Mechel announces winning the auction to acquire shares of Kuzbass Power Sales Company

JSC Mechel announces winning the auction to acquire shares of Kuzbass Power Sales Company comprising 49% of the company's charter capital. Together with 1.2% of the shares owned by Mechel previously, its stake in Kuzbass Power Sales Company has increased to 50.2%.

The acquisition of Kuzbass Power Sales Company is in line with Mechel’s strategy to expand in the power sector. Mechel’s power business has been developed to obtain additional markets for steam coal and to produce higher value added products, such as electric and heat energy, and provide its mining and metal segments with its own energy resources. In line with this strategy, Mechel previously acquired Southern Kuzbass Power Plant at an auction this March.

As a result of today’s auction, Mechel’s subsidiary, Mechel-Energo, has acquired from RAO UES of Russia 297,020,200 of ordinary shares of Kuzbass Power Sales Company comprising 49% of its charter capital for approximately US$ 44.0 million or RUR 1.14 billion.

Kuzbass Power Sales Company is the largest power distributing company in Siberia. Its planned distributed power volume for 2007 is 24.8 bln kWh. Based on Russian Accounting Standards (RAS) the revenues of the company were RUR 8.6 billion. in the first half of 2006 (it started its operations as an independent entity from July 1, 2006) and amounted to RUR 6.1 billion in the first quarter this year.