The Kurgan Region Government and RAO "UES of Russia" have entered into an Agreement on interaction in implementing investment projects to construct and upgrade the power facilities in the Kurgan Region until 2011. The Agreement was signed by Kurgan Region Governor Oleg Bogomolov and Chairman of RAO UES Management Board Anatoly Chubais.

The strong growth of the region's economy, specifically, development of transport and communications companies, machine building and metal working industries, implementation of housing and social infrastructure construction projects, increased electricity use by the residential sector are accompanied with growth in electricity consumption.

In 2006, the region's electricity use grew by 5.4%. The generation and network facilities of the Kurgan Energy System are heavily deteriorated and badly need replacement.

The Agreement is designed to ensure reliable electricity supply to customers, increase the network throughput capacity, create the conditions for new user connections to the power grids and increase the capacity available for users already connected, prevent power shortages amid growing electricity consumption in the region's energy system.

The Agreement envisages a well-balanced development of the region's generation capacity, grid facilities, and dispatch infrastructure. In particular, it includes investment projects to build and modernize 450 MW of generating capacity, construct substations of different voltage levels with the total transformer capacity of 980 MVA, and substations with 200 MVA of transformer capacity in the region's distribution networks.

The amount of funds needed to finance the capital investment projects under the Agreement is estimated at over RUB19.1 billion, of which RUB12 billion will be used to expand generation capacity and over RUB7.1 billion will be invested in the power grid infrastructure.

Within the framework of the priority measures provided by the Agreement and the Investment Programme of RAO "UES of Russia" for the period until 2011, OAO "Kurgan Generation Company" will modernize the Kurganskaya CHPP and install a new 230 MW power unit. OOO "Intertechelectro - New Generation", a private investor, will build a new 220 MW CHPP in the city of Kurgan.

In order to develop the assets of the Unified National Energy Grid (UNEG), which are part of the Kurgan Energy System, OAO "Federal Grid Company of Unified Energy System" will build a 500 kV transmission line across the Kurgan Region and the Chelyabinsk Region, which will link the Kurgan Substation and the Kozyrevo substation; a new 220 kV "Severnaya" substation, two 210/110 kV autotransformers connected to the "Shumikha" and "Promyshlennaya" substations, a new 220 kV "Shchuchanskaya" substation, two 220/110 kV autotransformers connected to the "Kozyrevo" and "Shumikha" substations.

The projects will be financed with own resources and borrowings of RAO UES companies operating in the Moscow Region, including the proceeds from additional share issues by generation companies, connection charges for grid companies, allocations from the federal budget for the grid companies and private investments.

The Agreement constitutes an understanding between RAO "UES of Russia" and the Kurgan Region Government in respect of financing the top priority projects to build and modernize the electric power facilities in the Kurgan Energy System.

The Agreement provides that the Kurgan Region Government will make annual adjustments to their electricity and transmission tariffs for the companies involved in the projects aimed at developing the Kurgan Energy System taking into account the sources of financing needed to develop and modernize energy facilities, including the cost of services and repayment of debt raised to finance the projects.

Also, to ensure that the projects are properly financed, the region's government will explore the possibility of setting an economically justified grid connection charge to finance the power grid development programmes of OAO "Kurganenergo".

The Kurgan Region Government and RAO "UES of Russia" will prepare an electricity consumption and load forecast by grid nodes for the period until 2020, including the information on the place and timing of the planned connections of the region's power-intensive consumers.

It should be noted that RAO "UES of Russia" has signed agreements to implement such programmes with the regional administrations in 10 PLAs, including the cities of Moscow and St. Petersburg, the Tyumen Region (including the Khanty-Mansi Autonomous Okrug and Yamalo-Nenets Autonomous Okrug), Krasnodar Kray, Moscow Region, Sverdlovsk Region, Nizhny Novgorod Region, and Chelyabinsk Region.

This year, similar agreements are expected to be signed with another 17 regional administrations, the Republic of Sakha (Yakutia), Republic of Komi, Krasnoyarsk Kray, Perm Kray, Vologda Region, Murmansk Region, Rostov Region, Volgograd Region, Samara Region, Belgorod Region, Kaliningrad Region, Kaluga Region, Leningradskaya Region, Ryazan Region, and some regions in the Far East of Russia. RAO "UES of Russia" has already appointed working groups members and adopted plans to produce five-year programmes to develop the respective energy systems.