LSR Group Lays the Foundation Stone for the Construction of its New Cement Plant

28 May 2008

Yesterday, on 27 May a gala ceremony took place in Slantsy, Leningrad Region to lay the foundation stone for the construction of the new LSR Group cement plant. The new project will help to provide a full-fledged solution to the shortage of cement in Northwest Russia*.

The event was attended by Governor of the Leningrad Region Valery Serdyukov, the Deputy Plenipotentiary of the RF President to the Northwest Federal District Alexandr Nesterov, Senator for the Leningrad Region in the RF Federation Council of the State Duma Andrey Molchanov, the Managing Director of LSR Group Mikhail Romanov, the President of Hefei Cement Research and Design Institute, China Xu Ning, the Vice President of FLSmidth & Co. A/S, Denmark Kim Pandrup Kristensen, the Consul General of the PRC in St. Petersburg Tian Erlong and the Consul General of Denmark in St. Petersburg Soren Kragholm.

LSR Group is building the cement plant in Slantsy, Leningrad Region. Phase 1 of the project with an annual capacity of 1.85 million tons of cement is to be completed in 2010. By 2010, the company is to invest approx. US$ 600 million. Subsequently, it is proposed to increase the capacity up to 3.7 million tons through launching a second production line. Currently, the project construction site is fully prepared with all of the necessary infrastructure provided and construction design work started while the equipment design work is nearing completion with the first machines to be supplied as early as in the summer of 2008.

According to the Governor of the Leningrad region Valery Serdyukov, the project is important not only for the Leningrad region but for Russia as a whole:

— Cement is necessary to build houses, factories, roads. Where construction projects are underway there is future, development and stability. The prioritized national project provides for doubling the volume of housing construction. Last year 840,000 sq.m of housing were completed in the Leningrad region but we need to build 1.7 million sq.m annually i.e. 1 sq.m per capita in the region each year. To accomplish this task, building materials should be available including cement. LSR’s new plant will result in entirely eliminating the cement shortage in Northwest Russia. The Government of the Leningrad region will contribute to the completion of the project on schedule to make sure this state-of-the-art plant goes operational as early as possible.

Mikhail Romanov, Managing Director responsible for new projects of LSR Group, said that “the construction of the cement plant in Slantsy is a project undertaken by three countries represented by their leading companies: LSR Group of Russia, Hefei Cement Research and Design Institute of China, and FLSmidth & Co. A/S of Denmark. The experience of the best builders from Europe and Asia will be used for the benefit of the Northwest region.”

Design and construction work is being implemented by a subsidiary of Hefei Cement Research and Design Institute, OOO Cement Northwest established specifically to implement the construction of LSR Group’s plant in the Russian Federation. Hefei Cement Research and Design Institute has extensive experience of constructing cement plants and in the last three years alone the company has completed construction and design projects for over ten plants worldwide. The contract amount totals EUR 163 million.

The equipment for the new project is to be designed and supplied by FLSmidth & Co. A/S of Denmark. The contracts signed with the Danish company are worth over EUR 128.9 million. FLSmidth has over 120 years of experience in the manufacture and supply of cement production equipment. FLSmidth machines are currently in operation in the USA, China, Africa and most European countries. However the key advantage is that FLSmidth has experience in the manufacture and supply of equipment capable of using non-traditional raw materials for cement production. Today there are over 100 million tons of used shale accumulated in the landfills of Slantsy after being extracted and processed by the companies Leningradslanets and Slanets in Slantsy. These landfills account for an aggregate of 400 hectares of land taken out of circulation. The new project boasts a unique technology for processing the landfills and using them as an additional source of cement production inputs. Hence, as a result of implementing the cement plant project the environmental situation in the region will substantially improve with more land made available for cultivation.
In addition, the new cement project of LSR Group will provide around 420 jobs for the local population and will be one of the key taxpayers in the region with the volume of tax deduction reaching EUR 31 million per annum by 2015.

*According to the Reshenie consulting and research company, the shortage of cement production in the Northwest Federal District of the Russian Federation in 2006 was 1.05 million tons while the market volume was 4.7 million tons. In 2008, the market volume will reach 5.65 million tons while the shortage will grow up to at least 1.34 million tons, Reshenie forecasts.

Notes to Editors:

OJSC LSR Group is a diversified construction company founded in 1993 and operating in a number of complementary market segments. Its core business areas are building materials, construction and real estate development. The Group includes enterprises for extraction and processing of aggregates, production and transportation of building materials, and housing construction — from mass market large-panel housing to elite property built after designs made by leading domestic and foreign architects.

LSR Group has operations and offices in a number of cities in the Leningrad Oblast, in St. Petersburg, Moscow, Yekaterinburg, Lithuania, Latvia, Estonia, Ukraine and Germany. LSR Group employs over 15,000 people.

In 2005 and 2006, the revenues of LSR Group (according to IFRS statements) were $ 463 million and $ 777 million respectively. In 2007, the revenues amounted to $ 1,403 million.

In November 2007, OJSC LSR Group implemented an IPO, and now its GDRs are listed on the London Stock Exchange, and the shares — on MICEX and RTS.

LSR Group has a B1 rating; outlook — stable assigned by Moody’s Investors Service.

In 2007, LSR Group was bestowed a National Award in the field of business as ‘The Company of the Year’ in the ‘Construction’ category.

For more details please contact:

Press Service, LSR Group
Tel.: +7(812) 314-1044


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