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RusHydro seeks to develop a 191 MW hydropower project in Kyrgyzstan

JSC RusHydro (ticker symbol: MICEX-RTS, LSE: HYDR; OTCQX: RSHYY) announces that it plans to develop a joint hydropower project with JSC Electric power stations (Kyrgyzstan) that provides for construction of four hydroelectric power stations in the Kyrgyz Republic. Governments of Russia and Kyrgyzstan today signed an agreement in Bishkek outlining the plans for development of this project.

The total installed capacity of the hydropower plants will be 191 MW with average annual electricity generation of 1,055 GWh. The project cost is estimated at USD 410-425 mn (as of 2009). Construction of each plant will take 2.5-3 years on average (synchronous construction of all stations can take 4-5 years). Electricity generated by hydropower plants can be supplied to mining companies, households or exported to neighboring counties.

RusHydro and JSC Electric power stations will set up a 50/50 joint venture (JV) to develop the project. Russian Federation will provide 50% of necessary funds to RusHydro as a contribution to JV to finance the construction and will guarantee that JV obtains a loan facility to cover the other 50% of construction cost. The Kyrgyz party will contribute land rights and other assets, including intangible. The full project’s financing scheme and terms of RusHydro’s involvement in the project will be determined after feasibility study is complete.

The agreements also stipulate that for duration of the project’s payback period:

- the Kyrgyz party will transfer a 25% stake in the project under RusHydro’s trust management;

- the Russian party will have strategic and operating management of the project, its representatives in JV’s Board of Directors and management board will have a majority;

- the Kyrgyz party will exempt the JV from property tax and land-use tax;

- Russia and Kyrgyzstan will exempt construction equipment, plant’s equipment and vehicles from customs payments.

The project also provides for investment protection of the Russian party in accordance with the agreement on investment stimulation measures and mutual investment protection in member states of Eurasian Economic Community (as of December 12, 2008). Should the agreement be made invalid, RusHydro’s stakes in JV are to be transferred to the Kyrgyz party only after full restitution.

Ministry of Energy of the Russian Federation and Ministry of Energy and Industry of the Kyrgyz Republic will be the coordinators of the project.

The information in this press release may contain projections or other forward-looking statements regarding future events or the future financial performance of RusHydro. You can identify forward looking statements by terms such as "expect," "believe," "anticipate," "estimate," "intend," "will," "could," "may" or "might," the negative of such terms or other similar expressions. We wish to caution you that these statements are only predictions and that actual events or results may differ materially from these statements. We do not intend to update these statements to reflect events and circumstances occurring after the date hereof or to reflect the occurrence of unanticipated events. Many factors could cause the actual results to differ materially from those contained in our projections or forward-looking statements, including, among others, general economic conditions, our competitive environment, risks associated with operating in Russia, rapid technological and market change in our industries, as well as many other risks specifically related to RusHydro and its operations.
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