Svetoch - for Investor

Vladimir Vtulkin

Svetoch Co., PlastChelyabinsk region,RUSSIA October 2012

Construction of a Gas-Piston Electric Power Plant to supply energy toJSC Yuzhuralzoloto Group of Companies»

An invitation to finance the Investment Project

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EXECUTIVE SUMMARY

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OBJECTIVE – Construction and operation of a mini-HPP (Heat and Power Plant) intended for independent power supply to Yuzhuralzoloto Group of Companies JSC.

The budgeted cost of the project is – EUR 15.800.000.00

The SCOPE OF THE PROJECT is:

Строительство of a gas-piston electric power station accompanied by simultaneous production of heat energy for commercial operations (external sale). Operation of two power plants: МAN Diesel & Turbo Model 18V32/40 PGI (SI) having a total installed capacity of 15.7 MW Making provisions for a guaranteed sale of generated power for independent power supply to the goldmine Tsentralnaya and other production facilities of Yuzhuralzoloto Group of Companies OAO (OJSC)

Project Investment Phase Timing:

Opening 01.12.2012Closing 30.12.2013

PROGECT GEOGRAPHICAL LOCATION

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The project is being realized in the town of Plast, the biggest gold-mining settlement of Chelyabinsk region.

Located 128 km southwest of Chelyabinsk

Having a population of ca.18 thousand

The inherent industries:

Gold Mining

Production of Arsenic, non-ferrous alloyed metals, porcelain

clay (kaolin)

Production of macadam and asphalt

Woodworking and production of saw timber

Bakery and confectionary industry

Челябинск

Plast

Yuzhuralzoloto, a solvent and highly promising consumer

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•Yuzhuralzoloto OAO (OJSC) is the biggest gold-mining enterprise of Chelyabinsk region.

•The company pursues economic activity all across the Russian Federation.

•The production potential of known gold deposits of Classes В+С1+С2, being at the disposal of Yuzhuralzoloto OAO (OJSC), is estimated at 181.6 tons, which should last another 50 years given the current capacity of gold mining.

kW Gcal

Electric power for the Tsentralnaya mine

10 212 -

Heat supply for the Tsentralnaya mine

- 6.958

Heat supply for the town of Plast - 6.202

Production related power & heat requisites of Yuzhuralzoloto OAO (OJSC)

Russian market share of 4%

Annual production of over 5 tons

Profit margin of 18-20 %

Headcount of over 2116

Deposits: (Chelyabinsk region) Svetlinskoye, Bereznyakovskoye, Kochkarskoye, Zapadny Kurasan, Yuzhny Kurasan; (Krasnoyarsk Kray) Priisk Drazhny; (Republic of Khakasia) Kommunarovsky Rudnik (mine); (Zabaykalsky Kray) Darasunsky Rudnik (mine)

Production program

Market segments

Capacity, per hour Price, Y2010 ProceedskW Gcal EUR/ kW EUR/ Gcal ‘000.

EUR/annum

Preemption power supply – First StagePower for Tsentralnaya gold mine

10 212 - 0.062 - 5 546

Heat supply for Tsentralnaya gold mine

- 6.958 - 13.31 2 671

Total 8 217Development prospects – Second Stage

Power supply for Kachkar mine

2 529 - 0.062 - 2 711

Heat supply for the town of Plast

- 6.202 - 13.31 2 381

Total 13 309

The project commodities are:

• electric power with the voltage of 6.3 kV, frequency of 50 Hz.

• hot water at the temperature (t) of 90/70oC to be supplied into the heat grid.

5

Long-Term Supply Liability Contracts Signed

• Corporate guarantee by Yuzhuralzoloto OAO (OJSC)– Preemptive consumption of 100% of electric power and 50% of heat as generated by

the new station and the possibility of heat transit over into the town grid

• Long-Term Agreement between the Project Originator and Yuzhuralzoloto OAO (OJSC) for the consumption of electric and heat energy, coming into effect after commissioning of the mini-HPP.

– The term of the agreement is 25 years. Prices regulation is by established legally binding reference to the power industry deflator

• Long-Term Supply guarantee by a Gas Supplier, Yamalgazresurs, LLC, till 2025 to the utmost extent necessary.

– Prices regulation is by established legally binding reference to the power industry deflator

• Invitation by the Plast district administration to supply heat energy

– Heat supply contract preparation is underway

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MARKET SUBSTANTIATION OF PROJECT

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The 3 problems of power industry in Chelyabinsk region

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The deficit of electric power in the region is 959 MW (over 20%)

The installed capacity of all Power Plants of the region is 4922.8 MW.

Deterioration, %

Specific fuel consumptio

n, g/kW.h

Argayash CHPP 55 380.1

Chelyabinsk CHPP-1 60 390.6



Chelyabinsk GRES 50 361.2

0

15000

30000

45000

1990 2000 2002 2004 2006 2008

Electric power generation

Electric power consumption

The problem of the main competitor, the TGC-10 – is high deterioration of facilities ratio being the case with the majority of the biggest CHPPs and, consequently, high generation costs.

deficit of transfer capacity is the case at all nodes of the regional grid

Power sales prices and gas purchasing prices forecasts

Forecast Year 2008 2012 2015 2020 2025

Electric power: general consumer tariff (EUR cent per kW.h)

6.4 9.7 11.3 14.8 17.7

Heat energy: regulated prices growth, times

1.22 2 2.3 3.8 4.5

Natural gas: general consumer price (USD per ‘000. cubic m)

76.4 157 262 337 390

Source: The concept of long-term social and economic development of the Russian Federation, innovational development scenario

Although it is likely that the generation profitability will be decreasing, THE PROFITABILITY MARGIN OF THE GAS-PISTON POWER STATIONS IS HIGH:To produce 1 kW of electric power it is required to consume up to 0.3 m3 of natural gas,In the current gas prices of 0.015 Eur/m3 we get 1 kW of electric power at a practically three times higher price - 0.062 Eur;- The heat of 1 kW generated by the mini-HPP may be considered as a bonus

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Energy sales prices, used in the project

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The probability of cancellation of the project-related heat and power supply contract on the initiative of Yuzhuralzoloto OAO (OJSC) is extremely low, as tariffs for the power produced by mini-HPP are 10% lower than those of Chelyabenergosbyt OAO (OJSC) (the Local Grid Operator’s Sales Unit).Additionally, an invitation was received from the Plast Municipal District Administration to supply the heat into the Municipal Heat Grid.

SALES PRICE (VAT incl) 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Price growth forecast, electric power (EUR) 22% 18% 11% 6% 6% 5% 5% 11% 6% 5% 5%

Electric power, EUR/kWh 0.05 0.06 0.07 0.07 0.08 0.08 0.08 0.09 0.09 0.10 0.10

Price growth forecast, heat energy 18% 20% 29% 22% 18% 15% 33% 25% 20% 17% 14%

Heat energy, EUR/Gcal 9.3 11.1 14.3 17.5 20.7 23.9 31.8 39.7 47.6 55.5 63.4

PURCHASING PRICE (VAT incl) 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Price growth forecast, gas 37% 15% 40% 22% 18% 15% 17% 6% 5% 5% 5%

Gas, EUR/’000*Nm3 60 69 96 118 139 160 187 198 208 219 229

Price growth forecast, oil 20% 15% 30% 22% 18% 15% 17% 6% 5% 5% 5%

Oil, EUR/ton 60 69 96 118 139 160 187 198 208 219 229

Project SWOT analysis

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Yuzhuralzoloto OAO (OJSC)’s electric power consumption quantities and profile

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# of month, 20111 2 3 4 5 6

10219 11809 10108 9845 9312 9222# of month, 2011

7 8 9 10 11 129635 9462 9343 9798 10144 10212

Monthly requirements of electric power for supply to Tsentralnaya gold mine,

(based on Agreement # 418 dated December 22, 2010 concluded between Yuzhuralzoloto OAO (OJSC) Group of Companies and Chelyabenergosbyt OAO

(OJSC))

Time interval (Moscow time)00.00-01.00 00.01-02.00 00.02-03.00 00.03-04.00 00.04-05.00 00.05-06.00

9360 9360 10440 9360 8640 8640Time interval (Moscow time)

00.06-07.00 00.07-08.00 00.08-09.00 00.09-10.00 10.00-11.00 11.00-12.009720 9540 9360 10080 9900 9540

Time interval (Moscow time)12.00-13.00 13.00-14.00 14.00-15.00 15.00-16.00 16.00-17.00 17.00-18.00

10260 9000 9360 9540 10260 8820Time interval (Moscow time)

18.00-19.00 19.00-20.00 20.00-21.00 21.00-22.00 22.00-23.00 23.00-24.008820 8640 10800 9360 9000 9000

Results of a day's measurement of electric energy consumption

The required minimum installed capacity for electric power supply to Yuzhuralzoloto OAO (OJSC) Group of Companies for Tsentralnaya gold mine must be a minimum of 10 440 + 600 = 11 040 kW, where10 440 kW – is for the production site of Tsentralnaya gold mine, and 600 kW shall be a heat & power plant’s own consumption.

As a result of the modernization and production capacity increase of Yuzhuralzoloto OAO (OJSC) in 2011, the electric power requirement increased, and the 2012 forecast has it at 14 MW.

Yuzhuralzoloto OAO (OJSC)’s heat energy consumption quantities and profile

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Seasonality of heat consumption by the units/facilities of Tsentralnaya gold mine

Heat consumption unitwise / facilitywise

In order to meet the requirements of the Tsentralnaya gold mine facilities it is necessary to furnish 7 Gcal of heat capacity.

During the heating season Yuzhuralzoloto OAO (OJSC) consumes 100% of the generated heat.

During the no-heating season the heat consumption rate including the contribution to the municipal grid (hot water supply) is 25% of the generated heat.

The transfer capacity of the corporate heat grid of Tsentralnaya gold mine id 16-17 Gcal of heat capacity.

Month

Number of days in the month, when the heat

consumption is:Heat sales, % of

generated100% 5 %

Jan 31 0100.0%Feb 28 0

Mar 31 0Apr 30 0

36.3%May 0 31Jun 0 30Jul 0 31

11.2%Aug 0 31Sep 6 24Oct 31 0

100.0%Nov 30 0

Dec 31 0

Unit / FacilityPeak loads Kcal/h

Total Kcal/h Heating Ventilation Hot water

Gold Factory 172 063 271 868 1 992 031

Mine 1 405 530 81 134 40 000 1 526 664Adm & Amenities

Building435 944 - 292 000 727 944

Complete refinery cycle factory

718 338 718 338

Garage 557 107 16 000 573 107

Mining tools repair shop

343 699 16 000 359 699

Other 907 877 35 720 116 500 1 060 097

Total 6 957 880

Substantiation of the technical solution choice

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Parameter description

Rolls-Royce Marine AS

В35:40V16AG

Sojitz Corporation18MACH30G

Wartsila Finland Oy16V34SG

Austro Energy Systems Int.AG

AES-16 G/S

МAN Diesel18V32/40PGI

Electric power, kW 6790 5750 6970 3 916 7855Efficiency output at the generator terminals

44.50% 44.90% 45.50% 41.90% 45.36%

Lead time, months 10 10 Up to 12 In stock 0-4Specific cost, EUR/kW 407.95* 589.12 552.36 546.26 432.84Total HPP price, EUR 5 540 000* 6 774 870 7 700 000 6 417 474 6 800 000Gas consumption Nm3/h 1 468 1290 1570 983 1773Specific gas consumption Nm3/kW.h

0.22 0.22 0.23 0.25 0.23

Oil burn-off, g/kW.h 0.4 0.5 0.4 0.3 0.29Voltage, kW 6.3/11 6.3/11 11 6.3 6.3

MTBO, h (yrs) not regulated 96 000 (12) 100 000 (12) 64 000 (8)100 000 (no overhauls

envisaged)

* The Rols-Royce delivery price, and, consequently, the specific cost calculation includes a gas-piston plant without accessories.

Russian experience of MAN D&T Model 18V32/40 SI (PGI) gas-piston power unit application

Customer name: Mezhregiongaz OAO (OJSC)

Location: Tomlino settlement, Lubertsy district, Moscow region.

HPP generating capacity: 23.4 MW

Date of commissioning: Dec. 2010

Configuration: 3 x 18V32/40 SI(PGI)

Current status: at present the construction of the power plant is practically completed, the systems are now under final adjustment

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MAN Diesel & Turbo SE Division’s assistance in project realization

In the course of the project the supplier of the main process equipment (MAN Diesel & Turbo) provides assistance along the following lines:•Personnel training in correct operating and maintenance techniques. (Both for mechanical and electrical equipment).•Gas-Piston Combined Power Units maintenance and repair, as well as supply of spare parts. MAN Diesel & Turbo has its own fully equipped service center in Saint Petersburg, strongly staffed with well-trained qualified personnel.•Complete elaboration of logistics for delivery of GP combined power units to the installation sites. Supplier has had experience delivering of a GP combined power unit model 18V32/40 SI (PGI) to a combined power plant’ construction site in the Russian Federation. •Equipment certification in compliance with Russian regulatory requirements. The equipments shipped to Russia will have all necessary certificates and licenses.•Supply of all required engineering data.•Installation supervised by MAN Diesel & Turbo personnel is included in the scope of delivery.

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Gas-Piston Power Unit V32/40 SI (PGI) manufactured by MAN Diesel & Turbo. Technical datasheet.

< 17 >

V32/40 SI (PGI)

Combustion process: Lean mixture

Number of cylinders: 18

Power output: 8100 kW (750 rpm)

Cylinder diameter: 320 mm

Piston stroke: 400 mm

Engine shaft rotation speed:

720/750 rpm

Avg. piston motion velocity:

9.6/10.0 mps

Avg. effective pressure:22.4 bar

Frequency: 50/60 Hz

Specific firing rate: 18V: 7540 кДж/kW·ч

The PGI (SI) waste heat from the cooling loops and from the engine exhaust is re-used for heating and hot water supply.

Advantages of Model 18V32/40 SI (PGI) Gas Piston Power Unit :

- High efficiency output of over 45%

- High MTBR and MTBM

- Application of lubricants produced by international concerns (Shell, Total) in the Russian Federation.

- Local service center in Saint-Petersburg

- Full set of required documentation in Russian.

Experience of MAN Diesel&Turbo Model 32/40 PGI (SI) gas-piston power unit application

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Total of installed capacity on the basis of the model spectrum of 32/40 PGI (SI):

94 MW

Out of which in the CIS:24 MW for Mezhregiongas OAO (OJSC) (in Russia), 48 MW for Altcom Industrial Group (in the Ukraine)

A CHPP (combined heat and power plant) on the basis of a GP Power Unit model 12V32/40 PGI (SI) operates at a MAN Diesel & Turbo factory in Augsburg

MAN Power Plant in Augsburg, Germany

Location Augsburg, GermanyCompany MAN Diesel SEType of unit CHP (Combined Heat and Power Plant)Purpose - A power source for the MAN Diesel factory, primarily for an

electric arc furnace (EAF) of the MAN Diesel Foundry- Heat for the factory heating system

Type of engine 12V32/40PGICylinder diameter: 320 mmPiston stroke: 400 mmEngine shaft rotation speed: 750 rpm

Output 5 400 kW max.5 220 kW op./50 Hz

Year of installation 2005Operation Starting the middle of 2005 at full capacity (24 h/day)

Project Cost

684

143

208

796

913

1089

1620

7491

0

Проектные работы, инжиниринг, страхование

Дымовые трубы

Наружные инженерные сети

Теплотехническое оборудование, распределительное устройство, аварийный дизель

Объекты энергетического хозяйства

Здание ГПЭС

Технологические сети электростанции

Газопоршневая электростанция MitsubishiMAN DT

Incl. EQUIPMENT and TECHNOLOGY for

EUR 12,944,000.00

The Cost of the Project is EUR 15,761,000.00

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Gas-Piston Power Generating Unit MAN D&T

Process networks of the Power Generating Unit

The Gas-Piston Power Generating Unit building

Power system facilities

Thermotechnical equipment, distribution device, backup diesel engine

External pipelines and networks

Exhaust pipes

Project design and engineering; Insurance

INFORMATION ON THE PROJECT TEAM

VLADIMIR SERGEYEVICH PAVLOV

Director for constructionof Svetoch OOO (LLC)

Higher education.Work experience in the sphere of management and business administration for over 20 years.

VLADIMIR ANATOLIEVICHVTULKIN

Chairman of the Board of Directorsof Svetoch OOO (LLC)

Higher education in the military and financial fields. Has entrepreneurial experience and that of interaction with investors in major investment projects, participated in attracting debt financing and direct investments.

VYACHESLAV VLADIMIROVICHLUGININ

Deputy General Director for finance

of Svetoch OOO (LLC)

Higher education in the field of Business Administration. Work experience in the sphere of management and business administration for over 15 years. Experience in managing a Group of Companies, creation of manufacturing enterprises from scratch. Experience in foreign economic activity.

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Sources and financing schedules of the project

PROJECT COST – EUR 15 761 000

BANK LOANEUR 12 944 000

EQUITYEUR 2 817 000

bank loan82%

EUR 12 944 000Equipment and

technology

EUR 1 665 000 working capital

EUR 1 152 000interest on loan

Equity18%

0

1000

2000

3000

4000

5000

6000

7000

8000

Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014

interest on loan 1152

working capital 5 9 8 537 1106

investment inequipment and

technology2213 7144 1668 1919

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Project realization schedule: investment phase 14 months, operational phase 20 years

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Project revenue and sufficiency for servicing of the loan

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Owner’s revenue

EUR 1 525 000

Project earnings are sufficient for loan repaymentThe operating balance is sufficient for repayment of loan and

related interest

Project economic indicators

Proceeds breakdown Expenditures breakdown

64%20%

1%

5% 9%

MaterialsOperating costs

Salaries

AmortisationTaxes

Heat energy

Electric power

24

Project financial indicators

0

5000

10000

15000

20000

25000

30000

35000

40000

45000

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

EU

R '

000

Cash closing balance EBITDA accrued

Net profit accrued

0

2000

4000

6000

8000

10000

12000

14000

16000

18000

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

EU

R '

000

Proceeds Costs Net profit EBITDA

25

By period Accrued totals

Project cashflow forecast, EUR ‘000

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Sales proceeds 1 185 11 461 12 909 13 877 14 264 15 239 15 130 16 301 17 808 18 403

Operating costs -498 -4 566 -6 046 -7 748 -8 964 -10 362 -11 703 -12 292 -13 103 -13 839

Taxes -2 -307 -2 406 -2 153 -1 871 -1 731 -1 218 -1 429 -1 679 -1 631

Interest on loans -1 621 -744 -485 -227 -32

Operating balance 684 4 967 3 713 3 490 3 203 3 114 2 209 2 581 3 026 2 933

Investments in buildings and equipment

-11 025 -1 919

Working capital investments -541 -1 106

Investments balance -11 566 -3 025

Target financing 559 1 106

Loans taking 11 025 1 919

Loans repayment -1 618 -3 236 -3 236 -3 236 -1 618

Financial balance 11 584 1 407 -3 236 -3 236 -3 236 -1 618

Total closing cashflow 702 3 349 477 254 -33 1 496 2 209 2 581 3 026 2 933

Total Cashflow, ACCRUED 702 4 051 4 528 4 782 4 749 6 245 8 454 11 035 14 061 16 99426

P&L forecast, EUR ‘000

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Net proceeds 1 004 9 713 10 940 11 760 12 088 12 915 12 822 13 815 15 091 15 596

- Cost of services provided/goods sold

-423 -4 756 -5 934 -7 282 -8 242 -9 371 -10 454 -10 905 -11 549 -12 133

Operating costs -421 -3 866 -5 119 -6 561 -7 590 -8 774 -9 910 -10 409 -11 096 -11 720

Taxes, attributed to current costs

-2 -14 -18 -21 -25 -29 -29 -29 -29 -29

Amortisation 0 -877 -797 -700 -627 -568 -515 -467 -423 -384

Gross profit 581 4 957 5 006 4 478 3 847 3 544 2 368 2 910 3 543 3 462

- Taxes, attributed to financial result

-54 -211 -168 -142 -127 -113 -101 -90 -80 -71

- Interest payable 0 -1 621 -744 -485 -227 -32 0 0 0 0

Profit before taxation 527 3 125 4 095 3 851 3 494 3 398 2 267 2 820 3 462 3 392

- Profit tax -130 -1 139 -1 161 -1 041 -893 -823 -544 -677 -831 -814

Net profit 397 1 986 2 933 2 810 2 601 2 575 1 723 2 143 2 631 2 578

Net profit, ACCRUED 397 2 383 5 317 8 127 10 728 13 302 15 025 17 168 19 800 22 377

EBITDA 527 5 622 5 636 5 037 4 347 3 998 2 782 3 287 3 886 3 775

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Economic efficiency indicators

Indicator descriptionUnit of

measurementIndicator valueDR

DR (Discount rate) % 20

DPP Years 6.15

NPV (residual project value considered)

EUR ‘000 3 319

ROI % 27.8

IRR % 30.8

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PROJECT IMPLEMENTATION DIAGRAM

Svetoch ООО/LLC (Customer)

Czech ЕРС-Contractor ‘ALTA’

CEB (Czech Export Bank)

EGAP

МАN Diesel & Turbo (GP Power Unit)

Siemens, (VA, DCS), Чехия

ABB (electric equipment), Чехия

FANS (water cooling tower), Czech Rep

JURBY (WPP)

CKO (compressor), CZH

Crane

EHB, Чехия

Other equipment

Stroytsentr OOO MP (local

contractor)

Insurance company

Malakut (insurance

broker)

ООО Proyektnaya kompaniya

ООО МП Stroytsentr


ООО YuITs

ООО EnergoStroyProyekt

ЗАО United Water Tech (Ob’edinonnye Vodnye Tekh)





ООО Trubenergoservis

ОАО ChPN

ООО Aleks

ООО YuITs

ООО Werktorf

Foreign work/services/to observe requirements of OESD, subsidiary HPP

D&E agreement/general design

D&E agreement/foundations

D&E agreement/CHS, WChem

D&E agreement OSG/ОРУ-110

Ventil, Heating, AC agreement

PCS agreement

WTF installation agreement

Electrics CIO agreement

CIO agreement heating equipm.

Civil work agreement

Gas pipe install.agreementSteelwork delivery and install agreem

Steelwork refractory & corros resist coating agreement

Commissioning and adj agreement

Delivery & customs clear. agreement

Shipments, work, services of Russian (local) suppliers/contractorsShipments, work, services of foreign

suppliers/contractors

Credit agreement

Loan insurance agreementЕРС-Contract

Total insurance agreement for transportation and CMR risks

Insurance organization

29

Current stage of project implementation

30

Land allocation permit for a land plot of 5000 m2 has been obtained. The plot address is: the town of Plast (Chelyabinsk region) Shakhtny pereulok (lane).

Analysis and expert assessment of fuel consumption by the mini-HPP have been performed. Thermotechnical calculation of gas requirement has been approved by Uraltransgaz OOO (LLC) (city of Yekaterinburg).

Technical possibility of gas supply to the Power Units of mini-HPP has been established. The Gazproyekt Institute has prepared a Hydraulic calculation of the possibilities of supply of the necessary gas volumes. A Gas Supply Agreement №130/10 has been concluded on Aug 18, 2010.

Uraltransgaz OOO (LLC) has issued A certificate on technical possibility of natural gas supply for the currently operating, being newly built, being expanded and modernized fuelconsuming plants of Ministries and departments of Russia № 01-10/27-209 dated Feb. 26, 2008

Chief Engineer Yu. P/ Maltsev of Chelyabinskgazkom OOO (LLC) has received and approved the technical specification dated July 01, 2010 for the connection to the gas pipeline at the pressure of 0.6 MPa and connection diameter of 159 mm.

The complete design and engineering task has been fulfilled including the layout of the equipment of the power units of the mini-HPP on the installation site, specification of interconnections with electric, heating and gas grids. The solutions have also been elaborated regarding the water supply and sewage. Complete estimation calculations have been performed. Construction permit has been applied for and is now being obtained.

Documents

Svetoch - for Investor