OREANDA-NEWS. On 03 April 2008 LSR Group, one of the leading real estate developers and building materials producers in St Petersburg and the Leningrad, announced that as part of an investment project for construction of a cement plant in Slantsy in the Leningrad region, OOO Cement (a subsidiary of LSR Group) has entered into a construction contract with OOO Cement Northwest, 100 percent owned by Hefei Cement Research and Design Institute, China. The contract is worth approx. ?163 million and is funded from LSR’s IPO proceeds and borrowings. The agreement was approved by the Board of LSR Group in March 2008.

Under the contract, OOO Cement Northwest will act as the general contractor of the whole range of design and construction work planned to be completed in June 2010.

OOO Cement Northwest was established by the state-owned Chinese company, Hefei Cement Research and Design Institute, specifically to construct the cement plant for LSR Group in the Russian Federation. The company was awarded the contract by LSR Group following bids from many leading players in industrial design and construction because it offered the best combination of cost, quality and time. It should also be noted that Hefei Cement Research and Design Institute has extensive experience in the construction of cement plants in particular and in the last three years has built and designed more than ten such plants across the world.

Phase 1 of the project with a capacity of 1.85 million tons of cement is planned to be operational in 2010. The Group will invest approx. US\\$600 million in the project by 2010. Subsequently, the plant capacity will be increased up to 3.7 million tons through the construction of a second production line. Currently, in addition to the design and construction work contract, another contract is being implemented providing for the supply of equipment worth ?126 million by FLSmidth & Co A/S of Denmark.

Commenting on the announcement, Igor Levit, CEO and member of the Board of Directors of LSR Group, said:

“We are pleased to say that LSR Group is on schedule with implementing this strategic project in Northwest Russia in line with the business plan. The Group itself is one of the major cement consumers in Russia and needs up to 1 million tons per year. Once operational, the new plant will enable LSR Group not only to satisfy its own demand for cement, but also take a leading position in the cement market of the Northwest Federal District of Russia, which experiences serious shortages of this building material.”

According to the Resheniye consulting and research company, the shortage of cement in the RF Northwest Federal District in 2006 was 1.05 million tons while the market size was 4.70 million tons. In 2008, the market size is expected to reach 5.65 million tons, and the cement shortfall will grow up to at least 1.34 million tons, according to Resheniye’s forecasts.