Tuesday, October 1, 2013

EU-funding pilot project – chances and challenges for new business

Karelia ENPI CBC Program offers excellent situation for concrete investment projects in program area. Looking to the program by Finnish side, it also offers good chance to companies to start business in Russia. It is a safety way because projects are managed by lead partner and money is protected by program. Companies can be partners with self-funding part and rest of money comes from EU. In my point of view companies should look at this like new the export opportunities for their business. Like in BIOKOS-project, the lead partner is Regional Council of Kainuu, which means in practice that administrative organization have several contacts to authorities in Russian side. For companies it is very useful to create their own contacts with them. In long term the contacts and the experience that has been got from project can help a lot in export or business in common. 

In BIOKOS project is target to build 1 MW combined heat and power plant (CHP) in connection with waste water treatment plant in Kostomuksha. It is a pilot project because nowhere else exists this kind of technology or exactly saying these kinds of equipment. Technology is based on thermal drying and thermal gasification which both are innovations of private Finnish persons. One partner is responsible to plan the entity. In case the project succeeds this can be start for new business and co-operation. But the best issue is that sewage sludge will be handled and modified to energy in Kostomuksha. It is nice to notice that City of Kostomuksha is very open for new innovations and new possibilities. Kostomuksha is pioneer and one good reference can open new cities to partners. 

By this Karelia ENPI CBC Program partners will get more knowledge than one reference. Export/Import from Finland to Russia is not so simply. Or it is, but it is important to know what must be done before the equipment transport to Russian side. Through this project partners will get simply model for export: knowledge about Technical Requirements of Custom Union, model for custom number that all equipment can be exported in one entity and a lot of technical papers will be translated to Russia. This is the case why should be more EU-funding investment and concrete projects available for small companies. And companies should take to chance. In Russia is a lot of knowledge in basic industry but also in new technics. By these EU-funding projects is possible to disseminate knowhow to each other and networking. Or even to create together something new! 

But. There are always some “buts”. In EU-funding projects budget is very limited and it means there is no more money than budgeted amount. In pilot projects can be unexpected costs in installation and in start-up. They can be even 10 % from total budget. It is really difficult to say how much should be allocate money for changes. And how much is it even possible inside the project budget? It is possible try to decrease some costs but how much can decrease for example design costs in pilot project -case? I would say that nothing. If these kinds of issues are not taken into account in project applications, it is very challenging to change budget during the project. There should always be some risk money behind the project budget or allocates some amount for unexpected costs. Pilot projects need probably more money for unexpected costs as usual. In budget can be money for purchasing needed equipment but there is no money to get process work. Or there is a risk that money finish before plant is totally running. Project can be an economic risk for all partners. Even in plants which are be built by well-known technics, there can be unexpected costs in start-up, too. For example it has been built several nuclear power plants in the world and technics are known. However Olkiluoto 3 has cost more than expected and project is late couple of years. 

EU-funding project differs from commercial project. In both cases the owner is known but in commercial projects there is some guarantee for the plant. After Sales Managers will make sure everything is working and in some cases maintenance will be easier. Or service is included into delivery. When EU-funding project ends it ends because the project can’t take tasks or costs after deadline. Despite of that it is important to make sure technical support is available for new owner if necessary. One project challenge can also be that some companies would like to keep innovations confidential until they have tested it or have ensured it works in process. 

The investment projects and the concrete building projects are always challenge for managers and partners. I’m sure all ENPI projects have challenges and own special cases. Co-operation and understanding are important for all of us. In my opinion it is important to share experiences to other projects because it can help somebody. You can follow how BIOKOS goes ahead in our web site www.biokospower.com. I wish to all other projects good luck and success!

Sanna Nikola-Määttä

KA408: The Biofuel Plant in Kostomuksha BIOKOS

Project Manager

Regional Council of Kainuu

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