Topic of the Issue. Main Sites. Main Sites

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1 Newsletter 2011 Investments. Innovations. Infrastructure Kaluga Region No. 6 Main Construction Sites in the Region Topic of the Issue [2] Events [3] Top Officials Speaking: Construction Industry Development Potential [4-5] Industrial Construction: Main Sites [6-7] Residential Construction: Main Sites [8] Hospitality Industry: New Dimension of Hotel Business Editorial The construction industry is often viewed as an economy locomotive. I would rather compare it to a mirror reflecting the actual attractiveness of a region from investors point of view, as all investment projects start with this or that type of construction works. This is true both for industrial facilities and other types of businesses. Thus, construction is a cornerstone of any project. This is the business, which at a certain stage interacts with all industries and investment projects. Kaluga Region boasts everything required for successful construction industry development from a foundation of optimistic view in the future to all necessary pre-conditions, such as high resource potential, human capital, financial and political stability, and more importantly high potential demand In this issue we look into the drivers of the regional economy locomotive. Best regards, Svetlana Kozeneva, Director, Kaluga News Agency Upcoming

2 2 Events 6, 2011 Events EUR 500 MILLION TO BE INVESTED IN 3 NEW WOOD-WORKING FACILITIES Magnat, a Novosibirsk developer, is to implement three investment projects in Kaluga Region in Anatoly Artamonov, Kaluga Region s Governor, and Igor Krysanov, Magnat Management Conpany President, have concluded a relevant memorandum. Magnat plans to build two production facilities in Kuybyshevsky district to manufacture medium density fiberboard and plywood. Another facility to produce oriented strand board (OSB) is to be built in Lyudinovo district. The total amount of investments reaches Euro 500 million. 2,000 new jobs will be created. The production capacity of three plants is to exceed 600,000 m 3 per year. The facilities will use local timber resources as raw material for production. Anatoly Artamonov pointed out that forests deteriorate and timber lose its quality as no timely measures are taken to process wood and restore the forests. Kaluga Region requires a properly equipped forest operator, which will not only process timber but also restore forest resources in a prompt and correct manner. NESTLÉ IN KALUGA REGION: VIVID EXAMPLE OF SUCCESSFUL INVESTMENTS Nestlé has opened Nestlé Purina Pet- Care distribution center in Vorsino Industrial Park. This is the third Nestlé facility in Kaluga Region. The new facility with the total area of 10,000 sq.m was built in a year with the use of innovative technologies. The company invested RUR500 million in its construction. 50 new jobs were created. Virtually all top managers from European Nestlé divisions attended the opening ceremony. Laurent Freixe, Nestlé S.A. Executive Vice President for Europe, spoke of the company s plans for the future. He said: Thanks to Kaluga Region our business in Russia is a success. We plan to continue the development process and invest approximately RUR1.3 billion in construction of a new shop to produce pet food. A new factory building is already being built. The facility is to be commissioned in summer KOREAN COMPANY WILL INVEST EURO 500 MIL- LION IN HOUSING ESTATE CONSTRUCTION SsangYong E&C is to build a multistorey housing estate in Kaluga. A relevant memorandum was concluded by SsangYong E&C CEO and Kaluga Region Governor. The project providing for investments in the amount of Euro 500 million is to be implemented in five years. Pak Jun Sob, the project chief architect, said that all buildings of the housing estate would be built according to a unique design developed specifically for Kaluga. The Korean developer plans to use only innovative proprietary technologies developed by SsangYong E&C. As the project is of great importance the Government of Kaluga Region guaranteed full assistance and support to SsangYong E&C. THE FIRST SERIAL MITSUBISHI I-MIEV ELECTRIC CAR IN KALUGA Mitsubishi Motors presented its new Mitsubishi i-miev electric car to Russian consumers in Kaluga. Mitsubishi i-miev is driven by 49 kw (63 h.p.) electric motor. The new car will have a range of up to 150 kilometers per charge. It will take 6-8 hours to fully recharge the vehicle s battery from a standard power socket. However, it is possible to charge the battery to its 80% capacity in a mere 30 minutes. Yukio Matsumoto, Mitsubishi Motors Rus Director General, said that Mitsubishi contributed to cleaner environment through introduction of innovative technologies. Andrei Pankov, Chief Executive Officer of RolfImport, Mitsubishi Motors distributor in Russia, said that many countries embarked on electric vehicles production development programs. A similar program has been developed in Russia as well. There is a possibility that Kaluga will become the first Russian region to be engaged in its implementation. In the near future Mitsubishi Motors is to launch production of 7 seven more electric car models, including Mitsubishi Outlander manufactured at Kaluga production facility. VNESHEKONOMBANK AND KALUGA REGION GOVERNMENT SUMMED UP THEIR COOPERA- TION RESULTS AND SET TARGETS FOR THE FUTURE In a three-year period of its cooperation with Vneshekonombank Kaluga Region managed to attain high results. Top managers of Vneshekonombank, the largest Russian financial institution, visited the region to see for themselves how efficiently the funds provided by Vneshekonombank for Kaluga automotive cluster infrastructure development were used. The delegation visited the largest automotive industry facilities in Grabtsevo, Rosva and Vorsino industrial parks. Vladimir Dmitriev, Vneshekonombank Chairman of the Board, noted that Kaluga Region demonstrated unique investment projects development pace. A number of modern production facilities were built in the region within a short period of time and there are plans to enhance localization even further. It was a great pleasure for Vneshekonombank to be a part of that success. In the future Vneshekonombank and Kaluga Region are to cooperate within the framework of projects associated with B-Park infrastructure development and Kaluga Airport runway reconstruction. DANISH PROGRAMS WILL BE USED TO TRAIN PER- SONNEL FOR KALUGA REGION PHARMACEUTI- CAL PLANTS Kaluga Region Government delegation visited Novo Nordisk head office in Denmark. The key purpose of the visit was to get acquainted with practical methods applied for training of pharmaceutical companies personnel. Currently a hitech pharmaceutical cluster is being actively formed in Kaluga Region. Six major companies, namely Hemofarm, Berlin- Chemie/Menarini, Novo Nordisk, Niar- Medic Plus, Galenica and AstraZeneca, are already engaged in the process. A new center has been established in Kaluga Region to train personnel for pharmaceutical companies. Elena Schepina, a person responsible for the training center creation, said that the experience of Danish colleagues and efficient training programs would form the basis for training relevant specialists in Kaluga Region. She also pointed out that a coordination committee formed under the Governor of Kaluga Region, which would render all necessary assistance to companies implementing investment projects in the region, would be of great importance for the pharmaceutical cluster success.

3 6, 2011 Top Officials Speaking 3 Construction Industry Development Potential «Kaluga Region does not posses natural resources forming the basis of the global raw material market. There is no gas, oil or gold deposits here. However, in certain respects we outdid the regions having such resources» Maxim Akimov, First Deputy Governor of Kaluga Region In its development, Kaluga Region relies on high quality human capital. People, their energy, ideas and talents formed the basis for economic prosperity. However, the availability of some natural resources (building stone, sand, clay, limestone, and wood) creates a foundation for the construction and construction materials industries development. This is a very important market segment for Kaluga Region, as it strives to give boost to the construction industry, significantly expand residential construction, and make housing more affordable. There is still much to be done to launch large-scale infrastructure and industrial projects. But the human capital, natural resources and favorable business climate are the three pillars, the three key elements required for a breakthrough in the construction industry. A number of construction projects have already been successfully completed in the region: Gras autoclaved aerated concrete plant, Fels Izvest, recently launched Kiilto, Lafarge (cement production) which acquired rights to develop Borschevskoe deposit, Eternit producing fibre cement panels, a concrete plant in Maklaki, etc. New innovative projects are being developed to re-launch production at the former brick plant in Vorotynsk. There is much work to be done. Especially taking into account the recently announced plans on expanding Moscow territory to the border of Kaluga region. And Moscow is a metropolis, whose demand for construction materials is virtually insatiable. Resources for production of the most popular construction materials Types of mineral resources Number Reserves of deposits Including Including Total in production Total in production Brick clay, mln. m , Expanded clay, mln. m ,5 6,2 Mortar sand, mln. m ,2 61,3 Glass-making sand, mln. m ,2 2,4 Moulding sand, mln. t ,3 0 Sand-gravel aggregates, mln. m ,3 30,8 Building stones, mln. m ,0 226,7 Chalk, mln. m ,3 0,2 Mineral pigments, mln. t 3 0 0,5 0 Gypsum, mln. t ,3 0 Sandstone (building stones), mln. m ,05 0 Rottenstone, mln. m ,9 4,! Sergey Bendenko, Deputy Director General, Kiilto Kaluga OOO Kiilto Kaluga is the first Kiilto s dry mix producing facility in Russia. We chose Kaluga Region because of its comfortable business climate all the agreements were timely met, availability of necessary engineering and utility systems, and, of course, raw materials resource base located in proximity to our plant. The facility was built in Maloyaroslavets district, next to Kollontaevskoe mortar sand deposit. Thanks to availability of such sands we are able to produce high quality dry mixes. I am positive that our enterprise will become a reliable partner to Affordable and Comfortable Housing national project implemented in the region. The region has an impressive potential for development of residential construction using wood. The estimated wood reserves for cutting is 2,432 thousand m 3, while only 2.5% of all available reserves are currently leased out.

4 4 Cover Story INDUSTRIAL CONSTRUCTION: main sites «The example of Kaluga Region clearly shows the way how to create new industrial centers almost from scratch, actively involve advanced technologies» Vladimir Putin, Russian Prime Minister VORSINO OBNINSK DETCHINO GRABTSEVO A-PARK KALUGA-SOUTH ROSVA LEMMINKAINEN private industrial park М1 Moscow-Minsk MOSCOW Vorsino Moscow region Obninsk А 101 Moscow-Warsaw KALUGA Total land plots area Available Investments under concluded agreements Jobs: Created Planned 2748 ha 1404 ha million RUR 9102 чел чел MINSK Bryansk region KIEV М3 Moscow-Kiev Sukhinichy Orel region Tula region Increasing business speed calls for new construction formats. Using the world s best practices and innovative technologies Kaluga Region became the first in Russia to launch creation of industrial parks with all the relevant infrastructure. This business product allowed to build hi-tech enterprises within the shortest timeframes. Businesses from Germany were the first to test the new offer. Volkswagen inaugurated its Russian production facility in Grabtsevo industrial park in Only 16 months elapsed since the agreement signing to roll out of the first car. It took Volvo less than 18 months to build a production facility in Kaluga-South industrial park. However, the undisputable leader in this respect is Peugeot Citroen Mitsubishi Motors Rus it built and commissioned a plant in Rosva industrial park in just nine months! Today investors may choose out of seven industrial parks. They differ in terms of area, number of occupants and a series of other parameters. The one thing they have in common is the uniqueness of our proposal to businesses: Land plot with transparent legal title; Engineering and utility systems at the border of the plot; Well-developed logistic infrastructure. All the paper formalities were simplified to the maximum extent, and legal rights are absolutely transparent. Businessmen do not have to get numerous approvals, look for contractors or engineering services suppliers. The new residents get a fully prepared site with engineering and utility systems and developed infrastructure. An investor enjoys support of the regional development agencies (Kaluga Region Development Corporation OAO and Agency for Regional Development GAU) when it just starts to choose the site, at early construction phases and during startup. Our experience shows that industrial parks laid the foundation for comfortable investment climate in the region. The leading global manufacturers say that this instrument helped them implement their projects faster and at a lower cost. Kaluga Region strives to anticipate investors needs and offer new format and products for businesses. Cluster approach became an important element of the industrial parks strategy implementation. It helps optimize the structure of the existing industrial parks and implement new infrastructure projects. The automotive industry, pharmaceutical industry and logistics are the key directions of the regional economy development. Nevertheless, industrial parks accommodate businesses from different market segments. Potential investors have a number of options for production accommodation: purchase of land plots with the existing infrastructure, rent or long-term lease of production facilities. For more information visit: www. invest.kaluga.ru; www. arrko.ru

5 6, 2011 Cover Story 5 «This was successful and fruitful work» Magna Technoplast ZAO plant, the fifth production facility of Magna International Inc. in Russia, was built in Kaluga with a recordbreaking time, even in comparison with the international best practices. The work began in February 2009 with the selection of a construction site. In March 2009 Magna management and the Government of Kaluga Region signed an investment agreement. In April Magna acquired fully prepared site in Grabtsevo industrial park with all necessary infrastructure. The ground breaking ceremony took place in July 2009 following the selection of a general contractor. Already in April 2010 Magna launched production at the new plant and started delivering commercial Development of industrial parks and construction of new production facilities creates new challenges and calls for innovative solutions. Kaluga Region government lays particular focus on establishment of cooperation between the existing Kaluga enterprises and foreign companies, coming to the region. This is important both for support of the local manufacturers and for optimization of global companies operation in the region. There are numerous examples of successful cooperation in various sectors of economy. For instance, in construction industry we should mention N.Averyanov Design Institute 8 OAO, a company engaged in integrated design projects. It participated in the largest regional projects, such as Grabtsevo, Rosva, Kaluga-South, and Vorsino industrial parks construction. Design works carried out by Design Institute 8 OAO helped to successfully implement Volvo-Vostok, PSMA Rus, Ruukki Rus, SAB Miller Rus, Fels Izvest, Volkswagen Group Rus and many other projects. Andrei Elberg is positive that the main secret behind the organization s competitiveness is its ability to offer an integrated solutions to tasks set by the customer, rather than selling separate services. In this case he means the development batches from the new facility. Thus, the construction stage of the project took exactly 10 months! Afterwards only some minor process setup was required. The official opening ceremony was held in October According to Dmitry Popov, this large-scale investment project was implemented in such a short period of time largely due to the comprehensive support provided by the regional government. Favorable economic conditions for investors, lack of any infrastructure-related risks, and proximity to major car makers plants Volkswagen Group Rus, Volvo Trucks, Peugeot Citroёn Mitsubishi contributed to successful development of Magna Technoplast ZAO business in Kaluga. «Maximum support and virtually no red tape» Back in 2008 when PSA Peugeot Citroёn and Mitsubishi Motors just started their discussion on construction of a joint production facility in Russia, the alliance managers fully realized that the green field construction of a plant in this country would be a difficult but very exciting project. Ambitious production plans, transfer from SKD to CKD processes, complex logistics infrastructure... Didier Aleton admits that the decision in favor of Kaluga Region was based on a number of factors. One of the key ones was Kaluga Region authorities dynamic approach to business, openness and eagerness. In 2009 PSMA Rus launched a construction project on the territory of Rosva industrial park. The first SKD shop was commissioned in «We are ready to meet the investors requirements» March It took two years to construct all buildings and to develop infrastructure for the new production facility. By that time PSMA Rus has built effective business relations not only with Kaluga Region administration, but also with a number of Kaluga companies, which took part in the plant construction. Currently the installation of process equipment at the new production site is almost completed. New shops are to be commissioned by mid-2012 when the plant is to become a full cycle production facility. PSMA Rus Director General believes that it would become a new stage in the plant development and an excellent example of efficient partnership between a major business and regional authorities. of all project stages: from master plan to receipt of approvals and follow-up. Engineering is a very important stage, especially if we speak of a major production facility. It predetermines the quality parameters of the new facility and its operational safety. In each country engineering is performed under different standards. Very often a foreign customer, planning to build a plant abroad, thinks of such differences at the very last moment, which causes major problems. The institute specialists, having high qualification, are able to adapt any technology to meet Russian standards and rules. The main competitive advantage of the institute is its reliability and high quality of services confirmed by numerous certificates and customer testimonials. Andrei Elberg says that many modern efficient production facilities delivering their products both to Russian and global markets have been built in Kaluga Region in the recent years, and the institute s cooperation with investors will become even more successful. The ability of the existing Russian companies to take a more active part in negotiations with potential investors is a prerequisite for such a success. And this calls for more support on the part of the regional government. Dmitry Popov, Director General, Magna Technoplast ZAO Branch in Kaluga «We managed to complete the construction phase in a short period of time, thanks to support provided by the local authorities. I would like to mention that Maxim Akimov, First Deputy Governor, and Ruslan Zalivatsky, Minister for Economic Development, personally controlled the construction progress. All issues arising at all construction stages were resolved immediately» Didier Aleton, Director General, PSMA Rus OOO «From the very beginning I was pleasantly surprises and convinced by high competence of the local administration. All our partners reminded more of modern managers, rather than typical red tape» Andrei Elberg, Director, N. Averyanov Design Institute 8 OAO «To win the investors trust, we had to change engineering process by 20% while still adhering to legislative requirements. At the same time, we had to change our approach to cooperation with customers by 80%. We understood what our customers really need, and we are willing to go a long way to meet the requirements of each partner. Thanks to huge experience, we can efficiently forecast issues that may arise and prevent any problems»

6 6 Cover Story RESIDENTIAL CONSTRUCTION: main sites «It is important not only to increase the number of construction projects, but also to ensure high quality of new buildings. Further development of the industry is directly related to introduction of new engineering solutions, energy efficiency technologies and green construction materials» Vladimir Popov, Director General, Kaluga Region Development Corporation OAO Rapid and large-scale housing construction is definitely one of the key challenges for Kaluga Region. It is not merely a social issue, but also a prerequisite for further successful economic development. There are 52 new production facilities in the region, and the total number of investment project at various completion stages is close to ,000 new jobs are to be created at new plants in the near future. A number of projects associated with construction of comfortable and affordable residential houses to accommodate these people are being implemented in Kaluga Region. 1 Vorotynskaya Roscha Vorotynskaya Roscha urban district construction projects was launched in June The new district is located in the vicinity of Rosva and I-Park industrial parks, where numerous investment projects are implemented. The main idea behind the construction was to provide comfortable apartments to specialists working at neighboring production facilities. 10 high-storey and 3 low-rise residential blocks are to be built at 140 ha. There will be approximately 6,000 apartments with the total area of 315,000 sq.m, and cottages with the total area of 45,000 sq.m. 200 apartments out of 400 in one of the houses are to be provided to PSMA Rus employees. The new urban district will have a school for 1,200 students, kindergartens, a day clinic, a swimming pool, a stadium, a hotel, a concert hall, and 5 trade centers. The first apartments are to be commissioned by the end of The construction project as a whole is to be completed in 4-5 years. 2 Vostochnoe Balabanovo Vostochnoe Balabanovo urban district is being built in an environmentally clean area of Balabanovo in the northern part of Kaluga Region, 7 kilometers away from the Moscow region border. This low-rise district is constructed with the view to provide affordable housing, in the first place, to the employees of companies operating in rapidly developing Vorsino industrial park. The total area of the new district is 280 ha. Three-storey residential buildings (9-12 apartments) with the total area of 400,000 sq.m are constructed according to European standards. The district infrastructure also includes two kindergartens (140 children), two schools (960 students), a day clinic, trade centers, open sports grounds, outdoor parking lots, public access parking lots, and a Russian orthodox church. The project developers say that it can be implemented in two years. 3 Voskresenskoe A project to build low-rise residential houses is being implemented in Voskresenskoe in the North-East of Kaluga in the vicinity of Grabtsevo industrial park. In the forest area of 180 ha, an urban district of 1,500 cottages with the total area of 130,000 sq.m is being built. The first construction stage has already been completed. It consists of 200 houses (12,000 sq.m) and secondary school for 630 students. Each house of 60 sq.m is located at the land plot of 600 sq.m. Actually such a house is similar to a typical two-room apartment. The second construction stage implementation in Voskresenskoe began in June 2011.

7 6, 2011 Cover Story 7 EcoDolye Muzhachi 4 EcoDolye Muzhachi settlement is being built in Peremyshl district at a 35-km distance from Kaluga. The new settlement has an area of 38 ha. It will include 1,212 cottages, 121 townhouses, and 28 low-rise buildings (168 apartments) with the total area of 272,000 sq.m. It is planned that 5,500 people will live in the new settlement. Houses to be built in EcoDolye Muzhachi will have an area of sq.m. The initial price of a 55-m house is RUR 1.5 million, a 74-m house RUR 2,2 million. Thus the average price per meter will be RUR 27,500. The settlement infrastructure will include three kindergartens (240 children each) and a school (1,000 students). A pharmacy, shops, consumer services and public catering facilities will be located at the entrance to the settlement. The construction is to begin in Q Yachensky Park 5 Yachensky Park will be built in the territory located in the western part of Kaluga in the vicinity of Babenki, Chernosvitino and Silikatnyi. The reasons behind the selection of this site for construction of the new residential area were the following: a short distance from the center of Kaluga, availability of necessary infrastructure, convenient access roads, including major ones. In the area of 214 ha it is planned to build five residential blocks with the centralized infrastructure facilities, such as a school, a kindergarten, a day clinic, and a shopping mall. 300,000 sq.m of comfortable and affordable residential premises are to be built. The project provides for construction of a number of 9-12-storey buildings, several blocks of 3-storey buildings and cottages. The construction is to begin in May Pravgorod 6 Pravgorod urban district will be located on the right bank of the Oka. The scope of the project is similar to construction of a new modern city. The number of Pravgorod residents is to reach 250,000, which means that the population of Kaluga will almost double. According to the project, the total area of residential premises will exceed 1 million sq.m. The buildings will vary in terms of the number of floors and level of comfort. Pravgorod will consist of seven functional areas, each one of which will become a separate investment project: Kvan residential area; Sekiotovo residential area; Novyi Tsentr (New Center), a new cultural and business center of the city; Sportivnyi residential area, Volvo Plant industrial area (Kaluga-South industrial park), recreation area with sports, fitness and entertainment facilities. Schools, kindergartens, hospitals and day clinics are to be built in Pravgorod as well. Shveitsarskaya Derevnya (Swiss Village) 7 Housing for rent is one of the key areas of Kaluga Region construction industry development. In Severnyi urban district, Kaluga, a number of 3- storey building (1,000 apartments) will be built at a land plot of 10 ha. The apartments are to be let on lease. According to forecasts, the demand for such apartments will come from Grabtsevo industrial park companies personnel, as well as qualified specialists to be employed by new production facilities of Kaluga Region. The project represents the new stage of Shveitsarskaya Derevnya project. The project to build low-rise residential blocks was launched in The site has all necessary infrastructure and utilities, which means that the construction will progress rapidly.

8 Newsletter Hospitality industry Kaluga Region No. 6 Investments. Innovations. Infrastructure 2011 Kaluga Region: new dimension of hotel business Ambassador Hotel Kaluga announced the official opening of its business hotel. The official opening ceremony took place in September in the hotel grounds. Jurgen Kazmayer, Ambassador Hotel Kaluga Managing Director, said that the hospitality sector in Kaluga Region was booming. The number of business persons coming to attend various workshops, exhibitions and to take part in negotiations constantly growing. Ambassador opening has become a major event in the city business life, which will bring Kaluga tourist market to a new level. The hotel is located in the city next to Grabtsevo industrial park. The hotel features 136 rooms of different categories and 74 comfortable apartments intended for guests who plan a longer stay in Kaluga. The hotel also has two meeting rooms and two conference halls for business and public events. Erlkönig restaurant s chef John van der Boeren entices guests with delicious meals. Time Out bar is the perfect venue for meeting with friends, playing billiards and darts. Troyka bar invites guests to relax after a busy day. The hotel premises include a SPA, Russian bath, hammam, and a fitness center. According to Maxim Gerasimov, Sales and Marketing Director, Ambassador Hotel Kaluga offers European quality of services. Currently it is the only 4-star hotel in Kaluga. Experts from Russian Forbes named Ambassador the best Kaluga hotel in their rating entitled the Best Regions for Doing Business Kaluga Region Newsletter Investments. Innovations. Infrastructure Published with the support of Ministry of Economic Development of Kaluga Region Materials provided by «Kaluga Information Agency» Contacts 27 Truda St., Kaluga, Russia Tel.: +7 (4842) Fax: +7 (4842) skozeneva@gmail.com ta7096@gmail.com