RAO "UES of Russia" and the Primorsky Kray Administration have signed an Agreement for Cooperation in Development of the Region's Energy System and Reliable Electricity Supply Through 2012.

The rapid economic and social development in the Primorsky Kray, located in the extreme South-Eastern region of Russia, is accompanied with increased power consumption. In 2007, the electricity demand grew more by than 3.1% compared to the year before. According to the forecasts, electricity demand in the region's energy system will increase by 4.1% annually during the period until 2010. In the southern energy area of the Primorsky Kray, where Vladivostok, the key industrial facilities and port infrastructure are located, this indicator may exceed 5%.

The Agreement is designed to improve the reliability of electricity supply, increase the network throughput capacity, create the conditions for new user connections to power grids and increase the capacity available for users already connected, prevent power shortages amid growing electricity consumption in the region's energy system. This task becomes especially important because Vladivostok is preparing to host the Asian-Pacific Economic Cooperation (APEC) Summit in 2012.

Under the Agreement, several projects will be implemented in the region relating to the construction and modernization of power plants and grid facilities. These projects will be implemented by the grid and generation companies which are part of the companies of the intended sector structure—FGC and OAO "RAO Energy Systems of the East" (the latter will comprise OAO "Far Eastern Energy Company", its subsidiaries "Far Eastern Generation" and "Far Eastern Distribution Grid Company", and the energy companies operating in the energy systems of the isolated Far Eastern regions).

Specifically, OAO "Far Eastern Generation Company" plans to increase the capacity of the region's power plants by 615 MW to more than 3,000 MW. By autumn-winter 2008-2009, 45 MW GTPPs will be installed at the Vladivostokskaya CHPP and, after the modernization of the Artyomovskaya CHPP and the Vladivostokskaya CHPP-2, the available capacity of these plants will increase by 50 MW and 70 MW, respectively. In 2009, the modernization of the Partizanskaya CHPP will help bring on line another 60 MW of capacity. By 2012, two coal-fired power units with a combined capacity of 360 MW are expected to be commissioned at the Ussuriyskaya CHPP.

Transmission companies will carry out projects to build new and modernize the existing facilities, with 3,069 MVA of transformer capacity and 961 km of HV transmission lines to be brought on line. The list of key projects to be implemented includes the construction of the 500-kV transmission lines, "Chuguevka – Lozovaya – Vladivostok" (372 km long) and "Dalnevostochnaya – Vladivostok", as well as the 220-kV "Ussuriysk-2 – Vladivostok" transmission line and the 500-kV "Vladivostok" transformer substation.

Also, as part of the preparations for the Asian-Pacific Economic Cooperation (APEC) Summit, it is planned to bring on line the following grid facilities by 2010: 220- kV transmission line "Vladivostok – ATEC", "Zeleny Ugol – ATEC", "Volna – VTEC-2", and the 220-kV substations, "Pospelovo", Patrokl", and "Zeleny Ugol".

As a result of construction and modernization projects in the distribution sector, OAO "Far Eastern Distribution Company" will bring on line substations with the combined capacity of more than 1091 MVA and nearly 485 km of 0.4-110-kV transmission lines. The top priority measures to develop the distribution grids in the Primorsky Kray will include the replacement of the overloaded transformers with more powerful ones. This will make it possible to improve the reliability of power supply and provide sufficient power for the existing and newly-connected consumers.

The amount of funds needed to finance the capital investment projects under the Agreement is estimated at nearly RUB60 billion, of which RUB24 billion will be used to expand the generation capacity and RUB36 billion will be invested in the power grid infrastructure.