In the current year, contracts were signed for the supply of 32 transformers.
Kazakhstan is gradually increasing the production of processed products. One example of this is the production of transformers. The Shymkent Asia Trafo LLP (part of the Alageum Electric group of companies) is a vivid example of how in the south of the country they were able not only to preserve, but also to develop high-tech production. In general, the production of transformers is not a novelty for Kazakhstan, they are manufactured in Kentau and Uralsk. However, the Shymkent plant has a special, distinctive quality - here, for the first time in the history of independent Kazakhstan, they produce the largest transformers in the voltage range of 110-500 kV, which were previously imported from outside the region.
Daulet Aldybaev, Deputy General Director of Asia Trafo, spoke about how the company operates in Kazakhstan and begins to conquer neighboring markets in an interview with Kursiv.
- What are the financial results for 2019? How many transformers were produced in 2019 and in the first eight months of this year?
- Asia Trafo started its activity closer to the second half of 2019. Based on the results of activities for the six months of 2019, the total annual income of the partnership amounted to 5.5 billion tenge. In 2019, the plant manufactured 29 pieces of equipment and sold 23 of them last year. Six reactors are located with us and await the readiness of the object at the customer's site for installation and connection of equipment. In the first eight months of 2020, contracts were concluded for 32 transformers. Nine of them have been manufactured and shipped, the rest are also in the process.
- How many transformers have already been implemented this year?
- This year contracts were signed for the supply of 32 transformers. Of these, nine transformers were manufactured and shipped to the customer. Also this year, we signed the first export contract for the supply of a power transformer to the national power grid operator of Tajikistan, the OJSC "Barki Tojik". They entrusted us with their electrical networks, so this is the first export swallow for us. The contract was concluded, the payment was made, and we started production of the transformer.
- What difficulties did the company face while implementing the project? How did you overcome them?
- Within the framework of the project for the construction of a plant for the production of transformers with a voltage class of 110-220 kV, which is a technically and technologically complex facility that has no analogues in Central Asia, the most varied difficulties arose, as in any new project. It should be admitted that even the most thought-out projects can surprise with ambiguous challenges during their implementation. The most important thing here is the well-coordinated work of the team and the responsible approach of each participant. The team of Alageum Electric specialists together with the Development Bank of Kazakhstan demonstrated their professionalism and responsibility during the implementation of the project.
More problems than during the construction of the plant arose after the implementation of the project. One of the problems is not entirely fair competition.
The Alageum Electric group of companies has been involved in the restoration of electrical engineering and transformer engineering in Kazakhstan for over 20 years.
Kentau Transformer Plant, part of Alageum Electric, has been producing transformers for over 60 years. During this period, we have seen everything. And if at voltage classes of 6-10 kV, we systematically fought against pseudo-enterprises, which organized the repair of used transformers by a handicraft method and passed them off as new ones, receiving manufacturer's certificates or ST-KZ certificates with a Kazakh content of more than 50%. But when this happens for products of a much higher class that we are now producing, it cannot but cause outrage.
The production and release of transformers with a voltage class of 110 kV and above is a very demanding job. There is a tremendous amount of labor and resources behind this. We, thanks to the help and support from DBK, DBK-Leasing, have built an ultra-modern plant. We educate, prepare our leaders, train yesterday's schoolchildren in engineering specialties to work and create healthy competition in the market. 250 people are provided with jobs at our enterprise, and when we reach the planned capacity, we will be able to provide jobs for more than 300 people. That is, we are doing a tremendous job, but someone is going the other way - the easy one. False manufacturers buy cheap products abroad, issue fictitious certificates with a high share of Kazakh content, participate in tenders for the supply of Kazakh infrastructure facilities and win.
Another point is the support of domestic producers. For example, when we export our products abroad, we see how other countries protect their markets from exporters like us by creating preferential conditions for their own companies. When selected through procurement tenders, they provide up to 20% incentives to suppliers based in their country. Unfortunately, we do not have this.
Also, probably, the situation around renewable energy sources (RES) requires coverage. In renewable energy projects, design institutes most often put foreign products, which are also manufactured in our country. This is the first thing.
Second. It may be necessary to revise the requirements or recommendations for investors who commit themselves to the construction of RES-based substations. Often, investor companies with foreign capital participate in tenders with the provision of minimum tariffs. It would seem that this should affect the payback period of the project, but more often the obligation to save the cost of the project falls on the equipment suppliers. Given the absence of any benefits for us, as a domestic producer participating in the RES project, we have to compete with imported products, which, by the way, are supported by the importing country. Simply put, a foreign investor, participating in a Kazakhstan renewable energy project, buys products in his country. So the Kazakhstani commodity producer remains out of work, because its price is uncompetitive in comparison with them. At the same time, the investor is not burdened by the need to use Kazakhstani products. We believe that in such priority areas implemented in the country, it is necessary to establish a requirement for investors to use local products.
- It turns out within the framework of renewable energy projects, if an investor buys equipment in his or a third country - not in Kazakhstan, then the government there supports the export of its products. Most likely, there are some export benefits...
- Sure. At the same time, in order to take part in a RES project with foreign investments, we are faced with much more difficult conditions. We have to compete with their low prices. At the same time, we have no support for participating in such projects. We have a couple of such moments where we took part, and at the moment there is an investigation into why the investor does not plan or even consider our domestic products and there is no support from the state in this regard. In our opinion, this needs to be corrected.
- What share of the manufactured products are planned to be exported, and what will go to cover the country's internal needs?
- Transformers manufactured by AsiaTrafo are a science-intensive, complex product requiring a high degree of professionalism. Alageum Electric Company constantly proves in practice that our product is in no way inferior to similar products of other factories, not only in Central Asia, but also in the world, because technology and production are of world standard. In August, we signed our first export contract for the supply of products to foreign chains. Currently, negotiations are underway to operate our products in the electrical networks of Russia, Kyrgyzstan and Uzbekistan. Now almost all production is used to cover the domestic needs of the country.
- What difficulties does the company face when exporting products, how can they be overcome? Is it marketing within the Alageum Electric group of companies, or does each of its subsidiaries do it independently?
- We have created a very wide dealer network in Russia, we also have representative offices in Tajikistan, we have a subsidiary company in Kyrgyzstan. We have partners in every country, and we have built a sales system through them. For example, the dealer network in Russia has been building for about eight years. In addition to the issue of competitive prices for products, which is also formed due to the costs associated with logistics, we are faced with the issue of trust in products. AsiaTrafo is undoubtedly a new plant, modern, energy efficient, with the most advanced power transformer technology. But this is not enough to convince a foreign client. We need a reference list of machines that have been successfully implemented and operated at sites. This is what we are doing now, supplying products to the domestic market, and forming a list of already operating transformers.
- Who buys your company's products?
- The voltage class from 110 kV is, of course, a consumer of an industrial scale: factories, industrial enterprises. 220 kV are power grid companies specializing in the transit and sale of electricity, regional and national. Our analogue is KEGOC. There are similar power grid companies abroad. Our main consumer is companies dealing with the transit and sale of electricity.
- When does the company plan to reach its design capacity and how much is it?
- The plant expects the installation of an additional drying oven and, in fact, we can assume that the production capacity of the plant corresponds to the design one. To put it simply, we are able to produce the declared 12,000 MVA per year if we secure orders. For 6 months of 2019, we have manufactured products for 1,400 MVA.
- What is the internal demand for transformers manufactured by the company? What will be the need for transformers in Kazakhstan, taking into account the need to replace old transformers and build new facilities where transformers produced by the company will be required?
- The service life of power transformers according to GOST is no more than 30 years. The current situation at substations and the transformers put into operation at them is deplorable. Most of the products have been in operation for over 35 years. And this affects the energy efficiency of networks, large losses affect the quality of the supplied energy. The insulating properties of materials are lost, which will undoubtedly lead to an accident one day.
In the age of the atom, energy and affordable broadband internet, the prospect of being without electricity can pose significant risks to any company. In a highly competitive market environment, the downtime of any major enterprise that is powered by these grids leads to much more serious financial costs and lost opportunities than replacing transformers. According to our calculations, in the next three to five years, more than 9.5 GVA of transformer equipment in total will need to be replaced. As an example, we took only the KEGOC power grid, which uses transformers. The work will be enough for us if we are trusted.
- Your cooperation with the Development Bank of Kazakhstan has been going on for several years, tell us why you choose DBK to finance your projects?
- The Asia Trafo project was financed within the framework of the State Program for Industrial and Innovative Development and the "Business Road Map 2020". We started the construction of a plant unique for the republic in 2017. The total cost of the project was about 19.1 billion tenge, of which 8.6 billion tenge was provided by the Development Bank of Kazakhstan (a subsidiary of Baiterek Holding in the form of a loan for a period of 12 years. DBK-Leasing, which is part of the Bank's structure, in turn provided financing in the amount of 5.9 billion tenge. Thanks to the support of these financial institutions, a modern plant was built, and high-tech equipment in the field of transformer construction was purchased. And we are inclined to believe that during the cooperation with DBK and DBK Leasing, the Alageum Electric group of companies has established itself as a reliable client, an entrepreneur with a long-term perspective.
