OREANDA-NEWS. On June 09, 2007 within the framework of the 11th St. Petersburg International Economic Forum, the Leningrad Region Government and RAO "UES of Russia" entered into an Agreement on cooperation in implementing capital investment projects to build and modernize the region's electric power facilities during the period until 2011. The Agreement was signed by Leningrad Region Governor Valery Serdyukov and Chairman of the Management Board of RAO "UES of Russia" Anatoly Chubais, reported the press-centre of  RAO "UES of Russia".

The rapid economic growth in the Leningrad Region, the development of auto industry, transport infrastructure and the growing activity of utilities are accompanied with considerable increase in electricity consumption. In 2006, the region's electricity use was up 4.1 percent. The generation and network facilities of the Leningrad Energy System are heavily deteriorated and are badly in need of replacement.

The Agreement signed today is designed to improve the reliability of electricity supply to customers, enhance the network transmission capacity, create the conditions for new user connections to power grids and increase the capacity available for the existing customers, and prevent power shortages as electricity consumption grows in the Leningrad Region.

The Agreement provides that investment projects will be implemented in 2007-2010 to build and upgrade about 956 MW of generating capacity, substations of various voltages with a combined transformer capacity of 1,600 MVA, and 140 km of transmission lines in the bulk power grids, as well as substations with a transformer capacity of 3,930 MVA and 1,539 km of lines in the regional distribution system.

The amount of funds needed to finance the capital investment projects under the Agreement is estimated at RUB70,7 billion, of which RUB19,4 billion will be used to expand the generation capacity and RUB51,3 billion will be invested in the power grid infrastructure.

As part of the implementation of the priority measures provided by the Agreement and the RAO UES Investment Programme for the period until 2011, OAO "WGC-6" will build a 800 MW combined-cycle unit at the Kirishskaya TPP. OAO "TGC-1" has plans for phased replacement of the hydropower units at the Volkhovskaya HPP, Nizhne-Svirskaya HPP, Lesogorskaya HPP, and Svetogorskaya HPP, and produce a master plan for district heating supply systems in the Vsevolozhsk district and Kudrovo district of the Leningrad Region, as well as the cities of Kirovsk and Schlisselburg.

In order to develop the assets of the Unified National Energy Grid in the Leningrad Region, OAO "Federal Grid Company", plans to build the 330 kV Zelenogorskaya transformer substation and with 330 kV transmission links, the 330 kV Gatchniskaya – Luga transmission line and two 330/110 kV substations, Luga and Zanevskaya. These projects will help ensure reliable electricity supply to customers on the Karelian Isthmus and in the Kudrovo and Luga districts of the Leningrad Region.

Moreover, under its Investment Programme, OAO "FGC" will replace the deteriorated and obsolete equipment at the 330 kV substations (Kingisepskaya and Syas), and 750/330 kV Leningradskaya substation, which will raise the operational reliability of the Leningrad Energy System and substantially improve electricity supply to the region's consumers.

Under the Agreement, OAO "Lenenergo" (the grid company) will construct eighteen new and modernize fifty existing substations with a combined capacity of over 3000 MVA. The Agreement also provides for the construction and modernization of over 1,300 km of transmission lines.

The key projects to be implemented by OAO "Lenenergo" are the construction of the Shcheglovo and Vyartemyagi 110 kV tie-substations which will ensure reliable supply of electricity to the Vsevolozhsk district, the area of the Leningrad Region that is worst hit by energy shortages. By 2010, six new substations with a combined capacity of over 470 MVA will be constructed in the district.

In order to supply electricity to the port in Ust-Luga and develop the marine terminals in the area of Luga Bay, two new 110 kV substations—No. 292A in Ust-Luga and Kingisepp-2—will be built in the Kingisepp District. The district's two existing 35 kV substations, Ust-Luga substation and substation No. 292, will be modernized upgraded to the voltage of 110 kV. Thus, the capacity in the Kingisepp district will grow by over 300 MVA.

Under the Agreement, the projects will be financed with a combination of equity and debt raised by RAO UES companies operating in the Leningrad Region, including the proceeds from new share issues by generation companies, network connection fees collected by the grid companies, and the funds committed by the federal and regional governments, as well as off-budget sources of finance and private investments.

According to the document signed today, the Leningrad Region Government is to make adjustments, on an annual basis, to the electricity and transmission tariffs for companies involved in energy system development projects taking into account the need to finance those projects, including the cost of debt servicing and repayment of the borrowings raised for the purpose.

Also, to ensure that the projects are financed properly, the region's government will explore the possibility of setting an economically justified grid connection fee for new consumers.

The Leningrad Region Government and RAO "UES of Russia" will prepare an electricity consumption and load forecast by grid nodes for the period until 2015, including the information on the place and timing of planned connection of the region's major energy users to the public power grids. The forecast will be serve as a basis for the new long-term master plan to develop the power grids and generation facilities in the Leningrad Region.

The Agreement also provides that the companies implementing investment projects in the Leningrad Region will be given green light in obtaining land plots and land use permits for power construction sites.

The parties agreed that a unified power grid company would need to be created in the Leningrad Region.