Joint Venture Investment Opportunity In Russia

Opportunity Summary

Investment Proposal

CJSC Energo-Invest is new company and needs in seed capital of US$500.000 to develop a pilot project "Construction of gas-turbine power station of 87MW" in the Chuvashiya, Russia. The enterprise will have to meet the ever increasing demand as the local population and regional enterprises in the electricity and hot water for domestic use and heating.

Start-up the power station eliminates the shortcomings of the existing scheme of power supply, which include:

- Shortage of electricity and thermal power;

- Fuel and electricity overconsumption because of the moral and physical deterioration of the equipment heating sources.

The investment project of Thermal Power Station Construction involves high competitiveness of energy produced, which compared with existing equipment will reduce unit costs of fuel for heat, power consumption for its own needs, etc. Among the benefits of the project can be identified and improved environmental performance and reliability of supply to customers.

Project will be given preferences of regional authorities on the legislative, administrative and logistical levels.

The preliminary total project cost – US$105M.

Estimated equipment – Finnish company Wärtsilä.

The required seed capital – US$500.000.

Term investment – 2-5 years.

ROI provided the debt financing – not less than 60%.

Alternatively, the investor may have share in the equity from 25+1 to 50-1%. JV is possible.

Sources of start-up funding identified. These include the EBRD, IFC and others specializing in the financing of energy projects and carbon credits.

To appeal to these sources is required:

- Organize a project team of designers and future project managers (available);

- To create work places for the organization of design works;

- Develop a detailed investment project in accordance with international standards.

By the strong points of the pilot project include:

- A significant potential to improve energy, environmental and economic performance associated with the ability to upgrade facilities and optimizing systems and heating schemes;

- Availability of market benefits associated with natural monopoly nature of the heat

market;

- A stable and relatively effective demand for heat and electricity (power);

- Availability of well-developed system of engineering services in the form of gas, heat, electricity, water supply networks;

- The existing capacity to increase volumes and improve the reliability and quality of supply to customers;

- Long-term experience of working on development and modernization of energy objects;

- Usually a small remoteness of existing heat objects from consumers.

Developing projects, contributing its know-how and taking on the specific costs of developing projects of CJSC Energo-Invest will receive a 25% share in the equity of the projected enterprises. For organizing the project financing CJSC Energo-Invest will receive a commission in the amount of 3% of the total project cost.

"Construction of gas-turbine power station of 87MW" project with some revisions will be replicated by us, as in Chuvash so in other regions.

A possible exit of the investor of the project

Return on investment not less than 60% per annum is possible after second year of the commission for project financing.

The CJSC Energo-Invest’s commission may take up to 3% of the total cost of the pilot project, i.e. approximately US$3M to be paid to our company with the first tranche of project funding.

The exit an investor of the project may have other forms as stipulated in the investment contract or a contract of joint venture.