In December 2003, the European Bank for Reconstruction and Development (EBRD) granted Uralkali a loan of US$ 75 million. This is the single largest investment project in the field of promotion of effective utilization of energy resources ever launched by the Bank. Uralkali plans to channel greater part of the loan to the implementation of program of developing its own power system.

This new energy project is discussed below, in the interview with Vasily Potapov, Director for Construction and Main Assets Management of OAO Uralkali.

- Mr. Vasily Potapov, in Russia, it is rare when such major enterprises as yours command own generating capacities. Still, there are some around. Will your mini electric power stations look like the existing ones?

V.P.: Really, there are few such projects in Russia and they all take into account the specific features of enterprises where they were implemented. Let's take, for instance, the Surgutneftgas and LUKOIL oil companies. They have been constructing small electric power stations right in the taiga, in their own oil fields: installing gas turbine plant in the wilderness, using associated gas from that very same oil field. For us this is not an option, as, first, we do not have associated gas, and, secondly, we are incorporating power generating facilities into the already deployed energy and heat consumption system operated by Uralkali. This is much more challenging, given the fact that our ore administrations are a kind of cities, each with its distinct specific character and established engineering infrastructure.

- What this program of building own energy capacity, pursued by your company is about? And what advantages will the company get from it?

V.P.: I'll start with the second part of the question. Our own generating capacity will help us significantly cut the heat and electric energy costs, which in its turn will lead to lower costs of the products we make. And this means that our company will become more competitive against the world potassium producers.

What this program is about? We considered several options for building own generating capacity. We were choosing between gas turbine and jet-propulsion plants fuelled by associated or natural gas. We settled on installing jet-propulsion plants operating on natural gas, as with this option the company's investment will be recovered one and a half times faster. We carefully considered the question of whether to introduce these generating facilities on a stage by stage basis or simultaneously at all the ore administrations, and we have four of them. Since this program requires rather huge investment, we decided to implement it stage by stage: at two ore administrations by 2004, and by 2005 we'll have it done at the remaining two.

Generally, the substance of program of developing own power system is in the fact that we will be 85 per cent self-sufficient in heat and electric energy. Though we will still purchase part of electric energy supplies from OAO Permenergo or in the FOREM free wholesale energy market (Federal Wholesale Energy Capacity Market). As of today, we have already completed development of draft design and are preparing working documents. We plan to directly start construction work when spring comes.

- Have you already picked up a general contractor?

V.P.: Currently Uralkali is making a pool of general contractors in constructing power generating facilities. This must be a reliable, sufficiently well-known, and well-established company. And by "well-established" I mean not only financial matters, but also sufficient experience and ability to perform such activities. Unfortunately, we have not found organizations meeting our requirements in the Perm Region.

Well, in Russia in general, there is only a handful of companies having experience in implementing such projects. Still, we will try and look.

- If people appear among the readers of our journal, willing to undertake implementation of your project, what will they have to do for you to consider their proposals?

V.P.: Well, nothing extraordinary is required: just call the number (34242) 9-60-63. This is the number of Directorate for Construction and Main Assets Management. And then we will accordingly coordinate our efforts along the usual lines.

- What about an engineering company: have you encountered the same problems? By the way, who has undertaken your project?

V.P.: We held a tender. Two companies - one from Germany and one from Yugoslavia submitted their proposals. Since, as I have already mentioned, there are few such projects in Russia, there are virtually no companies developing and implementing this type of projects. And we gave preference to the Yugoslavian company, since a very respected Belgrade Institute Thermoproject is behind it. It has a solid record of development and implementation of projects in the so-called alternative power systems field. In addition, they have an experience of implementing a similar type of project near the city of Moscow. The project developed for Mezhregiongas company, though, was designed for smaller capacity, but otherwise it is exactly what we need. We also held a tender for suppliers of necessary equipment. Eventually we have now left two companies out from the five initial bidders. I refer to Caterpillar of the United States and Jenbacher AG of Austria. Both companies have their own advantages, still the final choice is yet to be made.

- How do you estimate the costs for Uralkali of implementation of this project, and what will be the length of recoupment period?

V.P.: According to preliminary estimates, the amount of investment will be somewhere in the region of US$ 65 million, net of VAT. Recently the European Bank for Reconstruction and Development has granted Uralkali a big loan. Well, greater part of that loan will exactly go to developing our own power system. As for the length of recoupment period, we are projecting five to six years.