GE, INTER RAO UES & Russian Technologies to Form Joint Ventures to Modernize Russia’s Power Generation & Healthcare Sectors

GE (NYSE: GE) and two Russian companies signed a framework agreement today to form joint ventures that will help modernize the country’s healthcare and power generation sectors by localizing technology, manufacturing and expertise.

Under the framework agreement, GE, state corporation Russian Technologies (Rostekhnologii) and INTER RAO UES JSC intend to form a joint venture to manufacture, assemble, sell and service energy-efficient heavy-duty gas-fired power generation turbines in Russia. GE and Russian Technologies also intend to form a joint venture to manufacture, assemble, sell and service high-tech medical diagnostic equipment in Russia. Financial details of the transactions were not disclosed.

The framework agreement -- signed today in Moscow by GE International President and CEO Ferdinando Beccalli-Falco, Inter RAO UES Management Board Chairman Boris Kovalchuk and Russian Technologies’ Deputy General Director Dmitry Shugayev and witnessed by Russian Prime Minister Vladimir Putin -- supports the Russian government’s priorities of attracting foreign investment, enhancing the country’s aging energy infrastructure and modernizing its healthcare system. These initiatives are aligned with GE’s and its partners’ core industrial capabilities. Until local production of components can be established in Russia, they will be imported from other GE locations or qualified suppliers.

"These strategic partnerships are the latest examples of GE’s long-term commitment to Russia and our ‘company to country’ strategy, in which we work directly with governments to satisfy their needs in rapidly developing markets,” said Beccalli-Falco. "We are working with our Russian partners to bring technology to Russia and develop it locally. By harnessing GE’s wide range of products and services in strategic growth sectors, we and our partners can help to diversify Russia’s economy beyond natural resources and increase energy efficiency. In addition, we can apply innovative technology to help Russia reduce costs, increase access and improve quality in healthcare.”

Building on a memorandum of understanding the parties signed June 4, 2010, today’s agreement reflects GE’s deepening commitment to Russia, a major growth market for the company. The framework agreement envisions production of GE’s energy and medical equipment in Russia, as well as technology transfer, which will facilitate the development of a local supply chain and later, production in Russia of component parts for the joint ventures.

Energy Joint Venture

In energy, GE agreed with Russian Technologies and INTER RAO UES to form a jointly owned entity to manufacture, sell and service GE’s highly efficient, low-emissions and heavy-duty 6FA gas turbines at a factory to be built in the vicinity of the Russian city of Rybinsk. The turbines will address a growing need in Russia for high-performance, mid-sized power blocks in combined heat and power applications.

"INTER RAO sees this agreement as way to introduce modern, highly effective solutions for steam/gas cogeneration to the Russian energy sector, optimizing spending on the construction of new gas generation facilities and modernizing existing installations,” said Kovalchuk. "This will increase the stability and reliability of the energy system.”

This is the latest and most significant step in GE’s multi-phase localization plan for its Energy business in Russia. In November, GE opened the Kaluga Energy Technology Center to service advanced power generation equipment, helping customers keep their power plants running more reliably and efficiently. Initially, the new center will offer services for GE power generation equipment installed in Russia and the CIS. Later, the center’s production capabilities will be expanded to meet the Russian energy market’s demand for various products.

According to Russia’s Energy Ministry, the country needs to invest US $80 billion in the next 10 years to address aging generation assets. Official Russian government forecasts say Russia needs to build 80 gigawatts of thermal power generation capacity in the next 20 years. According to the Ministry, the average efficiency of gas-fired power stations in Russia is 38 percent, with a goal of 53 percent efficiency by 2030.

Healthcare Joint Venture

The healthcare joint venture is expected to start with production of CT scanners, then expand to other diagnostic equipment such as angiographs, MRI, ultrasound, digital X-ray, PET, gamma cameras and medical devices. The joint venture may use the recently established joint GE Healthcare-Medical Technologies Ltd. CT scanner assembly facility in Moscow. In May 2010, GE Healthcare installed in a Moscow hospital the first Russian-assembled 16-slice CT scanner, and through the end of November, it had been used to perform more than 2,000 exams.

Healthcare components initially will be sourced from GE, shifting later to local production by qualified Russian suppliers in keeping with GE’s requirements for quality, cost-effectiveness, design specifications and intellectual property protection.

The government plans to spend more than US $15 billion from 2011-2013 on healthcare. GE estimates Russian demand today for CT scanners alone at 3,000 units.

"The energy joint venture will provide Russian Technologies with the opportunity not only to produce high-tech gas turbines but to acquire a potential customer for components, services, repair and rehabilitation,” said Shugayev. "This will align with GE’s commitment to the maximum localization of production of energy equipment. On our side, we have already begun modernizing our businesses to make them qualified suppliers. The medical joint venture, meanwhile, could make a substantial contribution toward modernizing Russia’s healthcare system. Establishing production in Russia will facilitate not only the transfer of modern technology and local sourcing of components, but timely and quality service, as well as the creation of a wide regional system for the preparation of specialists.”

Russian Technologies and INTER RAO UES JSC will each hold a 25 percent stake in the energy joint venture. Russian Technologies will also hold a 50 percent stake in the healthcare joint venture. GE will hold 50 percent of each joint venture. GE will exercise operational control over the joint ventures, with joint decisions by the partners on strategic matters.

About GE in Russia

GE, which has been operating in Russia since the early 20^th century starting with the Soviet Union’s electrification and sale of locomotives and oil and gas equipment, is today represented across the country in multiple industries: healthcare, transportation, aviation, electric power, oil and gas, water treatment, financial services, media, appliances, lighting and intelligent platforms. With a head office in Moscow, GE has 2,500 employees and reported 2009 revenues of US $1.6 billion in Russia. GE has established training centers for Energy and Healthcare in Moscow. For more information, visit www.ge.com/ru.

GE (NYSE: GE) is a diversified infrastructure, finance and media company taking on the world’s toughest challenges. From aircraft engines and power generation to financial services, health care solutions, and television programming, GE operates in more than 100 countries and employs about 300,000 people worldwide. For more information, visit the company's Web site at www.ge.com.

About INTER RAO UES JSC

INTER RAO UES, JSC is one of Russia’s largest electric power companies, controlling a number of generation and distribution assets in Russia and abroad. The total installed capacity of the electric power stations of INTER RAO UES Group is about 18,000 MW. The company is a major investor and a leading exporter and importer of electric power in Russia, as well as a major generator in Russia.

About Russian Technologies State Corporation

Russian Technologies State Corporation was set up in accordance with the Federal Law of the Russian Federation on Nov. 23, 2007. Russian Technologies State Corporation’s goal is to assist in the development, production and export of high-tech industrial products by providing support, both on the domestic and foreign markets, to Russian companies involved in the development and production of high-tech industrial products, and by attracting investments to organizations in various industries. www.rostechnologii.ru

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