others.
Vladimir Putin: Is it Canadian-based?
Sergei Kiryenko: Yes, it operates under Canadian law. Today we have a controllng stake in it, with 49% held by private investors. Uranium One has the lowest production costs of all public companies around the world, to say nothing of its capitalisation, output and earnings.
Mr Putin, there is one thing which is more important than money. I have a quotation to back this remark. When we were buying the company, we left its independent board of directors. Ian Telfer, the president of the World Gold Council, is a legend in the mining industry. He set up the world’s largest gold mining company called Goldcorp, and remained chairman of the board. Here is a very interesting quote. He says, literally: “I was asked, what are you doing by starting working for a Russian state corporation?” Today he says he admires what has happened … “When a Russian state corporation acquired a public corporation on the market and its capitalisation continues to grow, and all the independent board of directors stays on (important for reputation), we can continue to make progress.”
Mr Putin, at that time you approved our desire to draft a federal targeted programme for rare earth metals. Now we want to apply our uranium expertise to rare earth minerals: the picture that is emerging is very much like that one.
Vladimir Putin: Mr Kiriyenko, let us now take up a different subject. A couple of years ago, we decided to place the entire nuclear icebreaker fleet under Rosatom.
Sergei Kiriyenko: Yes, we did.
Vladimir Putin: It was done to develop the Northern Sea Route and deal with the related issues. Too many unsolved problems have piled up since then. What are things like now?
Sergei Kiriyenko: Mr Putin, many thanks for supporting the nuclear fleet. The circumstances under which we took over were far from simple: its order book was dwindling and the ships had fuel storage problems. The logic of the transfer was to ensure nuclear radiation safety. I can report to you today that we have solved the radiation safety issues and are now offloading fuel at storage facilities securely – if you have an occasion to visit Murmansk, you can see them for yourself: we have photos of what they were and what they are today.
Mr Putin, this year alone, wages and salaries have increased 20%-plus and since we took over the fleet, by 150%. Carriage along the Northern Sea Route increased six-fold this year alone. For the first time this year our colleagues have asked us to send nuclear icebreakers to the Gulf of Finland because… A diesel icebreaker can negotiate only 1.5 metre thick ice (a modern one 1.8 metre thick ice). As soon as the ice thickness increases to two metres, a diesel vessel is unable to cope with it, and nuclear icebreakers need to step in. The new icebreakers (again, thanks for your decision to build three new icebreakers) will operate in ice up to three metres thick. That will make navigation available practically all year round. And one more important thing: we set a time record this year (together with Sovkomflot and the Transport Ministry, with which we are closely cooperating): a 160,000 tonne deadweight tanker crossed from ocean to ocean in only seven days – 7.1 to be exact. Compared with the detour it was …
Vladimir Putin: I think they passed north of the Norwegian Islands for the first time.
Sergei Kiriyenko: Yes, absolutely right. They blazed a route north of the Norwegian Islands, for considerable savings. Several convoys logged seven to eight days. Some of the convoys sailed even later, in November. This allows us to speak of resuming Northern Sea Route operation.
Vladimir Putin: The men working there are fine and real professionals.
Sergei Kiryenko: Yes. It is a big project with the Transport and Emergencies ministries because re-establishing the full chain…, defence matters were also prominent. But our key objective was to build new icebreakers. We did extend the service life of the old icebreakers, but it is just to 2018-2020. Beyond that and we would have found ourselves with nothing to fall back upon.
Vladimir Putin: That must fill the production capacities of our shipyards, including St. Petersburg and the north and north-west. The Baltic yard, which I visited, is looking to these orders.
Sergei Kiriyenko: Especially since their reputation was restored with the order for a floating nuclear power plant. We ordered it deliberately, realising we would pay more for it than for others to follow, because it was re-establishing the whole chain – just like with the ground plants. You remember the Rostov plant: we only restored the building complex there, and now we are reaping the results from the Kalinin plant. It is the same story here. The yard has already restored its operations and can confidently accept orders for nuclear icebreakers. And three icebreakers are a series. Together with floating nuclear power plants, they make up quite a series.
Vladimir Putin: This is a big order.
Sergei Kiriyenko: Yes, it is huge.
Vladimir Putin: I see that the people working here are all young, in their thirties. Are they new replacements?
Sergei Kiriyenko: Half of them are under 35 years of age.
Vladimir Putin: And what’s the picture of personnel generally in the industry?
Sergei Kiriyenko: Mr Putin, our total headcount is 287,000 people. Socially, they are well off: without government support they would not have been so, of course. Wages and salaries throughout the industry have grown almost three-fold since we launched the re-development programme six years ago. But our priority, as you told us, is the nuclear weapons complex. Here our average earnings have grown 250% and this is with the subsidies you signed off on …
Vladimir Putin: I need to visit some of the plants, as I promised you.
Sergei Kiriyenko: We would be pleased. We have things to show you.
Vladimir Putin: From the weapons complex.
Sergei Kiriyenko: Yes, we can show you the weapons complex, especially since you set objectives for it. The average monthly income there has increased 250% plus a 200% growth in social benefits. The average wages in the industry have risen 150% to 200%. We have kept up welfare benefits because the competition for jobs at the plant is high …
Vladimir Putin: As we were leaving the plant, your colleagues asked about the savings made during the construction and if they could be used for social purposes. Under the applicable laws, all medical facilities are federal property and belong to the Medical and Biological Agency. But all the amounts saved must be rerouted to Rosatom’s appropriate accounts to expand production – this is set down in a government resolution dating, I think, from 2002 or 2003. Or is it 2002?
Sergei Kiriyenko: Yes, 2002.
Vladimir Putin: Of course, such impressive cost-cutting calls for certain financial incentives. Let’s make a deal: We will adopt a separate government decision, and we will allow you to spend part of your saved allocations on resolving social issues.
Sergei Kiriyenko: Thank you.
Vladimir Putin: Here and at other Rosatom facilities. But you and I need to agree, what part should be spent. This is the first thing. Second, if this implies healthcare facilities, then you will have to transfer it to Federal Medical-Biological Agency account, so that the industry will not have to finance these facilities. But, of course, this funding should be spent on expanded production activity, to create new jobs, to increase the tax base and to expand the power industry …
Sergei Kiriyenko: Mr Putin, we could co-finance this together with the Federal Medical-Biological Agency.
Vladimir Putin: They have saved nothing so far, consequently …
Sergei Kiriyenko: This is more difficult.
Vladimir Putin: We must think about this. If you want to build, please build, but then transfer the facilities to their balance later on.
Sergei Kiriyenko: Good.
Mr Putin, I would now like to say a few words about our overall parameters. Considering the overall changes in the nuclear power industry, this year was not very easy for the global nuclear power sector. But I would like to tell you that we have not only fulfilled but even exceeded all of our objectives. This year, we increased power generation volume, the key parameter, by two billion kWt/hours. As I mentioned, uranium production has increased from 5,000 to 7,000, a 36% increase. Uranium reserves, worth less than $80, the cheapest uranium, have swelled considerably. We have beaten our revenue estimates. To be honest, this is for growth rates over 2010 and 2006 since the inception of the nuclear sector’s development programme. This amounts to a rebirth of the nuclear sector. Mr Putin, we have fulfilled all of our targets.
Vladimir Putin: OK. Is there anything you would like to ask me?
Sergei Kiriyenko: No, Mr Putin. I would also like to say that we have approved a strategy. I would like to tell you that, within the strategy’s context, apart from those questions you already asked, we continue to emphasise science. We are now investing much more in research.
Vladimir Putin: Do you mean R&D projects?
Sergei Kiriyenko: Yes. Frankly speaking, we had lagged behind in this respect. In 2006, R&D allocations were at only 0.6%. Our rivals spend 0.7-4.1% on research. We have come up with an annual plan, and we have already increased the R&D budget to 3.9%. Next year, it will total 4.5%.
Vladimir Putin: Excellent.
Sergei Kiriyenko: We are becoming real leaders in terms of investment. Of course, this implies the day after tomorrow, rather than tomorrow. But if we don’t invest, then … We continued to develop for a long time with the help of colossal Soviet-era reserves and those of the Ministry of Medium Machine-Building of the USSR. Now, we are developing with the help of the federal targeted programme approved in 2010. But, as you can see, we are seriously expanding our own assets. We are expanding our investments here. Thank you for providing state support. But this should only be the beginning, and we must eventually proceed on our own. We have already expanded three-fold …
Vladimir Putin: Mr Kiriyenko, we need to follow through on a programme which has been planned by us, no matter what. I understand that this is difficult because federal funding has been reduced to some extent. Quite possibly, this will be difficult as a result. But it can be accomplished with the help of the de-monopolisation of the supplier market, cooperation with suppliers and hands-on management during construction projects, as you have mentioned. We need to attain these cost-cutting parameters. Given this approach, I am confident that we will basically complete the programme on time.
Sergei Kiriyenko: Yes, Mr Putin, thank you. Summing up, I would like to tell you that we have now charted a strategy up to 2030 per the Government’s instructions. We have expanded 2.5 times in the past five years. We have set a serious objective, to grow five-fold by 2030. Our gross income currently totals $15 billion, we would like to reach $75 billion, and here we have provided a complete break-down …
Vladimir Putin: Are you talking about earnings?
Sergei Kiriyenko: Yes, this implies earnings.
Vladimir Putin: How much electricity did the sector generate last year? Did it generate 170 billion kWt? This is an all-time high.
Sergei Kiriyenko: Yes, an all-time high. This year, we will generate 172 billion kWt, despite quite substantial amounts of work. This year, we had had more maintenance and repairs. We conducted more in depth inspections after the Fukushima disaster and implemented additional security measures … Nevertheless, this implies power generation. I’m talking about growth volumes and a rather impressive share of our new products. I mean nuclear medicine and the production of isotopes.
Mr Putin, we have scheduled the following investment timeframe under this programme. We plan to invest more than $350 billion over 20 years. We will accomplish this. We have now planned a programme for the construction of new nuclear reactors. We intend to build 38 new reactors nationwide by 2030. And almost the same number … We plan to build 28 reactors abroad, and we have signed contracts for the construction of 21 reactors to date …
Vladimir Putin: There were 12 reactors last year, and now there are 21.
Sergei Kiriyenko: Yes, there are now 21. By the way, we have commissioned one reactor.
Vladimir Putin: This is an increase of almost 100% in 12 months.
Sergei Kiriyenko: Yes, almost 100%.
Vladimir Putin: This is very good. Of course, I would like to thank you for the results of the industry’s performance. I would like to congratulate you, this is such a record-breaking parameter, and the work has been duly organised. Thank you.
Sergei Kiriyenko: Thank you.