Moscow, 20 September 2007. RAO "UES of Russia" and the Belgorod Region Government have signed an Agreement on interaction in developing the energy system and ensuring reliable power supply to customers in the Belgorod region* until 2012.

The rapid economic and social development in the Belgorod Region has been accompanied by sharp increase in energy use. During H1 2007, the energy consumption grew year-on-year by 5.36% .

The Agreement signed today is designed to improve the reliability of electricity supply to customers, enhance the network transmission capacity, create the conditions for new user connections to power grids and increase the capacity available for the existing users, and prevent power shortages as electricity consumption grows in the Belgorod Region.

The document provides that a number projects to construct and modernize power plants and power grid facilities will be implemented in 2007-2012. specifically, it planned that 130 MW of new generation capacity will be brought on line and 187 km of heating grids will be revamped. This year, a new 60 MW combined-cycle unit will become operational at the Belgorodskaya CHPP. In 2010, a 70 MW combined-cycle unit is planned to be put into operation at the Gubkinskaya CHPP.

In the bulk transmission grids sector, new construction and modernization projects will be implemented to bring on line 1365 MVA of transformer capacity and about 120 km of HV transmission lines. In the distribution power grids of OAO "Belgorodenergo", under the construction and modernization programme, the energy company will bring into operation 314 MVA of substations and 4,225 km of 0.4-110 kV overhead and cable transmission lines.

The amount of funds needed to finance the capital investment projects under the Agreement is estimated at RUB27.5 billion (inclusive of VAT), of which RUB4.7 billion will be used to expand generation capacity, RUB3.9 billion will be invested in the heating network infrastructure and RUB18.88 billion in the power grids. The projects will be financed with own resources and borrowings of RAO UES companies operating in the Belgorod Region, including the proceeds from additional share offerings by generation companies, network connection charges for grid companies, off-budget sources, and private investments.

Under the Agreement, the Belgorod Region Government undertakes to set the electricity and heat generation and transmission tariffs for the companies engaged in the projects aimed at developing the region's energy sector taking into account the need to provide for the financing of the agreed investment projects and gradually reduce cross-subsidies.

Also, the regional authorities will approve economically justified amount of electricity network connection charges for the Belgorod Region, which will serve as a source of finance for the power grid construction projects.