Board of Directors decision on RusHydro’s participation in construction of Taishet aluminium smelter

April 5, 2018. Moscow, Russia. RusHydro Group (hereinafter referred to as the ‘Group’ or the ‘Company’, ticker symbol: MOEX, LSE: HYDR; OTCQX: RSHYY) announces that the Company's Board of Directors held a regular meeting on April 3, 2018

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The Board of Directors approved RusHydro’s participation in construction of Taishet aluminium smelter (TaAS), subject to the conditions determined earlier by the Board of Directors and determined additional conditions for participation in TaAS project, including:

• Limit on RusHydro’s liability under sponsorship support in the context of raising project financing for implementation of TaAS project – not higher than 7.5% of the full cost of TaAS project completion (not more than USD 60 mn);
• Cost of RusHydro’s participation in TaAS project must not exceed USD 319.5 mn, to be confirmed by report of an independent appraiser, and is to be paid in the following order:
• UC RUSAL accepts as partial payment for ownership stake in TaAS a 42.75% stake in JSC Irkutsk Grid Company (JSC IESC), owned by RusHydro, valued at USD 150 mn;
• Interest-free deferred payment of the residual USD 19.5 mn for a period of not less than 3 years after the smelter reaches its project capacity; going forward interest is accrued at average weighted rate used in the project financing of TaAS project;
• Payment of USD 150 mn via paying up by the JV of the amount owed to companies of UC RUSAL Group under loan agreement from the cash flow of the smelter after reaching design capacity;
• Absence of limitations on RusHydro’s right to divest the stake in the project;
• Application for tax benefits to the project;
• Provision by UC RUSAL of guarantees and obligations on funding of additional capex in case TaAS construction cost overrun;
• Confirmation of the decision that implementation of transaction of acquisition of a stake in the JV by RusHydro assumes refusal by both parties in the JV of joint completion of Boguchansky Aluminium Smelter¹ to declared project capacity (construction of the third and fourth phases);
• Provision of report on project’s economic efficiency to the Board of Directors based on the results of sensitivity analysis;
• Joint implementation of mechanism for RusHydro’s exit from the project in the event does not reach full operational capacity before the agreed upon date.

Yuri Trutnev, Deputy Chairman of the Government of the Russian Federation - Plenipotentiary Representative of the President of the Russian Federation in the Far Eastern Federal District, Chairman of the Board of Directors of RusHydro emphasized: “Resuming construction and driving TaAS up to the rated capacity with RusHydro’s participation in the JV has high socio-economic impact not only for Irkutsk region, but for the entire Siberian Federal District. Taishet Aluminium smelter project facilitates investment, tax collection and creation of new work places in the Irkutsk region. It employs modern and efficient technologies contributing to industrial potential of Siberia. Up to 4,000 work places will be created during construction phase. Once put into commission, 880 qualified professionals will be employed at the facility”.

Nikolay Shulginov,Chairman of the Management Board – General Director commented on the decision, adopted by the Board of Directors: “RusHydro’s Management has carried out significant work in order to achieve significant improvement of conditions for the participation in Taishet Aluminium Smelter project. After completion of all preparatory procedures, including independent assessment of the stake in the project, RusHydro’s management, per instruction from the Board of Directors, will apply for approval of the transaction by the Government of the Russian Federation and directives for vote in the Board of Directors on final decision relation to RusHydro’s participation in the project”.

UC RUSAL started construction of TaAS in 2006, but in 2009 the project was suspended. The project capacity of the smelter is 428,000 tonnes of aluminium per year. The technology will be based on RA-400 cells. Historical costs incurred by UC Rusal are estimated at USD 776 mn. CAPEX required for project completion is estimated at USD 700 mn.

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