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 OOO, 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.

“The acquisition of Kuzbass Power Sales Company enables us to form a vertically integrated power company with its own power generating facilities (Southern Kuzbass Power Plant), raw material resources (Southern Kuzbass) and now a well established client base. Acquiring the Kuzbass Power Sales Company is a very compelling opportunity and we intend to develop it as part of our power strategy,” Mechel’s Chief Operating Officer Alexey Ivanushkin commented.