St. Petersburg, Russia – The Russian state company responsible for developing a $30 billion tourism project in the country’s mountainous North Caucasus region, an initiative backed by Russian President Dimitry Medvedev that is to include world class skiing, unique mineral spas and the first modern beach resorts on the Caspian Sea, has signed a joint venture agreement with Korean Western Power Co., Ltd. (KOWEPO) and CHT Korea for construction of up to five new environmentally advanced power stations to supply electricity and heating both for tourist sites and surrounding populations.
“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,” said OJSC Northern Caucasus Resorts Company (NCRC) Chairman Akhmed Bilalov.
The signing took place in St. Petersburg against the background of the 2nd International Forum – Russia/Korea Dialog, aimed at strengthening bilateral trade and investment between the two countries. NCRC will own a 50 percent stake in the joint venture, while KOWEPO will hold 40 percent. A third company, CHT Korea, will have a 10 percent share.
Precise details of the project’s total production capacity and technological configuration are said to be forthcoming by year’s end. Preliminary plans call for up to five power plants using coal fuel with modern 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 $300 million in investment.
Russia’s state-owned NCRC is responsible for attracting both international and domestic investment and serves as the principal operating company for the ten-year, $30 billion tourism project. The development will stretch 600 km from the beaches of the Caspian Sea nearly to the Black Sea coast, where the Sochi 2014 Winter Olympic Games will take place. The five new ski resorts are hoped to attract yearly up to ten million skiers, eco-tourists, mineral spa enthusiasts and beach vacationers from Russia and Western Europe, as well as from the Middle East and China.
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 endeavor is the centerpiece of a massive federal government initiative valued in the tens of billions of dollars to address the social and economic challenges of the North Caucasus.
The region is one of eastern Europe’s most impoverished, and separatists have focused on the ski resort development as an opportunity to further their agenda. The Caucasus region is under siege by both Islamic militants and criminal gangs, which stage almost daily attacks. In February, terrorists shot dead three tourists and wounded three others in a minibus hours after blowing up a ski lift. The Russian government, however, sees the development of the ski resorts and eco-tourism as the solution to the region’s political woes.
The focal point of the planned new tourism industry for the region, which includes Europe’s highest peak, Mount Elbrus (5,642 meters), is a cluster of five 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, considered globally significant for biodiversity, is differentiated by its unique natural and cultural heritage. It is widely regarded as the most unspoiled 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.
The region’s bio-diversity has brought environmental opposition to the project that is almost certain to be strengthened by developers’ plans to use coal to fuel the new power plants in a region already ecologically threatened by illegal logging, unregulated tourism leading to frequent forest fires and unchecked waste disposal polluting mountain lakes and rivers. Groups including the All-Russian Society for Nature Protection, known by its Russian acronym VOOP since 1924, North Caucasus Ecological Watch, WWF Russia and globally renowned explorer, film-maker and conservationist Jean-Michel Cousteau, have all joined the fight.
“Our most valuable asset for this project is the region’s extraordinarily pristine environment,” said Bilalov, who also serves as vice president of the Russian Olympic Committee. “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.”
Alexei Nevsky, CEO of NCRC, has said that developers have at their disposal the vast environmental experience accumulated over the decades in the ski resort industry in Europe, North America, Australia and elsewhere, and that NCRC aimed to learn from mistakes made and capitalize on successes achieved in deriving know-how that safeguards and enhances ecosystems under conditions of commercial development.