Russian utility RAO UES and the Kurgan regional government have signed an agreement to implement a number of investment projects to construct and upgrade the power facilities in Russia's Kurgan region until 2011.

The strong growth of the region's economy has increased electricity consumption by 5.4%. The generation and network facilities of the Kurgan energy system are heavily deteriorated and badly need replacement, according to RAO UES.

The agreement is designed to ensure reliable electricity supply to customers, increase the network throughput capacity, create the conditions for new user connections to the power grids and increase the capacity available for users already connected, prevent power shortages amid growing electricity consumption in the region's energy system.

The agreement envisages a well-balanced development of the region's generation capacity, grid facilities, and dispatch infrastructure. In particular, it includes investment projects to build and modernize 450 MW of generating capacity, construct substations of different voltage levels with the total transformer capacity of 980 MVA, and substations with 200 MVA of transformer capacity in the region's distribution networks.

The amount of funds needed to finance the capital investment projects under the agreement is estimated at over RUB19.1 billion, of which RUB12 billion will be used to expand generation capacity and over RUB7.1 billion will be invested in the power grid infrastructure.

In order to develop the assets of the Unified National Energy Grid (UNEG), which are part of the Kurgan energy system, OAO "Federal Grid Company of Unified Energy System" will build a 500 kV transmission line across the Kurgan Region and the Chelyabinsk Region, which will link the Kurgan Substation and the Kozyrevo substation; a new 220 kV "Severnaya" substation, two 210/110 kV autotransformers connected to the "Shumikha" and "Promyshlennaya" substations, a new 220 kV "Shchuchanskaya" substation, two 220/110 kV autotransformers connected to the "Kozyrevo" and "Shumikha" substations.

The projects will be financed with own resources and borrowings of RAO UES companies operating in the Moscow Region, including the proceeds from additional share issues by generation companies, connection charges for grid companies, allocations from the federal budget for the grid companies and private investments.