core sector communique

Mechel OAO Announces Signing Cooperation Agreement With FGC UES and RusHydro

Moscow, Russia – August 27, 2010 – Mechel OAO (NYSE: MTL), one of the leading Russian mining and steel companies, announces signing a cooperation agreement with JSC Federal Grid Company of Unified Energy System (FGC UES) and JSC RusHydro (RusHydro), which regulates the parties’ cooperation while implementing investment projects on construction of Nizhne-Bureisk hydro power plant (HPP) and Elga coal mining complex. On August 27, 2010 Mechel, FGC UES and RusHydro signed the cooperation agreement which regulates the parties’ cooperation while implementing investment projects on construction of Nizhne-Bureisk HPP and Elga coal mining complex. Igor Zyuzin, Mechel’s Chairman of the Board of Directors, Evgeny Dod, Chairman of the Management Board of RusHydro, and Oleg Budargin, Chairman of the Management Board of FGC UES, signed this document. According to this agreement RusHydro will construct Nizhne-Bureisk HPP as well as develop power generation schemes. Mechel OAO will commission power receivers for Elga coal mining complex. FGC UES in its turn will construct external power supply facilities of Elga coal mining complex as well as provide power schemes of Nizhne-Bureisk HPP. In January 2010 FGC UES, Mechel OAO and System Operator UES OAO approved the external power supply scheme for Elga coal complex. The construction of the external power supply facilities will start in 2011 and have two stages. Within the 1st stage, by 2013 FGC UES will reconstruct the 220kW Prizeiskaya substation, build three new 220kW substations and 270 km long 220kW power transmission line Prizeiskaya – Elgaugol in Amursk region. By 2015 the extension of the 220kW power distributing gear at Prizeiskaya substation will be completed. The 2nd 220kW power transmission line Prizeiskaya – Elgaugol and the 2nd 125 MVA autotransformer at 220kW Elgaugol substation will be constructed by that time as well. Construction of power facilities for Elga coal mining complex is included into the draft of FGC UES investment program for 2010-2014, which is submitted for approval to the Ministry of Energy of the Russian Federation. Elga coal deposit is the largest coking coal deposit in Russia. It is located at the South-Eastern part of Yakutiya, 415 km to the East from Neryungri City and 300 km from Baikal-Amur railway. Estimated balance coal reserves amount to 2.2 billion tonnes.