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EuroChem acquires natural gas operator

Moscow, 20 January, 2012, OJSC “Mineral and Chemical Company “EuroChem” (“EuroChem”) today announced that it has completed the acquisition of 100% of the share capital of LLC “Severneft-Urengoy”, a gas exploration and production company operating in Russia’s Yamalo-Nenets Autonomous Region. The total value of the transaction on a cash-free, debt-free basis is RUB 12.7bn, or approximately USD 403 million at the current exchange rate.

The assets have a combined annual production capacity of approximately 1.1 billion cubic meters of natural gas and 220 thousand tonnes of gas condensate with aggregate total proven and probable reserves of 50 billion cubic meters of natural gas as well as 32 million tonnes of recoverable oil reserves.

Commenting on the transaction, Dmitry Strezhnev, EuroChem CEO, said “The idea of partially back integrating into natural gas production had been in the pipeline for some time. This is a very unusual move by a nitrogen fertilizer producer, but it will counter the effects of rising natural gas costs in Russia by providing a boost to our ammonia gas efficiency and strengthen our cost advantages”

EuroChem converts natural gas and atmospheric nitrogen into ammonia, which is the primary raw material for its nitrogen-based fertilizer production. Severneft-Urengoy’s current natural gas production capacity represents up to 25 per cent of EuroChem’s annual gas consumption. For the production of nitrogen-based fertilizers, EuroChem operates the Novomoskovskiy Azot and Nevinnomysskiy Azot nitrogen plants in Russia.

The transaction, which was approved by the EuroChem Board of Directors, received regulatory clearance from the Federal Antimonopoly Service of the Russian Federation (FAS).

K&L Gates acted as EuroChem’s legal counsel at different stages of the transaction.

EuroChem is one of the world’s top ten agrochemical companies by capacity. Vertically integrated with activities spanning from mining to logistics and distribution, EuroChem focuses on nitrogen and phosphate fertilizer production and holds licenses to develop potash reserves in Russia which entitle it to the fifth-largest volume of proven and probable potash reserves globally.

Its main production assets include the Nevinnomysskiy Azot, Novomoskovskiy Azot, Phosphorit, EuroChem – BMU, and Kovdorskiy GOK facilities in Russia and the Lifosa plant in Lithuania.

For further information, please visit www.eurochem.ru or contact:

Investors:
Olivier Harvey
Phone: +7 (495) 795 2527 ext 1519
Fax: +7 (495) 960 2293
ir@eurochem.ru

Media:
Vladimir Torin
Phone: +7 (495) 795 2527 ext. 1440
Fax: +7 (495) 960 2293
pr@eurochem.ru

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