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. Last Updated: 07/27/2016

UES, RusAl Sign Deal to Finish Hydro Plant

KODINSK, Central Siberia -- Russia's power monopoly and its biggest aluminum producer agreed on Saturday to finish building a Siberian hydroelectric plant after years of squabbling.

Unified Energy Systems and RusAl, the world's No.3 aluminum company, signed an agreement to finish construction of the Boguchansk hydro plant, started in 1980 when Soviet leader Leonid Brezhnev was in power, but never completed.

A joint company will own UES's and RusAl's stakes in the plant -- totaling about 90 percent -- and all the shares in an aluminum plant that will be built nearby. Finishing the power station will cost about $1.2 billion and building the aluminum factory will cost about the same, Economic Development and Trade Minister German Gref said, citing preliminary estimates.

"The decision is taken and the signing will take place later ... , after the agreement and introduction of the necessary ministerial directives," Gref told reporters after a meeting on the deal.

Anatoly Chubais, head of state-controlled UES, and Oleg Deripaska, who controls RusAl, have been locked in a lengthy battle over the plant amid fears that the country's biggest commodity producers were seeking control of electricity generation assets.

Electricity is a key cost for producers of aluminum, who are seeking to secure sources of energy as Chubais pushes through a complicated reorganization of the power sector.

Gref said that the cost of the hydro-plant did not include $600 million needed for work in the area which would be flooded by a lake to supply the plant. Gref said preliminary forecasts on the cost of the construction may have to be increased. He also said that a 200-kilometer railway would have to be built and thus agreement with Russian Railways was essential.

Construction of the plant may start in 2006 if all the necessary paperwork is finished in time, said Vyacheslav Sinugin, the head of wholesale hydroelectric generation. Gref said the preliminary documentation might take all of next year.

He said the project should be up and running by 2012, and hinted that the state may take some part in the project, although he did not give any details.

The hydro plant, a grand Soviet project, has cost billions of dollars in upkeep since the project was approved in 1976.