Johan Vanderplaetse, Schneider Electric: ‘I don’t exclude the possibility that the localisation project will be in Tatarstan’

'The company sees big advantages in Tatarstan'

Mr Vanderplaetse, at the recent meeting at TAIF, you told some information about Schneider Electric's work in Russia. Particularly, it was said that Russia took fourth position in the company's turnover. In your opinion, is the fourth place good or bad for Russia in this segment? What potential do you have in Russia?

Of course, as any head, I am never satisfied. Always there is an opportunity to do more. So it is great that Russia takes fourth position. We successfully cooperate in several segments. There are spheres where we can develop more. Our goal in Russia is to increase the market share in industrial automation at least to the level we are observing in other countries. As for investments, this year Schneider Electric is going to invest 5 billion rubles in Russia.

What market share do you have in Russia today? What position do you aspire to achieve?

The company takes approximately fifth position in industrial automation in Russia. Meanwhile, we are usually first or second in other areas in the country. By our calculations, it is quite real to be in the top 3 in Russia.

What period do you mean?

Three years, maximum five.

Last summer, Schneider Electric moved its equipment from the factory in Kazan, which leases a room in Q-Park, to its own factory in Yekaterinburg. Probably it has been the greatest departure of a foreign player from the republic in recent years. Is it planned to renew the analogous production in Kazan?

It happened before I headed Schneider Electric in Russia. There were some disagreements with the lessor of the building and uncertainty of the future complex where the factory was located. We could not plan long-term investments in the production in such conditions.

The company sees big advantages in the republic. During the visit to Tatarstan, we met with the Tatarstan Investment Development Agency and discussed further cooperation perspectives. We are going to meet the administration of Innopolis to talk about the localisation of Research and Development. It was decided to increase the production in Russia. We just need to decide where. Either we will do it on our own or in Skolkovo, or Skolkovo and Innopolis. I don't exclude the possibility that it will be in Tatarstan because, in my opinion, Innopolis is an interesting project. The place for equipment production for industrial automation is being actively discussed. Once again, I don't exclude the possibility that it will possibly be in Tatarstan.

Apart from it, Schneider Electric is a licenseе. At this moment some Tatarstan partners are using our technologies. They have their own production but with our solutions.

By our calculations, it is quite real to be in top 3 in Russia.

What do you think about the prospect of working with partners?

The market is growing very fast. We always look for new partners and new areas for cooperation.

You have your licensed production TATEC that produces low-voltage prefabricated transformer substations in Zainsk. Is there any possibility of further development there? Are you going to run a new production there?

As our company uses only modern-age technologies, we will given them only the latest licensed technologies.

'We should not forget we are living in a global world'

You said localisation was active in Russia. Where are Schneider Electric's factories located today?

The company has six factories in Russia. Two factories are in Samara. By the way, one of them – Electroshield – is the largest factory of the company in the world. For comparison, 6,000 people work at Electroshield, while about 12,000 people work at Schneider Electric across the country. Two factories are located in Saint Petersburg. There is a plant in Yekaterinburg. And one factory more is not far from here in Kozmodemyansk. Moreover, Russian companies manufacture a long list of equipment, for instance, Rosatom assembles medium voltage switchgears. This autumn we are going to open an assembly line of equipment for solar substations in Moscow technopolis. We will open a Research and Development in Skolkovo in the short run. It will create smart energy supply technologies. These are our key foundations in Russia.

You have said you looked for a partner. Will this project in Russia be new for you too?

Yes, it will be a new project. It is a topic we are actively discussing. The company is ready to consider joint businesses with a reliable Russian partner.

Growth of domestic production capacities including by means of increased localisation is one of the key goals of the Energy Strategy of Russia till 2035. The share of energy equipment of foreign origin like gas turbines has to make up at least 10%. What difficulties can it cause? And what opportunities will it offer?

We understand and support the Russian localisation and diversification strategy. I have been living and working here for almost 25 years. There always have been talks about diversification of production during my life in Russia. But they have really gone into the question in the last two or three years. Moreover, we try to buy as many components as possible for our production from Russian suppliers. But localising, the company sticks to three principles. Firstly, we will never make a compromise at the cost of quality. Certain components are absent in the Russian market at times. And we can't localise a production because we don't have necessary parts. Secondly, the company uses the latest technologies while localising. And, finally, thirdly, we should clearly understand that after the localisation, the production will be no less effective than a production of the company in other factories in the world. For example, we have a factory specialised in specific transformer production. Demand for them reaches three or four units per year. Naturally, we won't localise this technological line in Russia because there is no sense.

The director general of TAIF offered to purchase their polymers in order to use them in our Russian factories. We support this approach. So Schneider Electric will be able not to buy polymers abroad, which, in turn, should help the Russian economy.

Localisation is localisation. But we should not forget that we are living in a global world. This is why the company is holding a constructive dialogue with the government regarding realistic requirements for the level of equipment localisation. It is clear that no country in the modern world will be able to produce everything with a 100% localisation.

'Every crisis and sanction are opportunities'

Have European sanctions affected the development of the Russian segment of Schneider Electric's business? If they have, how?

Sanctions don't affect our business directly or they affect just a bit. We are speaking about specific technologies: shale oil, shale gas, oil extraction in Arctic. These projects don't refer to us. Financial sanctions that have been imposed have an indirect impact. No European and American bank is able to grant a certain long-term loan to Russian structures. If our clients have a problem while borrowing money, it will postpone their investment project, which, in turn, will affect us.

However, every crisis and sanction are opportunities. We are very proud that we started localisation projects until they became trendy. Now we are developing faster that the common market. It happens due to the sanctions too because our rivals understood they needed to produce on the spot. And we have our own production base.

We have good experience in the building of a charging station network in Moscow. Now we are seeking for a partner or a customer

How do you cope with financial sanctions? Do you take out loans in Russia?

We are not a bank, of course, but the company provides with some credit lines. For example, we work with such a big organisation as Coface. We provide with an approach that allows our clients to obtain a good financing.

The company creates solutions for smart grids. What novelties do smart systems offer to the market?

Smart grid is a topical and important issue. It is a big opportunity to achieve energy efficiency in the world. According to all forecasts, demand for energy will have grown by 50% by 2040. The population of big cities will also increase by 50%. At the same time it is necessary to reduce wastes in order to tackle climate change. New technologies are the only solution. I mean renewable energy: wind power, solar stations. In the past, energy transmission was very simple – power flow was wayside. The level of power was the same whether it was day or night. There were colossal losses. Due to new technologies, software, this transmission has become smarter. First of all, energy generation depends on its consumption – it grows in the daytime and reduces at night. Energy can be generated not by a powerful plant. There will be many small connected plants, including plants that use renewable energy sources. They have already appeared in the West. Smart grid starts to actively develop in Russia.

Do you apply these technologies in Tatarstan?

Yes, we apply them to the equipment. But we haven't applied them to control systems yet.

By the way, about alternative sources: Schneider Electric is planning to implement projects for construction of a network of electric vehicle charging stations. In 2011, in particular, it was reported on an agreement with rEVolta company, Russia's first provider of integrated solutions for the charging infrastructure for electric vehicles, on supply of a line of vehicle charging stations Evlin to the Russian market. Then it was reported that one of these stations is to be installed in Kazan. The network launch is planned for 2016. Is the company involved in this project or it was scrapped?

The project stalled, but we are ready to discuss it with Tatarstan. We have good experience in the building of a network of charging stations in Moscow. Now we are seeking a partner or a customer. The problem is that no one wants to invest in charging stations for electric vehicles because such vehicles are few. But I think that these difficulties are temporary and the future will come faster than you think.

'In order to get solar energy, the Sun is not necessarily to shine all the time'

One of the directions of Schneider Electric is the elaboration of solutions in the field of renewable energy. In Russia, this market is only forming. In your opinion, how suitable is the direction for our country?

I do not agree with the statement that alternative energy in Russia is developing slowly. Our business direction on solar energy is progressing rapidly in Russia as well. It is clear that it is impossible to get all energy from the Sun. Maybe, in 50 years it will be possible, but today definitely not. In Russia, the key energy sources are oil and gas. But despite this, Russia should pay attention to renewable sources. First, own industrial base will enhance competitiveness. Second, there will be a huge market for export of technologies abroad.

Have Russia's (geographical, climatic) peculiarities influence the possibilities of using alternative energy sources?

I do not see any special restrictions, frankly speaking. For example, in order to get solar energy, the Sun is not necessarily to shine all the time, the light will be enough. It is even more efficient to get such energy in cold weather. I have recently been at a forum in Vladivostok, where wind blows constantly due to Pacific. The locals consider this fact a huge drawback. I can see in this an endless free source of wind energy.

According to your forecasts, what is the share of alternative energy in Russia?

Today it is a tiny share, it is unlikely to even reach 1%. Schneider Electric has five completed projects of solar power plants in Russia. Interestingly, these projects are built on our localised equipment and designed by Russian engineers. For Russia, it is a benefit because there are people who know how to deal with new technologies. And when a breakthrough happens, Russia will not lag behind. I don't expect that in the next ten years the share of alternative energy would exceed 5%.

Just recently, you have signed a cooperation agreement with the Kazan State Energy University. What it will be?

We are planning to create a Training Center of applied qualifications Electro Skills on the basis of Kazan State Power Engineering University. It will specialize in the field of electrical-technical and electrical-installation works with application of World Skills International standard. At the center, the students will gain skills in electrical and installation works, will learn special aspects of design, installation, repair and technical maintenance of electrical equipment, as well as the center will retrain and advance training of specialists of working professions. As for investments, it will amount to about 7 million rubles.