25/06’14 – Since they opened a branch office in Bishkek in summer last year, Alstom has cautiously built up a certain profile for itself in Kyrgyzstan. In how far the bright outlook of the French celebrated construction giant in Kyrgyzstan could be blurred by its upcoming merger with America’s General Electric, however, is something that should remain scrutinized for months if not years to come.

 

“Today Alstom inaugurated its first office in Bishkek, Kyrgyz Republic,” a company press release on the occasion was to read. “Representatives of the Ministry of Energy and Industry of the Kyrgyz Republic, the management of Power Plants and other energy companies of the country, as well as the ambassador of France Mr. Thibaut Fourriere and ambassador of Switzerland Mr. Laurent Guye were present at the event. Alstom develops ready –made solutions in the sphere of integrated power plants and renders related services in relation to a wide range of energy sectors using the following power sources: water, nuclear fuel, gas, coal, wind. Having more than a century of experience, solutions and products in the sphere of energy that are used in more than 100 countries of the world, Alstom can offer the Kyrgyz Republic cooperation on current and prospective energy projects.

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Alstom headquarters (source: Reuters)

“In particular, Alstom is constructing a hydro energy equipment plant in Ufa in cooperation with RusHydro,” the press release continued. “The joint enterprise AlstomRusHydroEnergy where the partners hold a share of 50% each, will produce equipment for small hydroelectric power plants with capacity up to 25 MW, for medium capacity hydroelectric power plants (up to 100 MW), for water-storage power plants with capacity of up to 150 MW, as well as automated process control systems and auxiliary equipment. The partners also plan to extend the services rendered by the joint enterprise in the sphere of maintenance. Inspection and diagnostics of equipment installed at functioning hydroelectric power plants, supply of spare parts and components, works on re-equipment, repair and modernization of hydroelectric power plants equipment are among planned spheres of cooperation. In the energy supply market, Alstom has unique opportunities of providing complex solutions, sustainable production of energy and supply of equipment for energy transmission. Every fourth light bulb in the world gets electric energy from the equipment in which Alstom’s technology is applied. Equipment based on using Alstom’s technology ensures functioning of more than one fourth of capacity available in the world.”

 

RusHydro is no stranger to Kyrgyzstan, and is already deeply involved in the country’s development into a “power-power” for Central Asia and beyond. Moreover, cooperat with Rushydro can be more easily funded thanks to a number of financial vehicles maintained by the governments of the two states, which will only be strengthened with Kyrgyzstan’s entry into the Eurasian Economic Union this coming winter – something the US government is aggressively opposed to and intends to undermine at any possible cost. This is only one reason why the Kyrgyz party should be wary of sticking to Alstom proper without letting its new American partner sneak in through the back door.

 

“RusHydro” plans to allocate 1 billion rouble for the construction of Upper Naryn HPP cascade in 2014,” 24.kg in a news report published on June 6 this year [http://www.eng.24.kg/economics/170901-news24.html] quoted the Prime Minister of the Kyrgyz Republic Dzhoomart Otorbayev as telling reporters. “According to him, one billion was allocated and is already being developed,” the report read. “Through the Kyrgyz-Russian Development Fund it is planned to allocate additional funds for the energy sector. […] An agreement has been inked with the Swiss Government, if we return to the subject of energy, on allocating $20 million for modernization of the At-Bashy HPP (hydropower plant). It is a grant. At-Bashy HPP has been operating for 44 years, and upgrading its equipment is necessary. Thanks to this sum, it will be able to produce from 160 up to 168 million kWh of electricity.”

 

What happens to Alstom’s position in Kyrgyzstan in particular and in the former Soviet Union in general remains unclear for the moment. “G.E. will enter into three joint ventures with Alstom that will carry the Alstom name,” an article on the GE/Alstom question [http://dealbook.nytimes.com/2014/06/23/in-g-e-s-deal-for-alstom-french-interventionism-wins-out/] in the New York Times reads. “But the main gas-turbine business will end up as part of General Electric. The French government [has] planned to buy 20 percent of what remains of the stand-alone portion of Alstom, which will be a holding company for the train-manufacturing business and the joint ventures.”

 

“Under the agreement with Alstom, GE agreed to sell its railroad signal business to the French company for about $825 million,” a report by the Bishkek-based news agency AKIpress [http://www.akipress.com/news:543579/] published over last weekend reads . “The deal also calls for the companies to set up three 50-50 joint ventures: one for the power grid businesses, another for offshore wind and hydro-power operations, and a third for nuclear steam turbines. GE has said that if shareholders and workers’ representatives sign off on the deal, the acquisition of Alstom’s energy unit should close sometime next year.”

 

While US media see GE’s entry’s approval as Uncle Sam’s glorious path to world hegemony, in France Hollande’s move tends to be seen as one to keep employment within its borders without creating foreign investment hostility. “Long accused of being dithering and spineless, French President François Hollande’s government won praise on Monday for a rare show of backbone in taking a stake in ‘[http://www.thelocal.fr/20140623/hollandes-tough-stance-on-alstom-pays-off] reported over the weekend. “Hollande took charge personally of the Alstom case, which saw France on Sunday clinch a deal to become the main shareholder in the company, paving the way for an alliance with US giant General Electric,” the report reads further. “The deal will see the French state take a controlling stake in power-to-rail group Alstom and pursue a €12.35 billion deal with GE for its purchase of the group’s struggling energy businesses. Hollande’s government was initially opposed to GE’s bid and encouraged Germany’s Siemens to put in a rival offer, but turned around and backed the US giant after it sweetened its offer.GE has promised to give the government a veto over sensitive nuclear energy technology and to strengthen Alstom’s transportation business, which makes the French TGV high-speed trains.” An eventual merger with GE will require the green light both from American authorities and the European Commission.

 

The deal is particularly of interest for Kyrgyzstan, where Alstom is the first and so far the only concern of its global size and significance engaging in core projects, namely the construction of hydraulic and thermal power generating facilities. “French company ALSTOM is interested in participating in construction of the Kara- Keche thermal power plant and two hydroelectric power plants at Koko Meren cascade,” the Kyrgyz state news agency Kabar reported [http://www.kabar.kg/eng/economics/full/9815] on April 29. This topic was discussed during the meeting of Vice Prime Minister Valery Dill and head of ALSTOM- Central Asia” Marek Stech. M. Stech said that ALSTOM has a big experience in production of equipment for thermal and hydroelectric power stations. In addition, the company is a world leader in terms of installed hydro capacities. ‘Given the fact that more hydropower plants have been building now, our company has all the necessary technologies and specialists to build a thermal power station to meet the highest environmental standards. Now it is necessary to identify the sources of project financing for the construction of Karakeche TPP. Maybe this project will be interesting to the Chinese Eximbank,’ said Mr. Stech. In turn, The Vice Prime Minister noted that, given the ever-increasing energy consumption, the country needs new energy capacities. “I hope that our cooperation will continue and we will soon begin a detailed discussion of the project on construction of Karakeche TPP,’ said Dill.”

 

It can generally be considered a test for Kyrgyzstan: if Alstom succeeds in securing contracts, others might follow – including traditional German rival Siemens. With its immense hydraulic resources, appropriate infrastructure and generating capacity could enable Kyrgyzstan to produce ten times more electricity than it needs to satisfy its domestic needs, and thereby ensure national income on exportation proportionally comparable to Kazakhstan’s petrodollars – only in the case of Kyrgyzstan hydropower remains valid long after the world’s oil reserves have dried up.

 

The only blue note is, as usual, political. Alstom’s eventual adventure with General Electric might give the American government a finger in the brew. If indeed GE absorbs Alstom’s plans to get to business in Kyrgyzstan, the American partner could well be used as an instrument by Washington in attempts to push Russia’s and China’s engagements in Kyrgyzstan, which are considerable, to the background or at least within limits. It should therefore be more preferable for Kyrgyzstan to “keep things French” as long as the standoff caused by Washington’s partisan and aggressive attitude towards Russia and (to lesser extents) China continues. How that fits in to the upcoming tandem between Alstom and GE needs to be closely watched.

BY CHARLES VAN DER LEEUW, WRITER, NEWS ANALYST