TNK-BP and OGK-1 to Construct Power Unit at Nizhnevartovskaya TPP

Russian power generator OGK-1 and Anglo-Russian oil firm TNK-BP have signed a shareholders agreement to jointly implement an investment project for the construction of a new power unit at the Nizhnevartovskaya thermal power plant in Russia.

The agreement provides for the formation of a joint venture between OGK-1 and TNK-BP. According to the agreement, OGK-1 will contribute 100% of the shares of Nizhevartovskaya GRES, which owns two existing power units of Nizhnevartovskaya thermal power plant (TPP) with combined installed capacity of 1,600MW. TNK-BP will contribute approximately $320 million to the joint venture.

Under the agreement, OGK-1 will form a 100% subsidiary, NVGRES Holding. TNK-BP will then acquire newly issued shares of NVGRES Holding and get 25% plus one share of the total shares. The transaction is expected to take place in summer 2008.

OGK-1 and TNK-BP are in the process of jointly selecting the engineering, procurement and construction (EPC) contractor who will manage the construction of the new power unit at Nizhnevartovskaya TPP. The new power unit, based on a combined-cycle gas turbine design, will have an installed capacity of 800MW. Proposals for the EPC contract will be reviewed in mid-March 2008.

OGK-1 and TNK-BP also plan to enter long-term agreements, of at least 15 years, for the supply of gas and electric power. The purpose of these agreements is to secure the long-term gas supply to the new and existing power units of Nizhnevartovskaya TPP and the supply of electric power generated by the new power unit to TNK-BP upon it’s being commissioned.

At present TNK-BP supplies three billion cubic meters (bcm) of gas per year to the two existing power units of Nizhnevartovskaya TPP. The new power unit is expected to use an additional 1.2bcm per year.