19 Apr 2023 12:49

Siemens and Kazanorgsintez discussing out-of-court settlement of dispute on constructing power plant

KAZAN. April 19 (Interfax) - Siemens Energy and PJSC Kazanorgsintez are considering the possibility of an out-of-court settlement regarding the situation with constructing the CCGT-250 power plant, which has been suspended because the German company has exited projects in Russia, according to the statements of Neftegaz and Energetika LLC, a Siemens subsidiary in Russia.

"On March 30, 2023, PJSC Kazanorgsintez filed a claim against Siemens Energy, Neftegaz and Energetika LLC, and Enka for non-performance or improper performance under work contracts in the amount of around 9.5 billion rubles. The parties are simultaneously considering the possibility of an out-of-court settlement," according to the explanatory notes to the report.

"The European Union countries and the United States imposing sanctions in 2022 affected the possibility of executing contracts by European sub-suppliers of Neftegaz and Energetika LLC. Completion and execution of construction contracts with PJSC Nizhnekamskneftekhim and PJSC Kazanorgsintez have been suspended. At the moment, the company is coordinating possible options for resolving the matter with customers," according to the document.

According to the report, the reserve of Neftegaz and Energetika LLC for possible fines for delaying the project in Nizhnekamsk totaled 536.1 million rubles as on December 31, 2022.

Neftegaz and Energetika notes that, "to date, it cannot determine with a sufficient degree of certainty the likelihood of occurrence and the amount of reduction in the economic benefits that could arise in connection with these circumstances."

There were earlier reports that Kazanorgsintez and Siemens had signed a contract for the construction of a 250 MW CCGT-TPP combined-cycle plant, the Lushnikovskaya combined cycle gas turbine power unit (CCGT), in October 2019, along with agreements for service maintenance for the facility for 13 years. Meantime, a contract was signed for the maintenance of Nizhnekamskneftekhim's Lemaevskaya CCGT with capacity of 495 MW, which was also built by Siemens, and has been operating in pilot operation mode since 2022.

The CCGT-250 should have been delivered on a turnkey basis by March 2023; however, Siemens notified in July 2022 that it was refusing to fulfill its obligations owing to the EU-imposed sanctions because of the situation in Ukraine, following which all operations ceased at the facility.

Kazanorgsintez in March 2023 filed a claim with the Tatarstan Arbitration Court against Siemens Energy and Neftegaz and Energetika LLC, formerly Siemens Energetika LLC until June 2022, seeking to recover 9.5 billion rubles as the unused part of the advance payment for constructing the CCGT -250. Turkish engineering holding Enka, which participated in the construction of the power plant as a subcontractor, acted as a co-respondent. Kazanorgsintez also requested to arrest the property of Siemens and Enka in the Russian Federation as an interim measure, though the court refused to grant this request.