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Black Sea Investments Conference

Sochi Administration's List of Investment Projects

1. Air Transportation
- Investments are sought to complete the construction of the INTERNATIONAL SOCHI AIRPORT (Adler), to create the "SOCHI-AERO" free trade zone, to set a passenger air company and a cargo air carrier.
- At present the air terminal complex "Sochi" is a state owned company, with the book value of $ 120 mln. The overall value of the air terminal complex is $ 200 mln. It is planned that the complex would serve as a base for setting, together with the investor, a joint-stock company of the close type, in which the investor would hold 40% of shares.
- Individual companies - the cargo transportation company, the passenger airline, the business-class passenger airline - are planned. Up to 70% of shares in each company would be hold by the investor.
- The complete set of technical documentation on the air terminal complex is available and has been inspected by international experts.
- The volumes of reconstruction of the existing sites and of construction of new venues at the air terminal complex, as well as the contractor companies will be determined together with the investor.
- Joint Ventures in airline business to be set on the investor's initiative.
- The free trade zone (FTZ) to be organized in the free customs zone "SOCHI - AERO" will allow to simplify the specific visa, customs and border formalities on the grounds of the air terminal complex and of the adjusted urban territories. Besides, the FTZ will promote the construction of a net of consignment warehouses for transit import-export cargo flows within Sochi region and to other destinations in Russia and the CIS countries.
- At the same time there will be created a local free economic zone "SOCHI-AERO" , which will be granted the 80% tax allowances for 7 to 10 years if adequate reinvestments of the capital are directed into the infrastructure of the air terminal complex.
- In the FTZ "SOCHI-AERO" the investor is offered 25% of the legal ownership share in the zone management company, as well as the priorities in export-import operations, in the development of the service facilities and organization of food supplies on board the liners, etc.

2. Water Transportation
It is planned to shape the infrastructure of sea tourism and transportation along the Grater Sochi coast to achieve the following objectives:
- to create the region of intensive yachting, attractive to tourists at the wide range of markets, particularly at the markets of wealthy travelers who prefer yachting, at the market of small ship owners, at the market of charter and broker companies;
- to revive the system of passenger transportation along the Grater Sochi coast;
- to revive the international Mediterranean - Black Sea cruises.
In the line with the above-mentioned objectives, there are plans for the construction of Sochi marinas:
- The floating village - marina "Sheraton - Dagomar" of the coastal island type and the capacity of 800-1000 vessels, with a hub, with a hotel complex for 2000 guests is to be constructed in Dagomys opposite the 5-star-hotel "Sheraton". The marina will perform along the Sochi river - Shakhe river coastal passage. The total value of the construction is $ 493 mln.
- The floating village - marina "Homar" of the coastal island type, with the capasity of 500 vessels, with a hub, with a hotel complex for 1000 guests, will perform along the Adler and Khosta districts of Sochi. The total value of the construction is $299.3 mln.
- The club - marina "Sochi Yachting Club" for 200 vessels in the mouth of Bsugu river will incorporate the existing yachting sports marina and will operate in the recreation urban complex of the Cenral and Khosta districts of Sochi. The total value of the construction is $59.5 mln.
- The "Vodmar" marina in the area of Ashe river, near the "Vodopadnaia" railway station, will have the cargo terminal for 300 vessels and will operate along the coast from Sochi river to Shakhe river. The total value of the construction is $ 205.18 mln.
- The boarding marina "Centrmar" by the Southern terminal of the Sochi sea port will accommodate 70 vessels and will operate along the Central district of Sochi. The total value of the construction is $ 29.42 mln.
- The "Kumar" marina of the coastal type near the mouth of Kudepsta river will provide capacity for 300 vessels. It will be linked with the projected complex of attractions "Kudepsta" and will operate along the Khosta district of Sochi. Its concept is being developed. The estimated value of the construction of this marina and complex is $700 mln.
- The "Youzhmar" marina for 200 vessels, with an aqua-park, with a terminal for local passenger transportation will be constructed near the "Youzhnyie Kultouri" park in Adler district of Sochi. Its concept is being developed. The estimated value of this construction would be $200 mln.

3. Motor Transportation
In order to cut the way from Central Russia to Sochi by 120 km, and to provide security in motor transportation, as the drivers would be able to avoid the tiresom driving along the wavy mountainous roads, - it is planned to construct the motorway Maikop - Dakhovskaia - plato Lagonaki - valley of Shakhe river - Solokh-Aul - Dagomys. This new alternative road would be a public-private venture (with the new passages of the highway to be in private property, and the existing passages of the highway to be public).
The construction of this new highway will open routes for international tourists to Agygeia, known for its magnificent wild forests and other nature resources for international tourism development.

Specifications of the road:
Total length - 175 km
Existing highway (reconstruction) - 115 km
New construction - 60 km.

At present there are studies conducted in the area of the projected new road, that will include economic, ecological and feasibility studies.

4. Railway Transportation
It is projected to construct a new railway line Adler - Maikop, with some new tunnels to be made. The aim of the project is to redirect some cargo flows from the new sea port while banning the transit of goods through the territory of health resorts. The construction will allow to close the existing line which runs along the beaches, and thus to allocate some most valuable coast parts to the development of resorts. In place of the line to be dissembled there will be constructed a monorail.
Investments and the feasibility studies for this new railway construction are requested.

5. Construction of a new cargo sea port in Sochi
It is projected to construct a new cargo sea port in Imeritinskaia bay. It will serve as a transshipment place for cargoes to and from Russia. The list of cargo goods does not include cargoes which are dangerous for the environment (such cargoes as oil and its products). The port will be linked to the railway and to the strategic motor way.
The project is available, investments value would be $1.8 bln.

6. Electric power supply

1. Thermal power engineering
- Estimated capacity - 60 hecto-calories of thermal power and 120 megawatt of electric power:
- All kinds of endorsements have been obtained, the feasibility study, the technical specifications and the business plan are available.
- 25% of the volume of capital construction have been realized , 40% of intranets and communications have been installed, 15% of external communications have been constructed.
- The gas turbo generator has not been purchased, yet when it is purchased, installed and assembled by the investor's company, all the necessary adjustments into the technical terms can be introduced.
- There is a technical passport for eternal land use by the joint stock company of close type "ENERGO", the rent is minimal as the site is given the status of city infrastructure and importance.
- It is possible to set a joint venture with the investor, and the investor can obtain the ownership share.
- 60% of funding can be provided by the investor as an installment credit for 10 years minimum, on the terms that the credit repayment will start from the 5th year of operation.
- For the period of construction and for further 10 years there would be a relief from up to 80% of all local taxes and up to 40% of all federal taxes, under condition that the due sum would be reinvested into the city infrastructure development.
- The Joint Venture will be granted concession in production and sale of the thermal and electric power for the whole period of the site operation. The value of the project is $150 mln.

2. Small hydroelectric power stations in mountainous rivers.
- The mountainous areas of Grater Sochi are the perfect sites for the high pressure small hydroelectric power stations (SHEPS) with the derivation scheme, and such SHEPS are able to provide most economical technical resolution. This potential of the area is similar to the resources of Austria and Switzerland , where by 1991 nearly 1300 and 2 300 SHEPS sites had been constructed.
- In Sochi 120 sites could be constructed in 40 rivers. Capacity of each SHEPS is estimated as 6000 megawatt. The total capacity of all SHPS sites would be 132.85 megawatt, including 108.85 megawatt to be provided by SHEPS sites with individual capacity up to 3200 kilowatt. 46 of the projected SHEPS sites have 1 megawatt capacity. It is possible to accommodate in the station structure any tourist facility - like a restaurant, or a cafe, - which would provide services and promote the development of new hiking routes.
- The biggest potential is the capacity of Mzymta river, which runs down inside the gorge, where skiing resorts are being intensively developed. It has been estimated that 54 SHEPS sites could be located in Mzymta river, their total capacity would be 75.8 megawatt, including 25 SHEPS sites with individual capacities of over 1000 kilowatt.
- River Shakhe, which geographically has a great potential for attracting tourism development in Western Caucasus, is also convenient for SHEPS construction - to the total capacity of 22.85 megawatt.
- River Sochi, which runs through the industrial district of Sochi, is a potential for the construction of 22 SHEPS sites in the mountains, with the total capacity of 13.7 megawatt. SHEPS sites will be installed in the rivers Psou, Ashe, Psezuapse.
- The potential technical resources of Sochi are estimated at 585 mln kwatt hours. The construction and operation of SHEPS sites will allow to exclude from the technical balance of the city 175.5 th tons of organic fuel, which will mean that the pollution of the air will be decreased by 8.8 th tons of pollutants.
- Most of the projected SHEPS sites will be constructed in the remote mountainous areas, where the existing electricity supply is not reliable. Thus the SHEPS sites will impact and drive the development of remote settlements and areas by stimulating their economic development and promotion of their recreation resources.
- The SHEPS sites are constructed without water reserves, they operate in the regime of the river flows, and in some rare cases their operation can be adjusted according to day schedule. The sites are planned to be constructed in the river passages with 20-30 m of water per 1 km and over, with the pressure of 50-150 m.
- The buildings of the SHEPS sites are constructed of block units (one block box accommodates equipment - according to the number of agregates: a block box for electric technical equipment and a block box for supplies). Transportation of block boxes is by railway and motor transport. All block boxes are assembled on a concrete base which is 20-40 sm thick. SHEPS sites operate without being regulated, it's monitored automatically, so there is no need in permanent personnel.
- Cost of 1 kwatt/hour of electricity generated at SHEPS is less than 25% of the cost of electricity consumed at present. Average payability of each site is 1 year.
- Similar and bigger potential belongs to the rivers on the Eastern slope of the main Caucasian Range (the republic of Adygeia, Karachaievo-Cherkessia, Kabardino-Balkaria, Dagestan, etc.) Thus the programme is of a wider region scope.
- The value of the project in Sochi is $100 mln.

7. The Sheraton hotel chain
1. Sheraton -1
a 5-star hotel complex, 650 guests, in Dagomys, Lazarevski district, Sochi. Feasibility study has been done, technical terms and endorsements have been obtained. Value - $110 mln. Period of construction - 21 months.
2. Sheraton - 2
a 5-star hotel complex with the international tennis court, in Dagomys, lazarevski district, Sochi. Investments are needed to conduct feasibility study and for construction. Estimated value - $150 mln.
3. Sheraton - golf
a 5-star hotel complex with a golf club, in Krasnaia Volia settlement, Adler district, Sochi. Will include 150 bungaloes, a hotel for 200 guests, a gold club, a race court, stables for 60 horses. The feasibility study is ready and available. The project value - $263 mln.Period of construction - 24 months.
4. Sheraton-Cupidon
a 5 star hotel for 60 guests, next to the marina "Vodmar" in Lazarevski district, Sochi. Investments are requested for feasibility study and construction. Estimate value - $ 50 mln.
5. Sheraton - Gorni Vozduh (air in the mountains)
a 5-star hotel for 100 guests in Solokh Aul settlement, Lazarevski district, Sochi. Investments are requested for feasibility study and construction. Estimate value - $ 70 mln.
6. Sheraton - Okhotnichii domik (A Hunter's house)
a 5-star mountainous boarding house for 40 guests in Lazarevski district of Sochi. Investments are requested for feasibility study and construction. Estimate value - $ 30 mln.
7. Sheraton - Podnebesie (under the skies)
a 5 star hotel for 100 guets in Krasnaia Poliana, Adler district, Sochi. Investments are requested for feasibility study and construction. Estimate value - $ 70 mln.
8. Sheraton - Fischt
a 4 star hotel in the mountains for 35 guests (the 2-nd of the hotels of the complex), a restaurant, Russian baths (bania), a swimming pool, cable transport to the skiing heights, magnificent mountain skiing tracks. The 1-st hotel of the complex is in operation - it's a 2 star boarding house in the mountains for 16 people, - needs reconstruction. Feasibility study is available. Investments are requested for construction. Estimated value - $ 7 mln.

8. Krasnaia Poliana skiing resort complex in the mountains
The construction of a chain of hotels, boarding houses, rest homes in the mountains, also the construction of several cable lines for transportation up to the skiing tracks, the facilitation to the skiing tracks development into the mountains - with the necessary infrustructure of catering and other facilities.
Estimated value of total investments - $2 bln.

9. Reconstruction of available spas
1. "Zeleonaia Roscha"
- a spa in intensive operation, for 400 guests, 55 ha of land. The project will include reconstruction of the high rise hotel, of the beach, the development of a range of recreation facilities, animation, sports grounds and diagnostic-medical complex. It is envisaged to radically improve the comfort and service standards. Feasibility study is available. Estimate value - $ 20 mln.
2. "Frunze"
- a spa in intensive operation. It is envisaged to radically improve the comfort and service standards. Feasibility study is available. Estimate value - $ 18 mln.
3. Other 200 spas and accommodation facilities in Sochi
- most of them need reconstruction, re-equipment, updating of the diagnostic-medical complexes, improvement of service. Total value - $1 bln.

10. Water and drinks
1. In Sochi there are over 140 registered wells of mineral and seet water, each of them has the capacity of 5 mln litres of water a year.
The project aims at setting a Joint Venture which business will be to bottle water into glass and plastic vessels. Export will constitute 80% of the trade, while the demand at Russian national market is still not satisfied, in fact, the national market is able to consume practically unlimitted amount of water supplied. The expected yearly capital turnover - $ 20 mln., with 100% of profitability. There are several individual projects on which feasibility studies are available.
Value of investments - $ 18 mln.

Other projects are aimed at the construction of a plant of soft (non-alcoholic) drinks; of a production of Champaigne vines; of a beer brewery; of a drinking water supply, etc. Feasibility studies are available. Value of investments - $ 14 mln.

There is a plan for the construction of a cigarette producing workshop - with the capacilty of 10 bln cigarettes per year. Also, the reconstruction of the only in Russia tabacco fermenting plant.
Capital turnover per year - over $ 100 mln.
Requested investments - $ 35 mln.

Ecology

- wastes processing plant in Sochi, with the capacity of 140 th tons a year. Book value is $ 25 mln. Needs full reconstruction - which will cost $ 35 mln, including the installment of the lines of technological processing of wastes into the construction materials.
- Construction of 2 new wastes processing plants, with the capacity of 30 th tons a year each.
- Feasibility studies available. Value of investments - $ 60 mln.

Management Information Network of facilities in Sochi

The project is aimed at creating a reliable system of management and monitoring of the resort development. The system will include: advertising and information; accommodation booking; ticket reservation - of air, railway, other transportation; reservation of services; communication; facilitation to the free customs zones; cargo (re)shipping; banking services, that will enhance the development of all elements in the system.
Investments are required for the feasibility studies; data base; equipment; creation and equipment of the outlets of the system.
Estimated value of the project - $ 500 mln.

Deputy Head of Sochi City Victor K. Skrypkin
Tel : 927683, 922251
Fax : 927300
Code of Russia : 007
Code of Sochi city : 8622