Arctic Match - Market

Opportunities for Finnish

Arctic Know How

in Russia

The Arctic Match

Russian Government has accepted

National Arctic Strategy valid until 2020.

Many challenges identified in Russian

strategy match with the Finnish

companies' competences and offering

especially in offshore, maritime and

mining industries.

Finpro helps you to seize these business

opportunities. Our trade center network

in Russia with offices in Moscow,

St. Petersburg and Murmansk offers

local expertise and connections that

ensure your successful foothold at the

Russian arctic market.

12/05/2014 © Finpro 2

Key Drivers of the Russian Arctic Opportunity

Main investment and development

targets related to Russian Arctic Strategy:

• Oil, gas and mineral industry

Base of Russia`s export and state

income.

• Northern Sea Route (NSR)

facilitating exports (of oil, gas and

minerals)

5/12/2014 3 © Finpro

graph: Proceedings Magazine, July 2013

Shipping via NSR from Murmansk to

Japan 49% faster than via Suez canal.

Data Source: Murmansk Shipping Company

Financing Russian Arctic Development

Announced annual

investments into

Russian arctic

development around

5.6 billion Euros.

12/05/2014 4 © Finpro

12,7 21,2

Around 34 Billion Euros 2014-2020

Federal andRegionalbudget

Privateinvestmentsand loans

Source: nvpress.ru/economy/6878

Consumer Potential of Arctic Region

• 2,3 million consumers with higher average income in comparison with Central Russia

– Murmansk region: average salary in 2013 ca. 808€ vs St.Peterbourg where average salary ca. 757€ 1

• These potential consumers have basic needs e.g in

- FMCG

- Clothing

- Hobby related products

- Home renovation, decoration

• Most of the goods should be suitable for arctic conditions

• ICT solutions and services required to provide all the services announced by the RF Government

1) http://www.mojazarplata.ru/main/zarabotok/srednjaja-zarplata/2013

5/12/2014 5 © Finpro

Russian Offshore and Maritime Industry

Value Chain is the Key to Right Clients

12/05/2014 6 © Finpro

Subcontractors to main

contractors (many)

Main contractor, usually one large local company

End customer, often the same

as lisence holder

Lisence holder for oil & gaz

field development e.g. Rosneft,

Gazprom

• Subcontractors to main contractors and in some cases main

contractor offering turnkey solutions are in most cases the

right clients.

• Russian industry specific engineering companies and Russian

industry specific design companies are Important opinion

makers though not buyers.

Examples of the Client Needs at the Maritime

Market

12/05/2014 7 © Finpro

Technologies and equipment for

efficient ship repair services along NSR

Lack of competence in human resources e.g. in emergency

and rescue operations

Needs generated by modernization of existing ports and

building new

Search and rescue centers, equipment,

and technologies

Energy-efficient technologies for oil

and gas field development

Navigation infrastructure for the NSR

Data centers and telecommunication

infrastructure

Arctic ecology safety infrastructure

Energy efficient solutions

Example 1: Gas driven tankers and infrastructure

• Gas driven tankers and ice-breakers are obligatory in Europe starting 2015. Russia is preparing for the change.

• Russian tanker operating companies need gas tankers and related infrastructure for example

- gas bunker bases

- new types of engines that require re-fuelling less frequently than in 7-10 days

12/05/2014 8 © Finpro

Example 2: Murmansk Arctic Shipyard

In April 2014 Rosneft officially announced the Arctic Shipyard

complex to be established in Murmansk starting 2014.

• The main target is to ensure efficient and up-to-date service and

maintenance work for vessels operating around artic

• The complex includes service yards ( assembling, repair,

upgrade) and construction yard ( platforms for oil rigs)

• One of the main challenges is lack of qualified personnel so the

company will put much effort in innovative and efficient

technologies

5/12/2014 9 © Finpro

Russian Mining and Minerals Value Chain

is the Key to the Right Clients

12/05/2014 10 © Finpro

Subcontractors to main contractors

(many)

Main contractor (usually one)

End customer (often same as

lisence holder) or operator of mineral source if different

than lisence holder

Lisence holder for mineral source

development e.g. Eurochem,

Norilsknikel, Phosagro, Barrick

Gold Canada

• Subcontractors to main contractors and in some cases main

contractor offering turnkey solutions are in most cases the

right clients.

• Russian industry specific engineering companies and Russian

industry specific design companies are Important opinion

makers though not buyers.

Examples of the Client Needs in the Mining and

Minerals Industry

12/05/2014 11 © Finpro

Equipment and technologies for

recycling ore waste

Energy-efficient mining processes for large mining groups

Easy and fast to install housing

modules with low energy-consumption

High quality service and maintenance of

heavy machinery

Wide range of materials and equipment for

residential and none residential buildings

Environment safety know-how,

technologies and equipment for arctic

conditions

Example 1: Proposed Investments in 2014

Kovdor GOK ( Eurochem)

Eurochem to invest around 90 ml. euro

• Crushing factory reconstruction

• Enriching complex reconstruction

• New mining machinery ( crushers, mills, special transport)

12/05/2014 12 © Finpro

Example 2: Proposed Investments in 2014

Kolskaya GMK (Norilsk Nickel)

Norilsk Nickel to invest around 35 ml. euro

• Enriching plant modernization

• Development of mineral resource bases

• New purifying station for industrial waters

• Construction of crushing complexes

• Reconstruction of crushing unit ( enriching factory)

• Reconstruction of melting production

• Ecology projects

12/05/2014 13 © Finpro

Example 3: Proposed Investments in 2014

Olcon (Severstal)

Olcon to invest around 28 ml. euro

• new conveyor system

• ore concentrate drying equipment purchase

• up-to-date factory equipment purchase

• ecology solutions

• energy-efficency

12/05/2014 14 © Finpro

New Industry Specific Arctic Centres Offering

Know How and Co-operation Potential

Krylov Research and Scientific Institute in St. Peterbourg:

• Arctic shipbuilding, engineering and design

• Voluntary certification of materials and technologies for Russian Arctic

Marine Fleet Central Institute in St. Peterbourg:

• Arctic shipbuiding, engineering and design

• Infrastructure solutions for the Arctic

Training center at Transas company in St. Peterbourg:

• Simulation training for Arctic conditions

• Software solutions for Russian oil and gas industry

Rosneft & ExxonMobil in Moscow, St. Peterbourg, Murmansk:

• Research and development of technologies for Arctic operations

• Training center

Arctic shipyard in Murmansk (in progress):

• Proposed base for construction of Arctic fleet

12/05/2014 15 © Finpro

Krylov Arctic Center – Possible Information

Channel of Finnish Offering

”… by the way, last year (2013) was unsuccessful regarding investments budget – from allocated 4.5 bl. rubles(ca. 90 ml. euro), we managed to spend only 3.5 bl. rubles ( ca. 70 ml. euro)”

General Director, Igor Melik-Gaikasov, interview to Kovdorgok.ru, 29.01.2014

• There is a significant lack of knowledge of Finnish solutions in Russia. In many cases Russian companies lack information and contacts of Finnish suppliers.

• Krylov Arctic Center has suggested Finpro to establish a working group which can provide data and information both for Russian and Finnish companies.

– This might be a channel for Finnish SMEs to promote their offering in Russia

12/05/2014 16 © Finpro

Miilux Abrasion Resistant Steel Centre

provides services to the metal, mining

and rock industries as well as

earthwork and mechanical

engineering companies in Finland and

abroad. Company participated in

Human Protection and Search &

Rescue Technologies (SAR) Finland

Export Partner Group. Pekka Miilukangas, Managing Director,

Miilux

Finpro’s export partner group

succeeded just perfect for us and

we have been able to reach our

targets. Already during the second

year of export partner group, we

have signed some export deals.

So far we have achieved export

sales worth of nearly 1 million

euros from Russia.

Miilux is a family business belonging to the Miilukangas Group.

Miilux Abrasion Resistant Steel Centre provides services to the

metal, mining and rock industries as well as earthwork and

mechanical engineering companies in Finland and abroad.

Miilux was established in 2000 and its annual hardening

capacity is 32,000 tons per year. Miilux has approximately 45

employees and its turnover in 2011 was about 19.3 million

euros.

Miilux wanted to grow their business and find new export

markets abroad. Company also needed to strengthen its

presence in existing scattered markets. Miilux decided to

participate in Finpro’s export partner group, which consisted of

Finnish SME’s manufacturing products for Human Protection

and SAR Technologies. Export partner group started its

operations in 2010 and at present has its third operation year.

Target country for the export partner group was specified to

Russia. The operations in the export partner group started with

market research phase during which the clientele, competitive

situation, local manufacturing and required certificates were

analyzed. This was followed by Miilux business visits in Russia

after which the company received the first requests for

quotations.

As a result of export partner group Miilux has achieved export

sales of nearly 1 million euros from Russia in 2011 and 2012.

Company has recognized business opportunities and

established its presence in new markets. Already during the

second year of export partner group Miilux signed the first

export deals. Cooperation with Miilux continues in countries

worldwide in which growth customers have been identified.

EU-rahoitus, Horisontti 2020, pk-instrumentti

Kasvun pohjustaminen

TEM/ELY- keskus: kehittämispalvelu, 1200 €/pv, tuki 75 %

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Tutkimus ja kehitys Tekes: Tutkimus ja kehitys, max. 50 %, laina max. 70%

Kansainvälisen kasvun suunnittelu ja aloitus

ELY-keskus: kehittämisavustus (1.7.2014 alkaen), tuki max. 50 %

TEM: vientiverkosto 1-3 v, yritysten lukumäärä 4-6, tuki 0-65 %

Finnvera/UM: avustus pk-yritysten kv. hankkeisiin Venäjällä, tuki 50 %

Finnpartnership: liikekumppanuustuki, tuki 50-70 % pk-yritykset, isot yritykset 30-50 %

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Tavoite Top 5 joukossa Euroopassa, valmisteluvaihe I tuki 100 %, vaihe II tuki 87,5 %

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