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Press-release

RAO UES, Primorsky Kray Administration Sign an Agreement on Cooperation in Development of the Region's Energy System

Moscow, 17 January 2008. RAO "UES of Russia" and the Primorsky Kray Administration have signed an Agreement on Cooperation in Development of the Region's Energy System and Reliable Electricity Supply Through 2012.

The rapid economic and social development in the Primorsky Kray is accompanied with increased power consumption. In 2007, the electricity demand grew more by than 3.1% compared to the year before. According to the forecasts, electricity demand in the region's energy system will increase by 4.1% annually during the period until 2010. In the southern energy area of the Primorsky Kray, where Vladivostok, the key industrial facilities and port infrastructure are located, this indicator may exceed 5%.

The Agreement is designed to improve the reliability of electricity supply, increase the network throughput capacity, create the conditions for new user connections to power grids and increase the capacity available for users already connected, prevent power shortages amid growing electricity consumption in the region's energy system. This task becomes especially important because Vladivostok is preparing to host the Asian-Pacific Economic Cooperation (APEC) Summit in 2012.

Under the Agreement, several projects will be implemented in the region relating to the construction and modernization of power plants and grid facilities. These projects will be implemented by the grid and generation companies which are part of the companies of the intended sector structure—FGC and OAO "RAO Energy Systems of the East" (the latter will comprise OAO "Far Eastern Energy Company", its subsidiaries "Far Eastern Generation" and "Far Eastern Distribution Grid Company", and the energy companies operating in the energy systems of the isolated Far Eastern regions).

Specifically, OAO "Far Eastern Generation Company" plans to increase the capacity of the region's power plants by 615 MW to more than 3,000 MW. By autumn-winter 2008-2009, 45 MW GTPPs will be installed at the Vladivostokskaya CHPP and, after the modernization of the Artyomovskaya CHPP and the Vladivostokskaya CHPP-2, the available capacity of these plants will increase by 50 MW and 70 MW, respectively. In 2009, the modernization of the Partizanskaya CHPP will help bring on line another 60 MW of capacity. By 2012, two coal-fired power units with a combined capacity of 360 MW are expected to be commissioned at the Ussuriyskaya CHPP.

Transmission companies will carry out projects to build new and modernize the existing facilities, with 3,069 MVA of transformer capacity and 961 km of HV transmission lines to be brought on line. The list of key projects to be implemented includes the construction of the 500 kV transmission lines, "Chuguevka – Lozovaya – Vladivostok" (372 km long) and "Dalnevostochnaya – Vladivostok", as well as the 220 kV "Ussuriysk-2 – Vladivostok" transmission line and the 500 kV "Vladivostok" transformer substation.

Also, as part of the preparations for the Asian-Pacific Economic Cooperation (APEC) Summit, it is planned to bring on line the following grid facilities by 2010: 220 kV transmission line "Vladivostok – ATEC", "Zeleny Ugol – ATEC", "Volna – VTEC-2", and the 220 kV substations, "Pospelovo", Patrokl", and "Zeleny Ugol".

As a result of construction and modernization projects in the distribution sector, OAO "Far Eastern Distribution Company" will bring on line substations with the combined capacity of more than 1091 MVA and nearly 485 km of 0.4-110 kV transmission lines. The top priority measures to develop the distribution grids in the Primorsky Kray will include the replacement of the overloaded transformers with more powerful ones. This will make it possible to improve the reliability of power supply and provide sufficient power for the existing and newly-connected consumers.

The amount of funds needed to finance the capital investment projects under the Agreement is estimated at nearly RUB60 billion, of which RUB24 billion will be used to expand the generation capacity and RUB36 billion will be invested in the power grid infrastructure.

The projects will be financed with internal funds and equity of the RAO UES entities operating in the Primorsky Kray, connection charges (in case of grid companies), depreciation charges and borrowed capital, allocations from the federal and regional budgets and under the Federal Target Programmes "Development of Vladivostok as International Cooperation Center in the Asia-Pacific Region" and "Economic and Social Development of the Far East and Transbaikalia for the Period until 2013".

Under the Agreement, the Primorsky Kray Administration undertakes, when setting electricity and heat generation and transmission tariffs, to take into account the need to finance the approved investment projects and to reduce the cross-subsidies in the sector in a stepwise fashion.

Also, the regional authorities will ensure that economically justified connection charges are set for the grids located in the Primorsky Kray. These charges will be used to finance the construction of grid facilities in the region.

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* To date, RAO "UES of Russia" has concluded cooperation agreements for the development of regional energy systems with the administrations of 17 regions of the Russian Federation. By the time the Company's reorganization is completed (1 July 2008), it is planned to conclude another 15 cooperation agreements.

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Contact Information:

Stas Degtyarev
Press Office Expert
+7 (495) 710-6239

Shareholder Relations
+7 (495) 620-1609


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