OREANDA-NEWS. June 23, 2010. An annual general meeting of URALSEVERGAZ (a company with shareholding split between ITERA Oil and Gas Company and the Sverdlovsk Region Administration), a principal natural gas supplier to the Central Urals was held in Yekaterinburg on June 4. The Region is the second largest natural gas consumer among the Russian Federation constituent entities, reported the press-centre of ITERA.

2009 results were summed up at the meeting. It was pointed out that natural gas was being supplied to the Region under Cooperation Agreement for the period until 2015 made between the Government of the Sverdlovsk Region and ITERA Oil and Gas Company. Natural gas supply obligations in front of all categories of consumers had been fully fulfilled in the reference year. Natural gas demand in industry, social sphere and housing and public utilities was fully met.

It was stressed at the meeting that URALSEVERGAZ and other companies of ITERA International Group of Companies were actively involved in social and economic development of the Sverdlovsk Region, and that they were implementing investment projects related to gasification and energy-related projects, as well as in other industries. Sixty two up-to-date gas boiler houses with an aggregate capacity of 350 mW, 188 km of high pressure gas pipelines and over 300 km of distribution network lines have been commissioned in recent years.

It was under the order of ITERA and at an active involvement of the local administration and URALSEVERGAZ that specialists of Gazprom Promgaz completed preparation of the Master Plan of Gasification and Natural Gas Supply in Sverdlovsk Region until 2020. When implemented, the Project will allow to raise the gas supply coverage in the region from 53.4% to 72% and to increase 3.5 times the number of populated locations with the gas service installed.

A computer-based system for natural gas commercial record keeping is being created. The Program with financing in excess of Rub. 500 million is planned for four years and is intended to help economize and efficiently use natural gas.

ITERA and Uralsevergaz are implementing diverse sponsorship and charitable activities. Over Rub. 650 million have been invested to socially oriented projects.

It was pointed out at the General Meeting that ITERA and its affiliates in the Sverdlovsk Region were ready to continue investment and charitable activities. Nevertheless, the economic crisis, reduced natural gas demand and the problems related to systematic non-payments for natural gas supplies produced an extremely negative effect on implementation of the plans.

Despite repeated adjustments by URALSEVERGAZ of its pricing policy, reduction of prices on gas consumed by industry and housing/utilities infrastructure, social sphere and budgetary organizations (40% of the entire supplies) established by the Federal Tariff Service of Russia the indebtedness by enterprises and organizations of the Region remained at a critical level.

The total debt on the part of consumers of the Region due to URALSEVERGAZ for natural gas supplied as on 31.05.10 (without the value of natural gas supplied in May) accounted for Rub. 4.3 billion, including the debt of Rub. 3.2 billion of housing/utilities (their share in the debt structure increased to 74%). In fact, the debt is two times the value of the gas supplied on a monthly basis as in the average.

The extremely low level of payments by consumers threatens both the stability of the current natural gas supply and the timely beginning of the heating season forthcoming in September of 2010.

URALSEVERGAZ and ITERA raise considerable credit resources and with great difficulty carry out payments to gas producing companies for gas they supply and to Gazprom for transportation of gas to the Sverdlovsk Region.

Under the existing conditions URALSEVERGAZ is made to take unpopular measures intended to force unfair consumers in the Sverdlovsk Region to pay the natural gas they have consumed. These measures include limitation of gas supply to companies with large debts, and termination of gas-supply agreements with persistent non-payers.

Vladimir Makeyev, Chairman of the Management Board of ITERA Oil and Gas Company, LLC, Chairman of the Board of Directors of URALSEVERGAZ, when addressing the shareholders meeting, stated that "when fulfilling our contractual obligations on continuous gas supply to consumers of the Region we expect that the regional government and municipalities heads shall provide assistance in solving the problems related to payments for the consumed gas. A catastrophically low level of payments by consumers, especially by housing and utility companies causes realistic threat of reduction in natural gas supply to the Sverdlovsk Region".

Shareholders approved of the annual report, financial statements for 2009, and elected new Board of Directors of URALSEVERGAZ.  They finalized basic objectives for further implementation of the gas program, terms and conditions for the contractual campaign on natural gas supply to consumers of the Sverdlovsk Region in 2011, and the pricing policy of the Company.

Vladimir Makeyev was re-elected Chairman of the Board of Directors of URALSEVERGAZ. Vladimir Kusushin was elected General Director.

REFERENCE:
URALSEVERGAZ (a Company with shareholding split between ITERA Oil and Gas Company and Sverdlovsk Region Administration) was established in December of 1998. It has been supplying natural gas to the Sverdlovsk Region since 1999.