OREANDA-NEWS. On February 18, 2008 OGK-1 OAO (“OGK-1”) and TNK-BP have signed a Shareholders Agreement (“Agreement”) to jointly implement an investment project for the construction of a new power unit at Nizhnevartovskaya Thermal Power Plant (“Nizhnevartovskaya TPP”), reported the press-centre of TNK-BP.

The Agreement provides for the formation of a Joint Venture between OGK-1 and TNK-BP. According to the agreement OGK-1 will contribute 100% of the shares of Nizhevartovskaya GRES ZAO, which owns two existing power units of Nizhnevartovskaya TPP with combined installed capacity of 1,600 MW. TNK-BP will contribute approximately US$320m to the new Joint Venture.

Under the Agreement OGK-1 will form a private limited company NVGRES HOLDING LIMITED, 100% owned by OGK-1. TNK-BP will then acquire newly issued shares of NVGRES HOLDING LIMITED and get 25% plus one share of the total shares. The transaction is expected to take place early in the summer of 2008. The Agreement also provides an option for TNK-BP to increase its stake to 50% less one share after the construction of the new power unit is completed planned to be in 2010.

OGK-1 and TNK-BP are in the process of jointly selecting the EPC—contractor that will manage the construction of the new power unit at Nizhnevartovskaya TPP. The new power unit, based on combined cycle gas turbine design, will have an installed capacity of 800 MW. Proposals for the EPC contract will be reviewed in mid-March.

In the next few months, OGK-1 and TNK-BP also plan to enter long term agreements, of at least 15 years, for the supply of gas and electric power. The purpose of these agreements is to secure the long term gas supply to the new and existing power units of Nizhnevartovskaya TPP and the supply of electric power generated by the new power unit to TNK-BP upon it’s being commissioned. At present TNK-BP supplies 3 bcm of gas per year to the two existing power units of Nizhnevartovskaya TPP. The new power unit is expected to use an additional 1.2 bcm per year.

After signing the Agreement OGK-1 Chief Executive, Vladimir Khlebnikov, said:
“The signing of this landmark Agreement has paved the way to get started on this strategically important project for both our companies. The innovative use of project finance is an investment model which is groundbreaking for the Russian energy sector. The new power unit at Nizhnevartovskaya TPP will allow us to meet the fast growing demand of the regional industry. The project will benefit from the excellent geographical position of Nizhnevartovskaya TPP, close to the source of fuel and in the region with the rapid growth of demand for energy. “

TNK-BP Chief Executive Robert Dudley said:
“All oil companies face the challenge of effectively utilising associated gas. The use of associated  gas for power generation makes good commercial sense, because it monetizes this valuable resource and helps reduce the negative impact on the environment caused by flaring. Achieving higher rates of utilization of associated gas is a key priority for TNK-BP, and the signing of this agreement marks another tangible step towards this goal.”