SIBUR and IES Holding agree on long-term cooperation

5 February 2013. SIBUR's CEO Dmitry Konov and President of Integrated Energy Systems Boris Vainzikher signed a Strategic Memorandum to boost energy efficiency of SIBUR's petrochemicals production.

The Memorandum outlines a comprehensive action plan aimed at more efficient power supplies to SIBUR's production facilities from IES Holding's power plants located near Perm, Nizhny Novgorod, Samara, and in other Russian regions.

In February, the companies plan to sign a long-term contract that will see IES's TGC-6 deliver heat to RusVinyl, a joint venture PVC plant of SIBUR and SolVin under construction. As tentatively agreed by the parties, TGC-6's Novogorkovskaya CHPP is to provide RusVinyl with an annual 500,000 Gcal of steam and hot water and 1.5 mt of desalinated water over the next ten years.

"The predictability of energy costs and reliability of suppliers in the long run is of extreme importance to SIBUR that we believe is set to benefit from contracts of this kind," said Dmitry Konov.

The deal marks one of Russia's first ever arm's length long-term agreements on heat power deliveries to industrial consumers in line with the Federal Law On Heat Supplies," said Boris Vainzikher.

The parties also formed a project team to look into the efficiency of power supplies to related operations.

Notes to editors:

SIBUR is a uniquely positioned gas processing and petrochemicals company with a business model focused on the integrated operation of its two core segments. The Group owns and operates Russia’s largest gas processing business in terms of associated petroleum gas processing volumes, according to IHS CERA and is a leader in the Russian petrochemicals industry. The Group has two operating and reportable segments: feedstock and energy and petrochemicals. The Group’s feedstock and energy segment comprises (i) gathering and processing of associated petroleum gas (APG) that the Group purchases from major Russian oil companies, (ii) transportation, fractionation and other processing of natural gas liquids (NGLs) that the Group produces internally or purchases from major Russian oil and gas companies, and (iii) marketing and sales of energy products, such as natural gas, liquefied petroleum gases (LPG), naphtha, raw NGL, methyl tertiary butyl ether and other fuels and fuel additives. The Group sells these energy products on the Russian and international markets and uses some of them as feedstock for its petrochemicals segment, which processes them into various petrochemicals, including basic polymers, synthetic rubbers, plastics and products of organic synthesis, as well as intermediates and other chemicals.

IES Holding (Integrated Energy Systems) is Russia's largest private heat and power generation and supply company. It was established in 2002. The key areas of its business include: power generation, energy trading, and retail distribution of heat and power. IES's strategic assets are TGC-5, TGC-6, TGC-7, TGC-9, and a number of regional energy sales companies. TGCs that have IES as a strategic shareholder have a total installed capacity of 15,767 MW for power and 67,799 Gcal/hour for heat.

RusVinyl is a joint venture created by Russian and Belgian partners to construct and operate a PVC and caustic soda production facility near Kstovo in the Nizhny Novgorod Region. The JV partners are SIBUR and Belgium's SolVin, a leading European producer of PVC. SolVin is a joint venture of Solvay (75%), an international chemical and pharmaceutical group, and Germany's BASF (25%). The new facility will have an annual production capacity of 330,000 tonnes of PVC and 235,000 tonnes of caustic soda. Now, the project (including designing, equipment and supplies procurement, and construction) is over 70% completed.