Nov. 4 – Russia and South Korea are teaming up to develop a tourism hub in the mountainous North Caucasus region and Korean investors have signed on to contribute US$1 billion towards the US$30 billion project.
The state-run OJSC Northern Caucasus Resorts Company (NCRC) signed a joint venture agreement with Korean Western Power Co. (KOWEPO) and CHT Korea within the framework of the 2nd Russia-Korea Dialog International Forum in St. Petersburg on Wednesday.
The joint venture will produce and provide energy in the Northern Caucasus. The first stage will see five coal-fired power plants built in energy-deficient regions, with one in Sochi’s Krasnodar region, host of the 2014 Winter Olympic Games.
NCRC has been initially capitalized by a Russian government allocation of US$2 billion. One of the Korean investor, KOWEPO, accounts for approximately 13 percent of the Korean national generating capacity, mostly comprised of thermal, combined-cycle, and pumped-storage power plants.
Precise details of the project’s total production capacity and technological configuration are expected to be forthcoming by year’s end. Preliminary plans call for power plants using coal fuel with state-of-the-art emissions scrubbing and carbon sequestration and integrating renewable energy from wind and solar sources. The first phase of the joint project is expected to reach US$300 million in investment.
“The provision of a high-capacity, modern power-generation network incorporating renewables and supplying both the new resorts and neighboring communities is a major step forward in our master plan to develop a region-wide, ecologically-sustainable tourism industry to spur economic growth in the North Caucasus,” Akhmed Bilalov, NCRC Chairman and Russian Olympic Committee Vice President said.
“This energy project will create 20,000 jobs in the south of Russia,” he added.
Resorts of the North Caucasus will own 50 percent stakes in the joint venture, while KOWEPO and CHT Korea will hold a 40 percent and 10 percent share, respectively, according to the signed agreement.
South Korea is not the only international partner in the project: French state-run company Caisse des Depots et Consignations is also investing 15-20 billion euros in the hub development.
The government has designated the 50,000-square-kilometer tourism development area as a special economic zone, offering investors a highly concessionary tax regime and state guarantees for up to 70 percent of the value of a given investment.
The focal point of the planned new tourism industry for the region, which includes Europe’s highest mountain peak Elbrus (5,642 meters), is a cluster of five world-class ski resorts located in the Republic of Adygea, Krasnodar Region and parts of the North Caucasus Federal District, including Stavropol Region and the republics of Karachai-Cherkessia, Kabardino-Balkaria, North Ossetia and Dagestan.
The area is widely regarded as the most unspoilt mountain ecosystem remaining in Europe and hosts 46 distinct indigenous cultures, some with ancient histories, and is home to four major UNESCO World Heritage sites.
“One of the key reasons we selected KOWEPO to build the power network for this critical project was their top-in-industry commitment to both environmental and social responsibility. That is a fundamental requirement for all investors in this region,” Bilalov said.
“Korean engineers have the latest technologies in the industry sector, which aside from other things ensures 90 percent of coal utilization, whereby their Russians colleagues could provide less than half,” Islam Nazaraliyev with NCRC said.
“We believe that our good experience in this field, and mutual understanding with our respected partners from Russia, guarantee the success of the project. We hope that the project will play a significant role in the further development of relations between Russia and South Korea,” Kim Moon Duk, president of KOWEPO says.
“In 2014, Sochi will host the Winter Olympic Games and our company will also supply electric power to ski slopes and other infrastructure for the 2018 Winter Olympic Games which will take place in South Korea’s Pyeongchang,” he added.
The development will stretch 600 kilometers from the beaches of the Caspian Sea nearly to the Black Sea coast, where the Sochi 2014 Winter Olympic Games will take place. The new resorts are expected to attract up to 10 million skiers, eco-tourists, mineral spa enthusiasts and beach vacationers yearly from Russia and Western Europe, as well as from the Middle East and China.