TO BUILD OVER 2,500 MW"WE WILL ACHIEVE THEGOALS WE HAVE SET"

E4 GROUP: STATE OF THE ARTENGINEERING CONCEPTS

CIP JSC SUCCESSFULLYPERFORMSTHE PROJECTS FOR FGC UES

OGK�4 TO ENTER NEW STAGE

"IES INTENDS TO JOINRUSSIA'S TOP FIVEENERGY COMPANIES" MIKHAIL SLOBODIN

URALS IDGC � INVESTING INTO CON�SUMER'S COMFORT

TYUMEN: INVESTMENTATTRACTIVE ZONE

IN RUSSIAN POWER SECTORINTERVIEW BYSILVIAN SEU

LARGEST ENERGY PRO�DUCER IN THE REGIONUNITED POWER GRIDS OF NORTH�WEST RUSSIA

TOWARDS BLUE GOLD

OLEG BRAGIN"THE POWER OF MOTION"

THE TEC IS IMPLEMENTING CONTRACTS WORTH MILLIONS OF EUROS

INTERREGIONAL DISTRIBUTION GRID COMPANY OF CENTRE

INTEGRATING IT SOLUTIONS IN ENERGYSECTOR: TRENDS AND EXPERIENCE

In number

2�3

4�5

6�9

10

11

13

14

VVeerraa LLeebbeeddeevvaa

The energy sector is a primemover of global economicprogress, and sustainabledevelopment of any coun�try depends largely on itsefficiency. Given the deple�tion of Russia’s currentlyproducing fields, weshould promote thenational energy securityby reducing our fossil�fueldependence. Hence theneed to step up renewableenergy development.Hydropower is not only

environment�friendly butalso provides vast opportu�nities for diversificationand prompt response toload and demand change.

JSC RusHydro, Russia’s largestpower generating company andthe world’s second biggest compa�ny in terms of installed capacity, isa leader in developing the enor�mous potential of hydropower.RusHydro consistently abides bystrict ecological standards and theprinciple of social responsibility,and takes the most carefulapproach to likely transforma�

tions of environment at all of itsfacilities, both current and future.

After a close study of the situa�tion, the company has embarkedon finishing construction of theCheboksarskaya HPP, a projectapproved 40 years ago but stilluncompleted. It has turned outthat the low pressure hydroschemeat the current elevation of 63 m(design elevation 68 m) is unableto solve the entire range of VolgaRiver problems (ecology, naviga�tion, etc.). This point was alsomade in the statement of Caspianregions’ leaders and in the find�ings of a special Federation

Council commission, which sug�gested that the RF Governmentmake a decision on implementingthe initial design.

Also on the Government’sinstructions, RusHydro is currentlyexploring the possibility of build�ing the country’s most powerful(8,000 MW) Evenkiiskaya HPPwhich would transfer electricity towestern regions of Siberia viadirect�current power transmissionlines. The project began with apublic opinion study at the place ofwould�be construction. The peopleof Evenkia were pleasantly sur�prised to note the company’sdeparture from the principles onwhich the great construction proj�ects used to be implemented inSoviet times when ecological andsocial problems were dealt withon the leftover principle (electric�ity generation to the detriment ofall other things, as exemplified bythe same Cheboksarskaya HPPproject). Now their solution isplanned at the Terms of Referencestage of EIA.

The adoption of new, eco/socio�friendly technologies will helpRusHydro to cope successfullywith issues involved in promotingthe nation's energy security in thefuture as well.

The change of powerin Russia causes tra�ditionally an increa�sed stress on behalfof investors whilewaiting for con�crete specificationsof changes. This timethe situation is sta�ble: Dmitry Medve�dev will continue tosupport and developthe economic priori�ties made by VladimirPutin. This issue ofthe special project«Industrial Weekly»is meant to give anexample of the mostpromising players ofthe Russian powerindustry market.These are such compa�nies that VladimirPutin and DmitryMedvedev count on inthe energy policy.

Stake on EnergyRussian Leaders do not change Priorities

April 2008

Special edition from Russia

See From quantity, p. 2

Promoting Russia’s Energy Security ““GGooeellrroo--22””:: tthhee DDeevveellooppmmeenntt PPllaann ooff PPoowweerr EEnneerrggyy sseeccttoorr

2

OGK�1 is the largest whole�sale thermal power genera�tion company in Russia withinstalled capacity of 9,531MW. The company owns sixthermal power plants (TPPs)located in the most energydeficient areas of Russiawith the projected highestrate of increase in powerconsumption. The company isimplementing an ambitiousinvestment program, whichincludes the constructionof over 2,500 MW of addi�tional generation capacityby 2012. Most of the new gen�erating facilities will beconstructed in the Uralsregion.

The first of OGK�1's new capacitywill come on line this year with thecommissioning of a 330�MW coal unitat Kashirskaya TPP, producing approx�imately 10% of Moscow's power sys�tems energy. The unit will have anasynchronised generator of conceptu�ally new design for more flexible andreliable operation.

The company is also developing anunprecedented project of constructinga 450�MW unit based on combinedcycle gas turbine (CCGT) design in2011 at Urengoyskaya TPP. The powerplant situated in an area that hassevere climate conditions and per�mafrost will see its first 320MW asearly as in 2009.

The project of NizhnevartovskayaTPP, the youngest and most effectivepower plant of OGK�1, is remarkablefor the innovative use of projectfinance which is a groundbreakinginvestment model for the Russian

energy sector. The project is to beimplemented jointly with TNK�BP, andafter the CCGT�unit of 800 MW is com�missioned in 2010, it will be using theassociated gas provided by TNK�BPand supplying the electric power toTNK�BP in return.

The new power unit at Nizhne�vartovskaya TPP will allow OGK�1 tomeet the fast growing demand of theregional industry. The project willbenefit from the excellent geographi�cal position of NizhnevartovskayaTPP, close to the source of fuel and inthe region with the rapid growth ofdemand for energy. The partners arein the process of jointly selecting theEPC�contractor that will manage the

construction of the new power unit atNizhnevartovskaya TPP.

Another CCGT�based unit of800MW will be constructed atPermskaya TPP, making the powerplant the largest one in OGK�1 with thecapacity of 3200 MW in 2010, able tocover the energy deficit which alreadyshows in the area. The project involvesan EPCM�contractor and Siemens asthe power equipment supplier.

In pursue of the most effective finan�cial and environmental solutions thecompany has switched fuel for a new330�MW unit at Verkhnetagilskaya TPPplanned for 2011 from coal to naturalgas, with no changes to the plannedcapacity and project timetable.

Аpril 2008

Special edition from Russia

Founder and Publisher:Industrial Weekly NewsroomThe publication is registered withthe Russian Federation Ministry forthe Press, Broadcasting and MassCommunications PI No. 77�12380from 19.04.2002. Re�registered after a change of publisher PI No. 77�14566

from 07.02.2003Re�registered after a change ofpublisher PI No. FS77�19251 from23.12.2004. With the Federal OversightService for the Enforcement ofMass Communications Law and thePreservation of Cultural Heritage

General Director, Editor�in�ChiefValery Stolnikov

Deputy Editor�in�ChiefDmitry Kozhevnikov

Assistants to the EditorYulia Guzhonkova

Issuing EditorAlex OkunevInformation SupportSvetlana Golovan

DesignRoman KuraevElena Burylina

Materials may not be re�printed orcited without a referenceto Industrial WeeklyAdress: 123104 Moscow, P.O. Box 29Tel.: +7 (495) 7293977, 7781447Fax: 7 (495) 9401956E�mail: editor@promweekly.ru,promweekly@mail.ru

We want to make these companiescloser and more understandable bytelling about their role in develop�ing and reforming the industry,their investment projects, businessprinciple, etc. In other words, wewould like to say that there aregood players in the Russian powerindustry to deal with!

Dmitry Medvedev is taking the country’spower industry from Vladimir Putin in an inter�esting time when the industry is being activelyrestructured, the volume of investments isincreasing, the process of liberalization of elec�tric power market is being moved as planned,new generation companies go public success�fully one after another attracting a high interestof international investors. Certain assets cause aserious fight involving financial and politicalrecourses including those of foreign countries.And at the same time the energy yield is steadi�ly growing, investment energy projects are

becoming more ambitious and their successfulimplementation do not cause doubts. This is aninteresting time in deed for the Russian energypower. A unique time for unique plans andunique opportunities including implementationof international energy projects.

Vladimir Putin while meeting with thePresident of the USA George Bush in Sochimarked: «We hope for further development ofour energy dialogue filling it with perspectiveprojects which correspond with the immensepotential of two counties and favor strengthen�ing of energy safety”. Per se this is an appeal toa world energy dialogue, the importance ofwhich is admitted by both leaders, an appeal todevelop energy projects for which the GoldenAge is coming in Russia.

Russia is the fourth largest energy market inthe world after the USA, China, and Japan. Thecapitalization of RAO UES (including its sub�sidiary companies) is estimated in the range of$70�95 billion. And we have every reason tobelieve that this is far from the final price as theindustry has quite a number of hidden and

“dormant” assets which may add 15�20% to thecapitalization. The said capitalization does nottake into account the prospects of CIS countriesparticipation in the energy as well as dividendsreceived from synchronization with Europeansystems that experience an increased deficit ofgeneration. More over the economy of thecountry increases the consumption of energyby 5�8% annually.

Dmitry Medvedev not in the least thanVladimir Putin realizes how vast and attrac�tive in terms of investments the Russianpower energy is. And this is not the pointthat he has been Head of Board of directorsof the world’s largest gas monopoly —Gazprom. More important is his focus onkeeping the present policy and support ofdeveloping advanced technologies. “Weneed to work out such a set of measures thatwould make building stations and powerlines according to the latest technologiesmore beneficial than those built on draw�ings from the last century”, — this is animportant thesis of Medvedev’s program for

power energy development, and it should bepaid attention to. There is one more quota�tion of the new President to the subject: “Weshould provide a long�term lending for proj�ects that satisfy the most strict criteria forenergy effectiveness. Besides that, the gov�ernment may and should participate in co�financing of those energy projects that applylatest technologies”.

By the way, for those who are too careful Mr.Medvedev stated in Krasnoyarsk that Russiawill certainly carry out its commitments for allits energy supplies and projects. It is quite evi�dent that the new President will give a newimpulse to development of Russia — EU energydialogue bringing it to a form of internationalenergy communication according to experts.The status of energy superpower declared byRussia presumes first of all a complex of certainenergy responsibility and initiative in establish�ing energy mutual understanding. And thisvery issue i.e. energy mutual understanding isthe subject of the present project.

PPhhoottoo bbyy FFoottooxxpprreessss

Stake on EnergyRussian Leaders do not Change Priorities

(Continued from Page 1)

OGK�3 is one of the firstprivatized Russian powerproducers. The mainowner of the OGK�3 isRussian metals giantNorilsk Nickel.

The OGK�3 includes six largefederal electric power plants:Kostroma SDPP, Pechora SDPP,Cherepetsk SDPP, Kharanor SDPP,Gusinoozersk SDPP, YuznouralskSDPP. The plants are scattered allover Russia in seven time zonesfrom the North Polar Circle to thelake Baikal region. The installedcapacity of all six power plants ofthe OGK�3 amounts to 8497 MW,which is more than 5 % of all gen�erating capacities of the JSC RAOUES of Russia. The OGK�3 powerplants are located in rapidly grow�ing regions of Russia. The compa�ny shares float at Russian StockExchange and at Moscow Inter�national Currency Exchange.

The OGK�3 major long�termobjective is a growth of capitaliza�tion, transparancy and stability ofthe Company. The strategic priori�ties of the OGK�3 include: expan�sion of generation and sales ofpower, improvement of SDPPcapacity, implementation of newadvanced technologies; improve�ment of reliability of heating andelectric power supply; develop�ment of the Company high corpo�rate and organizational culture;environmental care.

Now the Company has workedout its strategy until 2012 and plansto invest about 4 bln dollars into itspower plants development. Thesegoals include almost doubling its

generating capacity by raising it to15 gigawatts over the next tenyears. Besides this, the companyplans to go into coal. In three tofour years, it expects to spend about$200 million on coal assets so it cansupply 50 percent of its coal fueldemand, of which it consumes 7 million tonnes per year.

"We plan to get our own coalreserves or greenfield coal minesto develop. This is a promisingapproach, especially in Siberia,above all to lower the physicalrisk of fuel delivery, and thefinancial risk of fuel prices,"Sergey Tazin says. At the otherend of the supply chain, OGK�3 isseeking to acquire or establishelectricity sales firms that dealdirectly with the end consumer.This will cut out the middle�manstructure in the power marketand allow OGK�3 to sell its powermore cheaply.

"We will achieve the goals wehave set for ourselves," says compa�ny executive director Sergei Tazin.

First privatizedTo build over 2,500 MW

3

Аpril 2008

Special edition from Russia

The management of theGeneration companyfour of the wholesaleelectricity market(OGK�4 and its keyshareholder E.ONheld webcast on 2007Company's results foranalysts of investmentcompanies and banks.

Actual start of electricitymarket liberalization, addi�tional issues of shares andsale of the state�owned stakeof OGK�4 charter capital inthe favour of E.ON, as well assignature of first EPC�con�tracts for new capacities con�struction, were named byAndrey Kitashev, OGK�4Director General being 2007milestones. "OGK�4 showed

high production results lastyear — it became the leaderamong Russian thermal OGKsin terms of electricity outputand capacity loading. Threepower plants — SurgutskayaGRES�2, Berezovskaya GRESand Yajvinskaya GRES — pro�duced the unprecedentedelectricity output since theywere launched", highlightedOGK�4 Director General.

Roman Lenkov, DeputyDirector General for econom�ics and finances noted that2007 company's revenue asper RAS (Russian accountingstandards) gained 18%growth compared to 2006 andmade up RUR 31.5 bln. Netprofit amounte to almost RUR1.5 bln., which is 2.5 timeshigher than it was planned.

Such high results werereached, in particular, due toprecise cost control and effec�tive performance in wholesaleelectricity market as well.

"Already after one month ofoperation in Russia it becameobvious for us that we havepurchased a good assets port�folio", — indicated SebastianEisenberg, OGK�4 Board mem�ber, in his speech. From hisperspective prompt implemen�tation of OGK�4 investmentprogram is currently one of thekey objectives. "Next step ofE.ON should be the extensionof the Russian assets portfolioand increase of assets value,and in these terms E.ONcounts on OGK�4 manage�ment support", — pointed outMr.Eisenberg.

OGK�4 to enter new stage

E4 Group was established about 2 years ago.However, it succeeded in becoming one of thelargest and key market participant of engi�neering services of Russia. The Companydeclares, that it will continue to grow withequally fast pace in 2008. E4 Group intends toallocate up to US$90 million for repowering,establishment of training centers and pur�chase of assets not only in Russia, but alsoabroad. Peter Bezukladnikov, CEO E4 Group pre�sented the Company.

— How the idea did come to you to set up the company?The Russian economy is at the moment at the stage of fast

development. This leads to considerable growth of electric andheat power consumption. The investment program of RAO "EESof Russia" launched for the period from 2006 to 2010 envisagesconstruction of the new generating capacities amounting to40.9 thousand kW. Before 2006 the Russian market could notoffer major contractors capable to perform EPC(M) contracts ofnew power units construction using their own resources.Therefore, in 2006 the amalgamation of key engineering com�panies resulted in setup of OJSC "E4 Group."

— What is the company organizational chart?— This is a vertically integrated company with transparent

business�processes, minimum administrative and manage�ment staff and planar structure of business kinds: design andresearch, construction and erection, construction of electricalnetworks and substations, service and repair, logistics, IT. Thetotal number of employees is over 18,000 highly knowledge�able specialists.

— What are your financial and economic indicators?— The revenue for 2007 amounted to over US$1138 million.

At the moment we have signed the contracts at the total amountof about US$2333 million and we intend to invest up to US$90million into development of the Company in 2008.

— Could you tell us about operating contracts of E4Group?

The total number of Russian and foreign projects per�formed by our business�units, exceeds 350. I would like toemphasize 3 contracts, awarded in 2008: Construction ofpower units 2x400 MW for the construction of Stavropol TPP(EPC Contract), CCPP�410 MW construction in Krasnodar TPP(EPC Contract) and construction of power unit #4 for 800 MWin Perm TPP (EPCM Contract).

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The principal mission of the Centre of Infrastructural Projects JSC (CIPJSC) is the creation of the Decision Support Systems (DSS) capable of act�ing in any field of management of the economic entities spatialresources on the basis of the geoinformation systems.

The Company created the Corporate Geospatial Resource Management System (CGRMS) forthe trunk transmission lines (330 kV and higher) of Federal Grid Company of Unified EnergySystem of Russia (FGC UES). CGRMS was created and commissioned at FGC UES (45 branches)as DSS for analysis, estimation, and management of assets and technical conditions of HVLs(45,000 km) and substations (144) in the territory from Vladivostok to Kaliningrad.

Nowadays CIP JSC successfully performs the projects for FGC UES on creating CGRMS for 220kV transmission lines of 90,000 km length, and for Moscow United Electrical Grid Company oncreating CGRMS for 110�6 kV distribution lines in Moscow Region (47,000 sq. m length).

Also CIP JSC performs the works for FGC UES in new directions, where application of geoin�formation technologies is worthwhile:

— FGC UES' assets management for the life cycle including permanent assets, land, real estate,inventory and work management;

— estimation of technical conditions of facilities and presentation of aggregated data for assetsmanagement, planning, and budgeting systems while planning and realizing the works on main�tenance and repair of the electric grid infrastructure of FGC UES;

— recovery of the lost design documentation and control of technical information, design andestimate documents related to any features, facilities, systems, equipment, etc.;

— research and development and control of civil and construction�assembly works at any stageof construction and/or reconstruction, including analysis of deviations from the project facilityalready constructed;

— updating of initial survey data and implementation of work practices and procedures.CIP JSC have been rendered the facilities of monitoring and natural calamity forecasting (fires,

lightning, glaze�ice, squally wind) for FGC UES since 01.08.2002 for making decisions on efficientmanagement of routine operation of the electrical grid infrastructure.

CIP JSC is the first Russian company, which used a dirigible possessing an unique 8�channelintegrated aerial surveying system, and made by AeroScan JSC — CIP JSC`s branch spatial mon�itoring of land for various industries, including power industry, oil and gas, railroad and highway.

CIP JSC successfully performs the projects for FGC UES

E4 Group: State of the Art Engineering Concepts

The first stage of the energyindustry's reform is nearing com�pletion. RAO UES of Russia is hold�ing the last auctions to sell itsassets and will go into liquidationas early as on 1 July. The industry'sfurther development will to alarge extent depend on the newowners of the generating assets.One of them, CJSC IntegratedEnergy Systems, is the largestRussian private operator in theelectric power and gas�distribu�tion industries. Today we havewith us IES�Holding PresidentMikhail Slobodin.

— In one of his latest public appear�ances, RAO UES CEO А.Chubais hinted thatGazprom or SUEK may be only a second�largest owner of generating assets. He mayhave alluded to IES. How do you assess yourcompany as compared with competitors? Asa fairly big player?

— I don't want to make guesses, I can tellyou how we position and feel ourselves today.IES has already become a fairly serious playerin the energy market. Over the five years of thecompany's existence we have turned into amajor holding company with over 60,000employees in 30 Russian and Ukrainianregions. We have closely approached our maintask of building a serious energy corporation.Over the five years of the company's existence I have managed to put together an assertiveteam of young professionals united by commongoals and willing and able to reach those tar�gets. This is important.

We currently assess our business at USD 3to 4 billion. We want this figure to grow toUSD 12 to 15 billion within five years. Thisyear we have to complete business structuringin two main lines of activities, i.e. generationand retail sales. Non�core assets will be sold.We plan to present our new structure and five�year strategy to the investors' community inthe first half of 2008. We are paying a lot ofattention to preparations for an IPO scheduledfor 2009�2010.

Our plans include becoming Russia's largestheat producer, the largest gas transportationcompany next to Gazprom and the largest sell�er of electric power, heat and gas to retail con�sumers. In other words, within the next fiveyears, IES intends to join Russia's top five ener�gy companies.

— Are you really planning an IPO? Where?— I think by 2009 we will have a better

understanding of where an IPO can be mostefficient. The shareholders will naturally maxi�mize the company's capitalization, there arescenarios for holding (an IPO) in Russia. I thinkby that time the Russian market will catch up onits instruments as well. Of course, there is awell�known, traditional, currently popularalternative, which is London. Russian investorsare now discovering Deutsche Boerse and so on.I think closer to 2009, we will decide on this.

— You have mentioned that the company'sbusiness is currently under transformation.How will IES' business be organized by thetime you hold an IPO?

— In fact we have spent nine months todevelop an optimal business model. IES offi�cers communicated with six European andworld energy companies in order to under�stand those companies' operational schemes.We discussed these issues with experts of majorenergy holding companies for about threeweeks. Today we know for sure what makestheir operations efficient.

A business model developed by IES�Holding will comprise generation (fuel, elec�tric power and heat production, heat net�works), trading (fuel purchase, operations inthe wholesale electric power market, heat sup�

ply bilateral contracts) and retail sales (elec�tric power, heat, gas).

Three divisions will be established on thebasis of IES assets. Firstly, the GenerationUrals Division based on OJSC TGC�5 and OJSCTGC�9, with its headquarters located in Perm.Secondly, the Trading Division with its head�quarters located in Perm. And thirdly, theRetail Sales Division with its headquarterslocated in Moscow. However, as (new) assetsare acquired in the key regions, the number ofdivisions may change.

— What do you consider to be the mostvital current problem for the new owners ofgenerating assets?

— I believe that one of the most vital andabsolutely unresolved problems is technicalconnection to the grids, which currentlyaccounts for 10�20% of investment programs.The procedure and the amounts that the com�panies are required to pay now were not at allprovided for in the generators' investment pro�grams. It means that an additional burden ofRUR 60 to 70 billion, being quite a considerableamount as I should say, lies on the company.

As a matter of fact, I am convinced that onlyone third part of the reform has been completedso far. During the second part investors will pro�ceed to the implementation of the investmentprogram, start operating in the new capacity

market, this will be the time when the genera�tors start operating under new conditions, andall mechanisms run in and tune up. It is exactlythe second stage that the whole reform's effi�ciency and completion will depend on.

For my part, I am sure of success of theindustry's reform. The difficulties and chal�lenges we are currently facing are quite sur�mountable, if all of us, meaning the state,industrial ministries and agencies, and privatestrategic investors, listen to and hear what eachof us says and work as a coherent team.

4

Mikhail Slobodin,

President of Integrated Energy Systems

Mikhail Slobodin,President of Integrated Energy SystemsBorn on September 17, 1972.

1992: Graduated from the Ural State University,

Faculty of Economics (major: Economics, summa

cum laude).

1992�1996: Sevuralboksitruda, Foreign Economic

Relations Department, Engineer; Finance

Department, Deputy Head of Department.

1996: Renova, Representative for the Ural Region.

Field Cryolite Plant, Head of Business

Development Project.

1996�1999: SUAL, Economic Department, Head

of Department; Financial and Economic

Department, Deputy Head of Department.

1999�2000: Nizhniy Tagil Smelter, Deputy

Director General for Economics and Finance.

2000�2001: Renova, Regional Development

Department, Director. Project Manager for estab�

lishing UralTEK (coal energy company: 5 thermal

power plants in Russia, and 2 coal strip mines in

Kazakhstan).

2001: Irkutskenergo, First Deputy Director

General for Economics and Finance.

2002: TNK, Power Business Development

Department, Director. After the TNK and British

Petroleum merger: ТNK�ВР Management, Vice

President for Energy.

2003: appointed Director General of IES, then in

2006 took up a post of President of CJSC IES.

In Brief

Аpril 2008

Special edition from Russia

“IES intends to join Russia's top five energy companies”Interview by IES-Holding President Mikhail Slobodin

5

The Urals Interregional DistributionGrid Company OJSC (Urals IDGC) is aunited operating company managingdistribution grid networks of the Sverdlovsk, Chelyabinsk andKurgan regions as well as the PermTerritory. Its operational areatotals 514,000 sq.km with over 12 mil�lion people living there.

The company's cable and overhead powerlines are stretching more than 150,000 km. Ithas 36,300 transformer substations with atotal capacity of over 52,000 MVA. The total

headcount of the grid facilities exceeds14,000 employees.

Urals IDGC provides electric power to over1.6 million consumers, including 30,000industrial enterprises of the Urals, namelythe Ural Mining and Metallurgical Company,Pipe Metallurgical Company, VSMPO�AvismaCorporation, Siberian�Ural AluminumCompany, Maxi�group, Magnitogorsk Iron�and�Steel Works, Russian Railways, etc. Thecompany supplies its consumers with over 80billion kWh a year and this figure is yearlygrowing by 4.5%.

The development of the Urals power distri�bution system is one of Urals IDGC's key objec�tives. About 25 billions rubles are to be investedinto the grid infrastructure of the Sverdlovsk,Chelyabinsk and Kurgan regions as well as thatof the Perm Territory by 2010. In this period,Urals IDGC is going to build many transformersubstations with a total capacity of 4,000 MVAand about 3,000 km of transmission lines.

The investment projects were successfullyimplemented chiefly due to Urals IDGC's closecooperation with regional authorities. UralsIDGC is now the only interregional companythat signed cooperation agreements withadministrations of all regions of its activities.The company is working on forecasts of elec�tric demand growth and elaborating andupdating plans for the development of theUrals jointly with authorities and major powerconsumers. The joint programme and interac�tion between authorities and energy compa�nies allowed the steady development of powersystems of the Sverdlovsk, Chelyabinsk andKurgan regions as well as the Perm Territory

and properly meeting the growing economy'sdemands in electric power.

Another Urals IDGC's key objective is improv�ing customer affairs. In order to create a unitedelectric power quality management systemaccording to the state standard, the companyhas certified electric power transmitted to con�sumers. In February 2008, all Urals IDGC's ener�gy producing affiliates finished the certificationof electric power. About 1,000 main substationshave been certified within Urals IDGC's area.

To ensure the high quality of services, UralsIDGC is preparing to monitor the quality ofelectric power and is constantly reconstructingand re�equipping its energy facilities. Only in2007, the company spent some 1.2 billionrubles on repairing vital energy equipment ofits power lines. The Urals power system over�haul programme for 2008 worth 1,239,700rubles will allow efficient work on establishingthe united electric power quality managementsystem to be continued.

Urals IDGC works in line with the UnitedClient Handling Standard setting requirementsfor and rules of customer relations, determin�ing the quality of services rendered and opti�mizing and formalizing relations between theenergy company and its client.

To improve the reliability of electric powersupply, Urals IDGC's initiated the First ClassReliability Programme that has been successful�ly run within the Urals for over a year. As aresult of this long�term project, all municipalformations and socially�important facilities willbe powered from several independent powersources, which will allow continuous powersupply even in case of malfunction on one of the

sources. This will bring the comfort of an ordi�nary consumer up to world standards.

Urals IDGC's key tasks are reliable and unin�terrupted power transmission to consumers ofthe Urals, high quality of energy transmitted anddevelopment of grid infrastructure. Meetingthem allows the company's efficient businessand full�fledged development of economic andsocial�cultural sphere of the Big Urals.

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Urals IDGC — Investing into Consumer's ComfortThe company supplies its consumers with over 80 billion kWh a year

AAnniilloovv DDeenniiss,, Deputy Director of Investment Policyand State Entrepreneurship Support Department of the Tumen Region

Now, the Tyumen Region, which isamong the most stable Russianregions, is considered one of themost attractive places for poten�tial investors. Its GRP grew byover 10% in 2007, which is morethan its average growth in Russia.

The Tyumen Region is Russia's complexconstituent part including, besides the south�ern Tyumen Region, the Khanty�Mansi andYamal�Nenets autonomous areas that are notits administrative units and remain full�fledged parts of Russia.

The region's economy features manybranches. It has large industrial enterprises,developed infrastructure, efficient agricultureand a wide range of various social services.

The Tyumen Region has various mineralresources, namely oil, peat, quartz sands,

brick and keramzite clays, sapropels, lime�stones, fresh and mineral waters, etc. It isrich in peat, which industrial reserves (495deposits) are estimated at 37 billion cu.m.

The timber and woodworking industryplays an important role in the development ofthe region. Its standing timber reserves totalabout 920 million cu.m.

In the last years, the growth of fixed capitalinvestments has been steadily growing in theTyumen Region. In 2006, 87.5 billion roublesand in 2007 — 113.7 billion were invested intothe region's (without autonomous areas) econ�omy and social sector.

Such companies as Lukoil, TNK�BP,Gazprom, US�based Halliburton, Austrian�based OMV, Salym Petroleum Development(Dutch�British Shell) and many others havealready started working in the Tyumen Region.

The south of the region features rapidly�growing power industry that fully meetsregional requirements and transferring electricpower to other regions. The German�largesconcern E.ON and Russian company STS have

established a Tyumen�based joint venturedubbed E.ON�STS Energiya to build powerfacilities with a capacity of 3,000 MW.

Also, the region has the developed petrole�um industry supplying Russia's petrochemicalindustry with light hydrocarbons. In 2006,the Antipinskiy oil refinery was launched.

Chemical and petrochemical enterprisesmanufacture butadiene, synthetic resin, plas�tics, polyethylene pipes and polymer film.Sibur Holding has initiated building theworld�largest olefins and polymers produc�tion petrochemical plant worth 1.7 billionEuro. 350 million Euro have been investedinto the construction of the Ural Mining andMetallurgical Company's iron and steelworks. Schlumberger and Bentec Drilling &Oilfield Systems companies are implement�ing oil�and�gas equipment production proj�ects in the Tyumen Region.

There is a considerable demand for con�struction and finishing materials in theTyumen Region due to rapid growth of thebuilding industry. In 2007, the housing con�struction equaled 896,000 sq.m and 1 millionsq.m are to be built in 2008. The MCBauchemie Russia company plans to spend 10million Euro for the production of dry mixes.Talks are being held with Knauf on building aheat�insulation materials plant.

An agreement of intent has been signedwith Ikea on constructing a furniture shieldplant.

The Tyumen Region is included into theRussian State Industrial Clusters Programme.

The legal, infrastructural and informationplatform has been created in the TyumenRegion in order to attract investments. In 2003,Regional Law No.159 "On state support forinvestments in the Tyumen Region" was adopt�ed, which allows for the following types of sup�porting investors: tax exemptions in line withfederal and regional laws, budget loans, subsi�dies, subventions and other forms.

The government of the Tyumen Region hasworked out and is offering investors more than60 investment projects totally worth over 12billion Euro in the following branches:

— Chemical and petrochemical industry;— Oil refining;— Machine�building;— Woodworking;— Shipbuilding;— Pharmacy;— Biotechnologies;— Peat processing;— Construction materials production;— Agriculture;— Light and food industry;— Transport and logistics;— Commercial and residential real estate;— Housing and public utilities;— Service industry.

PPhhoonnee:: ++77 33445522 229966 449922EE--mmaaiill:: AAnniilloovvDDEE@@iinnvveesstt..ttmmnn--oobbll..rruuVViissiitt wwwwww..iinnvveessttiinnttyyuummeenn..rruu ffoorr aallll

aaddddiittiioonnaall iinnffoorrmmaattiioonn oonn tthhee iinnvveessttmmeennttppootteennttiiaall ooff tthhee TTyyuummeenn RReeggiioonn..

The Tyumen Region (without autonomous areas)

is situated within the Western�Siberian plain. Its

area is 161,800 sq.km. It borders on the

Sverdlovsk, Kurgan and Omsk regions, Khanty�

Mansi Autonomous Area and Kazakhstan.

Population — 1,314,500 people

Population density — 8.2 inhabitants/sq.km

Administrative centre — Tyumen

(570,900 people).

In Brief

Аpril 2008

Special edition from Russia

Tyumen: Investment�Attractive Zone

6

Geographic, historicaland technical pecu�liarities of Russia’sUnified Power marketin the transition peri�od make new demandson automated systemsapplied in electricpower industry, suchas information andmetering, dispatchermanagement, techno�logical management,etc. Silvian Seu,Director General ofthe ENGINEERING CEN�TER “ENERGOAUDIT�CONTROL” — a nation�al leader in automatedsystems maintenanceanswered our ques�tions.

— Mr. Seu, what are EAC’sbusiness key principlesapplied in Russia?

— These principles arethe same worldwide. First ofall, automated systems usedin the power sector are com�plicated and involve variouskinds of metering and com�munication equipment man�aged by special software.Such systems are aimed atdifferent targets. For exam�ple, systems of commercialelectric power metering cre�ated to optimize the expendi�tures on energy and powerconsumed; besides, onlywith the help of theAutomated Information andMeasurement System ofElectric Power CommercialMetering (AIMS EPCC) con�sumers have their way to thewholesale electric powermarket.

— What services does EAChave on offer?

— We offer a full “circle”of services: development,start�up services and furthermaintenance of automatedmetering and control sys�tems. Integrated solutionsand wide range of servicesare among our company’sgreatest advantages.

To maintain moderninformation systems we needprofessional, competent spe�cialists who are numbered inthis field. A team of high�skilled engineers, designersand financial experts apply�ing comprehensive approachand understanding of thepeculiarities in the time ofpower sector reforming is keyfeature of our company. Theso called “triple threats”highly qualified profession�

als able to guarantee qualitymaintenance of each andevery element of the systemare rare. On the other hand,hiring numerous mainte�nance emplyees is inexpedi�ent. As a rule, in this case wework with specialized com�panies.

“ EN E RG OAU D I T C ON �TROL” possesses unique expe�rience in servicing companiesscattered on our territory,such as energy suppliers, oiland gas enterprises, transport

companies. With such geo�graphic scale you need quali�fied specialists as well as mod�ern technologies of remotecontrol in every region to exe�cute management and admin�istration.

— Could you please tell usa few words about yourclients.

— Our clients are most sig�nificant Russian companies,known all over the world.Among them Gazprom,Russian Railways, Sibur, Gaz�promneft, and Mosenergo. Bythe way, these companies aremajor power consumers; forexample, Russian Railways’share in national consumptionbalance is 6% Gazprom hasabout 2.5% Vast geography oftheir business makes it difficultto control energy consumption.For instance, Russian Railwaysowns thousands of facilitiesscattered from Kaliningrad toVladivostok. We have createdmetering and control systemwhich enables us to have cen�tralized access to the data andprocess it on�line via modernsoftware.

— What other large�scaleprojects is EAC running atpresent?

— At present we are simul�taneously running many proj�ects. It is suffice to say aboutthe systems of commercialelectric power calculation forGazprom and Sibur. They are,of course, not so extended asthe AIMS EPCC for RussianRailways but unique in theirtechnically sophistication. It isa real challenge to create a sys�tem of the kind in places — I mean gas extraction enter�prises — where even elemen�tary analog communication is

a problem. Imagine how diffi�cult it is to maintain a steadyreal time signal. Now youcould witness the upshot ofthis work — the monitorshows the amount of powerthis or that drill rig or oilpumping station is consuming— by the way, they are locatedbeyond the polar circle.

— What equipment doyou use?

— We are geared to exer�cise world leaders’ products,such as Landys & Gyr who

are number one in the worldin instrument and systemmanufacturing for electricpower calculation. We alsouse Echelon�, Elster� andMetronica�equipment. As fortransformers, we work exclu�sively with Russian manufac�turers — the EkaterinburgPlant, Elektroapparat from St.

Petersburg, Ramenskoe Plant,and other. We have many sup�pliers, since the number ofequipment items we need forwork is about 1,500.

Of course you know thatsystem upgrading is endless.There are always new prod�ucts that our specialists learnhow to work with. There is noturnkey technical solutions,ready to use. You always needsome debugging in order tounite separate elements into afailure�free and smooth�work�

ing system. This is our know— how.

— EAC’s strong point inRussia is in its extensive net�work. How do your affiliatesfunction?

— It is wrong to create afunctioning system and leave itto the cares of your customer— making him to sort out all

the problems he faces. We exe�cute monitoring and mainte�nance of systems by our ownmeans. For this purpose wehave organized affiliate net�work in the territory of theRussian Federation — in St.Petersburg, Yaroslavl, Novo�sibirsk, Vladivostok, Krasno�yarsk, and Ekaterinburg.

The system functions withthe help of our IT specialistsand programmers who pro�vide with high�level mainte�nance, e.g. quality work incentral posts of data gathering(Russian Railways, Gazprom,Sibur). The branches havealso got mobile teams who —if needed — get directly to thefields to meet the existingrequirements, an AIMS EPCCmust be restored in 24 hours.

— A company offeringoutstanding solutions needsoutstanding staff, doesn’t it?

— We are constantly devel�oping. It is no secret basicallyit is not funding that is a prob�lem, but high�skilled profes�sionals. There are very fewspecialists with relevant expe�rience, and of course, they arein great demand. Design engi�

neers are most hard�to�findindividuals. Besides, profes�sionals in automatics, powereconomy and programmingare always wanted. At presentthe company staff amounts atabout 500 skilled specialists.The overwhelming majoritywork in Moscow, and the rest— in our filial branches. Wewant professionals only every�where.

— What are the new direc�tions of the company? Whatprojects are short listed?

— We are running a num�ber of new projects — manyof them are still being workedout. We would like to diversi�fy our activities. To my mind,

we are now working with avery promising segment inresidential metering. Sometime ago with regards topeculiarities of residentialmetering tariffs, it was eco�nomically inexpedient.

But as the rates are grow�ing up, the problem of pre�cise metering data will cer�tainly occur — and the seg�ment will face dramaticdevelopment. We havealready started working onretail market AIMS EPCC —the project is being applied forthe Russian Railways. It isunique both for Russia andEurope.: the Russian Railwayshas got the most branchedelectric network in our coun�try. Thus, the company pro�vides with electricity all its

numerous consumers. Thisis, in fact, socially important,especially in the regions withno other energy supplier.Schools, hospitals, house�holds, small enterprises areamong Russian Railwayssub�consumers. Our compa�ny’s metering system forretail clients allows on�linepower consumption check.

This 3�year project is veryimportant for Russia.

— In a nutshell, what is themission of your company?

— “ENERGOAUDITCON�TROL” sees its mission in cre�ating perfect metering sys�tems using which our cus�tomers become more efficientand powerful!

The Engineering Centre“Energoauditcontrol” is the

leading Russian company in

creation and maintenance of

electric power commercial

calculation systems and auto�

mated dispatcher and tech�

nological control systems.

In Brief

Аpril 2008

Special edition from Russia

Energoauditсontrol in Russian power sectorSilvian SEU: “Our advantages are integrated solutions and wide range of services”

We offer a full “circle” of services: development,start�up services and further maintenance of

automated metering and control systems.Integrated solutions and wide range of servicesare among our company’s greatest advantages.

Our clients are most significant Russian compa�nies, known all over the world. Among them

Gazprom, Russian Railways, Sibur,Gazpromneft, and Mosenergo. By the way, these

companies are major power consumers; forexample, Russian Railways’ share in national

consumption balance is 6% Gazprom has about2.5% Vast geography of their business makes it

difficult to control energy consumption.

“ENERGOAUDITCONTROL” possesses uniqueexperience in servicing companies scattered on

our territory, such as energy suppliers, oil andgas enterprises, transport companies. With

such geographic scale you need qualified spe�cialists as well as modern technologies of

remote control in every region to execute man�agement and administration.

7

Аpril 2008

Special edition from Russia

On April 1, 2008, the restruc�turing of North�West IDGCby merging with sevenregional distribution gridcompanies was completed.The consolidation was car�ried out under the state�approved programme ofreforming Russia’s energyindustry. This step wasapproved by the overwhelm�ing majority (99.9%) of themerged companies’ share�holders.

What do we have?North�West IDGC General

Director Veniamin Pinhasik calledthe consolidation a remarkableevent. “After April 1, North�WestIDGC employs about 14,000 people,so we have become one of thelargest companies in North�WestRussia,” he said.

The company plans to receive 20billion roubles of profit in 2008.“The financial activity of eachbranch and the company as a wholewill be absolutely transparent,”promised V.Pinhasik. “The investorcan check each rouble spent on thegrid development.”

The unified company’s capitalstock equals 9.5787 billion roublesand it is divided into 95.787 regis�tered ordinary shares with a parvalue of 10 kopecks each. North�West IDGC’s main shareholder is thestate in the name of RAO UES of

Russia. It has 55.4% of the company’sstockholder capital.

In May 2008, North�West IDGCplans to enter the leading Russianstock exchanges without listing and,in June 2008 — to undergo the list�ing procedure.

“I am for grid companies toremain state�owned. Any instabilityin the grids may cause serious prob�lems,” Veniamin Pinhasik thinks.

To Build but to Take CareIn 2008, North�West IDGC’s com�

panies plan to raise investments intothe development of the power gridsystem by 20% up to 3.7 billion rou�bles. It is going to attract over 1 bil�lion roubles of loans for the con�struction, re�equipment and over�haul of energy facilities.

In line with investment pro�grammes for this year, 1,277 km oftransmission lines and 358 MVA ofgeneration facilities are to be built.

There are plans to largely raiseinvestments in the Komi Republic.Early this year the 110�kW line and

PS 110/10 kW substation werecommissioned, which is the firststep to solve the problem of powersupplies to Komi’s southern parts.Since 2005, the investments haveincreased almost 5 times and willtotal some 1 billion roubles by theend of this year.

A 110�kW substation is being builtin the Vologda Region, which willensure steady power supplies to thecity of Cherepovets, the region’s met�allurgical centre.

In 2008, 610 million roubles areto be invested into overhauling andconstructing grid facilities in theNovgorod Region. The constructionof the 110/10�kW substation willstart in Velikiy Novgorod to enhancethe reliability of power supplies tothe water intake facilities and a resi�dential district. Also, a 110�kW line isto be built to connect a major oiltrader to the power grid.

In the opinion of North�WestIDGC Chief Veniamin Pinhasik, it isnot a good solution to infinitely buildgeneration facilities to connect newconsumers. “The state should thinkabout energy saving. The wholeworld, except for Russia, is alreadythinking about it. The reason is lowtariffs for electric power making nosense saving it. Thus, energy con�sumption and grid loads grow andthe cost of their maintenanceincreases. Energy should be saved asit will allow making electric powercheaper for the consumer,” he said.

Plans for FutureBy 2015, North�West IDGC will

have invested some 33.4 billion rou�bles into the development of the

regional power grid system, whichwill allow to build 5,100 km of trans�mission lines and to put to operation2,770 MVA of capacities. Much moremoney should, however, be spent onbuilding power grid facilities.

“Our task is to construct powergrid facilities at priority rates for newconsumers to be connected withoutany limits. Such limits now existalmost in all large cities of RussianNorthwest,” said company ChiefEngineer Alexander Kukhmai.

Now that housing constructionand production is growing in theregions, the power industry must nothamper the development of theireconomic and social sphere. In thissituation, authorities and energycompanies must cooperate. And thisprocess can be seen.

In 2006, working out regionalprogrammes for power industrydevelopment and raising its reliabili�

ty started. Agreements between RAOUES of Russia and administrations ofthe Murmansk and Vologda regionshave already been concluded.Elaborating programmes with theadministration of the Komi Republicand Novgorod Region will soon becompleted. The regional agreementstipulates measures to develop thegrid infrastructure up to 2012.

Towards WiseManagement

“As an operation company, wehave the main task of taking propermanagement decisions and main�taining the stable work of the wholedistribution grid system in order toincrease North�West IDGC’s capital�ization,” reckons Deputy GeneralDirector for Corporate ManagementAnatoliy Kushnerov.

One of the tasks set by the compa�ny chief is to achieve a radically newlevel of distribution grid manage�ment with the development of infor�mation technologies being one of thesolutions. This year, North�WestIDGC plans to establish channels ofcommunication with is branches,which will allow the managing com�pany and seven branches located inNorth�West Russia to work in oneinformation field.

Taking care of company employ�ees is no less important. North�West IDGC’s Board of Directors hasadopted the programme for pre�venting injuries in companybranches for 2008�2010, which pri�orities include creating theadvanced labour safety manage�ment system, ensuring professionalactivity safety and protecting healthof the employees.

“The energy industry is a sphere,which is dangerous for people work�ing in it. Not everybody can for in anenergy company due to bad health,mentality and other factors. That iswhy, we are paying great attention topsychophysiologic testing of person�nel,” says Veniamin Pinhasik.

By 2012, North�West IDGC plansto spend more than 1.5 billion roublesfor motor transport including specialand cross�country vehicles. “Much of

our motor vehicles are quite worn�outwith almost half of them being morethan 10 years old,” said DeputyGeneral Director for Logistics AnatoliyIgnatyev. According to him, a unitedtransport division will soon be createdin the company to this end.

To take care not only of ourselvesbut of the environment as well is thecompany’s strategic objective. By2010, North�West IDGC will havespent 303.6 million roubles on envi�ronmental projects. The employmentof renewable energy sources in theNorthwest grid system is alreadybeing discussed.

VViissiitt NNoorrtthh--WWeesstt IIDDGGCC ccoorrppoorraatteewweebb--ssiittee aatt wwwwww..mmrrsskksseevvzzaapp..rruu aannddeenngg..mmrrsskksseevvzzaapp..rruu ((EEnngglliisshh vveerrssiioonn))..

BByy NNoorrtthh--WWeesstt IIDDGGCC PPrreessss--SSeerrvviicceePPhhoottoo bbyy AAnnttoonn SShhoosshhiinn

United Power Grids of North�West RussiaVeniamin Pinhasik: “The consolidated North-West IDGC is the largest energy producer in the region”

North�West Interregional Distribution Grid Company covers seven regions of Russia’sNorthwest Federal District with a total area of 1.5859 million sq.m and a population of6.69 million people. The total length of overhead and cable transmission lines is 169,300

km. The company has 1,141 substations with a capacity of 35 kW and up. The installed capacityof power transformers of the substations totals 17,500 MVA. There are 35,400 6�10/0.4�kW

transformer substations with their aggregate capacity of 6,700 MVA.

Veniamin Pinhasik: «The principle of our operational company is the maximum transparency»

“RAB — new tariff regulations system”The financial state of distribution grid

companies can be improved if the new

RAB (Regulatory Asset Base) tariff cal�

culation technique is introduced. This

year, its test introduction is scheduled

in Komienergo and Novgorodenergo.

North�West IDGC has set up a work�

ing group on implementing the RAB�

based tariff regulation project. It is led

by Deputy General Director for

Economy and Finance Olga Makarova.

“In line with the schedule, we are

expecting to have received final calcu�

lations of tariff and balance conse�

quences of the new tariff regulation

system’s introduction presumably by

June 1, 2008,” she said.

In Brief

8

The problem of drinkingwater is undoubtedly one ofthe most important problemsfacing humanity and it willbecome much more compli�cated in the future. The lackof energy and pure water arekey challenges our planetwill encounter in times tocome. That is why, each stepto solve these problems isfar beyond the scope oflocal technological or mar�keting success. So, it is espe�cially pleasant to mentionnew important (and evenrevolutionary) develop�ments represented byGerman companies New OilTechnologies GmbH and NewEnergy Technologies GmbHjointly with St.Petersburg�based Continvest at theHannover Messe 2008 show.For the first time in Europeand in the world, these com�panies exhibited cutting�edge and unique equipment— water treatment disinfec�tion units and fuel�free heatgenerators. The equipmentemploys the process of cavi�tation and a number ofunique advanced solutionskept in secret by the inven�tors. (Intellectual propertyand invention rights belongto corporate authors fromRussia and Ukraine).

Problem of Drinking WaterUS experts say over half of our

planet’s population will live in regionswith persisted water shortages. Freshwater is rapidly becoming a deficientnatural resource and is more andmore often called ‘blue gold’. In the20th century, water consumptionincreased 7 times, while the worldpopulation — only thrice. The lack ofwater causes a number of economic,social and political problems that canundermine stability in the world andlead to global disasters.

Statistics proves that 2.8 billionpeople constantly lack pure water.For example, in Eastern Europeancountries, 16% of people do nothave water and sewerage at their

homes, while in rural areas of thisregion this index exceeds 50%.According to the UN, 37 children dieevery day in developed EU countriesdue to water�related diseases. 2006saw 170,000 such cases with manyof the victims being babies from 6 to11 months old. Doctors assure theloss of 6% of water leads to subcon�scious state, 10% — to hallucina�tions and 12% — death. Accordingto the UN Food and AgriculturalOrganization (FAO), about 4,000children daily die in the world fromthe lack of potable water.

Almost all countries face water�related problems. Even such a humidand under�populated country asArmenia (a completely randomexample) with huge Sevan Lakefilled with fresh water will lack some750 billion cu.m of it yearly by 2025,according to local experts.

To attract attention to this problem,the UN set up World Water Day. TheMillenium Declaration adopted by theUN calls for reducing by half the num�

ber of people in the world lacking safedrinking water and proper sanitationby 2015. UN experts say meeting thisgoal requires $10 billion per annum.This year, World Water Day is devotedto hygiene issues as the UN declaredthe year 2008 the international Year ofSanitation. By the way, about 21% ofinfectious diseases in India are causedby unsafe drinking water.

The global water shortage is aggra�vated by the increasing populationthat will reach 8.1 billion by 2030.

Experts say two thirds of theworld population, which is about 3

billion people, will severely lackdrinking water by 2025. The worldalready faces the catastrophic short�age of drinking water, which willsoon be called ‘blue gold’.

Mexico, on of the most populat�ed cities in the world, will soonremain without potable water as,due to the lack of up�to�date drainsystems, rain water mixes withsewage effluents and then runsinto water pipelines.

The same situation is in theSpanish region of Catalonia, where4.5 million people lack drinkingwater that was usually taken fromunderground sources that are dryingnow. Spanish authorities are tryingto lay the pipeline from the RonaRiver in France to Barcelona.

Before the WarRussia is the most fresh water�rich

country in the world (Baikal Lakealone contains 23% of global drink�ing water resources). But it is notprofitable to export water (Russiaand Brazil could do it very well) evengiven severe shortages of drinkingwater. Transporting water (in anystate!) to another water basin is quiteexpensive. Transporting icebergsfrom Antarctica to South America,Africa and Australia is no cheaper.Icebergs are especially difficult tomove in the Northern hemisphere.

With that, humanity consumesonly 10% of world river flow and 90%of it remains undisturbed. But these90% are contaminated by the former10% already used and released aftertreatment plants back to the nature. Itresembles a fly in the ointment verywell. In this context, new state�of�the�art equipment made by New OilTechnologies GmbH, New EnergyTechnologies GmbH and Continvestcompensates for this shortcoming infavour of nature and people.

Water�related problems are com�plicated in Russia. We use only 2% of

the river flow for housing and publicutilities and other needs, thus, con�taminating the rest 98%. And themain contaminators are not so muchindustrial enterprises as housing andpublic utilities of cities, villages, etc.

At that, specific water consump�tion in different countries varies. Thisindex in Moscow officially equals 500l per head a year, in Europe — 150�160 l and Berlin — 120�130 l. Ofcourse, much depends on water man�

agement habits and culture and…water prices. In Russia, one cubicmeter (1,000 l) costs 7�8 roubles andin EU countries — 3�4 Euro — 20times more. But these are not the onlyreasons for the gap in consumption…

For the last 40 years, the MiddleEast and Northern Africa havereduced water consumption by 2.5times. The problem of water tarnish�es relations among the countries ofthis region that are complicated evenwithout that. Former UN Secretary�General Boutros Ghali thinks watershortages may cause the next war inthe Middle East. Former Israeli PMYitzhak Rabin and King of JordanHussein have the same opinion, too.

What to Do?The mankind is searching for

ways out of water crisis already now.Having drunk natural fresh water,the Gulf States started desalinatingsalt water at a price of $2.4�4.5 per

cu.m. Turkmenistan is seeking $4 bil�lion to build the world�largest saltlake. China is constructing channelsas it can afford to spend $59 billion tobuild three 1,300�km channels.Indeed, the ground water level inBeijing falls by 70 cm every year.

Russia has enough water�relatedproblems, too. It has the Supply ofPopulation with Drinking Water fed�eral target programme designed for10 years. It provides for river sanita�tion, replacement of water treatmentfacilities and water pipelines, intro�ducing advanced treatment tech�nologies and many other usefulthings. Due to the lack of funding,however, most Russians will simplyboil water in the coming 40 years.

Yet, there is a better solution.Much better!

Let us return to the beginning ofour conversation. To radically newequipment designed by New Oil

Towards Blue GoldAdvanced Technologies in Power Generation and Water Treatment

Gulnara Fridman,

Chief ofWaterbotruff andWarmbotruffprojects

Аpril 2008

Special edition from Russia

Principal hydraulic diagram of unit installation for disinfection and purification of water. Description of diagram:

1 — High�pressure cenrifugal pump;2 — Hidrodinamic contour;3 — Injecting pump;4 — Plate heat exchanger;5 — Heater;6 — Electro�magnet valve;7 — Ball cock;8 — Filter for rough purification;9 — Charding filter;

10 — Filter for fine purification;11 — Filter for fine purification;12 — Tank for initial water;13 — Receiving tank.

Many countries including Russia and Kazakhstan declared this year the year of purewater as this problem is getting increasingly important with every passing year. That is

why, units that can turn almost any dirty water into drinking one are vital today and willbe needed in the near future. It should be also considered that it takes the units 15�20 min�

utes (a record�breaking time) to clean dirty water after filling the circuit with dirtywater — it is not an ordinary multi�step treatment. Also, the units have compact configu�ration and the production cost of cleaned water is rather low. The next stage of works(about two months) is sea water desalination and bright results are already available.

9

Technologies GmbH, New EnergyTechnologies GmbH and Continvest— Waterbotruff units, in whichboundary conditions of cavitationdestroy pollutants and organic mole�cules and make water from any poolor loo in the world drinkable!

TestedIt is very important that the unit

demonstrated at the Hanover showwas not a laboratory one. It is analmost series product, which hasundergone serious tests in variouscountries, places and organizations.The results of the tests carried out inRussia and Western Europe for twoyears proved its high and unmatchedperformance. At the same time,heating and hot water supply unitswere tested.

Russian certificates for water dis�infection and treatment assembliesas well as for those designed for heat�ing and hot water supply and the EUcertificate for the water treatmentdevice have been received. Heatingand hot water supply units are not tobe certified as they do not belong tohigh�risk ones.

The new devices were undergo�ing the most difficult tests in Russiaon Lukoil’s facilities for ninemonths in 2007. It was thoroughlychecked whether they could beused for heating and drinkingwater supply at gas stations lackingcentral water supply.

The tests proved high efficiency ofthe units saving about 50% of electricpower and fully cleaning and disin�fecting well water. The results unam�biguously proved the need in suchunits. For example, they reduced theiron content in source water by 600times down to the normal level. Talksare being held with Lukoil on deliver�ing such assemblies.

Principle of OperationThe technology employed in new

assemblies has been designed andadjusted for several years. In theWarmbotruff 5,5A and Waterbotruff7,5A units, all customers’ require�ments were met. They have a newdesign, advanced electronics oper�ating in the automatic mode (as awashing machine), increased wateroutput and volume of the roomheated, etc.

Now, let us go into detail…The instruction strictly says that

the Waterbotruff unit is designed todisinfect and clean tap and any con�taminated ground water as well asholes to get clean drinking wateraccording to sanitary standardsadopted in Russia and Europe. Theunit uses the process of cavitationwith sonic waves destroying cavia�tion bubbles. The main place wherecavitation is created is… the pump.

If it is not completely clear, let usgo on. The unit employs the waterdisinfection principle basing onhydrodynamic effect. A wide rangeof ultrasonic frequencies allowsachieving maximum water disin�fection without using any chemicalagents. This method of disinfectiondoes not depend on the transparen�cy of source water unlike ultravioletdisinfection, which is very popularnow. The high�pressure water flowcreated by the centrifugal pump isspecially transformed into the pul�

sating bubble. Ultrasonic vibrationsare induced by the water vortex.

At the moment of burst, cavita�tion bubbles have a spot temperatureof several thousand degrees Kelvinand a pressure of dozens of thou�sands of atmospheres. Pathogenicflora is fully destroyed in such severeconditions.

The Waterbotruff’s patenteddesign allows maintaining cavita�tion mode without damaging assem�bly parts.

All parts of the unit contactingwith water are made of stainlesssteel. The assembly has no movingor rotating parts (except the enginewith the pump), which ensures itsabsolute reliability. Its service life is 25 years.

The unit has special filters withchangeable output cartridges to final�ly clean disinfected water from per�manent pollutants, namely solid andoily impurities, which allows getting

pure drinking water from sourceswith almost any level of contamina�tion. The unit’s daily capacity is 4,500l of pure water — a daily drinkingwater requirement for 1,500 people.

Warmer!Another state�of�the�art product

developed by New Oil TechnologiesGmbH, New Energy TechnologiesGmbH and Continvest employs ther�

mal energy released by cavitation toheat rooms. The Warmbotruff is anecologically�friendly alternativeenergy source. This advanced heat�ing system, which really needs nofuel, has an incredible efficiency ofelectric�to�thermal energy conver�sion — up to 300% (it was proved bypilot testing).

The main physical phenomenoncausing this conversion is interlayertargeted cavitation directed so that itdoes not damage the generator’sparts. The unit can be coupled withany heating systems without chang�ing its design. If needed, a boiler canbe switched to the unit to get runninghot water.

The Warmbotruff unit allows elec�tric power consumption to be signifi�cantly reduced at the expense of highconversion ratio. The only power con�sumer is the pump engine, whichworks 40% of day. A usual tariff isused in payments.

Advantages and efficiencyBeing alternative energy sources,

heating and hot water supply unitshave a number of big advantagesover devices employing other prin�ciples (gas and electric boilers, solarbatteries, oil radiators and under�ground thermal pumps). In addi�tion, this equipment is absolutelyenvironmentally�friendly as itmakes no emissions in the atmos�

phere and is completely safe to han�dle. It does not need continuousservice and can be used withouttechnical permissions and addition�al installation.

The both types of units includeparts made by famous manufactur�ers, namely Grundfos, Wilo andSiemens, US�made filters providinghigh�quality operation.

Marketing researches showed thatevery country (and the world marketat whole) needs such equipment dueto problems with pure drinking waterand heat. From year to year, the num�ber of natural disasters increases, sothe water�cleaning units are vital. Inaddition, they can be used to savewater by its cleaning and reusing atfood and processing plants. Also, theunits can be employed at plants pro�ducing pure drinking water.

The assemblies have very higheconomic parameters. For example,pure drinking water produced by theWaterbotruff from any contaminatedsource costs 5�6 copecks a litre (with�out installation and burden costs)and pay back period — 6 months.

Notably, the both units will bemanufactured in Germany sinceJune 1, 2008. Parts suppliers arenow fulfilling orders on parts, fil�ters, pumps, etc. Technical capabili�ties, however, create some limita�

tions — 1,000 units a month will besold in the first months (theWaterbotruff costs 18,000 Euro(VAT included) and Warmbotruff —8,000 Euro (VAT included) and thecapacity will have doubled by theend of the year. The pay back perioddoes not exceed 6 months. Theirwarranty period is 5 years and serv�ice life — 25 years.

Аpril 2008

Special edition from Russia

Elena Vasilyeva, Chief Engineer of “R&D Centre ofStandardization of ComplianceApproval Metrology (Certification)“Test�S.�Peterburg”.We tested one of the units designed

by Yu.R.Fridman and his team in

order to check if it could be used in

waste water treatment. With that,

waste water had different composi�

tion including industrial, household

and polluted natural waters. A num�

ber of drinking water parameters

were evaluated as reaching them is

the final tasks of water treatment.

The results showed a significant

improvement of both chemical and

microbiological parameters in the

cleaned water. At that, the cleaning

efficiency was very high given a quite

short operation cycle. To fully disin�

fect the water and remove contami�

nants from it, several stepped clean�

ing cycles were carried out, if needed.

The unit proved its high efficiency in

cleaning variously contaminated

waters given rather high output. It

opens wide prospects for its employ�

ment due to a number of reasons,

namely wide introduction of closed�

cycle water treatment technologies

in various production spheres, critical

importance of treating waste waters

drained into surface basins, etc.

In Brief

Principal diagram of heat generator

1 — The main pump "WILO";2 — Generator;3 — Circulating Pump;4 — Electro�magnet valve;5 — Ball cock;6 — Expansion tank;7 — Heating radiator.

Considering a pressing global problem of finding alternative heat sources, which is espe�cially important for the European market that has almost no own natural resources, we

can say that our project has solved this problem only in the local scale. Water is thesource of heat (all energetic resources of water have not been studied yet), but whencompared to such alternative devices as underground thermal pumps, solar batteries,

etc, our unit has big advantages. They are compact, easily installed, can do without regu�lar maintenance and the most important thing is that they allow considerable saving of

electric power (according to pilot projects) needing neither gas nor other fuel.

10 Special edition from Russia

JSC “Mobile Gas�Turbine PowerPlants” (“Mobile GTES”) is theunique and prospective company.These characteristics become ofgreat importance from the stand�point of power industry reformingand growing of power generationshortage. Being 100% affiliated com�pany of RAO “Unified Energy Systemof Russia”, after July 1, 2008, “MobileGTES” will be managed under theaegis of FSK Unified Energy System.Oleg Bragin, the General Directorof JSC “Mobile Gas�Turbine PowerPlants”, tells us about companyachievements, plans and features.

— Oleg Valentinovich, what purpose suchunique company as “Mobile Gas�TurbinePower Plants” was founded for in Russia?

— Our company was set up to provide thereliable power supply of Moscow region (andMoscow first of all). It was not easy, becauseMoscow region has always had problems withenergy supply. Region development stablyincreases and so the energy demand increases,too. But all that building of stationary powerindustrial objects– power plants, large substa�tions, and power distribution network – couldn’tkeep up with energy demand increase in region.To find a way out of this situation, we decided toplace our bets on mobile power plants. At firstwe made agreements with the Government ofMoscow, Moscow region authorities and RAO“Unified Energy System of Russia”. These agree�ments determine the main strategic principles ofenergy industry development in Moscow region.I would like to emphasize that mobile powerplants are not an alternative but addition to thetraditional power industrial objects.

— Which are built in Moscow region, too?— Yes, they are. But we should take into

account that building of electrical networksand stationary power supply objects takes agood deal of time. When building of one objecttakes no less than two or three years, and ener�gy demand increases too fast, we have to takeactive measures, traditional methods are notsuitable for us. The autumn�winter peak period2006�07 has showed that we are near to limitcustomer’s energy supply in case of cold weath�er in future to unload substations and avoidcontingency loading. Customers consumemore energy in the cold periods. Lowering oftemperature causes the avalanche�type rise ofadditional power consumption – especially inmorning and evening peak�hours. Thereforepower distributing substations going to be over�loaded, and many of them have sufficient tech�nological wear. Of course they permit someoverload level, but can’t work constantly insuch extreme conditions.

— And if all substations to refurbish…— Of course we doing refurbishment for

them, but it also takes much time. To unloadthese substations, we made, in my opinion,very good decision: injections of electricalpower in the places of distributing substationsoverloading. It is evident that is mobile gas�tur�bine power plants are the most effective thingbecause of fast installation, commissioning andtake�over, as well as re�transportation in newplaces, if needed.

— Are the mobile gas�turbine power plantsgoing to be transported often?

— This is the one of the advantages of themobile power plants: they could be transportedso many times as you need. It’s their normaloperating mode. The mobile power plants are

set in the places of electrical network equip�ment overload. It is actually mobile conceptionof energy industry: power plant can be operat�ed in one place, then in another, moving fromplace to place. Mobile power plants help us tosolve many problems until the large stationaryenergy industry objects are built in this region.

— So your company is of a kind “energyrescue”?

— In some sense… I would like to point out:our company had proved its importance. Wegenerated more than 20 million kWh in peak�hours last year, which is greater than it wasplanned earlier and we proved once more theidea of forming such company. We hadn’t anyfaulty during operation; specialists of our com�pany are in watch twenty�four hours a day.Every mobile power plant began to work underthe command of National Electrical NetworkOperator, and every time it starts to supplyelectrical power at nominal (full) load alreadyin 7 minutes after start�up. Our company expe�rience turned out to be very effective so wewere asked for help from other regions. Theyhave the same local problems to solve.

— Could you name some for example?— The most difficult situation is in

Vladivostok. The thing is that practically thewhole power generation is concentrated in thenorth of the Far East, in Khabarovsky region,but the most of customers are in the south ofPrimorsky region. At the same time there isonly one power line. This causes the energydeficit increase in peak�hours.

Primorsky region has the same situation asin Moscow region. There is also an agreementsigned between governor of the subject andRAO “Unified Energy system” concerning thepackage of measures on building of new ener�gy objects during few years. But to provide thecustomers with electric energy today localgeneration objects are not enough. To solvethis problem in 2008 “Mobile Gas�TurbinePower Plants” are planning to install two gas�turbine power plants. The customer of theproject is Dalnevostochnaya GeneratingCompany � business unit of RAO “UnifiedEnergy Systems of East”, and our companyperforms as the contractor.

Besides we plan to install the mobile powerplants in other regions of the country. After sur�vey of demand in the mobile power plantsapplications it has become evident that themost critical region after the Primorsky regionis Krasnodar Territory now. It is connected notonly with forthcoming Olympic Games 2014 inSochi (but still it’s a very important separateissue), but with spending of the nearest sum�mer. Specific character of the region is that thepeak power consumption loads, in contrast tothe most territories of Russia, appear not inwinter but in the period from May to August –to provide conditioning. At present we are try�ing to decide this problem by means of two gas�turbine power plants installation which weplan to take�over in operation from July.

— Are the mobile power plants used allover the world?

— Similar systems are actively used in theworld. For example, they proved their effective�ness during the Olympic Games in Athens. Ithad demonstrated excellent performance inSpain, Finland. Several stations are set inFrance now.

— Do you offer your services in the foreignmarket?

— Within the limits of our company we justregister the world demand. The fact is that wehave a lot of orders on such systems in Russia.At the same time we are ready to examinerequests from west partners. And probably wewill penetrate into the European market in thefuture. In general we have analyzed the globalmarket of mobile gas�turbine power plants andknow it well – as from the point of equipmentso as eventual customers.

— What type of equipment do you workwith?

— We are ready to examine all types ofequipment. Now we are satisfied in coopera�tion with Pratt&Whitney Power Systems, whichproduces very reliable equipment. Besides, it’seasy to operate and to install; our personnel istrained to work with this equipment. But weare also ready to collaborate with other manu�facturers. We are interested to get informationabout equipment produced by them. We useonly high and efficient technologies. Of coursein a year or two new more ecological technolo�gies come. But I’m sure that at any case we willuse the best of what the world gas�turbine tech�nologies can afford.

— What are the company’s plans the near�est future?

— Our plan is to work over the regions,which I mentioned earlier, together with theRAO “Unified Energy Systems of Russia”. Weprepare to install two power stations inKrasnodar Territory, but actually there is aneed in at least four power plants. Also situa�tion in some parts of Moscow region (for exam�ple, in Dmitrovsky region) remains quite diffi�cult, that’s why it will require additional power.To our opinion the demand for at least fivepower plants will arise during next year. AndI’m sure that we will have more orders nextyear. In other words, practically our businessactivity is in great demand at the market today.

Besides we work over the issue of forming akind of “Emergency Power Reserve” within theRussian Federation. Now we are talking aboutthe idea that in order to provide reliable energysupply we need to create a special service. Theservice that could localize the accident shortlyover the whole territory of country in case ofsome natural disaster: snowfall, earthquake orsimply power supply loss. This organizationshould be able to transport power generators tothe problem point and to restore energy supplyin short period of time. Now we determine theoptimal quantity and list of equipment to fulfillthe task of this “Emergency Power Reserve”.

— To what extent do you interested ininvestments?

— Any company is interested in attractinginvestments. And as we pass into FSK directing

from July 1, we will coordinate and agree allour investments programs and plans with thisorganization. One must say, that investmentsprogram of FSK includes a variety of significantarrangements, which solve the same problemsas our company does. At the present we workon synchronization of our investments plansand programs with investments plans and pro�grams of FSK to ensure a further developmentof mobile energy industry.

— Please, characterize your companyteam specialists.

— First of all – they are young and profes�sional. Practically all persons working in ourcompany are high�qualified and have greatexperience in energy industry. They areexperts at their area of knowledge! For exam�ple, specialists of our company must be inwatch twenty�four hours a day in the shifts.In case of emergency under the command ofthe National Electrical Network Operatorthey can immediately start the gas�turbinepower plant. It is not very easy! Whilepreparing annual report, we have paid atten�tion that more than 60% of our employeesare younger than 30 years. And there are pro�fessionals who worked in energy industry for30�40 years too. That’s why I think that ourcompany team is young and professional atthe same time.

I also would like to say some words aboutprofessionalism. The readiness to work twen�ty four hours a day is normal in our company.Our employees are ready to come to work atany time and solve any problem, and I appre�ciate it sincerely. We are the team, whereeverybody finds mutual understanding,knows what purpose he is working for andwhat perspectives he has. And speaking aboutprofessionalism, I have something to comparewith. For 7 years I’ve been working abroad, in

Finland taking part in stationary power plantsprojects, from it’s designing to erection andcommissioning. Taking into account this expe�rience I can say that professional level ofRussian specialists has increased greatly. I willgo so far as to say that our specialists are notinferior to foreign specialists.

I appreciated to my team for all that we haveachieved. It’s the team that is half the battleand high competitiveness level of the company.

— Do you consider your company as com�petitive?

— Yes, I think we are competitive in thewhole. Our company is unique not onlybecause of what we do, but how we do ourwork. Basically, there are a few such effectivecompanies in the world founded to provide fastmovable energy supply. I know that our expe�rience is unique, because we professionallywork only in the mobile electric power plantsindustry. We accomplish the full cycle fromdesigning to installation.

— Please formulate the motto of yourcompany.

— The company’s motto is “the power ofmotion”. Combination of these terms givesus… mobile power plants.

BByy DDmmiittrryy KKoozzhheevvnniikkoovv

Аpril 2008

Oleg Bragin,General Director of "Mobile Gas�Turbine Power Plants"

Take-over in operation of 10 mobile gas-turbine power plants in Moscow region (Site "Novosyrovo") From left

to right: O.Bragin, A.Chubais, V.Korobov, Ts.Tsagadaev.

“The Power of Motion”Oleg Bragin: «We have risen to eminence in our profession»

11

Аpril 2008

Special edition from Russia

400�year�old Tomskhas never been anindustrial centre.Since times immemori�al that saw openingthere the first univer�sity behind the Urals,Tomsk has been kindlycalled SiberianAthens. 15 years later,the Transsiberianmainline surpassed it,thus, almost finallydepriving it from thelaurels of an industri�al centre. Tomsk hasbeen famous for itsintellectual achieve�ments for over a cen�tury. In December 2005,this city worthily gotthe right to organize aspecial technical/pro�motional economiczone within its bor�ders.

The “Tomsk electroniccompany” scientific�produc�tion enterprise (TEC) was setup in 1999 on the scientificand production base of theTomsk branch of the MoscowMachine�Building TechnologyResearch Institute. The Tomskpetrochemical plant becameits first really serious partner.At that time, the TEC alreadyhad specialists on automation,electric drives and measuringinstruments. The help ren�dered to the petrochemicalplant was invaluable as theplant had hard economicproblems solved by theautomation project for theproduction of “polypropylene”elaborated by the TEC. Thenext serious contract was con�cluded with Transneft. It pro�vided for the development ofthe Russian intellectual elec�tric drive beating foreign ana�

logues by a number of param�eters. Now, the TEC manufac�tures 3,000 electric drives andelectronic control units a year.

The TEC has the full cycleof production with processmonitoring at all its stages. Italso has an automatic line forbrazing electronic componentsusing lead�free technologies.Advanced computer�con�trolled machines are used inmechanical production. Up�to�date foreign�made equipmentis also important for the enter�prise as it is one of the reasonswhy the TEC has made a qual�itative step forward. Largecontracts emerged soon after.

Technological lines for thePervouralsk Dinas Plant werethe first experience of makingcomplete metallurgical equip�ment. The world�famousYukos managed to be theTEC’s partner, too. It was 2003

that saw the company’s reach�ing a new frontier. It devel�oped a dedicated controller foroil, gas and water assessmentfor the oilmen. The next stepwas becoming a prime con�tractor. Since 2005, the TEChas signed a number of con�tract treaties with the NizhniyTagil Iron and Steel Works.The company was responsiblefor technological facilities oftwo shops of this giant — thewheels and tires shop andblast oxygen one. Works on thefirst object have already beenfinished — final check lineNo.3 has been launched. It hastaken the TEC one year and ahalf to design, manufactureand commission the advancedrobotic center. This project ledby the TEC united efforts ofleading Russian and foreignmanufacturers and the resultwas impressing.

This line allows controllingall types of full�profile han�dling wheels with a diameterof 720�1,260 mm at an annualperformance of 350,000wheels and high speed ofoperation.

All technological opera�tions are highly�automatedand a number of them arefully automated with railwaywheels acceptance proceduremeeting all Russian and inter�national standards.

Concurrently with this proj�ect, the TEC has started imple�menting the next one — thefull�scale overhaul of the blastoxygen shop at the NizniyTagil Iron and Steel Works.Austrian company Siemens�Voest�Alpine is the prime con�tractor and the TEC — a sub�contractor. This projectincludes a number of ready�to�operate works, particularlyoverhauling the system offeeding bulk metals into con�verters and steel�pouringladles including full�scaleengineering with working

project elaboration, manufac�turing and delivering equip�ment and technologicalprocess automated controlsystems, building and assem�bly works and comprehensiveequipment testing. In 2010,the Nizniy Tagil Iron and SteelWorks is to receive a new con�verter steel making shop withan annual capacity of4,300,000 t. The main difficul�ty of this overhaul is that it isimplemented without sus�pending the steelmakingprocess. So, the project isdivided into five stages witheach of the converters to besuccessively modernized.Building the loop flux han�dling line, TEC experts usedthe SICON conveyor systemmeeting increased environ�mental and economic stan�dards. Its employmentallowed the conveyor route tobe flexibly laid with a heightreaching 40 m and a length of400 m at large angles withouttransfer stations and chargematerial to be moved in the

off state mode. It is the onlyworking conveyor system inthe Russian metallurgicalindustry.

At present, the TEC isimplementing contracts worthmillions of Euros. It is ready tooffer its partners electricdrives and automatic electricsystems, oil metering stationsas well as to automate produc�tion processes in petrochem�istry and oil�and�gas produc�tion. It can also carry out over�haul operations for technolog�ical units. The company’s salesmarket includes the Urals andKazakhstan. It delivers oil�and�gas production equip�ment to consumers in thewhole of the Siberian FederalDistrict including the IrkutskRegion, Krasnoyarsk Territory,Khanty�Mansi and Yamal�Nenets autonomous areas.The TEC’s clients include suchRussian oil�and�gas giants asLukoil, Rosneft, TNK�BP andothers.

The TEC was named thebest innovation company in

the region. Just in terms of newjobs, it fulfilled obligations ofalmost all Tomsk�based inno�vation companies — last year itemployed 300 people.

The TEC is also carryingout R&D works. A design insti�tute has been working in thecompany sine 2007. Thissphere is called very promis�ing. The company also has astudent design bureau with20�30 people always workingthere. They receive produc�tion, pre�graduate and gradu�ate practice. Future specialistsstudy how to design and man�ufacture weight batching andmeasuring as well as manu�facturing control and regulat�ing systems, automate pro�duction and technologicalprocesses, create intellectualelectric drives, etc.

The economic stabilityachieved by Russia is one ofthe three strongholds of theTEC’s prosperity. The secondone is a wise marketing policyand the third one — its ownintellectual potential.

Tomsk Electronic CompanyThe TEC is implementing contracts worth millions of Euros

Andrey Shestakov, General Director of the Scientific and Manufacturing enterprise "Tomsk Electronic Company"

12

Аpril 2008

Special edition from Russia

Technical retooling andmastering new technolo�gies, R&D works, introduc�ing advanced businessprocesses and expanding therange of products are thekey tasks for a developingRussian machine�buildingenterprise. With that themain question remains —what certain steps should betaken to achieve the neededresult? What sources ofinvestments are availableand can the enterprise offera truly innovation productallowing the sales marketto be extended and featur�ing competitive advantages?A new team of top managerof the Novosibirsk ElectricMachine�Building Plant — the ELSIB ScientificProduction Enterprise OJSC(ELSIB) managed to answerthese and other questions.It took the enterprise oneyear to give up the policy ofsurvival in favour of thestrategy of development,progress and productiongrowth.

Potential of GrowthThe year 2007 became the year of

changes for ELSIB. A team of profes�sional managers led by Korney Gibertcame there in order to make ELSIBthe leader of the Russian machine�building. We can already say that theplant has become a stable enterprisewith a large potential of growth.

In 2007, the system approach wasthe main principle in the new policy.Changes were made in every sphereof the company's life without excep�tion. Serious efforts were made toimprove the company's managementsystem. Since January 1, 2008, thecompany has new organizationalstructure reflecting base manage�ment principles, namely flexibility,system approach, rationality andinnovations.

Due to growing requirements ingeneration equipment, ELSIB has atask of doubling the production ofgenerators. ELSIB's goals till 2011are to raise its production, technolog�ical and innovation capabilities inorder to yearly manufacture up to20�22 turbo�generators, 5�6 hydro�generators and up to 500 large elec�tric motors. As for the nearest plans,in 2008, the company plans to sell$100 million worth of products and,in 2009 — over $180 million.

Investments in SuccessIn line with its investment plan,

RAO UES is to rapidly raise its gener�ating capacities. The Novosibirskplant plays an important role in theprocess ot generating capacities. Forexample, it is to build generatingfacilities for Olympics�2014, whichalone proves it is stable and trustedby the authorities.

ELSIB experts are sure that theRussian energy sector will acquiremuch home�made equipment.Russian generation companies needand will need hydro� and turbo�gen�erators, high�voltage asynchronouselectric motors produced at the plant.Yet, ELSIB participates in many inter�national tenders. It repeatedly had tocompete with multinationalmachine�building giants. The advan�tage of Western corporations is engi�neering — their readiness to fulfill alarge project from beginning to end.Russian businessmen felt this trend,too. For instance, the Russian consor�tium headed by the E�4 group won atender organized by SouthernGeneration Company — TGK�8 to ful�fill the project dubbed "Expandingthe Krasnodar TPP with building the410�MW combined�cycle gas tur�bine." As a prime contractor, E�4Group will deliver the so�called"energy island" (equipment set forpower generation independentlyfrom the country's energy system).The combined�cycle plant willinclude the 303.4�MW M701F4�typegas turbine made by MitsubishiHeavy Industries as well as theMitsubishi Electric hydrogen�cooled

gas turbine generator. In addition,the Ural Turbine Plant will ship the140�MW steam cogeneration turbineand ELSIB — the generator for theair�cooled steam turbine.

"Professional management ofwise investment policy is the prereq�uisite for success," says ELSIBGeneral Director Korney Gibert."We are aimed at creating efficientbusiness process management sys�tem and working out the develop�ment strategy."

The overfulfillment of the invest�ment programme proved it, too — 34projects were implemented insteadof 21 that had been initially sched�uled. The enterprise invested morethan 2 million roubles with 60% ofthem spent on buying basic funds.

ELSIB's plans for 2008 are evenmore ambitious. $17 million are to bespent with this figure not being afinal one. The real investments intothe company's development and,thus, the growth of Siberia's share onthe machine�building market, will bemuch higher. Most of the assets(83%) will be spent on the produc�tion development.

"It is impossible to fulfill a devel�oped investment programme andintroduce innovation productionmanagement technologies in mod�ern conditions without cooperatingwith reliable and experienced part�ner, including foreign ones," stressedELSIB General Director KorneyGibert. "In this connection, the com�pany's managers bolstered foreigneconomic relations and are talkingwith a number of enterprises onlong�term cooperation."

In 2008, the company's prioritywill be designing and manufacturinghigh� and medium�output hydro�gen�erators, 50�200�MW air�cooledturbo�generators (for steam and gasturbines), high�voltage asynchronouselectric motors and special high�volt�age motors. According to the moderntrends in the electric machine�build�ing, the ELSIB has designed air�cooled generators and is raising theirproduction. Their main advantage is

larger flexibility, simplicity of opera�tion and fire safety.

Profitably and EfficientlyOne of the main evidences of the

Novosibirsk Electric Machine�Building Plant's success is the 16�times increase in profit against thelast year. The volume of main prod�uct sales has risen 30% as comparedto 2006 and totaled 870 million rou�bles. In 2007 the plant's aggregateincome (including other activities)

reached 1,063 million roubles,which is 46% more than in the lastyear. These achievements were pos�sible due to a number of large con�tracts, which include delivering theTVM�500 turbo�generator to theReftinskaya SDPP. The 500�MWTVM�type assembly has a number ofadvantages over its analogues withthe efficiency (98.95%) being themain one. High quality, reliabilityand long service life of ELSIB's elec�tric machines are proved by multi�year operation.

The production development isimpossible without attracting newemployees. To solve this problem,ELSIB concluded contracts withbranch educational institutionsteaching students for the certainwork. In addition, the plant hasformed the personnel reserve to fillmanagement vacancies, which willallow efficiently mastering new busi�ness processes and directions.

In 2007, many social problemswere solved. In particular, ELSIBadopted the new Collective agree�ment for 2008�2010, approved thecompany's Social�economic policy,worked out the housing problemsolution plan and raised salary.

Notably, regional authorities seri�ously help the enterprise as it is qual�ified as a strategic one. In 2007,ELSIB twice received state supportfor investment projects. Fruitfulcooperation will be continued espe�cially in the social sphere andemploying people.

"In 2008, ELSIB will become 55years old," said General Director

Korney Gibert. "The plant has a richexperience behind and wideprospects and large possibilities —ahead. The main thing is that everymove and decision should lead tothe main goal — to make ELSIB gen�erator of the future!"

Korney Gibert, ELSIB General Director:"No doubt that the year 2007 was

a successful one. Now, our task

is not to stop and move on even

more firmly.

ELSIB has years of hard and interest�

ing work ahead. Expanding produc�

tion and entering new markets will

require the introduction of advanced

technologies and employment of cut�

ting�edge equipment. Altogether, we

should do our best to further improve

production procedures and manage�

ment structure as well as enhance

labour, rest and living conditions."

In Brief

Electric Machine Buildingwith Siberian CharacterELSIB is one of the main Russian and

the only Siberian and Far Eastern

enterprise manufacturing large elec�

tric machines for power stations. Its

location — in the centre of Russia —

was chosen according to its role

determined by the Soviet govern�

ment in 1950 in the decree on its

establishment. "The Novosibirsk

Turbo�Generator Plant" (the compa�

ny was called in this way when it was

set up) was to meet requirements of

power stations located in Siberia, the

Far East and Middle Asian Soviet

republics in electric generators for

steam and hydraulic turbines. From

the very beginning, the enterprise's

team, however, set higher goals. Their

selfless work allowed creating a large

plant with own R&D centre that could

solve the most complicated tasks.

Developing and manufacturing new

electric assemblies meeting world

standards by their technical and oper�

ational performance, the company

has quickly gained confidence and

respect of its clients and became one

of the leading manufacturers.

ELSIB's electric machines are used not

only in the energy field but also by oil�

and�gas companies, coal producers,

chemical, metallurgical, metalworking

and other major industrial enterpris�

es. Its generators and large asynchro�

nous electric motors have been long

and reliably working in all regions, for�

mer Soviet republics and 42 countries

all over the world. Almost 30% of the

aggregate Russian TPP capacity is gen�

erated by ELSIB's generators.

The company chiefly designs and

manufactures:

— Powerful hydro�generators for all

types of vertical hydraulic turbines;

— Air�, hydrogen� and liquid�cooled

turbo�generators;

— High�voltage asynchronous electric

motors in standard and explosion�

protected versions.

When surviving difficult years of radi�

cal changes and sweeping economic

reforms, ELSIB did not stop its innova�

tion�driven development. Within the

recent 18 years, it has designed air�

cooled turbo�generators with a

capacity of up to 125 MW. The TF�

125�2U3 turbo�generator is the best

in its class featuring the highest effi�

ciency. In order to meet requirements

for oil pipelines, ELSIB has created

new bipolar explosion�protected elec�

tric motors in the explosion�proof cas�

ing with a capacity of up to 5 MW. In

addition, it has developed a number

of new asynchronous electric motors

for thermal and nuclear power plants

and other industries.

In Brief

ELSIB — Generator of the Future

Turbo-generator TVM-500 was on of the most succesful project of ELSIB

13

Аpril 2008

Special edition from Russia

Open Joint�Stock Company"Interregional DistributionGrid Company of Centre" wasestablished on 17 December2004. Electric systems of theCompany of over 377, 539.6 kmtotal length are located onthe territory of 459.8 thou�sand sq. km in 11 constituententities of the RussianFederation. Activities ontransmission and distribu�tion of the electric powerand connection of clients tothe electric networks of 0.4— 110 kV voltage are provid�ed by 11 network branches ofthe company. The structureof IDGC of Centre includesthe following branches:Belgorodenergo, Bryansk�energo, Voronezhenergo,Kurskenergo, Kostromaener�go, Lipetskenergo, Tverener�go, Smolenskenergo, Orelen�ergo, Tambovenergo, andYarenergo. Evgeniy Fedo�rovich Makarov is GeneralDirector of IDGC of Centre

Industrial potential of IDGC ofCentre is 2,308 substations of 35�110kV for the total capacity of 30, 366.3MVA and 85, 097 substations of 6�10kV for the total capacity above14,227 MVA. The proceeds of thecompany increased by 25% in 2007in comparison with 2006 andequaled 32.3 billion rubles.According to the forecasts, in 2008the consolidated proceeds willincrease up to 42 billion rubles, in2009 — up to 50 billion rubles.Capitalization of the company as of 1 March 2008 amounts to 54.3 bil�lion rubles. Net asset value as of thesame date exceeded 38 billionrubles. EBITDA is 6.6 billion rubles.Despite the increase in the amount ofloans, the relation of the aggregateborrowed capital to EBITDA in 2007decreased in comparison with 2006from 0.75 to 0.62 that provesimprovement of the credit rating onthe given indicator.

Target ModelEstablishment of IDGC of Centre

is an integral part of the approvedreform plan of the Russian electricpower industry which provides inter�regional integration of newly createdenterprises after division of thepower companies by kinds of busi�ness. Formation of the target struc�ture of IDGC of Centre was complet�ed by consolidation of 11 distributiongrid companies with IDGC of Centrein the form of branches, and transi�tion to the unified share.

The consolidation was completedon 31 March 2008. On this daychanges were made in the UniformState Register of Legal Entities abouttermination of activity of DGC as aresult of their consolidation withIDGC. It is necessary to say that theIDGC reform was supported by theoverwhelming majority of sharehold�ers, including the minority ones.Their support is provided by the res�olutions of the extraordinary generalmeetings of shareholders whichpassed in all subordinated compa�nies in January of this year.

As to the transition of the wholecompany to the unified share, it willtake place in the 2nd quarter 2008.Shares of IDGC will be registered inMay�June at the stock exchanges ofRTS and MICEX Stock Exchange inthe sector of non�listed securities. On20 March 2008, the Federal FinancialMarkets Service of Russia registeredadditional issues and prospectus ofordinary registered uncertificatedshares of IDGC of Centre for convert�ing shares of the distribution gridcompanies into them.

AchievementsIDGC of Centre for its short three�

year history managed to demonstrateefficiency of the activity, high level ofmanagement, transparency of thecompany in all directions. The evi�dence of the efficiency is the receivedcertificates and leading places innational scorings in many directions.

JSC IDGC of Centre became thefirst interregional distribution net�work company which received thecertificate of conformity of theQuality Management System withthe requirements of ISO 9001:2000International Standard in view ofprovisions of ISO 10006:2003 "Guideto Quality Management atDesigning." Implementation of QMSin JSC IDGC of Centre became one ofthe major steps to formation of theunified operational company with ahigh potential of growth of capital�ization and integrated hi�tech man�agement system. Increase in theinvestment appeal of the companywill become an important result ofQMS introduction.

Consortium of the RussianInstitute of Directors and Expert —RA Rating Agency "RID — ExpertRA" awarded IDGC of Centre the cor�porate governance scoring B++ inaccordance with the NationalCorporate Governance Scoring. It isnoteworthy that the corporate gover�nance scoring B++ was awardedonly to 152 Russian companies.

The National Rating Agencyawarded IDGC of Centre the certifi�cate of the high business solvency rat�ing ("A", 2nd level). Including owing tothis high rating, the company man�aged to involve in the beginning ofthis year the loan unprecedented forthe electric power industry — in thevolume of 10.5 billion rubles. GeneralDirector of IDGC of Centre EvgeniyMakarov says that the investmentappeal of IDGC as a unified opera�tional company will be much higherthan now. It will allow to becomeattractive in the market of both theborrowed and the share capital, andto make loans cheaper in the future.

JSC IDGC of Centre also receivedthe certificate of conformity with the

2nd level of organization and techno�logical maturity in the field of projectmanagement. The next goal is imple�mentation of the management sys�tems on the basis of environmentaland industrial safety standards.

All the received certificates provea high level of management, financialtransparency, openness of the com�pany in all directions. But reception ofratings and certificates was precededby large�scale work on realization of agreat deal of projects and actions.

Thus, in 2007 IDGC of Centrecompleted realization of the projecton introduction of the automatedsystem of controlling of efficiency ofbusiness processes on the basis ofARIS Process PerformanceManagement platform. The impor�tant component and recipe for effi�

ciency of functioning of IDGC ofCentre's management system is thedeveloped corporate informationresources management system onthe basis of SAP products. As of thebeginning of 2008, the automationsystem project covered all industrialdivisions of IDGC of Centre branch�es; the first automated workplacesappeared in the regional electric sys�tems. The major achievements of2007 are implementation of SAP IS�Umodules regarding formation of theproductive supply and balances ofthe electric power to consumers,billing and invoicing, introduction ofFI, FM, СO, HR, MM SD, РМ modulesand other modules — maintenanceservice and repair of the equipment.

SAP also automated the process oftechnological connection whichallows to reduce the period of servic�ing the client. Developing theautomation system project, the com�pany within three years should buildthe unified information space andjoin the leading West�European firmsas for the level of information struc�ture development.

Strategic plansThe company has approved and is

performing the DevelopmentStrategy for 2008�2015. The Strategyis directed at a large�scale attractionof investments in order to decreasethe grid equipment deterioration tothe level of highly developed coun�tries (40�50%) and creation of theelectric capacities reserve, the vol�

ume of which is 3�5 years ahead theeconomic development.

Till 2010 IDGC of Centre plans todirect over 38 bn rubles for invest�ment which is an unprecedented vol�ume in the history of the electricpower industry.

In 2007 IDGC of Centre construct�ed over 3 thousand km of networks,and through 2010 the company plansto construct more than 11 thousandkm of transmission lines and launchsubstations of 35�110 kV voltage forthe total capacity of 2,920 MVA.

The capacity planned to be con�nected in 2008 is 785 Mega�voltampere (MVA); according tothe forecasts for 2009 this indicatorwill reach 824 MVA. Now, within

Interregional Distribution Grid Company of Centre

the limits of the Special EconomicZones (SEZ) program, the companywill have to provide Lipetsk SEZwith 40 MW of the electric capaci�ty. Under the Affordable andComfortable Habitation — toCitizens of Russia presidential pro�gram, the required capacity in theYaroslavl Region is 22.8 MW.

According to the Russian GridComplex Development Programmeapproved by the RF Government, till2011 IDGC of Centre will have todeliver about 700 MW capacities tothe generation facilities, including60 MW capacity at the BelgorodThermal Power Station (on 28November 2007 a new gas�turbinestation was launched).

Such wide�scale projects will beperformed due to many factors,including productive teamwork ofJSC IDGC of Centre and the authori�ties of the Russian Federation's con�stituent entities. At the moment theCompany has signed cooperationagreements with administrations ofall 11 regions serviced by it.

The agreements provide mutualobligations of the parties concern�ing the performance of Programs ofprime measures on the grid facili�ties construction and reconstructionand performance of other actionsdirected at prevention of capacitydeficiency and increase in the gridcomplex work reliability, and alsopossibility to connect consumers tothe electric networks.

The agreements also reflect thenecessity of the integration of thecompany's subsidiaries' grid complexand the municipal power entities,joint position of the administrationand JSC IDGC of Centre concerningthe establishment of CustomerService Centres system on the terri�tory of the regions, and other impor�tant issues on mutually advanta�geous cooperation of the parties.

'The most important mechanismof attraction of investments in ourindustry is transition to the new RABtariff regulation system', saidEvgeniy Makarov. 'It will help us toupdate our production funds and,thus, the network companies willnot hamper the development of theregions' economy. I would like tostress that the reform which is beingperformed in Russia is a great bene�fit for shareholders, investors, thecompany, and its clients'.

Transition to a long�term tariffregulation and inclusion in the tariffof expenses for the involved capital,introduction of economic incentivesfor decrease in the operational costsof the companies' subsidiaries, andincrease in the service reliability andquality are the main elements of thecompany's strategy.

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14

In order to reach a princi�pally new level, meet newconditions and actively par�ticipate in the country'ssocial�economic develop�ment, Russian energy compa�nies need advanced tech�nologies. Belgorod is anexample of introducing ITsolutions in the energy sec�tor. Belgorodenergo wasthe first in Russia to intro�duce the SAP R/3 industrysolution. This project wasimplemented by consultingcompanies Fainomika andSciener. Since their estab�lishment, these companieshave fulfilled a number ofunique projects for Russianenergy enterprises. We shalltalk about it with FainomikaManaging Director AlekseiChernikov and ScienerManaging Director MaksimLesnichenko.

— What trends determine thedevelopment of IT services inRussia's energy industry?

Maksim Lesnichenko (ML): Themarket of IT services in the Russianenergy sector is developing directlyaccording to its tasks. The branchhas entered the final stage of restruc�turing, which allows major Russianand foreign players to come in it. Inthese conditions, IT solutions helpoptimize three main parts of energycompanies' activities, namely theirlong�term development strategy,faultless performance of energy sup�ply facilities and social importanceas well as client�orientedness.

The first aim investors want toachieve after buying energy compa�nies is to raise their efficiency. Tothis end, they should work out thestrategy, create common manage�

ment procedures and rules, elabo�rate the common database properlyand timely reflecting companyactivities as well as provide commu�nication between the base and ener�gy consumers.

The second aim is to ensure thereliability of energy supplies.Continuous energy supplies are vitalfor the energy sector. The final prod�uct — energy — reaches the con�sumer almost instantly and the com�panies are always connected withclients and each other by a singleinseparable network of electricpower and heating grids. The relia�bility and quality of power supplies,

which are the main quality criterion,are ensured primarily by the fault�tolerance of energy facilities.

There is another critical issue. Theenergy industry is a socially�impor�tant branch, which successful per�formance influences the safety, com�fort and welfare of many thousandspeople. A company improving itswork with residential electrical cus�tomers has much more chances tosucceed in its sphere. Thus, it shouldpursue a client�oriented policy nec�essary to manage client relations inmarket conditions. Information tech�nologies allow creating clear proce�dures in order to make relationsbetween the company and its clientsfully transparent.

It is only natural that the imple�mentation of the aforementionedthree components should be well�balanced considering interests ofshareholders. Companies supplyingIT services in the energy sectorshould meet these requirements.

— Why do Sciener and Faino�mika companies cooperate and howthis cooperation is going on?

Aleksei Chernikov (ACh): I shouldsay that our companies establishedpartnership relations in the verybeginning due to the common base,Belgorodenergo, and a common ideaof business process management

optimization. It was planned thatFainomika and Sciener would sup�plement each other in the IT sphere.Now, our cooperation is quite fruit�ful. Fainomika specializes on build�ing and upgrading strategic manage�ment and quality management sys�tems as well as provides informationsupport for these processes. Creatingenterprise management models,Fainomika solves three main tasks,namely modeling business process�es, building resources managementsystems and forming strategic plan�ning. Working together, we offer ourclients integrated solutions of opti�mizing production and business as a

whole. In practice, we help createstrict regulations for businessprocesses of the company and itsbranches, elaborate normative andregulatory documents and work outstrict management procedures andrules. So, the leadership gets clearand exact idea of all company busi�ness processes irrespective of its fieldof activity and resulting key efficien�cy indexes as well as can carry outshort— and long�term planning.

ML: Concerning Sciener, I wouldlike to say that we adapt the manage�ment and strategic planning systemsin the company's operational activityand automate this sphere. WhileFainomika determines the client'sstrategic policy, Sciener arranges itsday�to�day activity. Thus, the con�sumer receives integrated strategicand day�to�day business processmanagement system.

— What results have the bothcompanies achieved together?

ML: Since the companies were setup, Belgorodenergo has been thefirst and the main our orderer. Infact, it is our cradle. All the projectswe have done for this regional distri�bution company work well. Forexample, we have recently finishedautomating the process of electricgrid connections in Belgorodenergo.We have developed an integrated

solution automating all stages ofconnection process, from the client'sapplication to payment for work.Also, we have done much work forTulenergo and are starting to coop�erate with Center and Volga IDGC.This valuable experience allowed usto create typical solutions thatremain relevant even during theprocess of energy companies'"unpacking" — separating genera�tion, grids, sales, etc.

ACh: Big results have beenachieved when creating the central�ized resources management systemfor Center IDGC. We have jointly cre�ated the system's basis for this com�

pany. In the end of this year, 4,600company employees worked in theSAP, SEM and ERP modules. In addi�tion, these solutions were copied inall subsidiary regional distributioncompanies. For the Center IDGC, theautomation concept dubbed "Systemproject" has been developed and isbeing implemented. It is intended tounify the company's managementsystem, provide transparency forshareholders and superior bodiesand make the day�to�day manage�ment of this large and geographicallydispersed holding more efficient.The "System project" provides for theautomation of main, auxiliary anddeveloping business processes at thestrategic and operational level. Theproject has already passed the orga�nizational, so�called "zero" phase andphase No.1, during which businessprocesses and electric poweraccounting were automated and adatabase of subordinate energy facil�ities was built. Then, we are to carryout the second phase of the projectrelating to assets management andclient relations. Under the project,Fainomika (as its initiator) isengaged with introducing the qualitymanagement system, ARIS�basedmethodology and software, SAPstrategic planning instruments andtheir integration with SAP ERP trans�

action modules. Sciener is introduc�ing the SAP IS�U, SAP ERP, SAPNetWeaver, SAP BW, SAP SRM, SAPSCM, SAP Solution Manager, SAPMobile, SAP Learning Solution andSAP E�Recruting systems and inte�grating the modules with each otherand external systems, namelySCADA, ASU TP, AIIS KUE, etc.

At the same time, we participate ina difficult but interesting process ofmerging regional distribution compa�nies with Center IDGC into the UnitedOperation Company (UOC).

— Are there any companies inRussia that introduce IT solutionsin the energy field like Sciener andFainomika?

ACh: Of course, there are. And, ofcourse, we face competition.Nevertheless, we have managed tooccupy our market niche and makeour products and services interestingfor clients. And if we speak abouthow we differ from other suppliers ofIT solutions to the energy industry, Ishould say that we have come out ofthis sphere and have close ties withit. Our experts, business engineers,many of which worked in the energysector for many years, perfectly knowits requirements and processes, say,from inside. It is very important asthe energy sphere features ownnomenclature and strict productionregulations. Timely response andcontrol, proper business planning forenterprises that are often located farfrom each other and in different taxzones, have different wage systems,etc are extremely important in thissphere. Knowing this, we offer ener�gy companies ready and field�proventypical base decisions. We do nothave to spent time and money toadapt for the client and learn anew athis expense.

ML: Another important point isthat all solutions we offer are notshort�term ones and are designedto be relevant for several years con�sidering interests of the consumer,economic feasibility and market sit�uation. In future, this will allowenergy companies to respond tobusiness challenges with minimalexpenses and maximum flexibility.Long�term cooperation is one of ourmain principles of dealing withenergy companies.

— What requirements do energycompanies have to suppliers of ITsolutions and which of them are themost popular?

ACh: The main requirements arethe presence of branch solutions,successful introduction experienceand integrated approach. Starting to

Integrated ProjectsIntegrating IT Solutions in Energy Sector: Trends and Experience

Аpril 2008

Special edition from Russia

Aleksei Chernikov

Maksim Lesnichenko

15

work with a certain company, wefirst find out what are the client'sgoals and business sphere wheredoes he want to achieve good results.According to this, the managementsystem project can be either complexor optimize processes in a separatedirection whether it be businessprocess management, resourcesmanagement or strategic planning.First, we find out the company'sdevelopment strategy and long�termgoals. Then, we create the manage�ment system needed to achievethem, work out and shape businessprocesses, determine the range ofresponsible persons and executors.And at the final stage, we automatethe system basing on IT solutions inorder to manage and analyze accu�mulated data. In addition, resultsreceived with the introduction of themanagement system are showed,e.g., the comparison of real annualfinancial results with the plannedones, the compliance of the compa�ny's operation to the adopted strate�gy and rules, etc.

ML: As a rule, we start workingwith a client from developing thefinance management system by cre�ating budgeting and networkaccounting systems. To elaborate theoperational control system, Scienerclassifies it, formalizing regulationsand accounting policy, creating aunited counterparty database, sys�tem materials registry, etc.Eventually, the client will require the

optimization of other businessprocesses, namely electric powersales and purchases, grid mainte�nance and operation managementand customer relationship manage�ment. But it is much more profitableand efficient for energy companies tocreate a full�fledged managementsystem covering all spheres of opera�tion from the very beginning. Such asystem�wide long�term approachallows the system to become cheaperand more efficient.

— What do you think are theprospects of the Russian IT market?What solutions are your companiesgoing to offer in the near future?

ML: The Russian IT market haspassed the initial stage and is suc�cessfully developing. Moreover,many spheres, such as the oil�and�gas industry, energy sector andheavy machine�building have beensaturated with IT solutions relatingto financial�economic and produc�tion processes. I think future solu�tions in this sphere will be aimed atreducing accounting and flow ofdocuments, stepping up decision�making and coordination processesand creating united informationmanagement systems. This will helpto manage production process at acompletely new level.

Besides, in the future, IT develop�ers will focus their efforts on lessprofitable but quite attractivespheres, one of which is the munici�pal and housing sector. There are two

reasons of this. On one hand, the peo�ple welfare is growing and qualityrequirements for municipal servicesas well as their range are increasing,too. An advanced consumer wants touse rapid Internet and high�qualitytelephone service, security and otherlife support services. On the otherhand, major investors are coming tothe municipal and housing sector,too. They are directly interested inmaking the field at most efficient,controllable and transparent. That iswhy, IT companies have a realprospect of cooperating with munici�pal/housing and associated compa�nies as well as banking and insuranceones, which is proved by the experi�ence of developed countries.

We plan to develop and supply ourproducts not only in the energysphere. Say, municipal and housingcompanies can employ solutionsdesigned for energy ones. Sciener isready to offer CRM solutions for manykinds of municipal and housing serv�ices. We have a CRM solution inte�grated with IS�U. Sciener participatesin the "Creating the regional integrat�ed information system of the BelgorodRegion" Regional Target Programme.

Some power sales companieswere privatized and now their share�holders want the range of services tobe expanded. We are ready to offerthem adequate solutions.

The main prospects of grid com�panies are the total accounting ofelectric power and assets manage�

ment. In this context, we can offerproper and time�tested solutions. Inaddition, we can create solutions forpromising direct contracts for elec�tric power transfer.

We are working on a solution thatwill allow the grids to enter the elec�tric power wholesale market to com�pensate for their technological loss�es. We have a management andcost�saving solution for reducinglosses in internal grids. We canapply it to assets management andreliability, provide monitoring anddecision support system to optimizethe grids development, overhauland maintenance.

ACh: I think the state sector willsoon require IT solutions, too. It canbe the military�industrial complexand state corporations as well as theadministration sphere. In fact, thestate also supplies services providingsecurity, social protection and eco�nomic welfare of our citizens. For thestate administration system to be up�to�date its main internal processesshould be optimized, too. And we areready to help it. Also, we are interest�ed in the cooperation with metallur�gical and oil, nuclear energy andchemical enterprises. It concernsboth Russian and CIS companiesespecially their energy sphere.

Notably, our companies offer ourclients complex solutions from strate�gic planning and process modelingto financial�economic managementand branch specialization.

Аpril 2008

Special edition from Russia

Nucon Company is one of the rec�ognized leaders of the Russianmarket of electro technical prod�ucts. The success of the Company ismainly determined by its rely onstate�of�the�art technologies andfinding its place in the Russian andworld markets. The instrumentsthat the Company uses in its opera�tions and how Nucon sees its fur�ther development is the subject ofour conversation with GeneralDirector of the Company...

— Your company is rather young...— Our company was set up seven years ago.

We have been in this business for a long time:we were engaged in sales, we grew and wantedRussian producers to increase the quality oftheir products. We pointed it out to Russianenterprises but we didn’t get a due affect asmost of them were as a rule former Soviet plantswith a complex structure where a decision mak�ing process took about 8�10 months. That iswhy we had an idea to set up our own plant. Westarted to learn ways of investments, technicalcapabilities of equipment producers; for twoyears we visited manufacturing plants andexamined opportunities...We made up a seriousengineering group and bought from the leadingEuropean producers the technological process�es that influence the quality of the manufac�

tured products. The processes that automatizeand reduce manual labor are our know�how.Our engineers developed a number of techno�logical processes and built up a completelyautomated production where about 60 employ�ers are engaged though a similar manufactur�ing enterprise in Russia hire 1200�1500 people.

— What is the geography of your supplies?— So far it is mainly Russia and CIS coun�

tries, however, we are actively entering othermarkets. Experts in other countries including

competitors and consumers know us, lookclosely at us, compare prices... In the interna�tional market one should demonstrate its sta�bility, after being in the market for 3�4 yearsyou may be perceived as a stable world suppli�er. We plan to enter European and Asian mar�kets including central Asia: United ArabEmirates, Syria, and other countries. We offercompetitive prices and high quality.

— What about home Russian market? — We’ve got reliable positions in the home

market. Five years ago when we were settingup our business the Russian market wasalmost fully controlled by European manufac�turers, mainly Italian and German companies.

But we managed to “win over” about 80% ofthe Russian market within three�four years.We took it up very seriously as it was a diffi�cult competitive struggle with the companiesthat had high reputation, popular brand and atruly high�quality product. And we were anewcomer and started our business fromscratch. Many Russian manufacturers werechanging their attitude very slowly: at thebeginning top management did not want toconsider home producers seriously as they

didn’t believe them. But we proved persistent�ly that we were not worse and in a number ofpositions we were better than our competi�tors. We invited their top management to visitour plant, they watched our operations andexamined our equipment (and we had themost advanced one at that moment). Weexplained to them in detail the quality of ourproduct. They agreed with us and in thecourse of time they started to buy small batch�es of illuminating equipment, lamps, lightingfittings, outdoor lighting, etc. It took a longtime for a number of companies to make adecision whether to work with us or not, butnow all of them are our partners.

It may be said that nowadays many compa�nies understand that it is more reliable toimplement large�scale perspective projectstogether with Russian producers. Because nowthey think where and at what prices they willbe purchasing spare parts and order modern�ization in 20 years...

— Where exactly can your products be seen?— Almost everywhere. For example, in all

new construction sites in Sochi, all roads thatare being reconstructed or constructed by thegovernment, streets in cities — everywhere thelighting is based upon our products. And notonly in Russia. We’ve got representatives inBelarus, Ukraine, Kazakhstan...

In some places more, in some — less, butour product is present in all former�SovietUnion territory. On the whole there are almostno technical limitations for our product. Wealso produce equipment which improves elec�tric power transportation, relieves power cir�cuit, and makes it possible to increase the num�ber of consumers by 40%.

— How do newcomers enter Westernmarkets where there are a lot of local man�ufactures?

— It happens according to standard marketrules. Yes, there are own brands there, seriouscompetitors who gained a foothold long ago,established systems and sales networks. Butyoung fast�growing companies always appearand they want to have as more high�qualitybrands in their portfolio as possible. And herewe go with our high�quality brand. And theyuse their marketing methods in their market topromote Russian certified condensers alongwith Turkish, German, Italian, Chinese, Indianones... A price/quality question arises. And wemaintain high quality and competitive pricesdue to large�scale mass serial production.

— Do you easily come to an understandingwith your partners?

— I’ll say this way: we are always open fordiscussion and search for mutually beneficialforms of cooperation with our partners. We arealways ready to consider all wishes and find areasonable compromise. But we never applydumping methods or reducing prices at the costof quality... We earn every new contract honestly.

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«Almost 80% of the Russian Market»

In Brief

The Fainomika LLC was established in

2003. It is a consultant in the sphere of

strategic and operational manage�

ment, financial and information tech�

nologies for major Russian energy

enterprises. The company specializes

in the design and introduction of

strategic management systems on the

basis of the Balanced Scorecard (SSP).

www.fainomika.ru

The Sciener LLC was set up in 2002.

It specializes in introducing SAP ERP

management systems for Russian

energy companies. The company

runs projects on automation of

administrative, financial, production

and other processes in the power

industry. Its fulfilled projects include

introducing the resource manage�

ment system for Belgorodenergo

and automating business processes

of other Belgorod�based energy

companies; creating a unified net�

work platform and introducing

information management systems in

the UES Federal Grid Company and a

number of Russian and CIS energy

companies.

www.sciener.ru