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Unified Energy System

December 27, 2006

Nizhny Novgorod Region Gov't, RAO UES sign Agreement intended to improve reliability of power supply in the Nizhny Novgorod Region

Moscow, 27 December 2006. The Nizhny Novgorod Region Government and RAO "UES of Russia" have signed an Agreement on Cooperation in implementing priority capital investment projects to build and refurbish electric power facilities in the Nizhny Novgorod Energy System for the period until 2012. The Agreement was signed by the Nizhny Novgorod Region Governor Valery Shantsev and Chairman of RAO UES Management Board Anatoly Chubais.

According to the electricity consumption forecast for the Nizhny Novgorod Energy System prepared by the regional government and RAO "UES of Russia", electricity use is expected to grow by 3.1% to 5.8% annually within the next five years. Such growth is anticipated owing to the regional government's large-scale plans to develop the local economy and implement housing and social infrastructure construction projects. The generation and network facilities of the Nizhny Novgorod Energy System are heavily deteriorated and badly in need of replacement.

The Agreement is designed to improve the reliability of electricity supply to customers, 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.

Under the Agreement, projects will be implemented to build and upgrade about 820 MW of generating capacity, 700 MVA of transformer capacity and 335 km of transmission lines in the bulk power grids, and 1,622 MVA of transformer capacity and 197.5 km of lines in the regional distribution system, both through new construction and upgrade of the existing substations of different voltage classes.

In particular, within the framework of the Agreement, OAO "TGC-6" will upgrade and modernize the power equipment at the Igumnovskaya CHPP, Sormovskaya CHPP, and Novogorkovskaya CHPP with the total design capacity of 820 MW for electricity and 1,800 Gcal/h for heat.

In order to supply heat to the residential area being constructed under the Affordable Housing national project in Q1 2007, the Nizhny Novgorod Region Government and RAO "UES of Russia" will take steps needed to find an investor to finance construct a combined-cycle power plant (CCGT-CHPP) with 840 Gcal/h heat capacity and 900 MW electric capacity.

In order to enhance the reliability of power supplies to consumers in the Nizhny Novgorod industrial area, OAO "UES FGC" will take a number of priority measures at the facilities of the Unified National Energy Grid. Specifically, it will construct the second part of the 500 kV transmission line linking the Kostromskaya TPP and the Nizhegorodskaya Substation, install the second 501 MVA autotransformer at the 500/220 kV Nizhegorodskaya Substation, construct a 220 kV power line between the Nizhegorodskaya Substation, Nagornaya Substation, and Borskaya Substation, and install the third 200 MVA autotransformer at the 220/110 kV Nagornaya Substation.

The overall cost of the projects to be implemented under the Agreement is estimated at over RUB22 billion, of which RUB3 billion will be used to expand generation capacity and RUB19 billion will be invested in power grid facilities.

The projects will be financed with own resources and borrowings of the Company's generating and grid companies operating in the Nizhny Novgorod Region, appropriations from the federal and regional budgets. Most of the investment projects in the distribution grids will be financed from charges for technological connection to power grids.

The Agreement represents an understanding between RAO "UES of Russia" and the Nizhny Novgorod Region Government in respect of the financing of top priority measures needed to build and modernize the electric power facilities in the region's energy system.

The Agreement provides that the regional authorities in the Nizhny Novgorod Region will make annual adjustments to their heat and electricity tariffs for the companies involved in the projects aimed at developing the Nizhny Novgorod Energy System taking into account the sources of financing needed to develop and modernize energy facilities, including the cost of services and repayment of money raised to fund the projects.

Also, to ensure that the projects are financed properly, the region's government will explore the possibility of setting an economically justified grid connection fee for new consumers.

Moreover, the peculiarity of this Agreement is the regional authorities' initiative to allocate budget funds for subsidizing interest on the loans raised by OAO "Nizhnovenergo" to finance its power grids development programme.

The Agreement further provides that the companies implementing investment projects will be treated as strategic investors by the regional authorities, and will be entitled to tax exemptions under the regional investment and innovation legislation. Besides, their projects will be given green light in obtaining approvals and land use permits for the construction of energy projects.

The Nizhny Novgorod Government and RAO "UES of Russia" will prepare a forecast of electricity consumption and electricity load growth by power grid nodes for the period until 2015, which will include the timing and location of the planned connection of the region's major energy users to the public power grids. The forecast will be serve as a basis for the long-term strategy to develop power grids and generation capacity in the Nizhny Novgorod Region.

 

 

 

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