The aim of the new investment project is to enable Teploenergo to continue its expansion into other districts in the city of Taganrog by replacing obsolete and inefficient boiler house equipment with new equipment that will ensure high quality heating services for consumers and significantly reduce the consumption of fuel and energy resources.

The independent director of the Teploenergo board, Wolfgang Ville, attended the signing ceremony. Mr. Ville is a specialist in the field of energy and heat supply (see the attached CV). The appointment of an independent director guarantees Teploenergo's customers, employees and shareholders that the company's activities will be transparent and ensures an independent decision-making process.

Teploenergo was founded in 1977. In 1997 it became an open joint-stock company, and today it is owned by: the EBRD (25%), Center-Invest Bank (47%), Mezhregionteploenergo (13%), Dr Vasily Vysokov and Mrs Tatiana Vysokova (11%), and a number of minority shareholders (4%).

Commenting on the signing of the agreement, Bruno Balvanera, Head of EBRD Regional Development in Russia, said, “Supporting private companies operating in the infrastructure sector is one of the EBRD’s priorities in Russia and we are pleased to continue our collaboration with Teploenergo. The EBRD investment will help the company expand its operations and improve the quality of service to the benefit of Taganrog.”

“This project is a continuation of the technical modernization of heat supply in the city of Taganrog,” said Dr Vasily Vysokov, Chairman of the Board of Directors of Center-Invest Bank. “But this particular project will be implemented at a time of transition to energy efficient technologies and reform of the housing and communal services sector, in particular, the introduction of long-term tariffs and a transparent system for collecting payments for heating services.”

Teploenergo completed an investment programme to upgrade its boiler houses in Taganrog in 2009. Total investment in the project was RUB354m: RUB133m was contributed by the EBRD to the company's registered capital in 2007, and RUB221m was provided in 2008 as a ten-year EBRD loan.

As reported on the EBRD website (http://www.ebrd.com/projects/psd/psd2009/40894t.pdf)

The project will contribute towards improved frameworks for markets through the introduction of a multi-year RAB tariff for heat transportation by Teploenergo in 2011. The adoption of the new multi-year RAB tariff would significantly reduce the risk of investments in the sector due to increased transparency of the tariff setting process and improved predictability of revenues. An independent environmental and social analysis of the proposed investment and an environmental, health and safety audit of existing operations were conducted in November-December 2009. The due diligence identified that the Project will bring about environmental benefits due to reduction of air emissions and improved energy efficiency. The new boiler houses will be automated and allow constant on-line control of the combustion process and consumption of energy and water.

Today, Teploenergo accounts for 57% of the heat and 75% of the hot water supplied in Taganrog. The company's turnover in 2009 was RUB397m.