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. Last Updated: 07/27/2016

Conflicting Messages On Boguchansk Deal

RusHydro said Monday that it would slash construction costs at its Boguchansk hydropower plant by 11 percent this year and would pay out 750 million rubles ($22.5 million) of debt with partner RusAl to the plant's builders by the end of the week.

RusAl, however, denied that any agreement on costs was reached and called for a review of all construction costs, floating the possibility that alternative contractors could be chosen, the firm said in a statement, Bloomberg reported.

RusHydro said the decisions were reached in cooperation with RusAl.

The contractors have been working at half capacity since February and have threatened to stop altogether if the debt is not paid by RusAl and state-run RusHydro, which are equally managing the project.

"Today, we pressed our contractors to agree to reduce the cost of their services this year," acting CEO Vasily Zubakin said on the sidelines of an industry conference. "This way, we will save 800 million rubles."

United Energy Construction president Sergei Burkov, one of the contractors, said by telephone that RusHydro had negotiated a 17 percent decrease in payments with him this year, bringing the figure to 1.5 billion rubles.

"They asked for a bigger decrease, but we stood firmly," Burkov said. "We couldn't help but agree on the cuts, however, as we understand that the financial crisis is out there."

Burkov said RusAl and RusHydro owed him 148 million rubles for construction work in February and March. "I have 400 people working on the site, I need to pay them salary, pay taxes, pay for construction materials. I need the payments urgently," he said. "If they don't pay, we won't be able to continue building."

Zubakin said Monday that RusAl and RusHydro would pay the contractors 750 million rubles -- the debt for February -- by the end of the week.

"If RusAl cannot pay, we can do it ourselves," Zubakin said. "We have enough money on our accounts." RusAl spokeswomen did not answer calls and e-mailed requests for comment. No agreement has been reached on whether RusAl will pay its debt, RusHydro spokesman Yevgeny Druzyaka said.

RusAl is seeking to delay the launch of the plant, saying the facility is too expensive and will have too few customers. The first stage of the plant is supposed to be launched in December 2010, while the second stage will come on line in 2012. Energy Minister Sergei Shmatko has repeatedly said the massive Boguchansk plant must come on line as planned.

RusHydro has said RusAl, Oleg Deripaska's indebted aluminum producer, stopped paying builders in January. RusAl paid 192 million rubles to the project account on April 15 and said it was ready to pay out 1.2 billion rubles more, which would fully cover the company's debt for investing in the project for the first quarter.

RusHydro said the 1.2 billion rubles had not yet been paid.