Investment Audit of the Udmurt Republic Version 2.0 Udmurtia on the Map of Russia 1

Home , Buy (river), Glazov, Kambarka, Kirov railway station, Lada Izhevsk, Mozhga

INVESTMENT AUDIT OF THE UDMURT REPUBLIC VERSION 2.0 UDMURTIA ON THE MAP OF RUSSIA 1

Moscow MADE IN UDMURTIA Kirov 41,200 SQ KM Perm Nizhny Novgorod Area Izhevsk (56th/85*) Kazan Ekaterinburg

Ufa Samara 1.5 M Population (30th/85*)

UDMURTIA’S LARGEST CITIES RUB 622.7 BILLION1 970 KM GRP IZHEVSK 650,000 Distance from Izhevsk to (33rd/85*) Moscow: SARAPUL 98,000 2 hours 98,000 VOTKINSK 18 hours (1200 km)

GLAZOV 93,000 RUB 412,3001 GRP per capita (42nd/85*) KEY TRANSPORT INFRASTRUCTURE:

Trans-Siberian Railway (Balezino Station, Glazov Station)

¹ P reliminary data for 2018, Ministry of P320 Elabuga-Izhevsk regional highway, connection to M7 Volga Economy of the Udmurt Republic Udmurt Republic * Ranking among Russian regions in 2017 Volga Federal District (VFD)

Source: PwC analysis on the basis of Rosstat data and geodata 2 IGOR SHUVALOV MAKSIM ORESHKIN DENIS MANTUROV DMITRY PATRUSHEV 3 Chairman of VEB.RF Minister of Economic Development Minister of Industry and Trade of Minister of Agriculture of the THE REGIONAL ADMINISTRATION HAS INITIATED of the Russian Federation the Russian Federation Russian Federation AN INVESTMENT AUDIT TO SUPPORT UDMURTIA’S LONG-TERM ECONOMIC DEVELOPMENT MADE IN UDMURTIA 2014 2017 2019 2020

“VEB.RF, the Russian Export “Udmurtia’s focus on driving non- “Udmurtia is a region with “Udmurtia’s climate and Centre, DOM.RF and the SME resource-based exports, training enormous investment potential environment provide an excellent Investment strategy Map of investment Investment audit Udmurt Republic 2027 Social opportunities and Economic Strategy Corporation are providing the entrepreneurs and promoting and ambitious goals to develop foundation for the further Udmurtia’s 2025 An investment audit of the people of Udmurtia with essential entrepreneurship, enhancing the manufacturing sector. There development of the agribusiness, Investment Strategy is The Udmurt Republic Udmurt Republic has been The strategy will be based on tools to attract investors, open new productivity and adopting best is intense demand for investment food, raw materials and consumer aimed at enhancing the undertook a massive conducted, resulting in the growth areas identified during manufacturing sites, create new practices from other regions, with among companies in Udmurtia goods sectors. Fast growth republic’s investment stock-taking of its following outcomes: the investment audit. jobs, upgrade existing enterprises the proper implementation, is and strong collaboration between has helped to drive promising appeal and nurturing a investment resources ━ the leading ━ a roadmap of priority and promote goods made in definitely the right way to develop the regional administration and investments in Udmurtia’s favourable environment for and developed a map of ━ ━ factors promoting investment areas Udmurtia in foreign markets. VEB. the region’s economy.” the Industrial Development Fund agricultural sector, where there investment projects. investment opportunities: the investment has been developed, RF has forged a comprehensive established by the Russian Ministry are vast opportunities on both the madeinudmurtia.ru The strategy’s main attractiveness of the including a set of partnership with the regional of Industry and Trade. Regional Russian and international market.” objectives are to: Udmurt Republic measures for targeted administration. We are ready companies are participating in have been confirmed, work with investors, to participate in the region’s joint modernisation initiatives and ━ improve the ━ including in the five as well as a set of priority investment projects on setting up new production lines competitiveness industries selected for measures to improve transport infrastructure and urban and import-substitution products. of regional an in-depth audit; the investment development, including a major As a result, Udmurtia today is one manufacturing; ━ based on an analysis environment. upgrade of public transportation of the 10 leading Russian regions ━ ensure a better quality ━ ━ of the market and networks. Another economic in terms of private equity raised of life for the people; priority is the diversification via the Industrial Development resources in the of Udmurtia’s defence sector. Fund. In 2018, companies filed ━━ retain and develop Udmurt Republic, 10 The region’s highly educated RUB 1 billion worth of requests human capital; priority areas have population and human capital with the Fund and signed RUB ━━ develop small and been identified (out of resources provide Udmurtia 500 million worth of contracts. medium enterprises; 100) to attract strategic ALEXANDER BRECHALOV investors to the Udmurt with the opportunity to enhance In 2019, Udmurtia plans to attract ━ drive well-balanced Governor ━ Republic, and related existing manufacturing capacities around RUB 750 million via the regional development. of the Udmurt Republic and produce highly competitive Industrial Development Fund to areas have been civilian-use goods using low-cost develop manufacturing projects. determined for further financing tools.” The region’s cluster of oil and investment; gas equipment manufacturers ━━ the advantages of is going to be a powerful driver the Udmurt Republic in developing the oil and gas have been identified sector. Furthermore, the region to attract strategic is successfully facilitating the investors for the 10 conversion of military enterprises priority areas, including to civilian-use manufacturing, and, a list of potential “We will use the results of PwC’s investment in the process, creating jobs and regional partners; demand for further investment.” audit to build a new strategy to develop the regional economy through 2027.” 5 THE FIRST RESULTS OF THE INVESTMENT AUDIT 4 OF THE UDMURT REPUBLIC

ESTABLISHMENT OF OOO SOFTLINE OUTSOURCING Project Description: Establishment of OOO Softline Outsourcing, which provides a range of staffing and accounting outsourcing services. SOFTLINE IS OPENING AN OFFICE IN UDMURTIA TO OUTSOURCE ACCOUNTING SERVICES MADE IN UDMURTIA MADE IN UDMURTIA

Investor: Softline

Number of jobs: up to 400 UP TO 400 JOBS Taxes to the Consolidated Budget of Udmurtia: RUB 46 million a year Status: The office has been launched and the first employees hired.

ESTABLISHMENT OF A RUSSIAN POST R&D CENTRE Project Description: Establishment of a Russian Post R&D Centre to develop end-to-end digital THE RUSSIAN POST IS OPENING AN R&D CENTRE TO DEVELOP END-TO-END TECHNOLOGIES technologies.

Investor: Russian Post

Number of jobs: up to 300 300 JOBS Taxes to the Consolidated Budget of Udmurtia: RUB 44 million a year Status: Office is being arranged and advance team hired.

IZHEVSK AIRPORT RENOVATION Project Description: Izhevsk Airport renovation NEGOTIATIONS WITH A STRATEGIC INVESTOR ARE UNDERWAY TO ATTRACT PRIVATE INVESTMENT Implementation term: TO A PROJECT ON RENOVATING THE IZHEVSK AIRPORT 2019-2024 (2019-2020: design and price audit, 2021-2014: reconstruction and construction)

Total investments: RUB 6.8 billion, including: Federal budget funds, RUB 3.4 billion RUB 3.4 BILLION IN PRIVATE INVESTMENT Private investments, RUB 3.4 billion Status: Negotiations with the strategic investor are underway.

Source: Development Corporation of the Udmurt Republic 7 MIKHAIL BAZHENOV 6 PwC Partner THIS INVESTMENT AUDIT OF THE RESULTS OF THE INVESTMENT AUDIT HIGHLIGHT UDMURTIA’S THE UDMURT REPUBLIC IS AN FAVOURABLE INVESTMENT CLIMATE INDEPENDENT ASSESSMENT

OF THE REGION’S POTENTIAL MADE IN UDMURTIA MADE IN UDMURTIA FROM THE INVESTOR’S POINT “We are pleased to present the final results of our investment audit of Udmurtia. The project was initiated by the regional administration to benchmark the republic’s investment potential and identify high- OF VIEW Key advantages of Udmurtia identified in the potential and promising investment and growth areas. investment audit:

In the fall of 2017, Alexander Brechalov was appointed the governor 1. Our retrospective analysis has demonstrated that the 9. Udmurtia provides investors with the opportunity of Udmurtia. One of his first announcements was to focus on region’s favourable business climate can already be to get their businesses up and running quickly at budget optimisation, business development and the ambitious goal credited with fostering investment successes. launch-ready sites. of attracting additional direct investment. Much has already been done to improve the region’s investment appeal — administrative Key objectives of the investment audit: 2. The regional administration is highly accessible for 10. Udmurtia has a highly educated population to barriers have been reduced, a package of tax and financial benefits 1. Identify the competitive advantages of everyday work with investors. support investment projects, including 16 universities, has been developed and investment sites at our industrial parks and Udmurtia for direct investment The regional administration has taken special with 67% graduates working in the region. priority social and economic development areas (PSEDAs) have been 3. established. These initiatives are ongoing. 2. Identify direct investment growth points in measures to focus on important dimensions of social 11. Udmurtia offers a wide range of tax benefits to and economic development. investors, including tax incentives in the Glazov and Based on the results of the investment audit in the Udmurt Republic, Udmurtia we identified 10 key areas to attract strategic investors and prepared Sarapul priority social and economic development 3. Prepare recommendations on the 4. Udmurtia provides investors with relevant a Roadmap for the Udmurt Republic to work with these investment areas (PSEDAs). development of regional infrastructure information about opportunities in the region via the areas, including targeted work with potential investors and other modern communication channels. 12. Ivestors and their projects receive turn-key support in interested parties, as well as a range of measures for additional 4. Develop a roadmap for priority investment Udmurtia with the help of a one-window system. support of investors, including financial and administrative support areas 5. The consumer market in and around Udmurtia is measures, providing the necessary infrastructure and personnel for more than RUB 2 trillion. 13. Over the last three years, investment projects in new projects. 6. PwC analysis has identified investment appeal factors Udmurtia have received more than RUB 2.5 billion The description of investment opportunities includes: justification across five industries selected for an in-depth audit. from federal development institutes and more of market potential, required investment volume, range of potential than RUB 2 billion from regional and municipal PwC analysis has identified ten top priority profitability, list of potential partner companies in the region, 7. development institutes. description of the production, research and personnel base in the investment opportunities to attract strategic investors region, description of specific investment sites, support measures in to the Udmurt Republic. 14. In 2018, for the first time in the last five years, the the region. growth of capital investments was above 10%. 8. The transport infrastructure in Udmurtia offers This information is intended for potential investors and partners, significant advantages to investors. development institutes and federal authorities.” 9 CONTENTS 8 3 BENEFITS FOR INVESTORS IN UDMURTIA — 53 P.

3.1 Rankings — 54 p.

1 MADE IN UDMURTIA MADE IN UDMURTIA WHERE TO INVEST 3.2 Transport infrastructure — 56 p. IN UDMURTIA — 11 P. 3.3 Human capital — 60 p. 3.4 Investment sites and industrial parks — 62 p.

1.1 High-potential investment areas in Udmurtia — 12 p. 4

1.2 Investment opportunities in Udmurtia — 14 p. APPENDICES — 79 P.

1.3 PPP opportunities in Udmurtia — 36 p. 4.1 Business success stories in Udmurtia — 80 p. 4.2 Advantages of investing in five industries selected for an in-depth audit — 95 p. 2 REGIONAL SUPPORT FOR INVESTORS 4.2.1 Dairy farming — 96 p. IN UDMURTIA — 39 P. 4.2.2 Wood — 100 p. 4.2.3 Machinery — 104 p.

4.2.4 Food production — 108 p. 2.1 Tax incentives — 40 p. 4.2.5 Petroleum refining — 110 p. 2.2 Financial incentives — 42 p. 4.3 Investment projects of the Udmurt Republic proposed for joint 2.3 Infrastructure incentives — 48 p. implementation — 113 p.

2.4 Administrative incentives — 51 p. Key contacts in the regional administration — 136 p. 11 MADE IN UDMURTIA

WHERE TO INVEST 1 IN UDMURTIA HIGH-POTENTIAL INVESTMENT AREAS IN UDMURTIA For detailed advantages of investing in the five key industries in Udmurtia, please 12 13 PWC ANALYSIS IDENTIFIED THE INVESTMENT APPEAL refer to Appendix 4.2 FACTORS ACROSS FIVE INDUSTRIES SELECTED FOR AN IN-DEPTH AUDIT

ECONOMIC PERFORMANCE AND INDUSTRIAL PRODUCTIVITY HUMAN CAPITAL BUSINESS EXPENSES DAIRY FARMING Izhevsk State Agricultural Academy Priority industry in the Sarapul PSEDA 4 % 5.9 TONNES A field-specific university that provides 4 % RUB 1.2/SQ M Livestock breeding makes up a larger share Milk yield per cow at regional farms is higher than in the most education programmes specialised for the The employment rate in the sector is higher The average cost of acquiring industrial land is lower of regional company revenues in Udmurtia other leading dairy production regions. agricultural sector. than the national average and at the level of than in comparable leading regions. The total cost of than in other leading milk production leading peer regions. connecting a standard production facility to utilities regions. (electricity, water, waste disposal, heating) in the Udmurt Republic is lower than in four out of five comparable regions.

PETROLEUM REFINING Udmurtneft Belkamneft Gutseriev Oil and Gas Institute Annual oil production in Udmurtia is 11 million Oil production at two new fields in Udmurtia is scheduled to A field-specific university that provides specialised tonnes. launch in 2021. education programmes for the oil and gas sector.

WOOD 9 % 1.3 % Izhevsk State Agricultural Academy 0.5 % Job placement rates over the last three Investment as a share of company revenues is Industry’s share in the revenue of all Udmurtia companies is years have been above 90%. Employment in the sector is higher than the higher than the national average. higher than the national average. national average. Priority industry in the Glazov and RUB 190/SQ M Sarapul PSEDAs MACHINERY Kalashnikov Izhevsk State Technical University The average cost of acquiring industrial land is A field-specific university that provides education 2 % >10 % 12 lower than in comparable leading regions. for machine building industries. Machine building as a share of a company Of the Russian rolled steel is produced in the Volga Federal Companies have signed specialist education The total cost of connecting a standard production revenues is higher than the national average. District. contracts with the university. facility to utilities (electricity, water, waste disposal, The regional administration supports machine building heating) in the Udmurt Republic is lower than in 12 companies in obtaining reduced-rate loans from federal out of 13 comparable regions. development institutes, including the Industrial Development Fund.

FOOD PRODUCTION 2 % >80 % Investment as a share of company revenues is The share of profitable businesses in the sector in at the level of most peer regions. Udmurtia is at the level of comparable leading regions. Sources: refer to Appendix 4.2 INVESTMENT OPPORTUNITIES IN UDMURTIA 15 PWC ANALYSIS IDENTIFIED 10 PRIORITY INVESTMENT 14 OPPORTUNITIES TO ATTRACT STRATEGIC INVESTORS TO UDMURTIA MADE IN UDMURTIA MADE IN UDMURTIA

GENERAL MACHINERY DEVELOPMENT OF METAL-PROCESSING MACHINES GENERAL MACHINERY LAUNCH OF EQUIPMENT PRODUCTION FOR MUNICIPAL SOLID WASTE PROCESSING AND Processing centres: SORTING ━ Metals-processing presses ━ 1. Separators for automatic waste sorting ━ Small presses for solid municipal waste processing ━ 2. Non-technology-intensive components for waste sorting plants: ━ Turning machines ━ ━ Conveyors The second stage of the project may include localisation of additional niche products, including ━ ━ Hydraulic drives industrial robots and 3D printers for handling metal. ━ ━━ Metal structures, etc. GENERAL MACHINERY EXPANSION AND LOCALISATION OF PUMP AND COMPRESSOR PRODUCTION ELECTRICAL LAUNCH OF PRODUCTION OF DIGITAL EQUIPMENT AND EXPANSION OF LOW-VOLTAGE ━━ Rotor pumps ━━ Screw compressors ENGINEERING DISTRIBUTION EQUIPMENT PRODUCTION ━━ Cryogenic pumps 1. Equipment for digitalisation of electrical grids: ━ Product pumps ━ ━━ Digital substations with automatic control systems ━ Block oil pump stations ━ ━━ Digital current and voltage transformers ━━ Other types of products in accordance with the sectoral plan for import substitution issued by the 2. Low-voltage devices (circuit breakers and relays) Ministry of Industry and Trade of Russia for the oil and gas sector 3. Low-voltage equipment sets

ELECTRONICS LAUNCH OF DEVICE AND SENSOR PRODUCTION, INCLUDING SMART ELECTRONICS LAUNCH OF TELECOMMUNICATION EQUIPMENT PRODUCTION CITY SOLUTIONS ━━ Traditional telecommunication equipment, including base stations, switches and routers ━ Equipment for 5G new generation networks, including micro- and macrobase stations, 5G modules ━━ Pollutant emission control devices at enterprises (part of automatic emission control systems) ━ ━━ Smart city devices and sensors (noise and temperature sensors, smart lighting, smart traffic lights) ━━ Smart utility meters (electricity, water, gas) PHARMACEUTICALS LAUNCH OF PHARMACEUTICAL PRODUCTION WITH SUBSEQUENT DEEPENING OF LOCALISATION AND SUBSTANCES PRODUCTION

ELECTRONICS LAUNCH OF MEDICAL EQUIPMENT PRODUCTION ━━ Antibiotics ━ Hormonal drugs ━━ Equipment for oncological diagnostics ━ ━ Vitamins ━━ Equipment for cardiovascular treatments ━ ━ Insulin-based drugs ━━ Medical robots ━ ━ Other drugs that are currently imported to Russia ━━ Portable medical devices ━ The second stage of the project will include production of pharmaceuticals for specified items. ━━ Implantable items

CHEMICALS LAUNCH OF INDUSTRIAL PAINTS AND VARNISHES PRODUCTION FOOD PRODUCTS LAUNCH OF SERUM PRODUCTION FOR DRY INFANT MILK FORMULAS AND CONSTRUC- Industrial paints and varnishes: TION OF DAIRY FARMS ━━ for protection of metals and pipes ━ Dry infant milk formulas with subsequent deepening of localisation and serum production for dry ━━ paints for automobile production ━ milk formulas and dry milk ━━ paints for shipbuilding ━ Creation of dairy farms that will meet the needs of new projects for processing raw materials ━━ paints for furniture production ━ ━━ paints for rail transport INVESTMENT OPPORTUNITIES IN UDMURTIA 17 DEVELOPMENT OF METAL-PROCESSING MACHINES 16

INVESTMENT MARKET PREREQUISITES FOR NEW PROJECT ADVANTAGES OPPORTUNITY IMPLEMENTATION OF THE UDMURT REPUBLIC

OPPORTUNITY DESCRIPTION KEY PROJECT PREREQUISITES MADE IN UDMURTIA POTENTIAL STRATEGIC PARTNERS IN THE REGION MADE IN UDMURTIA Creation of a joint venture by expanding the current Kalashnikov Engineering (part of the Rostec Group) manufactures manufactures its own machines. production of Kalashnikov Engineering with the involvement OAO NITI Progress and the Votkinsk Factory manufacture metalworking machines and parts upon of a foreign strategic partner or creating a new production RUB 95 BILLION individual orders, including internally-designed machines. using the AO Bummash metal processing enterprise. Machines market in Russia in 2018. Partners in project development could be attracted, including the Votkinsk plant or OAO NITI Progress. RUB 42.1 BILLION INTEGRATION OF THE NEW PROJECT IN THE REGIONAL ECONOMY Niche market for import substitution in POTENTIAL PRODUCTS Russia in 2018. AO Bummash and Votkinsk Factory Cast metal parts of machines ━━ processing centres ━━ High moral and physical depreciation of capital assets ━ metals-processing presses ━ in Russian machine building (about 50%). Digitalisation Enterprises from the Ural Federal District Supply of metals to Udmurtia ━ small presses for solid municipal waste processing (up ━ of enterprises requires renovation of a vast amount of to 3 tonnes) machines. ━━ turning machines ━━ Imported machines accounted for 96% of purchases in 2018. SITE AND REGIONAL PREFERENCES ━━ Legislation stimulating localisation is being updated, The project may be implemented using the production facilities of Kalashnikov Engineering or AO including the import substitution plan of the Ministry Bummash, or at the Sarapul or Glazov PSEDAs, with appropriate benefits. of Industry and Trade of Russia as of 2015, soft lending (at 5% rate since 2018) by the Industrial Development Fund for launching machine-tool building projects, and prohibition on purchasing foreign machines if there are HUMAN CAPITAL Russian analogues (since March 2019). Graduates of Izhevsk State Technical University with a degree in design and technological support for engineering production (1,784 students in 2018), as well as graduates of Votkinsk Industrial and Izhevsk POTENTIAL MARKET Engineering Schools with a degree in adjuster of machines and equipment in machining (49 and 90 Consumers of the machines may include enterprises students, respectively, in 2018) could be involved. engaged in metalworking, machine building and automobile manufacturing. Udmurtia is favourably located in the Volga Federal District and near the Ural Federal District, which KEY PROJECT PARAMETERS are key engineering centres. In the region, machines are purchased by Kalashnikov Concern, Izhmash Concern, Votkinsk Plant, Izhneftemash, Izhstal, LADA Izhevsk, etc. RUB 0.5-3.0 BILLION In the Volga Federal District and closely located regions in the Ural Federal District, potential consumers include potential investment volume ChTZ, ChTPZ, Uralskaya Kuznitsa (Chelyabinsk Region), Uralmashzavod and Uralvagonzavod (Sverdlovsk Region), 10.7-27.4 % AvtoVAZ and RCC Progress (Samara Region), KAMAZ and KVZ (Republic of Tatarstan), and GAZ and Sokol (Nizhny range of potential profitability Novgorod Region).

Source: PwC analysis based on data from similar investment projects implemented in Russia over the past five years and the profitability of Russian and foreign companies in this industry INVESTMENT OPPORTUNITIES IN UDMURTIA 1 Dragunov Izhevsk Industrial College, Izhevsk Polytechnic College, Sadovnikov Votkinsk Engineering College, Glazov Polytechnic College, 19 LAUNCH OF EQUIPMENT PRODUCTION FOR MUNICIPAL SOLID 18 Sarapul College of Mechanical Engineering and Information Technology, Izhevsk Assembly College and Shutov Radiomechanical College. WASTE PROCESSING AND SORTING

INVESTMENT MARKET PREREQUISITES FOR NEW PROJECT ADVANTAGES

OPPORTUNITY IMPLEMENTATION MADE IN UDMURTIA OF THE UDMURT REPUBLIC MADE IN UDMURTIA

OPPORTUNITY DESCRIPTION KEY PROJECT PREREQUISITES POTENTIAL STRATEGIC PARTNERS IN THE REGION The launch of production of separator equipment for OOO Spetsavtohohozyaystvo is the regional municipal solid waste management operator responsible automated waste sorting with the involvement of a foreign 70 MILLION TONNES for establishing waste sorting facilities in the Udmurt Republic. Kalashnikov Engineering, AO SEGZ and partner (technology owner). Localisation is possible at the amount of municipal solid waste generated in NITI Progress have facilities for tool production and machine building (localisation of separators is facilities operated by Kalashnikov Engineering, AO SEGZ (part Russia in 2018 of the Rostec Group) and NITI Progress. possible). The production of non-technology-intensive components on contract for waste sorting facilities is possible at 220 PLANTS facilities operated by OOO IzhMSK, AO Bummash, OOO for municipal solid waste processing and disposal INTEGRATION OF THE NEW PROJECT IN THE REGIONAL ECONOMY Donvard Hydraulic Systems, OAO Izhneftemash, OOO NPO are planned to be built by 2024 in Russia Gidrosistemy, Votkinsk Factory and NITI Progress. OOO IzhMSK Conveyors ━━ As part of the National Ecology Project, Russia is planning to increase the share of sorted municipal solid POTENTIAL PRODUCTS waste from 7% to 60% by 2024. AO Bummash, Votkinsk Factory Shaped casting, metal structures, metal processing ━━ The Russian Environmental Operator (REO) plans to metal processing ━━ Separators for automatic waste sorting stimulate localisation of equipment for sorting plants. ━━ Non-technology-intensive components for waste By 2024, it is planned to achieve reduction in the share sorting complexes, including conveyors, hydraulic of equipment imported to process municipal solid waste OOO Donvard Hydraulic Systems, Hydraulic equipment drives, metal structures, grinders (shafts and knives), from 50% in 2018 to 22% in 2024. OAO Izhneftemash, presses, tanks and storage containers, etc. ━━ The REO also plans to stimulate consumption of OOO NPO Hydrosystems domestic equipment among regional municipal solid waste operators by providing beneficial loans and leasing. SITE AND REGIONAL PREFERENCES POTENTIAL MARKET Separator production could be implemented at sites operated by Kalashnikov Engineering, AO SEGZ, The territorial distribution of 220 plants is assumed to NITI Progress, or at the Sarapul and Glazov PSEDAs, which offer tax and other benefits. be proportional to the volume of municipal solid waste generated in the regions. In Udmurtia, the launch of two KEY PROJECT PARAMETERS waste sorting facilities and eight waste sorting stations is expected. HUMAN CAPITAL Since separators are expensive products, Russia as a whole RUB 0.5-5.0 BILLION and the Volga Federal District in particular may form a Graduates of Izhevsk State Technical University with a degree in engineering, technological machinery potential investment volume market for them. and equipment, design and technological support for engineering production (2,418 students in 2018) Udmurtia and neighbouring regions should become may be involved. Graduates of technical schools with a degree in Engineering Technology (1,075 a market for non-technology-intensive components, 1 10.0-18.2 % since the production of such components is planned to students in 2018) could also be involved. range of potential profitability be concentrated in close proximity to the plant under construction.

INVESTMENT MARKET PREREQUISITES FOR NEW PROJECT ADVANTAGES

OPPORTUNITY IMPLEMENTATION MADE IN UDMURTIA OF THE UDMURT REPUBLIC MADE IN UDMURTIA

INVESTMENT OPPORTUNITY KEY PROJECT PREREQUISITES POTENTIAL STRATEGIC PARTNERS IN THE REGION Expansion of the current production of pumps, pumping OAO Izhneftemash, AO Votkinsk Factory, Izhdril Holding, AO IEMZ Kupol and GP Reduktor produce rotor, equipment and compressors for the oil and gas and RUB 300 BILLION drilling and electric pumps, and pumping assemblies. utilities sectors and the localisation of new products using Pumps market in Russia in 2018. OOO Donvard Hydraulic Systems, NPO Gidrosistemy and OOO ORION produce hydraulic equipment, existing enterprises with the participation of a foreign partner (technology owner). Localisation is possible at including pumps and pumping stations. facilities operated by OAO Izhneftemash, Izhdril Holding, RUB 144 BILLION GP Reduktor, OOO Donvard Hydraulic Systems, NPO Market niche for import substitution Gidrosistemy and OOO ORION. in Russia in 2018 INTEGRATION OF THE NEW PROJECT IN THE REGIONAL ECONOMY

POTENTIAL PRODUCTS ━━ Imports of pumps and compressions accounted for 68% of consumption in Russia in 2018. As regards separate The above mentioned companies Components for pumps and compressors ━ Rotor pumps ━ categories of equipment in the oil and gas sector, ━ Screw compressors ━ imports make up 95% of the consumption market. ━━ Cryogenic pumps Votkinsk Factory, AO Bummash Metal cast ━━ In April 2019, the Russian Ministry of Trade adopted a ━ Product pumps ━ plan for import substitution in the oil and gas sector ━ Block oil pump stations ━ (selection of enterprises and measures to stimulate OAO NITI Progress Equipment for service maintenance and diagnostics ━ Other types of products, in accordance with the sectoral ━ localisation are planned). of oil production equipment plan for import substitution issued by the Ministry of ━━ The National Ecology Project includes large-scale Industry and Trade of Russia for the oil and gas sector modernisation of water treatment facilities. As part of adopted on 16 April 2019 (Order No. 1329) the comprehensive plan for Magistral, modernisation of key oil and gas industry infrastructure is planned. SITE AND REGIONAL PREFERENCES The project may be implemented at facilities operated by specified enterprises in the region or at the POTENTIAL MARKET Sarapul and Glazov PSEDAs with tax and other benefits. The potential consumers of pumps and pumping equipment may include oil producers in the Republic of Tatarstan, KEY PROJECT PARAMETERS Republic of Bashkortostan and Perm Territory, as well as water treatment companies. HUMAN CAPITAL Oil production is developed in the Udmurt Republic. The RUB 0.7-4.1 BILLION key consumers of pumps and compressors include OAO Graduates of Izhevsk State Technical University with a degree in power engineering may be involved potential investment volume Udmurtneft (Rosneft), OOO UDS Neft (UDS Group), AO (74 students in 2018). Belkamneft (AO NK Neftisa). High margins would enable the 6.6-28.0 % region to send supplies throughout Russia. range of potential profitability

Source: PwC analysis based on data from similar investment projects implemented in Russia over the past five years and the profitability of Russian and foreign companies in this industry INVESTMENT OPPORTUNITIES IN UDMURTIA 22 LAUNCH OF PRODUCTION OF DIGITAL EQUIPMENT 23 AND EXPANSION OF LOW-VOLTAGE DISTRIBUTION EQUIPMENT PRODUCTION INVESTMENT MARKET PREREQUISITES FOR NEW PROJECT ADVANTAGES OPPORTUNITY IMPLEMENTATION MADE IN UDMURTIA OF THE UDMURT REPUBLIC MADE IN UDMURTIA

OPPORTUNITY DESCRIPTION KEY PROJECT PREREQUISITES POTENTIAL STRATEGIC PARTNERS IN THE REGION Launch of production of digital distribution equipment AO SEGZ produces electrical equipment, electric motors, etc. and solutions for smart grids through localisation of RUB 269 BILLION OOO ETZ Vektor and OOO ZETO ENKO are engaged in the production of low-voltage switchgears and foreign technology could be done in partnership with local Electrical equipment market transformers. manufacturers, including AO SEGZ, OOO ETZ Vektor, OOO in Russia in 2018 ENKO Plant of Electrotechnical Equipment and OOO Sarapul OOO SEMZ is implementing a project in Sarapul PSEDA on the production of complete transformer Electromechanical Plant, as well as expansion of the current substations. capacity of low-voltage distribution equipment production RUB 97 BILLION companies. Market niche for low-voltage equipment INTEGRATION OF THE NEW PROJECT IN THE REGIONAL ECONOMY import substitution in Russia in 2018 POTENTIAL PRODUCTS ━━ Imports account for 48% of low-voltage equipment AO IMZ Axion-holding Automated systems for electro-radio equipment 1. Equipment for electrical grid digitalisation: sales in Russia (RUB 27.3 billion) and 77% of low-voltage monitoring and diagnostics ━━ Digital substations with automatic control systems sets (RUB 69.9 billion). At the same time, low-voltage ━ Digital current and voltage transformers devices have been included in the import substitution ━ AO IRZ Production of cable products and winding products 2. Low-voltage devices (circuit breakers and relays) programme under the Ministry of Industry and Trade of 3. Low-voltage equipment sets Russia (as of 2015) ━━ By 2030, PAO Rosseti is planning to modernise and digitalise power grids by investing over RUB 1 trillion (“Digital Transformation 2030”), which will create demand for smart transformers and substations. SITE AND REGIONAL PREFERENCES The project may be implemented at sites operated by AO SEGZ, OOO ETZ Vektor, OOO ZETO ENKO or POTENTIAL MARKET OOO SEMZ or at the Glazov and Sarapul PSEDAs with tax and other preferences. Low-voltage equipment can satisfy the demand from network companies, power supply network service KEY PROJECT PARAMETERS companies, industrial companies, construction companies in the construction of residential areas and the population in HUMAN CAPITAL the the Volga Federal District. Under the digitalisation programme for electric grids, PAO Graduates of the Izhevsk State Technical University and Udmurt State University with a degree in RUB 0.6-1.5 BILLION Rosseti and its subsidiaries (in particular PAO FGC UES) electrical engineering and electrical equipment (633 number of students in 2018) may be involved, as potential investment volume may become consumers of equipment for smart grids. AO well as graduates of the Izhevsk Assembly and Radio-Mechanical Technical schools may also be involved Udmurtenergo, a branch of PAO IDGC of Centre and Volga Region (a subsidiary of PAO Rosseti), is located in the Udmurt with specialisations in technical operation of electrical equipment, electrician, and installation and 19.2-27.8 % Republic, which could become a pilot training ground for operation of industrial equipment (1,095 people). range of potential profitability testing and marketing of equipment.

Source: PwC analysis based on data from similar investment projects implemented in Russia over the past five years and the profitability of Russian and foreign companies in this industry INVESTMENT OPPORTUNITIES IN UDMURTIA Note. 1 Russian Ministry of Natural Resources and Ecology Order No. 154 of 18 April 2018. 25 LAUNCH OF MEASURING DEVICES AND SENSORS PRODUCTION, 24 INCLUDING SMART CITY SOLUTIONS

INVESTMENT MARKET PREREQUISITES FOR NEW PROJECT ADVANTAGES

OPPORTUNITY IMPLEMENTATION MADE IN UDMURTIA OF THE UDMURT REPUBLIC MADE IN UDMURTIA

OPPORTUNITY DESCRIPTION KEY PROJECT PREREQUISITES POTENTIAL STRATEGIC PARTNERS IN THE REGION Launch of measuring device and sensor production, AO Izhevsk Radio Plant (communication and navigation equipment, visual control devices), AO Sarapul including smart city solutions and ecological instrument RUB 120 BILLION Radio Plant (gyrostabilizers, communication equipment), AO Axion Holding IMZ (printed circuit boards, engineering. A joint venture may be established in PAO Rosseti investments in smart meter energy-saving technologies) provide an existing manufacturing base for the innovative production of partnership with Izhevsk Radio Plant (IRZ), Sarapul Radio production through 2022 Plant, and AO IMZ Axion Holding. instruments. RUB 239 BILLION POTENTIAL PRODUCTS funds for Smart City project in Moscow through 2021 INTEGRATION OF THE NEW PROJECT IN THE REGIONAL ECONOMY ━━ Pollutant emission control devices at enterprises (part of ━ In January 2019, emission fines were increased by four automatic emission control systems) ━ times and the Ministry of Natural Resources of Russia ━━ Smart city devices and sensors (noise and temperature OOO AMMOLIT, OOO Izhprest, OOO High Software ordered the largest enterprises to install automatic sensors, smart lighting, smart traffic lights) Technology Centre, etc. systems to control pollutant emissions. ━━ Smart utility meters (electricity, water, gas) ━━ Russia has launched a smart city project that involves the introduction of smart solutions in 58 pilot cities, with AO IMZ Axion-holding, Component base an emphasis on Internet of Things technology. AO Elekond, AO IEMZ Kupol, ━ Starting from 1 July 2020, installation of smart electricity ━ AO Chepetsk Mechanical Plant meters will be mandatory. PAO Rosseti will install about 22 million smart meters by 2025.

SITE AND REGIONAL PREFERENCES The project may be implemented at facilities operated by the Izhevsk and Sarapul Radio Plants, AO IMZ POTENTIAL MARKET Axion-Holding, or at the Sarapul and Glazov PSEDAs with tax and other benefits. Pollutant emission control devices: 300 largest enterprises included in the list of the Ministry of Natural Resources of Russia through 2026 and then all first-category pollution KEY PROJECT PARAMETERS facilities (7,406) through 2029.¹ Smart city devices: purchases will be made by Russian HUMAN CAPITAL regions (implementation is planned in 58 pilot cities, RUB 0.1-0.7 BILLION including Sarapul and Izhevsk), as well as by companies that Graduates of Izhevsk State Technical University with a degree in instrumentation may be involved (176 potential investment volume are launching smart city pilot projects (PAO Rostelecom, students in 2018), as well as graduates of the Sarapul Technical School of Mechanical Engineering and Rostec GK, Cisco). Smart electricity meters: PAO Rosseti is planning to Information Technology and the Shutov Radiomechanical Technical School with a degree in radio 20.2-37.7 % independently purchase and install meters (and to invest equipment engineering (163 students in 2018). range of potential profitability RUB 120 billion through 2022).

INVESTMENT MARKET PREREQUISITES FOR NEW PROJECT ADVANTAGES

OPPORTUNITY IMPLEMENTATION MADE IN UDMURTIA OF THE UDMURT REPUBLIC MADE IN UDMURTIA

OPPORTUNITY DESCRIPTION KEY PROJECT PREREQUISITES POTENTIAL STRATEGIC PARTNERS IN THE REGION Launch of telecommunication equipment production with ZAO NPO Telecom manufactures of a wide range of telecommunication equipment on contract. involvement of a global technological market leader. New <8% AO Izhevsk Radio Plant produces special communication equipment (DMR standard). production can be organised using existing production Market share of Russian manufacturers AO Sarapul Systems produces switching equipment. capacities at AO Izhevsk Radio Plant, OAO Elekond or AO in 2018 Sarapul Radio Plant, or established separately. At the initial stage, equipment may be assembled with a subsequent increase in the degree of localisation. RUB 153 BILLION Market niche for import substitution INTEGRATION OF THE NEW PROJECT IN THE REGIONAL ECONOMY POTENTIAL PRODUCTS in Russia in 2018 ━━ In 2018, imports accounted for 92% of the AO Izhevsk Radio Plant, Component base ━ Traditional telecommunication equipment, including ━ telecommunication equipment sold in Russia. AO Sarapul Radio Plant, base stations, switches and routers ━━ The key driver of market growth will be the launch OOO Istok, OOO RTC Milya ━━ Equipment for 5G new generation networks, including of 5G networks. Currently, the Russian Ministry micro- and macrobase stations and 5G modules of Communications and the Russian Ministry of Industry and Trade are designing 5G development OAO Elekond Condensers programmes and incentives for localising production of telecommunication equipment (special conditions for using 5G frequencies for companies operating domestic AO Chepetsk Mechanical Plant Rare metals equipment and software, tax incentives, revision of import duties, restrictions on government procurement of foreign-made radio electronics). SITE AND REGIONAL PREFERENCES ━━ According to a concept developed by the Rostec Group, by 2030, the share of domestic equipment consumed The project may be implemented at facilities operated by the Izhevsk Radio Plant, OAO Elekond or at the in Russia should increase from the current 8% to 30%, Glasov and Sarapul PSEDAs with tax and other benefits. and up to 50% of equipment for mobile operators core networks. KEY PROJECT PARAMETERS POTENTIAL MARKET HUMAN CAPITAL The expected key equipment consumers for new generation Graduates of Izhevsk State Technical University with a degree in information technologies and networks in Russia include mobile operators such as PAO RUB 0.9-6.3 BILLION communication systems and radio engineering (463 students in 2018 was 463) may be involved, as well potential investment volume VimpelCom, PAO MTS, OOO T2 Mobile and PAO Megafon). Traditional telecommunication equipment may be used as graduates of the Sarapul Technical School of Mechanical Engineering and Information Technology to create Wi-Fi networks in public transport (Smart City and the Shutov and Voskresensky technical schools with a degree in radiomechanics or radio equipment 13.3-25.7 % project). Exports to the CIS and Asian and African countries engineering (350 students in 2018). range of potential profitability is also possible.

INVESTMENT MARKET PREREQUISITES FOR NEW PROJECT ADVANTAGES

OPPORTUNITY IMPLEMENTATION MADE IN UDMURTIA OF THE UDMURT REPUBLIC MADE IN UDMURTIA

OPPORTUNITY DESCRIPTION KEY PROJECT PREREQUISITES POTENTIAL STRATEGIC PARTNERS IN THE REGION Launch of medical equipment production with involvement AO Izhevsk Mechanical Plant produces implantable cardiac pacemakers. of a foreign strategic partner (technology owner). A joint RUB 281 BILLION AO Izhevsk Motor Plant Axion-Holding produces cardiographs that transmit information over wireless venture may be established with existing companies, Medical equipment market networks, as well as portable defibrillators. including AO Izhevsk Mechanical Plant, AO IMZ Axion- in Russia in 2018 Holding or Kalashnikov GK). Kalashnikov GK produces single-chamber and two-chamber pacemakers and devices for therapeutic hypothermia. RUB 219 BILLION POTENTIAL PRODUCTS Market niche for import substitution in Russia in 2018 ━━ Equipment for oncology diseases diagnostics INTEGRATION OF THE NEW PROJECT IN THE REGIONAL ECONOMY ━ Equipment for cardiovascular diseases treatment ━ ━━ The market is dynamic, with growth of 5.4% per year ━ Medical robots ━ between 2011 and 2018. AO Chepetsk Mechanical Plant Titanium powders ━━ Portable medical devices ━━ At the same time, growth in demand is expected to (component base for implantable devices) ━━ Implantable items reach 5.7% on average from 2019 to 2030 following implementation of the National Healthcare Project, which provides for the large-scale upgrading of equipment at medical facilities. ━━ Imports accounted for 77.8% of the market in 2018. SITE AND REGIONAL PREFERENCES Since 2015, foreign-produced medical devices have The project may be implemented at facilities operated by Izhevsk Mechanical Plant, AO IMZ Axion- faced restrictions in the state procurement process, which has helped to support localisation. The list of Holding or at Sarapul and Glazov PSEDAs, with tax and other benefits. equipment affected by such restrictions is constantly expanding.

HUMAN CAPITAL POTENTIAL MARKET Graduates of the Izhevsk State Technical University and Udmurt State University with a degree in KEY PROJECT PARAMETERS State procurements currently make up more than 80% of the radioelectronic systems and complexes, nanotechnologies and nanosystem engineering, and the design market, and up to 99% for medical equipment for diagnosis and technology of electrical devices (780 students in 2018) may be involved. and treatment of cancer and cardiovascular diseases. RUB 0.2-1.7 BILLION Sales of portable devices are possible through pharmacy potential investment volume chains and household appliances stores. Transport expenses make up a small share of the cost of medical equipment, so 12.1-20.5 % the deliveries may extend beyond 1,000 km. range of potential profitability

Source: PwC analysis based on data from similar investment projects implemented in Russia over the past five years and the profitability of Russian and foreign companies in this industry INVESTMENT OPPORTUNITIES IN UDMURTIA 31 LAUNCH OF PHARMACEUTICAL PRODUCTION WITH SUBSEQUENT 30 DEEPENING OF LOCALISATION AND SUBSTANCES PRODUCTION

INVESTMENT MARKET PREREQUISITES FOR NEW PROJECT ADVANTAGES OPPORTUNITY IMPLEMENTATION MADE IN UDMURTIA OF THE UDMURT REPUBLIC MADE IN UDMURTIA

OPPORTUNITY DESCRIPTION KEY PROJECT PREREQUISITES POTENTIAL STRATEGIC PARTNERS IN THE REGION Creation of new medical drugs production by localising ZAO Rester (a subsidiary of the defence enterprise AO IEMZ Kupol). a foreign manufacturer in the Udmurt Republic. A joint RUB 958 BILLION Production of full-cycle infusion solutions was organised in 2008 jointly with the world leading Fresenius venture may be established in partnership with ZAO Rester, Pharmaceutical market Medical Care. Manufacturing of other dosage forms (tablets, capsules) is one of the priorities for the a manufacturer of infusion solutions. The second stage in Russia in 2018 of the project may include deepening of localisation and company. launch of pharmaceuticals production to meet the needs of enterprises. RUB 424 BILLION Niche market for import substitution INTEGRABILITY OF THE NEW PROJECT IN THE REGION’S ECONOMY POTENTIAL PRODUCTS in Russia in 2018 ━━ The market is characterised by the high share held by AO IEMZ Kupol Plastic tare, containers and packaging ━━ Antibiotics imports (66% in 2018). ━━ Hormonal drugs ━━ At the same time, measures to stimulate localisation for medical products ━━ Vitamins came into force in January 2019, for example, 25% ━━ Insulin-based drugs price preference in public procurement for domestic Food industry companies Meat industry waste as a raw material ━ Other drugs that account for a significant share of producers. ━ for gelatine capsule production imports to Russia ━━ The industry is also characterised by highly dynamic At the second stage of the project, pharmaceuticals for demand (real aggregate average annual market growth specified items will be manufactured. rate was 5.5% in 2008-2018). ━━ An increase in demand for drugs is expected during implementation of the National Healthcare project SITE AND REGIONAL PREFERENCES (for treatment of cancer, cardiovascular and children’s diseases). The project may be implemented at the Sarapul PSEDA with relevant benefits. POTENTIAL MARKET The Volga Federal District is the second largest medical drug market in Russia, as it covers 29.9 million people. The KEY PROJECT PARAMETERS District accounted for RUB 12.2 billion of imports (2018) HUMAN CAPITAL and RUB 16.6 billion of deliveries from other regions (2016). Graduates of Udmurt State University with a degree in pharmaceutical biotechnology, general The largest markets include Nizhny Novgorod Region, the biochemistry, immunobiotechnology, biotechnology (43 students in 2018) and chemistry (108 people) RUB 0.2-15.5 BILLION Republic of Bashkortostan and the Republic of Tatarstan, potential investment volume which together accounted for 94.6% of imports. Medical may be involved. drugs are a high-margin product, so all of Russia could Graduates of higher educational institutions in the Volfa Federal District (Perm State Pharmaceutical be considered a market (the niche for import substitution Academy, Samara State Medical University) may also be involved. 20.1-43.0 % amounted to RUB 424 billion in 2018). range of potential profitability

INVESTMENT MARKET PREREQUISITES FOR NEW PROJECT ADVANTAGES

OPPORTUNITY IMPLEMENTATION MADE IN UDMURTIA OF THE UDMURT REPUBLIC MADE IN UDMURTIA

OPPORTUNITY DESCRIPTION KEY PROJECT PREREQUISITES POTENTIAL STRATEGIC PARTNERS IN THE REGION Launch of industrial varnish and paint production with OOO Nort: production of paints and varnishes for corrosion and fire protection of participation of a foreign company (technology owner) RUB 112 BILLION wood and concrete. in partnership with existing manufacturers in the Udmurt Industrial paint and varnish market OOO Novy Dom: production of decorative paints and varnishes. Republic or as a separate plant. in Russia in 2018 Stena GK: production of innovative paints and varnishes with its own R&D centre. The company’s paint produced with nanoparticles was the only one in its niche to receive approval from Roskachestvo. POTENTIAL PRODUCTS RUB 50 BILLION Industrial paints and varnishes: Market niche for industrial paint and varnish (import substitution) in Russia in 2018 ━━ for metal and pipe protection INTEGRABILITY OF THE NEW PROJECT IN THE REGION’S ECONOMY ━ for automobile production ━ ━ In 2014-2017, the industrial paint and varnish market ━ for shipbuilding ━ ━ grew by 8.8% per year, which could drive dynamic ━ for furniture production OOO Arteko Colorants and industrial pigment concentrates ━ growth for the project in the future. ━━ for rail transport ━━ Localisation of production takes place mainly in the decorative paint segment, while industrial paints and varnishes account for almost all imports. In 2018, OOO Novy Dom Colorants and pigment pastes imports account for 10% of the decorative paint market and up to 45% of the industrial paint market. ━━ Industrial paints are more expensive and marginal, with the cost per tonne exceeding the cost of decorative paints by a factor of three or four. SITE AND REGIONAL PREFERENCES The project may be implemented at facilities operated by OOO Nort, OOO Novy Dom and Stena GK, or POTENTIAL MARKET at Sarapul PSEDA with tax and other benefits. Key consumers of industrial paints and varnishes in Udmurtia included machine-building and metallurgical enterprises KEY PROJECT PARAMETERS such as Izhevsk Automobile Plant, Pruzhina PNTs, Izhstal, Axion-Holding, Izhevsk Mechanical Plant, Izhevsk Plant of HUMAN CAPITAL Plastics, SEGZ and ChMZ. Enterprises located in the Volga and Ural Federal Districts Graduates of Udmurt State University with a degree in chemistry, as well as in chemistry, physics and RUB 0.5-2.0 BILLION may also constitute a market, including AvtoVAZ (automobile mechanics of materials (214 students in 2018) may be involved. potential investment volume production), KAMAZ (truck manufacturing), Ural- WagonZavod (railway engineering), ChTPZ (pipe industry), MMK (metallurgy), and aviation enterprises in Tatarstan and 22.0-29.3 % the Ulyanovsk and Sverdlovsk regions. range of potential profitability

INVESTMENT MARKET PREREQUISITES FOR NEW PROJECT ADVANTAGES OPPORTUNITY IMPLEMENTATION MADE IN UDMURTIA OF THE UDMURT REPUBLIC MADE IN UDMURTIA

OPPORTUNITY DESCRIPTION KEY PROJECT PREREQUISITES POTENTIAL STRATEGIC PARTNERS IN THE REGION Launch of production of demineralised serum and dry milk The Udmurt Republic is the third largest milk-producing region in Russia and one of the largest milk for dry infant formula in partnership with a foreign company Imports account for a >90% processors. to localise production of breast milk substitutes (BMS) in share of dry milk formulas Russia. in 2018 in Russia KEY CONSUMERS OF RAW MILK: Creation of dairy farms to provide raw materials for new milk processing projects in the Udmurt Republic expected to be +180,000 TONNES OAO MILKOM (Sarapul-moloko, Milk processing implemented in 2019-2028. increase in demand for raw milk Izhmoloko, Glazov-moloko) in the Udmurt Republic by 2021 More than 90% of breast milk substitutes on the Russian OOO Uva-Moloko Processing Milk POTENTIAL PRODUCTS market are imports. A number of measures to stimulate localisation in Russia is expected: and OOO DMS Vostok ━━ Demineralised serum D90 for dry infant formulas ━ In November 2018, a Russian Government Decree was ━━ Dry milk ━ issued on providing compensation of up to 20% of the ━━ Dry infant milk formulas costs to construct BMS plants in Russian regions POTENTIAL MANUFACTURERS OF D90 SERUM: ━━ Raw milk for further processing ━━ Since June 2019, proposals to increase import duties from 5% to 15% on formulas have been under PP Glazov-Moloko (OAO MILKOM) Dry milk, D70 serum consideration. In Udmurtia, the demand for raw milk is expected to grow by 23% (180,000 tonnes) by 2021, with a subsequent increase OOO Uva-Moloko Dry milk products due to new processing projects in the region: and OOO DMS Vostok ━━ Construction of a plant for dry dairy products (OOO DMS Vostok) in 2019-2028 ━━ Construction of a dairy production plant (OOO Uva- SITE AND REGIONAL PREFERENCES Moloko) in 2018-2021 ━━ Modernisation of four OAO MILKOM processing facilities The project could be implemented at the Glasov and Sarapul PSEDAs with relevant tax benefits. KEY PROJECT PARAMETERS in 2018-2024 RUB 8.7-10.0 BILLION POTENTIAL MARKET HUMAN CAPITAL One of the key consumers of D90 serum would be the potential investment volume Graduates of the Izhevsk State Agricultural Academy with a degree in technology of production and potential investor and BMS producer in Russia. The total niche market for BMS import substitution in Russia is RUB processing of agricultural products and in the technology of production and organisation of food 15.2 billion. production (625 students in 2018 was 625 people) may be involved. Graduates of the Izhevsk Trade and 19.8-36.6 % The target market is CFD (99% of imports). Economic College and the Sarapul Industrial College with a degree in Technology of Milk and Dairy range of potential profitability The key raw milk consumers include several new projects Products (69 people) may also be involved. involving OAO MILKOM, OOO DMS Vostok, OOO Uva- * launch of serum production for dry infant milk formulas Moloko and the D90 serum production project.

Source: PwC analysis based on data from similar investment projects implemented in Russia over the past five years and the profitability of Russian and foreign companies in this industry 37 PPP OPPORTUNITIES IN UDMURTIA 36 MAKSIM TKACHENKO Executive Director of ANO PPP UDMURTIA IS ONE OF THE 20 LEADING REGIONS IN TERMS OF PPP National Centre MATURITY, WITH TESTED INVESTOR SUPPORT MEASURES AND A SUCCESSFUL PPP TRACK RECORD MADE IN UDMURTIA MADE IN UDMURTIA

“The Udmurt Republic is one of the According to the PPP development PPP IN UDMURTIA IN NUMBERS leaders in terms of development of its rating of Russian regions as at 2019, 36 PPP institutional, regulatory and legal PPP projects with a total of RUB 21.8bn framework. In particular, the region (including 17.8bn in private investments) has enacted a comprehensive and in investments are underway in RUB RUB extensive PPP project support system Udmurtia. Social infrastructure projects TH PPP BILLION BILLION for all project stages. Under this system, raised RUB 1.1bn in private equity, 19 36 21.8 17.8 functions are allocated between including three sports facilities (RUB out of 85 regions in the projects with private total PPP investments as at PPP private investments as at dedicated structures. The Ministry of 800m) and three dialysis centres (RUB PPP development rating investments over RUB the beginning of 2019 the beginning of 2019 Economics coordinates and monitors 200m). Most projects are focused on of Russian regions 1 million as at the beginning PPP projects on an interdepartmental utilities infrastructure, with 25 raising a (2018-2019) of 2019 level; the Development Corporation total of RUB 6bn in private investments.” provides comprehensive PPP project support and the Investment Activity and Competition Policy Council BEST PRACTICES makes decisions on PPP projects and developments. In addition, a wide range Heating supplies in Izhevsk Nephrology and dialysis A sports centre with a swimming of private investor support measures has been adopted in Udmurtia, and the Thanks to a city-wide project departments in Izhevsk and Sarapul pool in the village of Pirogovo regional administration has a highly Izhevsk, all residential buildings and A project has made dialysis services This sports centre has a swimming qualified team of PPP subject-matter public buildings are connected to more accessible to the public. pool, gym, athletics track and experts. centralised heating and hot water. Next generation services are cafeteria. The 25-metre pool was The frequency of downtimes in provided under OHI (obligatory built in compliance with FINA heating networks and other public health insurance) policies. A total standards. The centre’s capacity is utilities has been reduced. The total of RUB 90m was raised in private 2,500 people per day. A total of RUB investment in the centralised heating investments. 200m in private investments was system is RUB 5.16 billion. raised. ━━ This project won the Best PPP ━━ In 2018, the Russian Ministry Healthcare Infrastructure Project of Construction of recognised from the Ministry of Health of the this project as one of the most Russian Federation effective in the country

Sources: ANO PPP National Centre, Development Corporation of the Udmurt Republic 39 MADE IN UDMURTIA

REGIONAL SUPPORT 2 FOR INVESTORS IN UDMURTIA 41 TAX INCENTIVES 40 TYPE OF BENEFIT LARGE INVESTMENT PROJECTS INSTALLATION OF SOCIAL, CULTURAL OR UTILITY FACILITIES

UDMURTIA OFFERS A WIDE RANGE OF TAX PREFERENCES AND Land plot lease Application criteria Application criteria (falls under one of the following categories): without bidding (minimum investment volume): ━━ Social and cultural infrastructure (healthcare, culture, ━━ Agriculture, forestry, hunting, fishing and fish farming: education, etc.) from RUB 3 to 10 million.1 OTHER BENEFITS TO INVESTORS, INCLUDING SPECIAL TAX ━━ Utility infrastructure (electricity, gas, etc.) ━━ Food production and Beverages production: from RUB 10 to 50 million.2 INCENTIVES FOR INVESTORS IN PRIORITY SOCIAL AND ECONOMIC ━━ Other types of activities: from RUB 10 to 100 million.3 MADE IN UDMURTIA TYPE OF BENEFIT INVESTMENT PROJECTS PPP

DEVELOPMENT AREAS (PSEDAS) Reduced-rate rent for Land Plots: Land Plots: use of land plots and 75% of the annual rent amount from the date of the decision to 75% of the annual rent amount from the date of the decision to provide real estate provide the benefit until the date of the commissioning permit the benefit until the date of the commissioning permit Real estate: Preferential rental rate for the payback period of the investment project, but no more than five years from the date of the decision

1 RUB 3 million for municipal districts; RUB 50 million for Izhevsk, Glazov, Votkinsk, Sarapul, Mozhga and Kambarskoye 2 RUB 10 million for municipal districts (except for Zavyalovsky District); RUB 50 million for the cities of Izhevsk, Glazov, Votkinsk, Sarapul and Mozhga and the municipal settlements of Kambarskoye and Zavyalovsky 3 RUB 10 million for municipal districts (except for Zavyalovsky District); RUB 50 million for the cities of Glazov, Votkinsk, Sarapul and Mozhga and the Zavyalovsky District municipal settlement; RUB 100 million for Izhevsk CATEGORIES OF REDUCED RATE RECIPIENTS TAX TYPE STANDARD REGIME INVESTMENT PROJECTS PPP INDUSTRIAL PARKS PSEDA 4

Income tax Standard regime 20 % including: 2 % federal 0 % under federal special investment contracts 0 % years 1-10 3% until 2020

18 % regional 10 % under regional investment contracts 13.5 % over five tax periods (for PPPs involving social 5 % for five tax periods 17% until 2020 and cultural facilities, no more than 10 tax periods) glazov-gov.ru/city/ 13.5 % under special investment contracts 12.5 % to 2020 10 % for the following five tax economy/TOSER 12.5 % until 2020 periods

Land tax Standard regime Standard regime Standard regime 1.5 % 0 % for the first ten years Insurance contributions Standard regime Standard regime Standard regime 30 % 22% for the Pension Fund, 2.9% for the Social 7.6 % for the first ten years Insurance Fund and 5.1% for the Medical Insurance Fund

Property tax 2.2 % 0 % from the beginning of the tax period, in which the company was 0 % from the beginning of the tax period in which the 0 % for five years (property on 0 % years 1-5 adm-sarapul.ru/ included in the register of regional investment projects’ participants for the investment contract is concluded for the project payback the balance sheet of the resident/ city/invest/toser- project payback period, but no longer than 10 years period, but no more than five years (for social and cultural management company located at up to 1.1 % (additional years) sarapul/index.php projects and/or utility projects: no more than for 10 years; the park) for social and cultural projects and/or utility projects: no 4 There are two PSEDAs more than for 10 years) in Udmurtia (Glazov and MET Standard regime Standard regime Standard regime Sarapul) and the support 5.5 % (rock, sand, clay) up to 0.8 % (rock, sand, clay) measures are similar. See the list of permitted Transport tax — — — — 0 % five years (for residents, activities in PSEDAs on excluding cars manufacturers) p. 76-77. Investment tax — No more than 90% of fixed asset acquisition, construction, manufacturing, delivery, the assessed tax to be paid to the regional budget for the — — deduction additional equipping, reconstruction, upgrade or technical re-equipping costs tax (reporting) period at a 17% rate and the assessed tax to in the current period. The threshold value is defined in the difference between –› be paid to the regional budget at a 5% tax rate.

Source: PwC analysis based on federal and regional laws, April 2019. * Programme 1764 provides reduced-rate loans to SMEs in accordance with Russian Government Resolution No. 1764 of 30 December 42 FINANCIAL INCENTIVES 43 2018. The programme is overseen by the Russian Ministry of Economic Development together with the SME Corporation. OVER THE LAST THREE YEARS, UDMURTIA-BASED COMPANIES HAVE RECEIVED MORE THAN RUB 2.5BN FROM COLLABORATIONS BETWEEN THE REGIONAL GOVERNMENT AND FEDERAL SUPPORT MADE IN UDMURTIA MADE IN UDMURTIA INSTITUTES

FEDERAL SUPPORT INSTITUTIONS ORGANISATION SUPPORT MEASURES CATEGORY OF RECIPIENT RESULTS PLANS

SME Corporation ━━ Loan and guarantee support for SMEs Small- and medium-sized Include three more SMEs in the large and SME Bank enterprises supplier cultivation programme ━━ Implementation of Programme 1764* RUB 1.5 BN RUB 21.4 BN ━ Implementation of a reduced-rate leasing programme ━ In loans received in 2016-2019 in leasing support received ━━ Measures aimed at increasing the share of purchasing with guarantee support from the by SMEs from SMEs, including a programme to cultivate large SME Corporation suppliers

━━ Property support for SMEs +10 % annual growth in the quantity of ━━ Educational programmes property transferred

Federal Industry Development ━━ Financing for industrial projects in cooperation Small- and medium-sized Collaboration with the Industry Fund with the Udmurtia Fund for Entrepreneurship enterprises RUB >1.1 BN Development Fund to implement the Development national Productivity and Employment in financial support for regional Support programme companies

Foundation for the Development ━━ Fundraising to co-finance the construction and Investors (PSEDA resident Raise investments from the of Single-Industry Cities renovation of infrastructure investors) Foundation for the Development 7 11 RUB 240M of Single-Industry Cities to develop ━ Interest-free loans for project implementation ━ co-financing interest-free loan of total co-financing infrastructure in Votkinsk, Glazov and projects projects Sarapul in 2019-2022

Sources: Ministry of Economy of the Udmurt Republic, Ministry of Industry and Trade of the Udmurt Republic, Development Corporation of the Udmurt Republic 45 ALEXANDER MALAKH ROMAN PETRUTSA 44 IRINA MAKIEVA Regional Project Leader, RDIF Head of the Industry Deputy Chair, VEB.RF & CEO, (Russian Direct Investment Fund) Development Fund Foundation for the Development & Director, Centre for Attracting of Single-Industry Cities Investment to Russian Regions MADE IN UDMURTIA MADE IN UDMURTIA

“The regional administration understands that the state “Companies in Udmurtia work extensively with the “MONOGORODA.RF has a reliable partner in Udmurtia. may not always be the most efficient owner and is Industrial Development Fund to obtain reduced-rate Our joint efforts have resulted in two large investment actively exploring growth areas and existing assets that loans. As of today, the fund has financed eight projects projects that have created more than 400 jobs in can be further developed and enhanced. The regional for a total of RUB 850m. An additional RUB 1.5bn in Udmurtia. I have no doubt that the region can easily administration is strongly committed to supporting private equity has been raised for these projects. The scale up similar projects. The region has an appealing investment and expects investors to be a key resource total volume of private equity investment in the Republic business climate, with two Priority Social and Economic for the republic’s development. The administration is will be more than RUB 2.3 billion. The implementation of Development Areas (PSEDAs) that provide investors open to any form of mutually beneficial cooperation, projects funded by the Industrial Development Fund will with key benefits. Supported by the region’s expert be it privatisation, PPP or support of private investment create more than 300 jobs and more than RUB 1.6bn in team, these zones are a colossal resource for fuelling projects.” tax payments. Three enterprises have already launched Udmurtia’s development.” new manufacturing lines enabled by loans from the Industrial Development Fund. Our achievements have been a collective effort. However, a significant role was played by the governor and regional administration. They have worked hard to find high-potential projects and raise awareness about the opportunities offered by the Industrial Development Fund among producers. The governor’s team has placed a particular focus on developing manufacturing and raising investments in the region. We strongly believe that Udmurtia’s manufacturing sector and regional administration will continue their intense and fruitful cooperation with the Industrial Development Fund.” 47 FINANCIAL INCENTIVES 46 OVER THE PAST THREE YEARS, UDMURT-BASED COMPANIES HAVE RECEIVED MORE THAN RUB 2BN IN REGIONAL AND MUNICIPAL SUPPORT MADE IN UDMURTIA MADE IN UDMURTIA REGIONAL SUPPORT INSTITUTIONS ORGANISATION SUPPORT MEASURES CATEGORY OF RECIPIENT RESULTS PLANS FOR 2020

Udmurtia Fund for ━━ Reduced-rate financing for entities through Small- and medium-sized Issue microloans for RUB 900m Entrepreneurship Development microloans at rates from 3% enterprises RUB 714.5M 530 (UFED) ━ Acts as a regional industrial development fund Amount of microloans The number of microloans granted from ━ issued from the year start to the year start to 18 November 2019 in cooperation with the Federal Industrial 18 November 2019 Development Fund 3RD PLACE RUB 1.13 BN in Russia by the volume of microloans Loan portfolio as of 18 November 2019 2 % Share of overdue payments

Guarantee Fund for SME Lending Providing guarantees for liabilities of SMEs at Small- and medium-sized Additionally capitalise the Guarantee Support of the Udmurt Republic a rate of 1% per year enterprises RUB 3.9 BN RUB 10.4 BN Fund for SME Lending Support from the In guarantees from the raised by SMEs from beginning of budget for RUB 25m for the purpose of beginning of 2010 to 18 2010 to 18 November 2019 guarantee support provision November 2019

13TH PLACE 9X in terms of issued guarantees growth in the guarantees among 85 regional guarantee portfolio since 2012 organisations

MUNICIPAL SUPPORT INSTITUTIONS ORGANISATION SUPPORT MEASURES CATEGORY OF RECIPIENT RESULTS STATUS Municipal small businesses Soft-term financing of SMEs located in the Small- and medium-sized Since 2019, municipal support support funds municipality enterprises RUB 655 M 929 institutions have became standalone in microloans issued in The number of microloans departments of the Udmurtia Fund 2016–2018 issued in 2016–2018 for Entrepreneurship Development (became part of the Udmurtia Fund for Entrepreneurship Development)

Source: Ministry of Economy of the Udmurt Republic 49 INFRASTRUCTURE INCENTIVES 48 PAVEL LIVINSKY CEO & Chairman of the UDMURTIA IS WORKING TO REDUCE THE ADMINISTRATIVE BARRIERS Management Board PAO Rosseti TO OBTAINING CONSTRUCTION PERMITS MADE IN UDMURTIA MADE IN UDMURTIA

“Forming an effective collaboration with the The estimated target time for these procedures is regional administration and corporate and SUPPORTED PARTY MEASURE based on the following parameters: individual consumers, Rosseti is investing Investors applying for a Reduce the time required to obtain a construction permit in terms of: ━━ The length of networks under construction is less significant funds in network infrastructure construction permit ━━ obtaining a development plan for a land plot from 20 business days to 15 business days than 200 metres; network construction does not development. Rosseti and Udmurtia have ━━ undergoing an expert evaluation from 40-55 calendar days to 22 business days entail land disputes on routing feasibility; signed a regulatory agreement providing for long-term planning and increased ━━ obtaining a construction permit from 7 business days to 5 business days ━━ The client ensures provision of documents and materials required for the procedures in the full investments to renovate the region’s Investors applying for utility Reduce the time required for utility connections: amount; electricity grids. Upgrading and developing connections ━ gas from 40 business days to 25 business days Udmurtia’s electricity grids will be carried out ━ ━━ The facility is connected to the electric lines for the using state-of-the-art technology to enable ━━ electricity less than 20 business days first time; a successful digital transformation. In 2019, ━ water and waste disposal from 44 business days to 25 business days ━ Connection to the lines via an individual tariff is not ━ ━ our investments in developing the region’s required; ━━ heating and hot water from 30 business days to 20 business days grid infrastructure will exceed RUB 1.2 billion. ━━ Construction of a transformer substation is not Starting on 1 January 2019, Rosseti Central required for connecting the facility. and Volga Region’s branch, Udmurtenergo, overtook operational management and technical support of AO Izhevsk Electrical Networks grids and facilities. This deal – the largest electricity network asset consolidation 15 DAYS +25 DAYS +22 DAYS + 5 DAYS deal in Russia – is a clear example of how DAYS land plot devel- utlility Gosekspertiza Construction operating the region’s grid under the banner 67 = { opment plan connection (State Expert permit } of Russia’s largest grid company provides Assessment) clear benefits to the public.”

THE TIME REQUIRED TO COMPLETE THE PROCEDURES FOR OBTAINING A CONSTRUCTION PERMIT IS LESS THAN 67 DAYS (SUBJECT TO CONCURRENT UTILITY CONNECTIONS)

Source: Ministry of Construction of the Udmurt Republic 51 INFRASTRUCTURE INCENTIVES 50 ADMINISTRATIVE INCENTIVES TIMELINE FOR INTRODUCING CHANGES IN LAND-USE INVESTORS AND THEIR PROJECTS RECEIVE TURN-KEY SUPPORT PLANNING DOCUMENTS IN UDMURTIA’S MUNICIPALITIES IN UDMURTIA ACROSS KEY AREAS, LARGELY FREE OF CHARGE HAS BEEN CONSIDERABLY REDUCED MADE IN UDMURTIA MADE IN UDMURTIA

INTRODUCTION OF CHANGES TO MUNICIPAL MASTER PLANS ORGANISATIONS * Provided that there is SPECIALISED IN ATTRACTING INVESTOR SUPPORT MEASURES REVIEW STAGE DEADLINE UNTIL 1 OCTOBER 2019 DEADLINE FROM 1 OCTOBER 2019 public financing for the specified work or non- INVESTMENT ━━ Provide a one-stop shop to support investor engagement with government Request reviewed by the Administration, agencies. days days public funds raised (at directive to prepare draft changes to Master 66 25 the requester’s expense) ━━ Facilitate engagement of investors and project initiators with investment and Plan prepared* venture funds, financial organisations, etc. Draft changes to Master Plan prepared The term is set in the contract with the contractor ━━ Organise investors meetings with the Head of the Udmurt Republic and Head of the Udmurt Republic Government. Project materials uploaded to the Federal days (less term to remedy noted flaws) State Territorial Planning Information System, 90 ━━ Selection of a land plot, buildings or premises to locate a project upon the access provided, public hearings conducted investor’s specification. ━ Interaction with public authorities and network organisations regarding Draft Master Plan approved and signed-off ━ 41 working days 18 working days allocation of land plots, receiving construction permits, connection to networks. Total days 225 DAYS 145 DAYS RECOVERABLE INVESTOR SUPPORT INTRODUCTION OF CHANGES TO MUNICIPAL ENTITY LAND USE AND DEVELOPMENT RULES* MEASURES

Development ━━ Organise, carry out and participate in business missions, conferences and Investors REVIEW STAGE DEADLINE UNTIL 1 OCTOBER 2019 DEADLINE FROM 1 OCTOBER 2019 Corporation of the festivals. Request reviewed by the Administration, ━━ Help to draft applications for co-financing from the Industry Development days days Udmurt Republic Instruction to prepare draft changes to Land 66 25 Fund, the Foundation for the Development of Single-Industry Cities, SME Use and Development Rules prepared Corporation and other development institutes. ━ Set up investment project delivery arrangements based on PPPs, including Draft changes to Land Use and Development The term is set in the contract with the contractor ━ concession agreements. Rules prepared ━━ Provide advisory services on financial, economic and legal matters. Public hearings conducted 120 working days 70 working days Draft Land Use and Development Rules working days working days compliance checked, draft changes to Land 41 18 Use and Development Rules approved and signed-off Total days 232 DAYS 125 DAYS

Source: Ministry of Construction of the Udmurt Republic 53 MADE IN UDMURTIA

BENEFITS FOR INVESTORS 3 IN UDMURTIA 55 RANKINGS 54 CAPITAL INVESTMENT PER CAPITA, INDUSTRIAL PRODUCTION RUB THOUSAND / PERSON INDEX UDMURTIA IS AN ATTRACTIVE INVESTMENT TARGET AND IS AMONG 65 107 54 60 54 57 55 102 99 103 100 102 THE 30 MOST INNOVATIVE RUSSIAN REGIONS, WITH EXTENSIVE EXPERIENCE IMPLEMENTING PPPS MADE IN UDMURTIA MADE IN UDMURTIA

2013 2014 2015 2016 2017 2018 2013 2014 2015 2016 2017 2018

IZHEVSK 42,100 KM2 1.5 M 72.5 YEARS 701,000 RUB 31,800 4.8 % RUB 622.7 BN 1 Capital Total area Population Average life expectancy PEOPLE (72.9 in Russia on average) Average monthly Unemployment rate Gross regional product (GRP) Average annual salary (4,8% in Russia on Moscow number of those (rub 43,700 in Russia average) PPP DEVELOPMENT RATING OF RATING OF INNOVATIVE REGIONS employed on average) 9 70 km RUSSIAN REGIONS 2018-2019: OF RUSSIA, AIRR 2018*: ¹ Preliminary data for 2018, Ministry of Economy of the Udmurt Republic Izhevsk 19TH PLACE/85 29TH PLACE/85 *INNOVATION HUBS IN UDMURTIA

assessment of the current perfor- reflects positive change in the 1. Regional Engineering Centre of the Udmurt Republic 5. Technology Transfer Centre, Izhevsk State Medical Academy mance of PPPs in Russian regions, development of regional innovation Works to enhance the technical capacity of small- and medium- Conducts patent research and provides advice on patentability; sized companies to help them develop innovative products. prepares applications for inventions; performs expert reviews of project implementation experience, ecosystems innovation proposals; prepares innovation proposal certificates. development level of the institutional 2. IzhSpetsTech Engineering Centre (Kalashnikov Izhevsk State Technical University) 6. Centre for Shared Instrument Use, Udmurt State University INVESTMENT ATTRACTIVENESS environment Provides a full range of engineering services for the Offers shared use of expensive instruments, technical and process SCORE manufacturing industry; commercialises R&D output of the equipment and measurement techniques. university; supports an institutional environment and tools to Investment attractiveness rating of the RANKING OF RUSSIAN REGIONS BY ADMINISTRATIVE PRESSURE 7. Share Use Centres, Kalashnikov Izhevsk State Technical implement complex technical projects; promotes innovative University Russian regions, National Rating Agency SOCIOECONOMIC STATUS, RIA RATING 2019 INDEX – 2019 solutions and technologies. 8. Centre for Share Use of Scientific Equipment Centre of Physical (2018) 3. Engineering Centre of Innovative Research and Expert Review, and Physicochemical Analysis Methods, Investigation of Udmurt State University UDMURTIA Properties of Surfaces, Nanostructures, Materials and Products, Provides engineering, advisory and expert services, develops TH PLACE/85 st Udmurt Federal Research Centre, Ural Branch of the Russian IC1 IC2 IC3 IC4 IC5 IC6 IC7 IC8 IC9 38 1 PLACE/81 and implements projects, facilitates the rapid commercialisation Academy of Sciences BY MINIMUM ADMINISTRATIVE of market-oriented projects; conducts employee trainings the assessment covers the size of the Conducts fundamental and applied research; develops and for institutions, organisations and enterprises and fosters the LOAD implements new experimental techniques. High Average Low economy, economic performance, establishment of new SMEs. budget indicators and social indicators indicators of control and supervisory 4. Technology Transfer Centre, Udmurt State University Enables the development and promotion of innovative projects; Sources: Rosstat (2013-2018), National Rating Agency activities are evaluated by Rospotreb- conducts expert reviews of the innovative potential of projects (NRA), PPP Development Centre, Association of Innovative nadzor, Rostekhnadzor, Rosprirod- and prepares expert opinions; helps to find financing for Regions of Russia (AIRR), RIA Rating, Appendix to the nadzor, Rosselkhoznadzor, EMERCOM, innovative projects. Report to the President of the Russian Federation – 2019 by the Presidential Commissioner for Entrepreneurs’ Housing and Public Utilities, transpor- Rights: Administrative Pressure Index – 2019 tation 57 TRANSPORT INFRASTRUCTURE IN UDMURTIA 56 LARGE RUSSIAN CITIES CLOSEST POPULATION, THE CONSUMER MARKET AROUND UDMURTIA TO UDMURTIA MILLION PEOPLE Moscow 12.6 IS RUB 2.24 TRILLION Ekaterinburg 1.4 Nizhny Novgorod 1.3

MADE IN UDMURTIA Kazan 1.2 MADE IN UDMURTIA

Chelyabinsk 1.2

Samara 1.2

Ufa 1.1 MOSCOW Moscow Perm 1.1

2 hours Nizhny Novgorod 17 hours Tumen WITHIN 600 KM WITHIN 1000 KM 18 hours — 1,200 km Perm PERM FROM IZHEVSK FROM IZHEVSK Voronezh Izhevsk Ekaterinburg 7 hours Kazan NIZHNY NOVGOROD 4 hours — 290 km Samara Ufa 44 MILLION 88 MILLION 14 hours permanent residents permanent residents Volgograd Chelyabinsk 10.5 hours — 780 km EKATERINBURG

11 hours KAZAN 8 hours — 640 km 7 CITIES 10 CITIES cities with a million-plus cities with a million-plus 5 hours population population 5.5 hours — 390 km UFA

5 hours — 340 km SAMARA RUB 904 BN RUB 2.24 TRILLION 23 hours CHELYABINSK per month spent by the local per month spent by the local population on consumer goods population on consumer goods 8 hours — 560 km 11 hours — 740 km and services and services

Source: PwC analysis on the basis of Rosstat (2017) data and geodata 25 0 25 50 75 100 km 59 TRANSPORT INFRASTRUCTURE IN UDMURTIA 58 THE TRANSPORT INFRASTRUCTURE IN UDMURTIA OFFERS KIROV REGION SIGNIFICANT ADVANTAGES TO INVESTORS GLAZOV

Highway reconstruction: 11.5 MADE IN UDMURTIA BALEZINO MADE IN UDMURTIA km to to the border

Izhevsk Federal Airport can land Embraer, Sukhoi Superjet The region has direct access to the Trans-Siberian Railway, with Kirov Region 100, Airbus А-319, Airbus А-320, Airbus А-321 and all lighter with a large railway hub in Glazov. In 2017, a total of aircraft. Passenger traffic in 2018 was 352,000 passengers, 2,098.000 tonnes of goods were shipped by rail. Reconstruction of with 885 tonnes of cargo traffic. The region’s river routes are 180 km long, enabling access Balezino Railway Major transport corridors connect Udmurtia to to the Baltic Sea, the Black Sea and the Caspian Sea via Station neighbouring regions: the Kambarka Cargo Port. The port facilitates shipments ━ The P242 Perm-Ekaterinburg federal highway connects to Turkey, Romania, Bulgaria and further to Central and PERM TERRITORY ━ Izhevsk Airport Udmurtia to the Urals. Western Europe. The total volume of cargo shipped in 2017 was 373,000 tonnes. renovation ━━ The P320 Yelabuga-Izhevsk regional highway connects Izhevsk to other large cities in the Volga Region via the M7 Volga Federal Highway, which is part of the Construction of a European Е22 route. transport and transit hub in Mozhga

PROJECTS IN UDMURTIA TO DEVELOP AND MODERNISE THE IZHEVSK AIRPORT PASSENGER THROUGHPUT VOTKINSK TRANSPORT INFRASTRUCTURE ARE IMPROVING THE REGION’S CAPACITY, THOUSAND PEOPLE ACCESSIBILITY 352 316 The airport is undergoing a major overhaul to be able to 257 IZHEVSK land new types of aircraft (Boeing) 255 241 By 2024, the Izhevsk Airport will have been renovated, including the runway, and a new terminal will have been built. The federal budget allocated RUB 3.4 billion to renovate the airport.

By 2021, 35 km of roads will have been built and renovated including reconstruction of the highway to Kirov Oblast (to MOZHGA be completed in 2020). Total funds are RUB 252m. 2014 2015 2016 2017 2018 SARAPUL By 2020, the city of Mozhga will see a new transport interchange hub that will link the existing railway station to KAMBARKA the bus hub, enhancing the region’s transport accessibility and commuting possibilities. Investment: RUB 300m with major highways co-financing from the regional budget and OAO RZD railways By 2024, the Balezino Station will have been renovated (Trans-Siberian Railway Network), improving throughput river port capacity by 50%. The total investment is RUB 4bn including REPUBLIC OF REPUBLIC OF OAO RZD funds. TATARSTAN BASHKORTOSTAN

Source: Ministry of Transport of the Udmurt Republic 61 HUMAN CAPITAL 60 UDMURTIA HAS HIGHLY EDUCATED POPULATION TO REALISE ... IN THE REPUBLIC THAT TRAIN SPECIALISTS IN ALL AREAS OF INVESTMENT PROJECTS: THERE ARE 7 HIGHER EDUCATIONAL ECONOMIC ACTIVITY, 67% OF GRADUATES WORK IN THE REGION INSTITUTIONS AND 9 BRANCH CAMPUSES... MADE IN UDMURTIA MADE IN UDMURTIA

KEY EDUCATION AND SCIENCE INDICATORS KEY HUMAN CAPITAL INDICATORS higher education institutions in Udmurtia, students per 1,000 residents % Employment rate LEADER AMONG Specialists involved in R&D per including 9 university branches, offer education (29 in Russia on average) in Udmurtia PEER REGIONS** 1,000 employees 16 programmes and training (incl. 9 university branches) 30 67 (65,5% in Russia on average) 3 (10 in Russia on average)

Distribution of university students across fields of study Distribution of employed individuals across economic sectors

10 % 5 % 2 % 12 % 1 % 4 % Humanities Healthcare and medical 15 % Education Agriculture, forestry, hunting sciences Arts and culture 5 % Healthcare and social services Mining and extraction Agriculture and agricultural Mathematics and natural 10 % Public administration Manufacturing 20,544* sciences sciences 28 % FULL-TIME Transportation and storage Construction STUDENTS Engineering, technology Social sciences Culture, sports and leisure Wholesale and retail 9 % 36 % and industrial sciences Education and pedagogy 26 % Professional, scientific Other and technical activities 7 % 8 % 2 % 8 % 3 % 7 % 4 %

Source: Udmurtstat (2018)

of graduates from Udmurt TOP THREE AMONG of regional university graduates of mining, manufacturing and Share of innovative goods, work universities are employed within PEER REGIONS** stay to work in Udmurtia energy companies in Udmurtia and services among all goods, 85 % one year upon graduation 67 % 12 % are engaged in innovation 18% work and services in Udmurtia (in (11.5 % in Russia on average) the mining, manufacturing and energy industries) * Students from state universities (8 % in Russia on average) ** Peer regions are the following 15 regions: Irkutsk Region, Astrakhan Region, Republic of Tatarstan, Orenburg Region. Perm Territory, Samara Region, Lipetsk Region, Voronezh Region, Kaliningrad Region. Volgograd Region, Saratov Region, Tver Region, Leningrad Region. Rostov Region and Republic of Bashkortostan

Sources: Main Information and Computer Centre (GIVTs), Higher Education Monitoring, 2018, Ministry of Education of the Udmurt Republic, 2018 Source: National Research University Higher School of Economics, innovation indicators, 2016 62 INVESTMENT SITES AND INDUSTRIAL PARKS 63 INVESTMENT PLATFORMS IN UDMURTIA PROPERTY (1/3)

No. ADDRESS TYPE OF PROPERTY AREA ACCESS WAYS ELECTRICITY SUPPLY GAS SUPPLY WATER SUPPLY AND WATER DISPOSAL TYPE OF COST USE CASES OWNERSHIP

1 Izhevsk

No.1 8, ulitsa Property portfolio (5 items) S (land area): 50,000 m2 М-7: 2 km Private Any type of production activity 2 MW Capability to connect to networks Central water supply / * Promyshlennaya (gas pipeline across the plot) S (GBA): 61,100 m2 Izhevsk Station: 7 km

Gas pipeline will be extended to the No.2 101, ulitsa Lenina Property portfolio (113 items) S (land area): 150,000 m2 М-7: 3.5 km 5 MW Central water supply and on-site Private * Any type of production activity borders of the plot by end 2019 / wells S (GBA): 100,000 m2 Izhevsk Station: 10 km

М-7: 2.5 km No.3 77, ulitsa Poyma Property portfolio (15 items), S (land area): 100,000 m2 2 MW Capability to connect to networks Central water supply Private RUB 120m Any type of production activity 1 overhead crane (gas pipeline across the plot) S (GBA): 15,000 m2 Izhevsk Station: 5 km

No.4 5, ulitsa Property portfolio S (land area): 33,231 m2 М-7: 7 km Private Any type of production activity, Capability to connect Capability to connect to Avtozavod’s Capability to connect / * Avtozavodskaya (2 items) networks metalworking S (production shop): 12,000 m2 Izhevsk Station: 15 km 300 m 300 m 9 overhead cranes S (office building): 3,000 m2 300 m

М-7: 18 km No.5 170, Votkinskoye Building (non-residential, 1 floor) S (land area): 20,789 m2 300 kW, capability to Capability to connect Capability to connect to water Private RUB 12,000/m2 Any type of production activity, logistics shosse 6 overhead cranes Izhevsk Station: 15 km increase capacity supply networks S (GBA): 12,000 m2 RUB 200/m2

М-7: 5 km The facility is connected to city heat No.6 22, ulitsa Health centre building S (land area): 3,533 m2 301 kW 315 m3/day Municipal RUB 31m Office, hotel, health centre Ukhtomskogo supply networks S (GBA): 3,115 m2 Izhevsk Station: 15 km Capability to connect 400 m

М-7: 5 km The facility is connected to city heat No.7 26, ulitsa Health centre building S (land area): 7,842 m2 301 kW 315 m3/day Municipal RUB 40m Office, hotel, health centre Ukhtomskogo supply networks S (GBA): 3,036 m2 Izhevsk Station: 15 km Capability to connect 300 m

М-7: 10 km — No.8 74a, ulitsa Group of buildings S (GBA): 1,151.3 m2 150 kW Central water supply Municipal RUB 28.6m Any type of commercial activity Gorkogo S (land plot): 2,281 m2 Izhevsk Station: 5 km

М-7: 12 km Capability to connect, the cost of No.9 9, ulitsa 2 cafeteria buildings S (GBA): 119 m2 and 120 m2 150 kW per each cafeteria Central water supply Municipal Estimated cost is Food production Nagovitsina work is RUB 1.8m RUB 8.4m S (land plot): 1,548 m2 Izhevsk Station: 6 km

М-7: 6 km No.10 6a, ulitsa Group of buildings S (GBA): 3,211 m2 300 kW Gas boiler house for 300 kW Central water supply Private RUB 23m Office, production activity Kirzavodskaya S (land plot): 5,446 m2 Izhevsk Station: 3 km

2 Sarapul

М-7: 55 km No.11 5 letter A, Building (residential, 2 floors) S (land area): 2,125 m2 Capability to connect Capability to connect Capability to connect to water Municipal RUB 5.3m* After the facility is reclassified as non- ulitsa Krasnaya The building is a cultural heritage site supply networks residential, it can be used for commercial S (GBA): 493,6 m2 Sarapul Station: 5 km 100 kW 50 m3/h ploshchad purposes 200 m 700 m 15,000 m3/day 55 m Capability to connect to water disposal networks

8,000 m3/day 20 m

Capability to install a substation No.12 49, ulitsa Truda Administrative and service building (a S (land area): 52,001 m2 М-7: 55 km Capability to connect Capability to connect to water Private RUB 10.1m* Any type of production activity, and connect it to 6 kV cable five-floor administrative building and a supply networks woodworking S (structures): 12,053.3 m2 Sarapul Station: 6 km 300 m three-floor production facility) 10 m 5 m

М-7: 55 km No.13 49, ulitsa Truda Building (non-residential, three floors, S (land area): 9,238 m2 The site is connected Capability to connect The site is connected Private RUB 4.4m* Any type of production activity production facility) Sarapul Station: 6 km S (GBA): 11,638 m2 150 kW 200 m 30 m3/day

М-7: 55 km No.14 40, ulitsa Building (non-residential, 3 floors) S (land area): 4,962 m2 up to 1,000 kVA, Capability to connect Water supply Private RUB 2.6m* Any type of production activity Gogolya, S (GBA): 1,452.7 m2 Sarapul Station: 6 km 50 m 100 m building 7 TP-3 with a capacity of Water drainage 2*1,000 kVA 100 m

М-7: 54 km No.15 15 ulitsa Elektro- Building (non-residential, 2 floors) S (land area): 3,500 m2 Capability to connect 1.5 MW Capability to connect Capability to connect to water Private RUB 2.2m* Any type of production activity zavodskaya supply networks S (GBA): 5,543 m2 Sarapul Station: 3 km TP-21: 30 m 300 m TP-22: 80 m 15 m Capability to connect to water disposal networks 10 m

No.16 30 letter BB, ulitsa Building (non-residential, 8 floors) S (land area): 2,519 m2 М-7: 55 km Capability to connect Capability to connect Capability to connect to water Private / * Any type of production activity Industrialnaya supply networks S (GBA): 9,417.7 m2 Sarapul Station: 6 km 1,136 kW/h 205.75 m3/h 213 m3/day Capability to connect to water disposal networks

109 m3/day

М-7: 54 km No.17 1A, ulitsa Production property portfolio (48 items) S (land area): 108,018 m2 1.8 MW Capability to connect Water supply 30 m3/day Federal RUB 59.4m* Any type of production activity, production Goncharova of reinforced concrete structures S (GBA): 23,633.6 m2 Sarapul Station: 3 km TP-1 — 545 m 250 m 300 m TP-2 — 300 m Drainage 30 m3/day (drainage pumping station on the premises)

3 Votkinsk

М-7: 60 km No.18 19A, ulitsa Building (non-residential, 1 floor) S (land area): 40,576 m2 235.05 kW 51,400 m3/year 27 m3/day Private RUB 60/m2 Any type of production activity, logistics Votkinsk Station: 4 km Dekabristov S (GBA): 7,000 m2

4 Glazov

М-7: 83 km No.19 AO ChMZ Site UAT land plot and property portfolio S (land area): 54,679 m2 Substation PS-13 Transformers Heat supply and hot water supply Compressed air 8 m3/h Private RUB 19.26m* Any type of production activity except food No 1, (22 items) 6/0.4 kV 2x630 kVA production S (GBA): 11,880.2 m2 Glazov Station: 0.5 km 2 Gcal/h Service and drinking water supply 7, ulitsa Belova Substation PS-14 Transformers 20 m3/h 6/0.4 kV 2x320 kVA Technical water 15 m3/h Current utilisation ≈ 600 kVA Storm water drain 50m3/h Service drainage 80 m3/h

М-7: 83 km No.20 AO ChMZ Site Land plot with an unclad concrete struc- S (GBA): 18,025.9 m2 38 MW Heating supply Service and drinking water supply Private RUB 49.32m Any type of production activity except food No 2, ture Detached structure Glazov Station: 0.05 13 тыс m3/day production 80 Gcal/h 7, ulitsa Belova km Technical water 130,000 m3/day

М-7: 83 km No.21 AO ChMZ Site Pre-production site (17 items) S (land area): 44,618 m2 Substation PS-13 Transformers Heat supply and hot water supply Service and drinking water supply Private RUB 19.75m Any type of production activity except food No 3, 6/0.4 kV 2x630 kVA 20 m3/h production S (GBA): 16,768 m2 Glazov Station: 0.1 km 1.5 Gcal/h 7, ulitsa Belova Substation PS-14 Transformers Service drainage 100 m3/h 6/0.4 kV 2x320 kVA Current utilisation ≈ 600 kVA

М-7: 78 km No.22 69, ulitsa OAO Glazov.Elektron production site S (land area): 21,839 m2 300 kW within the land plot Capability to connect The site is connected Other (Public RUB 300/m2 Any type of production activity except food Dragunova complex (9 items) Glazov Station: 0.5 km 3 Organization) production S (GBA): 10,000 m2 100 m /h 60 m3/day

М-7: 0.2 km The camp has sufficient electricity Gas connection is available with gas Borehole, pumping station, treatment No.23 Yakshur- Berezova Roshcha Recreation Camp S (land area): 126,500 m2 Private RUB 100m Recreation camp Bodyinsky supply boiler house facilities district, quarter 49 of Yakshur- Bodyinsky forestry

Sale Lease Cadastral value of the land plot Capacity to connect SUPPORT –T– he regional administration will provide assistance –– Reduced-rate lending from the Udmurtia Fund for in preparing the full package of documents for Entrepreneurship Development (No.1–7) Capacity Capacity range Distance to connection point The site is connected commissioning (No.1,No.9) MEASURES: –P– SEDA (No.10–15, 17–20) * Upon the investor’s request, a valuation can be conducted on the asset. Source: Development Corporation of the Udmurt Republic Source: Development Corporation of the Udmurt Republic Udmurt the of Corporation Development Source: INVESTMENT SITES IN UDMURTIA INVESTMENT SITES AND INDUSTRIAL PARKS o2 ulitsaIndustrialnaya No.28 Izhevsk, ulitsa50let No.27 Intersection of No.24 o3 ,uis eigasaa5.24 1, ulitsaLeningradskaya No.30 No.29 No.26 198,ulitsaKambarskaya No.25 NO. CATEGORY LAND 2 1 Sarapul formation) (plot in the process of VLKSM Galyansky Trakt Obyezdnaya and Izhevsk 177p, ulitsa Azina 177p, ulitsa Teplichnaya11, ADDRESS Se – Landf – or production, energy industry, transport, commu- – – (No.22, 31–33) nications andother specialpurposes (No.22, ttlement lands(No.23–30) 6.7 7,060 m 30 1.1 7 9.8 AREA, HA 2

ACCESS WAYS Sarapul Station: 5km Sarapul Station: 4km Sarapul Station: 7km Izhevsk Station: 18 km Izhevsk Station: 15 km Izhevsk Station: 27 km

М- М- М- М- М- М- 7: 62km 7: 57km 7: 62km 7: 9km 7: 6km 7: 25km For deployment of industrialfacilities and businessbuildings For deployment of production andutility facilities andpublic business buildingsandutility infrastructure servicing the zone. Production andutility infrastructure zone for publicand Farming business facilities or ashoppingcentre For publicandbusinessfacilities. For deployment of publicand houses or parts thereof andother similar products equipment, liftsandhoists,carpenter products, pre-fabricated materials), service andconstruction gasandplumbing construction materials (brick,sawed timber, concrete, fixture Deployment of capitalconstruction production facilities: deployment of anindustrialfacility or warehouses Land for multifunctional publicandbusinessfacilities. For zone inamulti-storied structure D1-1 Zone: Multi-functional publicandbusinessdevelopment PERMITTED USE TYPE USE PERMITTED MEASURES: SUPPORT F – F – – – (No.26, 28, 29, 33) 29, 28, or lease without bidding (No.26, 27,or 30) lease without bidding. PSEDA (No.25, 6 kV cable substation andconnect it to Capability to installa the border of the plot received, networks goalong Technical specificationsnot received Technical specifications ELECTRICITY SUPPLY ELECTRICITY to connect Capability to connect 10m 300m 50m

Capability 100 kW 150 кВт 1 MW onsite 2 MW onsite

68 pon the investor’s request, a valuation can beconducted on the asset. * LAND PLOTS (1/2) PLOTS LAND the plot Networks goalong the border of ehia pcfctosrcie Technicalspecifications received Technical specifications received the plot Networks goalong the border of GAS SUPPLY GAS U to connect to connect 100m 50m Capability Capability Capability 300 m3/h 100 m3/h 20 m3/h 2000 m3/honsite Capacity Sale o connect to Capacity range Lease Networks goalong the border of the plot Water-bearing layer depth: 30m Capability to drilla well to facilitate onsite operations. ofplot the Technical specificationsnot received, networks goalong theborder WATER SUPPLY AND WATER DISPOSAL WATER AND SUPPLY WATER to connect to connect to water disposal networks to connect to water supply networks to connect to water disposalprovided adrainage to connect to water supply networks 70m 1,60m 51m 55m Capability Capability Capability pumping stationisbuilt Capability Capability 4,200 m3/day 2,500 m3/day 2,500 m3/day 2,500 m3/day 2,500 m3/day Distance to connection point Cadastral value of the landplot Capacityconnect to The site isconnected Private Private Private Private Private Municipal Municipal TYPE OF OWNERSHIP OF TYPE agribusiness park Search for aninvestor to buildan COST *RUB17.8m* / RUB7.9m* / RUB32.0m* / RUB 29m RUB 262.1m RUB 5mper hectare

69 Source: Development Corporation of the Udmurt Republic Udmurt the of Corporation Development Source: INVESTMENT SITES IN UDMURTIA INVESTMENT SITES AND INDUSTRIAL PARKS o3 900m west of the No.36 No.34 pereulok Gvardeisky/ No.33 2.6 160,ulitsaPugacheva No.31 No.35 14, ulitsa No.32 NO. CATEGORY LAND 4 6 5 3 Mozhginsky District Glazov Votkinsk MO Gornakskoye village of Chumoitlo, Zavyalovsky Area ulitsa Kuibysheva Zavyalovsky Area Zavyalovsky Area Promyshlennaya ADDRESS Se – Landf – or production, energy industry, transport, commu- – – (No.22, 31–33) nications andother specialpurposes (No.22, ttlement lands(No.23–30) 71.3 2.7 7.6 8 1.425 AREA, HA

ACCESS WAYS Izhevsk Station: 26 km Izhevsk Station: 26 km Glazov Station: 5km Votkinsk Station: 5km Votkinsk Station: 4km

Mozhga Station: 7km the М- М- М- М- М- near 7: 27km 7: 27km 7: 80km 7: 80km 7: 62km М-7 dealership For deployment of anindustrialfacility, warehouses or car Current: publicandbusinessfacilities. dealership For deployment of anindustrialfacility, warehouses or car Current: publicandbusinessfacilities. To buildclassIV-V hazard industrialfacilities For deployment of industrialfacilities support, production supportor communications industry, construction industry, warehouses, agriculture administration, car service, subsoiluse,consumer goods Option to change the type of permitted use to business Food production. For deployment of industrialfacilities PERMITTED USE TYPE USE PERMITTED MEASURES: SUPPORT F – F – – – (No.26, 28, 29, 33) 29, 28, or lease without bidding (No.26, 27,or 30) lease without bidding. PSEDA (No.25, operations generator to facilitate onsite Capability to installagas operations generator to facilitate onsite Capability to installagas ELECTRICITY SUPPLY ELECTRICITY 300m (STP-268) 400m (KTP-19) ≈120m onsite 4.5 M 52 k 100 kW W W

70 pon the investor’s request, a valuation can beconducted on the asset. * LAND PLOTS (2/2) PLOTS LAND GAS SUPPLY GAS U 150m 500m 300 m 1,000 m3/day on site 1,000 m on site 1,000 m Capacity Sale 3/h 3/h Capacity range Lease Water-bearing layer depth: 30m Capability to drilla well to facilitate onsite operations. Water-bearing layer depth: 30m Capability to drilla well to facilitate onsite operations. WATER SUPPLY AND WATER DISPOSAL WATER AND SUPPLY WATER 0.25 km 0.1km 1,500m 1,500m

6,000 m Water drainage Water supply Water drainage Main water supply pipeline (sewage treatment facilities) 69.92 m3/h facilities’ inlet chamber:5,000m HC Main water supply pipeline -2 step-up: 346.78m3/hour Sewage treatment 3/year Distance to connection point Cadastral value of the landplot Capacityconnect to The site isconnected Private Private Municipal Municipal Municipal properties Non-delineated federal TYPE OF OWNERSHIP OF TYPE COST RUB137.1m* RUB67m* RUB14.1m* RUB8.1m* RUB 5mper hectare RUB 5mper hectare

71 72 INVESTMENT SITES AND INDUSTRIAL PARKS 73 INDUSTRIAL PARKS IN UDMURTIA IZHEVSK PLANT METALLURGIC SYNERGY IZHEVSK PLANT METALLURGIC SYNERGY

298, Votkinskoye Shosse, 27, Novoazhimova Street, Park infrastructure, land plot Address Deryabin Proezd, Izhevsk 4 Izhevsk Izhevsk Total territory in the park, hectares 76.90 52.10 14.40 Management company OOO Izhevsk Plant Razvitie Permitted hazardous facility class Class II Class IV-V Class IV-V www.most-dvlp.ru, www.most-dvlp.ru, https://most-dvlp.ru/ Website www.паркразвитие.рф https://инmеталлпарк.рф nashi-obekty/synergy/ 5 Real estate (Industrial, Office)

Focus Processing industry Industrial and logistics centre Existing production facilities designated for placement of residents, sq m 260,420 50,110 18,020

1 Basic services of the management company Total office floor size for placement of residents, sq m 32,400 1,098 600

Sale of land plots 6 Resources

Lease of land plots Electricity Available capacity, MW 20 4 6 Lease of finished production facilities Tariff for residents, RUB/kWh 4.85 4.74 4.74

Construction of turn-key industrial buildings Park gas supply

Provision of specialised equipment CNC machines and Heat supply heavy-duty crane equipment Park water supply 2 Additional services of the management company Water disposal in the park and storm sewage treatment facilities Logistics, recruitment, maintenance and operation of common use facilities, security, legal, consulting, IT, cleaning of grounds and garbage Communications (telephone and fibre optic Internet) removal 7 Accessibility for employees 3 Transport accessibility

Availability of transport connection from residential areas to the park permanent public transport routes Distance to the nearest federal highway, km 2 0.03 2

Nearest road, name Deryabin Proezd Votkinskoye Shosse Novoazhimova Street 8 Investments and residents

Nearest motor road, distance, km 0.01 0 0.15 Total investments in park infrastructure, RUB million 632.5 184.49 315.88

Length of road network in the park, km 2.5 3.5 2 Total investments of park residents, RUB million 121.84 23.42 12.04

Number of jobs created in the park, units 788 168 13 Railway connection

On-site railway tracks in the park

Name of the nearest discharge terminal Industrial park Izhevsk Station Izhevsk Station

Distance to the nearest railway discharge terminal, km 0.2 8 8 CONTACT PERSON Artem Votyakov T +7 (3412) 911-969 E [email protected] Distance to the nearest international airport, km 220 M +7 (912) 451-60-98

Source: Development Corporation of the Udmurt Republic 74 INFORMATION ON AVAILABLE LEASE 75 Land plots are leased out for AGRICULTURAL LAND 49 years without bidding, 19 provided that an investment project will be implemented YARSKY there. MADE IN UDMURTIA MADE IN UDMURTIA SALE 34 HA HA 91,100 100 11,800 ━━ After three years of YUKAMENSKY lease, a land plot may available agricultural land land plots have already been have been assigned cadastral numbers be purchased without assigned cadastral numbers bidding at its cadastral value. DISTRICT NUMBER OF TOTAL AREA OF MINIMUM AND MAXIMUM AVERAGE COST OF MINIMUM AND MAXIMUM ━ For farming purposes, land AGRICULTURAL LAND PLOTS AREA OF LAND PLOTS ANNUAL LAND PLOT COST OF ANNUAL ━ plots are provided without LAND PLOTS AVAILABLE FOR AVAILABLE FOR SALE/ LEASE (WITHOUT LEASES ON LAND PLOTS bidding, provided that the 8 (WITH ASSIGNED SALE/LEASE, HA LEASE, HA BIDDING), RUB* AVAILABLE FOR SALE/ lessee has published the CADASTRAL LEASE, RUB project and is participating SELTINSKY NUMBERS) in a regional state programme. Kiyasovsky 16 3,632.2 12 848 13,561.9 640 45,235 ━━ In other cases, there 7 is an auction with the Mozhginsky 2 391.0 72 319 12,424.8 4,571 20,278 starting price determined UVINSKY following an appraisal. Sarapulsky 13 1,333.4 6 356 13,642.8 935 66,372 IZHEVSK

Seltinsky 8 169.8 8 37 682.1 171 1,237

2 13 Uvinsky 7 115.1 6 43 637.4 241 1,738 MOZHGINSKY SARAPULSKY Yukamensky 34 5,375.6 2 1,317 10,087.1 152 71,798 16 KIYASOVSKY Yarsky 19 782.0 0.2 512 2,360.2 11 29,332

Minimum Maximum

*0.4% of the cadastral value (rate for agricultural land established by Udmurt Republic Government Resolution No. 172 of 6 November 2007) Note: Depending on the project and investor’s requirements, the location and size of the plot may be determined individually. Source: Development Corporation of the Udmurt Republic 76 PERMITTED ACTIVITIES IN THE GLAZOV 77 AND SARAPUL PSEDAS

GLAZOV

1. Food production 9. Electrical equipment MADE IN UDMURTIA 17. Computers, electronic and optical products (except 37. Provision of care with accommodation on site MADE IN UDMURTIA for elements of electronic equipment and printed 2. Textiles 10. General machinery and equipment 38. Creative sector, art and entertainment circuits, and communication equipment) 3. Clothing 11. Furniture 39. Sports, recreation and entertainment 18. Electrical equipment (except for the production 4. Wood and wood products, except furniture; 12. Finished goods of electric motors, electric generators and straw and plaited goods 13. IT transformers) 5. Rubber and plastic items 14. Health care 19. General machinery and equipment 6. Non-metallic mineral products 15. Libraries, archives, museums and other cultural 20. Motor vehicles, trailers and semi-trailers Fabricated metal products, except machinery facilities 7. 21. Other vehicles and equipment and equipment Sports, recreation and entertainment 16. 22. Furniture 8. Computers, electronic and optical devices 23. Finished goods 24. Waste processing and disposal 25. Sorted materials disposal SARAPUL 26. Warehousing and storage 27. Freight transport processing 1. Plant growing and cattle breeding, hunting and 7. Clothing provision of related services in these areas (except 28. Provision of temporary accommodation 8. Leather and related products for auxiliary activities in the field of crop production 29. Telecommunications and post-harvest processing of agricultural products, 9. Wood and wood products, except furniture; straw 30. Software development, consulting services in this hunting, capture and shooting of wild animals, and plaited goods area and other related services including provision of services in these areas) 10. Paper and paper products 31. IT 2. Fisheries 11. Chemicals and chemical products 32. Research and development 3. Stone, sand and clay 12. Basic pharmaceutical products and medical devices 33. Other professional, scientific and technical activities 4. Food production (except for drinking milk and 13. Rubber and plastic items (except for professional, scientific and other drinking cream, production of grain crops flour, 14. Non-metallic mineral products (except for cement, technical activities not included in other groups) production of bread and baked goods, cakes and lime and plaster) pastries with short shelf-lives) 34. General education 15. Metallurgy 5. Soft drinks and mineral water 35. Additional education 16. Finished metal products, except for machines and 6. Textiles 36. Health care equipment (except for weapons and ammunition)

Sources: Russian Government Decree No. 1178 of 29 September 2017 Russian Government Decree No. 125 of 12 February 2019 79 MADE IN UDMURTIA

APPENDIX 1: 4.1 SUCCESS STORIES IN UDMURTIA 81 SUCCESS STORIES IN UDMURTIA 80 PROMISING AREAS Goal: increase the share of civilian-use goods and 1.4 Forgings services in total revenues to 30% AO KALASHNIKOV CONCERN OF DEVELOPMENT 1.5 Precision casting: steel, special alloys, grey 1. Kalashnikov Engineering* products: pig iron and Ni-resist

1.1 Machine tool building: 1.6 Tool-making facilities

1.1.1 CNC lathe mills 1.7 IT products for production digitalisation (in-house developed MES, SCADA, PLM) 1.1.2 Screw-cutting lathes IZh 250ITVM

MADE IN UDMURTIA 2. Kalashnikov Engineering* services: MADE IN UDMURTIA 1.1.3 CNC turning mills 2.1 SERVICE 360 contract (a production DMITRY TARASOV 1.1.4 Hybrid welding and milling machining centres The Izhevsk Mechanical Plant was founded in 1807 following a decree issued by service mix representing an efficient approach YEAR OF General Director (combination of additive technologies and Alexander I. AO Kalashnikov Concern to business management and enabling a ESTABLISHMENT mechanical metal-working) The Izmash Production Association was set up in 1975. considerable reduction of production losses 1.1.5 Special metal working machines and along with improvement of the enterprise AO NPO Izhmash was renamed as AO Kalashnikov Concern in 2013 based on technological equipment built to customer’s performance). Rostec Corporation Decision No. 122-ROAO of 23 May 2013 specifications 2.2 Process Laboratory Training Centre (staff 1.1.6 Rolling screws and nuts (ball-and-screw units) training and implementation of global best CORE TYPES 1. Civilian-use small weapons (sports and hunting weapons, tactical weapons, 1.1.7 Gear production machinery practices in production and business systems) OF CIVILIAN signal guns, air guns, dummy guns, non-lethal weapons and replica weapons) 1.2 SERVICE 360 contract (a production service 2.3 Kalashnikov Development (civil PRODUCTS 2. Unmanned aerial vehicles (copters and planes) “OVER THE PAST FIVE YEARS, mix representing an efficient approach to business engineering services) 3. Shipbuilding (civilian multifunctional and commercial boats, civilian ships, WE HAVE MADE A GREAT LEAP management and enabling a considerable reduction 2.4 Engineering Centre (enterprise compound civilian boats, patrol crafts, guided missile boats, speedboats and FORWARD IN PRODUCING of production losses along with improvement of the modernisation, development and operating assault boats) CIVILIAN-USE PRODUCTS. IN enterprise performance). efficiency improvement services) 4. Clothing and accessories 2018, YEAR-ON-YEAR REVENUE 1.3 Manufacturing of complex geometric parts using 2.5 Technological equipment and spindle FROM CIVILIAN-USE PRODUCTS MIM technology 5. Electric transport assembly repair and maintenance INCREASED THREEFOLD.

KEY COMPET- ━━ Strong brand We are recognised as a Russian STATE SUPPORT ━━ Participation in programmes operated by the Industrial Development Fund. About the programme: debt financing is provided to enterprises in the military-industrial complex aimed ITIVENESS ━━ Continuous implementation of R&D and advanced technologies to enhance the leader in the digitalisation of EXPERIENCE DRIVERS product line manufacturing. At Kalashnikov, at manufacturing high-tech civilian- and/or double-purpose products we have built an IT ecosystem ━ Participation in the subsidy programme under Russian Government Resolution No. 1312 of 30 ━━ Manufacturing of a wide range of high-demand and competitive products ━ that serves as a model for December 2013 “On Approving the Rules of Granting Subsidies from the Federal Budget to ━━ Extensive experience in the industry and highly qualified engineers other Russian manufacturing Russian Entities to Reimburse a Share of R&D Costs in Priority Fields of Civil Industry as Part of ━━ Rostec Corporation, which incudes more than 700 entities that work to enterprises. Implementing Comprehensive Investment Projects by Such Entities” unleash Russia’s technological and scientific potential, holds a 25% share in AO The regional administration Kalashnikov Concern. provides key assistance in engaging with development institutes.”

‘Kalashnikov Engineering is a brand of Kalashnikov Concern, which develops products and provides services for the civilian sector’

Source: AO Kalashnikov Concern 82 SUCCESS STORIES IN UDMURTIA ANDREY SHUTOV 83 ━ KOMOS comprises 17 companies in Udmurtia, KEY ━ Managing Shareholder OOO KOMOS GROUP COMPETITIVENESS Tatarstan, Perm and Bashkortostan. OOO KOMOS GROUP DRIVERS ━━ KOMOS operates branded retail outlets and the KOMOS-Logistika transportation company, which delivers the holding’s products across Russia.

━━ KOMOS collaborates with the Selo Zelenoe chain (the brand’s projected sales for 2019 will be RUB 10bn). MADE IN UDMURTIA

STATE SUPPORT ━━ In 2018, the Foundation for the Development of EXPERIENCE Single-Industry Cities approved the application of the “TODAY, GOODS UNDER OUR SELO Udmurt Republic in relation to the investment project ZELENOE, MOLOCHNAYA RECHKA, “Reconstruction of Sarapul Meat-Processing Plant TOPTYZHKA, TOBE AND OTHER of OOO Vostochny of KOMOS GROUP agricultural BRANDS ARE SOLD ACROSS A VARIETY holding”. As part of the investment project, several OF NATIONAL AND LOCAL CHAINS YEAR OF 2003 shops have been repaired, new production equipment IN RUSSIA AND NEIGHBOURING ESTABLISHMENT has been launched and infrastructure is being COUNTRIES. WE HAVE STARTED TO developed. Completing the project will enhance EXPORT OUR PRODUCTS TO CHINA. CORE ACTIVITIES ━━ Milk processing (2nd largest Russian producer of UTH milk) production volumes and create 100 new jobs. Udmurtia has become part of ━ Poultry farming (5th in egg production) ━ the global world. This is not just a ━ KOMOS delivers products to 72 Russian regions. ━━ Pig-breeding and meat processing (23rd in pork production) SALES GEOGRAPHY ━ slogan. The regional administration ━ In April 2019, Sarapul-Moloko shipped the first batch ━━ Meat processing ━ has taken important measures of dairy products to China as part of an international to promote products made in ━━ Crop and dairy farming contract signed in March between the agricultural Udmurtia. We highly appreciate ━ Animal feed production ━ holding and Li Hua Economic and Co.Ltd.Suifenhe the efforts of the regional ━━ Fish processing (Suifenhe, People’s Republic of China). The expected administration to enhance the trade volume will be at least 500 tonnes of dairy investment appeal of our territory PRODUCTION ━━ The strategic goal of KOMOS GROUP is to become the leading milk processing company in products and 40 tonnes of ice cream per month. and support local producers. All MODERNISATION AND Russia by reaching processing volumes of 1 million tonnes. For this purpose, the agricultural of this helps to promote a positive DEVELOPMENT holding is conducting large scale reconstruction projects on a regular basis. In particular, image of Udmurtia.” the holding is currently implementing the MILKOM 2020 investment project, which is aimed at modernising production facilities and adopting modern technology for waste water processing at the Kezskiy Cheese Factory.

━━ In the near future, the Ministry of Agriculture and Food of the Udmurt Republic and OAO MILKOM plan to sign a special investment contract that will facilitate the project, provided that OAO MILKOM receives tax benefits. Total investments to reconstruct the Kezskiy Cheese Factory will exceed RUB 2bn.

━━ From 2005 to 2018, the holding invested RUB 23.2bn in the agribusiness sector in Udmurtia, Tatarstan and Perm.

Source: OOO Komos Group 85 SUCCESS STORIES IN UDMURTIA 84 KEY ━━ Modern automatic equipment from Germany, Italy, Japan, Turkey and Switzerland and OOO IZHEVSK HEATING COMPETITIVENESS sufficient material and technical resources DRIVERS ━━ Highly trained and skilled personnel EQUIPMENT FACTORY ━━ Wide range of high-quality products ━━ Internal network of authorised service centres ━━ High quality standards

MADE IN UDMURTIA ━━ Collaboration with leading Russian and European universities, laboratories and institutes MADE IN UDMURTIA

KEY ACCOUNTS ━━ BalLu ━━ Zanussi ━━ Electrolux VASILY PERMYAKOV ━━ ZUBR YEAR OF 2007 Director of OOO Izhevsk ESTABLISHMENT Heating Equipment Factory ━━ Interskol ━━ Russian Railways (RZD) Thermal equipment: CORE PRODUCTS ━━ Moscow Metro ━ Heat guns, thermal curtains ━ ━━ Sberbank ━━ Infrared electric and gas heaters, electric convectors ━ Russia and CIS ━━ Gas lamps with an electronic control unit, water fan heaters SALES MARKETS ━ ━━ Norway ━ In 2008, an assembly site was launched at NPP Kupol. THE FACTORY’S ━ ━━ Finland MILESTONES ━ In 2011, the factory moved to new production facilities. The ━ ━━ Sweden factory launched the following: mechanical metal-working, press- ━━ Holland forming, powder painting and assembling conveyors. “UDMURTIA IS A LONG ESTABLISHED ━━ England ━━ The factory introduced the Lean Production Programme. INDUSTRIAL REGION WITH PRODUCTION ━━ France ━━ In 2014, the factory opened new production facilities in Kirzhach, EXPERTISE, STRONG COLLABORATIONS ━ Poland Vladimir Region. СЕ certified. A belt conveyor, bending machine, AND HIGH LEVELS OF HUMAN CAPITAL. ━ laser machine and profiling line are in place. In combination with state support, ━━ In 2015, the factory obtained a Quality Management System all of these factors create excellent certificate in accordance with ISO 9001 standards. conditions to develop existing production facilities and attract new investment.”

Source: OOO Izhevsk Heating Equipment Factory 87 SUCCESS STORIES IN UDMURTIA 86 ALEKSANDR SHTUMF ━ In 2013-2016, the company received subsidies from the STATE SUPPORT ━ Director OOO ORION OOO ORION EXPERIENCE regional and federal budgets. ━━ The company received a reduced-rate forest resource lease under a forest development priority investment project (“Technical re-equipment of veneer and sawmilling production, forest harvesting operations set-up”) in 2015.

━━ The company raised funds via the Industry Development Fund MADE IN UDMURTIA for an investment project (“11-section veneer roller dryer with MADE IN UDMURTIA automated independent temperature control for each gas burner, veneer hot presses and compactors”) in 2017. ━ The company received a 106.6m loan against a guarantee YEAR OF 2010 ━ “STATE SUPPORT RECEIVED AT issued by the SME Corporation under Programme 6.5 to carry ESTABLISHMENT THE REGIONAL LEVEL FROM THE out modernisation and purchase raw materials. GUARANTEE FUND GAVE THE COMPANY ━━ In 2005, the company sold veneer stock and fire wood to a forest combine. COMPANY ADDITIONAL RESOURCES SALES GEOGRAPHY ━━ Russian Federation ━━ Finland MILESTONES ━━ In 2010, the company bought equipment from Uvadrev Holding and started lato-flex TO DEVELOP NEW LINES OF production. ━━ Azerbaijan ━━ Czech Republic BUSINESS AND ENTER NEW ━ Italy ━ Germany ━━ In 2012, the company started producing veneers of various thickness. ━ ━ DISTRIBUTION MARKETS.” ━ Egypt ━ Canada ━━ In 2018, an up-to-date high-output sawmilling line was launched. ━ ━ ━━ Estonia CORE PRODUCTS ━━ Birch veneer products, including veneer, caul, panels.

PROMISING AREAS ━━ Wood trim from soft and hard wood including floor and roofing board, rectangular timber, OF DEVELOPMENT weatherboard, casing molding

KEY ━━ Using cutting-edge, energy-efficient wood processing equipment made in Taiwan, Finland COMPETITIVENESS and Brazil DRIVERS ━━ Efficient use of state support

Source: OOO Orion 89 SUCCESS STORIES IN UDMURTIA 88 HIGH-POTENTIAL ━━ Energy efficient gas-fired radiant heating systems GOODS AND ━━ Turn-key industrial waste water treatment solutions (galvanics) АО IEMZ KUPOL SERVICES ━━ Solid state wave gyroscopes ━━ Two-component solutions for peritoneal dialysis ALEKSEI ZLOBIN YEAR OF 1957 Manufacturing and Technical ━ Project management principles ESTABLISHMENT Products Director AO IEMZ KEY ━ KUPOL COMPETITIVENESS ━━ Successful experience in production conversion, diversification, technology development MADE IN UDMURTIA DRIVERS KEY STAGES ━━ In 1997, the first fan heater was manufactured laying the foundations for ━━ Organisation of joint projects with foreign partners (a joint venture with FRESENIUS MEDICAL OF CIVILIAN- a fully fledged climate control equipment production line. CARE Deutschland GmbH) USE PRODUCT ━━ In the 1990s-early 2000s, as part of the Conversion Programme, a MANUFACTURING pharmaceutical manufacturing facility (Rester) and civilian-use products manufacturing plant (TNP Meteor) were built. STATE SUPPORT ━━ Industrial Development Fund: funding finned pipe rolling-on production (ongoing approval procedure) ━━ In 2008, Rester worked with FRESENIUS MEDICAL CARE Deutschland EXPERIENCE GmbH to launch the production of solutions for peritoneal dialysis; the ━━ Russian Ministry of Industry and Commerce: subsidised interest rates opening ceremony was attended by Walter Jürgen Schmid, the German “WE FEEL SUPPORTED BY THE Ambassador to Russia. SALES GEOGRAPHY ━━ Russian Federation GOVERNOR AND REGIONAL ━━ Belarus MAIN CIVILIAN- Climate control equipment: Machinery products and fuel and ADMINISTRATION AND THE ━━ Turkey energy complex: ALMAZ-ANTEY CONCERN. USE PRODUCTS ━━ Fan heaters ━━ Bangladesh AND SERVICES ━ NPP equipment We have developed gas- ━━ Air curtains ━ powered radiant heating ━━ indirect exports to India ━ Edge rolling-off ━━ Infra-red heaters ━ systems that enable large ━━ South Korea ━ Oilfield equipment ━━ Heat guns ━ industrial sites to cut their ━━ China ━━ Heat exchangers for ventilation and energy costs in half. And this air conditioning systems Environment and health: is a fact. We provide turn-key ━━ stay•safe® solutions for High-tech products: peritoneal dialysis purification facilities, including designing the technical and ━━ Metal-carbon composites and ━ Plastic manufacturing ━ construction blueprint. We corrosion inhibitors (containers, packaging for also build, commission, train ━ Highly purified material containers, confectionery, ━ and set up work schedules for medicine) purification facilities.” Energy and resource efficiency:

━━ Gas infra-red heating elements ━━ Light gauge steel framing (LGSF)

Source: AO IEMZ Kupol (Izhevsk Electromechanical Plant) 91 SUCCESS STORIES IN UDMURTIA 90 OOO ELMA OOO HIGH TECHNOLOGY CENTRE ALEKSEI TREFILOV 2006 YEAR OF CEO OOO Elma ESTABLISHMENT

CORE PRODUCTS ━━ Projects+ (project management) ━━ ЕСМ+ (electronic workflow) ━ CRM+ (sales management) ━ ВРМ (business process management)

MADE IN UDMURTIA ━ ━ ━━ KPI (performance indicators management)

OLEG VYLEZHAGIN PROMISING ━━ ELMA.IA (RPA, AI) 2000 YEAR OF CEO OOO High Technology DEVELOPMENT ━━ ELMA365 (a cloud-based system for SME automation) “WE ARE HEAVILY ENGAGED ESTABLISHMENT Centre AREAS IN TRANSFORMING TRADITIONAL COMPANIES ━ Developing tailored solutions for e-commerce, media and CORE ACTIVITIES ━ STATE SUPPORT ━━ The company is registered in the Udmurt Republic’s Export-Focused SME INTO INNOVATIVE ONES manufacturing enterprises EXPERIENCE Register AND IN HELPING OUR CLIENTS START PROCESS- TECHNOLOGIES ━━ Augmented reality and virtual reality KEY ━━ High speed of adoption ━━ Wide integration capabilities and quick FOCUSED BUSINESS OFFERED BY THE ━ Computer vision ━ COMPETITIVENESS ━ Low entry threshold adaptation to company infrastructure TRANSFORMATIONS.” COMPANY ━ ━━ Monitoring systems for robots and manufacturing equipment DRIVERS and visual clarity ━━ Affordable implementation cost and low cost of ownership and roll-out ━━ Low-code support STATE SUPPORT ━━ Federal tax benefit for companies registered in the Register of ━ Adaptive outer look, ━━ Smart automation solutions support EXPERIENCE Certified IT Companies “IN OUR REGION, WE CALL IT ━ COMPANIES OUR COLLEAGUES, NOT user-friendly interface OUR COMPETITORS. OVERALL, THE KEY ACCOUNTS ━━ Samsung ━━ ivi.ru ENVIRONMENT IS VERY FRIENDLY. ━━ IEMZ Kupol ━━ Alfa Bank Many important annual SALES ━━ Russia ━━ China ━━ UK ━━ Rosatom ━━ Tinkoff events are organised by the GEOGRAPHY ━━ Netherlands ━━ Poland ━━ Ukraine regional administration and the ━━ STS Media ━━ Guatemala ━━ Kazakhstan ━━ Azerbaijan Ministry of Informatisation and Communications, as well as by AWARDS ━━ Top 100 production developers and top 50 web developers according to Tagline individual companies.”

━━ Second place at Tagline Awards 2018 in the Best Smart TV App nomination

━━ Winner of the Golden App Awards 2018 ━━ Third place at Tagline Awards 2018 in the Best AR/VR App nomination

Source: OOO High Technology Centre Source: OOO Elma 92 SUCCESS STORIES IN UDMURTIA 93 IN MANY HIGH-POTENTIAL DEVELOPMENT AREAS, UDMURTIA ... AND R&D, AND A NUMBER OF SUCCESS STORIES IN HIGH ALREADY HAS OPERATIONS SUPPORT FACILITIES... TECHNOLOGY AND SCIENCE-DRIVEN MANUFACTURING MADE IN UDMURTIA MADE IN UDMURTIA

UNMANNED SYSTEMS LIFT WINCHES

Product description Launch date Did you know? Product description Launch date Did you know? Reconnaissance 2004 ━━ 2% of the world’s UAVs are manufactured in Udmurtia. Lift winches and worm- 2018 ━ Russia’s first domestic lift winch manufacturing unmanned systems ━ Udmurtia is a leader in aerial monitoring service ━ Key success factors ━ and-worm wheel facility was launched in the region. to ensure state border provision for the fuel and energy industry in Russia. (equipment for lift Key success factors protection, carry out Synergy with the Kalashnikov UAVs annually inspect over 5 million kilometres of fuel ━━ As part of this process, the Industry Development winches). Conversion of military and industrial reconnaissance and Concern (part of the Concern since and energy infrastructure making over 20,000 flights. Fund issued a reduced-rate loan in the amount of rescue missions and 2015) aimed at driving military and www.segz.ru areas, high import substitution RUB 249 million. ━━ Zala Aero Group’s unmanned systems are used to monitor high-risk sites. industrial areas conversion. potential. monitor forest fires and other emergency situations. ━━ Key accounts: major Russian lift manufacturers: www.zala.aero OTIS, Shcherbinsky Lift Plant, Karacharovsky ━ Key accounts: Roskosmos, Rosatom, Transneft, ━ Mechanical Engineering Plant. Gazprom, Rostelekom and defence and law enforcement agencies. ━━ Direct-drive winches are under development to extend the product range of localised production facilities.

Source: AO Kalashnikov Concern Source: OAO Sarapul Electricity Generator Plant

MEDICAL EQUIPMENT NANOMATERIALS

Product description Launch date Did you know? Product description Launch date Did you know? Portable automated 1991 (defibrillators). ━━ Up to 2004, all first aid and ambulance teams were external defibrillators 2011 (DKI-N-11). equipped with DKI-N-04 defibrillators. A range of varnishes 1994 (incorporation) ━━ Silver Nano is Russia’s only paint with silver and paints with nano- 2009 (PAINTTECH nanopaint) nanoparticles certified by Independent Russian including monitor ━ The enhanced DKI-N-11 monitor defibrillator is the only Key success factors ━ sized components with Product Quality Assurance and Certification Agency. defibrillators and device in its class manufactured in Russia. antiseptic properties and Key success factors defibrillators with thermal Conversion of military technology ━━ Silver Nano is used in healthcare facilities, ━━ DKI-N-11 defibrillators were used during FIFA World printers. into civilian manufacturing, bactericidal effects. Partnership with Rosnano kindergartens and schools, the Ministry of Defence Cup 2018 in Ekaterinburg, Rostov-on-Don, Kaliningrad, collaboration in product design with www.stena18.ru since 2012. and the Penal Correction Department facilities and www.axion.ru Samara, Saransk, Nizhny Novgorod and Volgograd. medical and R&D centres. also other congested locations. ━━ This paint is designed to prevent the spread of disease.

Source: AO Izhevsk Motor Plant Axion Holding Source: Stena Group of Companies 95 MADE IN UDMURTIA

APPENDIX 2: ADVANTAGES OF INVESTING IN THE FIVE INDUSTRIES SELECTED 4.2 FOR AN IN-DEPTH AUDIT 96 PRODUCTIVITY MILK YIELD PER COW BY ENTERPRISE CATEGORY IN 2017 (TONNES) 97 DAIRY FARMING: ADVANTAGES OF SS INVESTING COLLECTIVE FARMS AND INDIVIDUAL IN UDMURTIA (1/2) AGRICULTURE ENTREPRENEURS HOUSEHOLD FARMS K UDMURTIA 5.9 5.0 4.2 VORONEZH REGION TONNES 6.5 4.8 5.4 757 TATARSTAN 5.5 5.4 4.8 ECONOMIC PERFORMANCE MADE IN UDMURTIA MADE IN UDMURTIA Raw milk production in 2017 ROSTOV REGION 5.5 4.9 4.5

17% 0.7 % BASHKORTOSTAN 5.0 4.4 4.2 Average for Russia Average for Russia RUB RUSSIA 5.7 3.6 3.5 11 % 4 % 16 BN Share of private equity in livestock Livestock accounts for a higher Total investments in livestock ~93 % revenues share of regional company for 2013–2017 Sources: Dairy News (2018), Marketability of milk produced revenues in comparison with the Rosstat (2017) in Udmurtia (2018) national average Source: Rosstat (2017)

HUMAN CAPITAL IZHEVSK STATE AGRICULTURAL ACADEMY

IN REVENUE 28,000 4 % RUB 876 PER EMPLOYEE 100 % 5 130 56 of students majoring in agriculture, programmes were companies offer average EGE (Uniform people employed in farming and Share of farming and livestock in in the agricultural industry (estimate) forestry and fishery (code 35.00.00) recognised as the best internships to the State Exam) score livestock breeding regional employment in Udmurtia study in the academy programmes according academy’s students among students to the Best Educational enrolled in all Programmes of Innovative programmes Russia Programme for 2018 THE AGRICULTURAL SECTOR ACCOUNTS FOR A HIGHER UDMURTIA 4.0 SHARE OF EMPLOYMENT IN UDMURTIA COMPARED WITH VORONEZH REGION 3.8 SHARE OF GRADUATES UNDER CODE 35.00.00 WHO ARE EMPLOYED (%) THE NATIONAL AVERAGE AND PEER REGIONS (%) TATARSTAN 2.7 84% 97% ROSTOV REGION 2.8 66% Sources: Main Information and Computer Centre BASHKORTOSTAN 2.7 RUSSIA 1.9 2015 2016 2017 99 DAIRY FARMING: ADVANTAGES OF SS INVESTING 98 UDMURT AGRIBUSINESS SUPPORT FROM THE FEDERAL AND REGIONAL BUDGET IN UDMURTIA (2/2) Total funding in the Udmurt RUB REGIONAL rub 987,288,000 agribusiness sector in 2019 2 BN FEDERAL rub 1,038,707,000 MADE IN UDMURTIA MADE IN UDMURTIA

FINANCIAL PERFORMANCE MAJOR SUPPORT PROGRAMMES IN 2019: SHARE OF PROFIT-MAKING FINANCIAL RESULT TO REVENUE RATIO IN M M M M ORGANISATIONS IN 2017 (%) 2017 (%) UDMURTIA 84% 11% 750 RUB 90 RUB 153 RUB 100 RUB VORONEZH REGION 75% 14% Programme to increase Partial compensation of Measures to achieve the Subsidy for compensation the productivity of dairy costs to acquire young output of one million of costs to acquire TATARSTAN 86% 10% cattle. Udmurtia has dairy cattle. tonnes of milk (fully from and modernise plant ROSTOV REGION 100% 2% * The cost of allocated an additional the regional budget). and equipment for BASHKORTOSTAN 86% 10% construction RUB 300m above the agribusiness enterprises RUSSIA 82% 14% advantage is calculated agreed co-financing and organisations (fully as the difference amount. from the regional budget). between the Russia’s average construction cost index and the regional construction cost index. For EXPECTED BUSINESS COSTS OF CAPITAL CONSTRUCTION example, a 10 p.p. The PSEDA in Sarapul includes livestock breeding in its list of approved economic activity. advantage means the construction cost RUSSIAN REGION CONSTRUCTION* LAND** index in the region is RUSSIAN REGION UTILITY CONNECTIONS 10 p.p. lower than the price advantage vs the average for Russia (p.p.) RUB/sq m average for Russia. Power (%) Water (%) Heat (%) Total (RUB million)

** The cadastral value UDMURTIA 14 p.p. 1.2 of agricultural lands for UDMURTIA 1% 81% 19% 5 the most recent year of cadastral assessment in VORONEZH REGION 16 p.p. 5.8 the region. VORONEZH REGION 2% 53% 45% 4

TATARSTAN 15 p.p. 60.0 ROSTOV REGION 1% 58% 40% 7 ROSTOV REGION 23 p.p. 2.6 BASHKORTOSTAN 2% 55% 44% 8

BASHKORTOSTAN 25 p.p. 3.5 TATARSTAN 2% 92% 6% 9

Sources: Co-Invest (2017), regional laws and regulations on tariff setting, Rosstat (2017), PwC analysis 101 WOOD: ADVANTAGES OF INVESTING 100 UDMURTIA’S LIMITED TIMBER RESERVES ARE OFFSET BY HIGHLY EFFICIENT PRODUCTION METHODS IN UDMURTIA (1/2)

TIMBER RESERVE (CUBIC METRES) % OF FOREST FUND ROUGH TIMBER (THOUSAND CUBIC PER SQUARE METRE OF FOREST LAND METRES) PER PERSON EMPLOYED IN FUND LAND, 2017 THE INDUSTRY MADE IN UDMURTIA MADE IN UDMURTIA RAW MATERIALS UDMURTIA 57 48% 3.1 TVER REGION 62 57% 3.0 15% 0.2 % Average for Russia Average for Russia RUB LENINGRAD REGION 60 57% 0.9 9 % 1.3 % 4.8 BN IRKUTSK REGION 72 89% 2.8 PERM KRAI 71 63% 1.7 Share of private equity in wood Share of the wood industry in Total investments in the industry revenues the total revenue of regional wood industry for 2013– companies 2017 Source: Rosstat (2017)

Source: Rosstat (2017)

HUMAN CAPITAL IZHEVSK STATE AGRICULTURAL ACADEMY

IZhGSKha offers higher education programmes in the forest and woodworking 0.3 % industry Average for Russia RUB/ 3,300 0.5 % 2,169,000 PERS. Number of persons employed Share of the wood industry in Revenue per employee in SHARE OF FORESTRY GRADUATES AMONG SHARE OF FORESTRY GRADUATES WHO ARE EMPLOYED in the woodworking industry the total revenue of regional the woodworking industry IZHGSKHA GRADUATES IN THEIR AREA OF EDUCATION companies (estimate) 7% 8% 100% 93% Source: Rosstat (2017) 74% 4%

2015 2016 2017 2015 2016 2017

Source: IzhGSKha 102 WOOD: ADVANTAGES OF INVESTING 103 IN UDMURTIA (2/2) MADE IN UDMURTIA MADE IN UDMURTIA FINANCIAL PERFORMANCE Wood processing is on the list of permitted types of economic activity in the Sarapul and Glazov PSEDAs

SHARE OF PROFIT-MAKING FINANCIAL RESULT TO REVENUE Source: Rosstat (2017) ORGANISATIONS IN 2017 (%) RATIO IN 2017 (%) RUSSIAN REGION UTILITY CONNECTIONS Power (%) Water (%) Heat (%) Total (RUB million) UDMURTIA 100% 23% TVER REGION 57% 6% LENINGRAD REGION 75% 15% UDMURTIA 68% 19% 13% 31 IRKUTSK REGION 73% 8% PERM KRAI 100% 19% * The cost of TVER REGION 69% 9% 22% 64 AVERAGE FOR RUSSIA 65% 13% construction advantage is calculated as the difference LENINGRAD REGION 57% 36% 7% 54 between the Russia’s average construction cost index and the IRKUTSK REGION 27% 64% 8% 82 regional construction EXPECTED BUSINESS COSTS OF CAPITAL CONSTRUCTION cost index. For example, a 10 p.p. 74% 25% 1% 115 advantage means the PERM KRAI RUSSIAN REGION CONSTRUCTION* LAND** construction cost index in the region is price advantage vs the average for Russia (p.p.) RUB/sq m 10 p.p. lower than the Sources: Co-Invest (2017), regional laws and regulations on tariff setting, Rosstat (2017), PwC analysis average for Russia.

** The cadastral value UDMURTIA 14 p.p. 189.8 of industrial land plots is specified for the TVER REGION 17 p.p. 284.6 last year of cadastral evaluation in the LENINGRAD REGION 5 p.p. 349.8 region (permitted use type 2 applied — land IRKUTSK REGION 5 p.p. 194.5 plots for construction of production and PERM KRAI 22 p.p. 231.3 administrative facilities). 105 MACHINERY: ADVANTAGES OF INVESTING 104 IN UDMURTIA (1/2)

ECONOMIC PERFORMANCE MADE IN UDMURTIA RAW MATERIALS MADE IN UDMURTIA

The Volga Federal District (VFD) produces more than 10% of Russia’s hot-rolled sheet steel and rod 5% 0.6 % (used as raw materials for metal cutters) Average for Russia Average for Russia RUB 4 % 2.1 % 1.7 BN 14% 15% Share of private equity Share of the machinery industry Total investments in the SHARE OF THE VFD IN RUSSIAN in machinery revenues in the total revenue of regional machinery industry for PRODUCTION OF CERTAIN TYPES OF 3% companies 2013–2017 ROLLED STEEL IN 2017 (%) 0% Hot rolled sheet Plated rolled steel Profiled bar and rod Cold rolled sheet steel steel Source: Rosstat (2017) Source: Rosstat (2017)

HUMAN CAPITAL KALASHNIKOV IZHEVSK STATE TECHNICAL UNIVERSITY

0.3 % Average for Russia RUB/ 6,000 1 % 1,949,000 PERS. Number of persons employed Machinery industry’s share of Revenue per employee in the in the machinery industry regional employment machinery industry 65 % 12 498 8 of students in Udmurtia companies have signed companies provide small enterprises created Source: Rosstat (2017) who major in machine special education internships for students by the university building study at the contracts with the from the university university university

Source: Rosstat (2017) 107 MACHINERY: ADVANTAGES OF INVESTING 106 IN UDMURTIA (2/2)

FINANCIAL PERFORMANCE MADE IN UDMURTIA MADE IN UDMURTIA

SHARE OF PROFIT-MAKING ORGANISATIONS FINANCIAL RESULT TO REVENUE Source: RUSSIAN REGION UTILITY CONNECTIONS Rosstat (2017) IN 2017 (%) RATIO IN 2017 (%) Power (%) Water (%) Heat (%) Total (RUB million)

UDMURTIA 62% 3% VORONEZH REGION 75% 5% UDMURTIA 68% 19% 13% 31 BASHKORTOSTAN 77% 6% ORENBURG REGION 50% 6% VORONEZH REGION 83% 7% 11% 63 LIPETSK REGION 73% 5% AVERAGE FOR RUSSIA 76% 8% BASHKORTOSTAN 65% 8% 26% 54 * The cost of construction advantage is calculated ORENBURG REGION 44% 47% 8% 101 as the difference between the Russia’s average construction 35% 36% 29% 29 cost index and the LIPETSK REGION regional construction cost index. For EXPECTED BUSINESS COSTS OF CAPITAL CONSTRUCTION example, a 10 p.p. Sources: Co-Invest (2017), regional laws and regulations on tariff setting, Rosstat (2017), PwC analysis advantage means the RUSSIAN REGION CONSTRUCTION* LAND** construction cost index in the region is price advantage vs the average for Russia (p.p.) RUB/sq m 10 p.p. lower than the average for Russia.

UDMURTIA 14 p.p. 189.8 ** The cadastral value of industrial land plots is specified for the VORONEZH REGION 16 p.p. 378.9 last year of cadastral evaluation in the BASHKORTOSTAN 25 p.p. 201.3 region (permitted use type 2 applied — land ORENBURG REGION 23 p.p. 412.6 plots for construction of production and LIPETSK REGION 19 p.p. 219.3 administrative facilities). 109 FOOD PRODUCTION: ADVANTAGES OF INVESTING 108 FINANCIAL PERFORMANCE

SHARE OF PROFIT-MAKING FINANCIAL RESULT TO REVENUE Source: IN UDMURTIA Rosstat (2017) ORGANISATIONS IN 2017 (%) RATIO IN 2017 (%)

ECONOMIC PERFORMANCE UDMURTIA 82% 5% LIPETSK REGION 85% 10%

4 % 2.6 % MADE IN UDMURTIA MADE IN UDMURTIA Average for Russia Average for Russia RUB VORONEZH REGION 69% 6% % % BN KALININGRAD REGION 73% 3% 2 6.3 4.3 7% VOLGOGRAD REGION 59% Share of private equity in food Share of the food production Total investments in the food SARATOV REGION No data 3% production revenues industry in the total revenue of production industry for 2013–2017 TVER REGION 72% 1% regional companies AVERAGE FOR RUSSIA 78% 7% Source: Rosstat (2017)

* The cost of HUMAN CAPITAL EXPECTED BUSINESS COSTS OF CAPITAL CONSTRUCTION construction advantage is calculated as the difference between 1.4 % the Russia’s average Average for Russia RUB/ RUSSIAN REGION CONSTRUCTION* LAND** UTILITY CONNECTIONS construction cost price advantage vs RUB/sq m Power (%) Water (%) Heat (%) Total (RUB million) index and the regional % PERS. the average for Russia 10,000 1.4 3,543,000 construction cost index. (p.p.) For example, a 10 p.p. Number of people employed Food production industry’s share Revenue per employee in the food advantage means the in the food production industry of regional employment production industry (estimate) UDMURTIA 14 p.p. 189.8 68% 19% 13% 31 construction cost index in the region is 10 p.p. Source: Rosstat (2017) lower than the average LIPETSK REGION 25 p.p. 219.3 35% 36% 29% 29 for Russia.

VORONEZH REGION 16 p.p. 378.9 83% 7% 11% 63 ** The cadastral value of industrial land plots KALININGRAD REGION -2 p.p. 884.8 69% 25% 7% 68 is specified for the PRODUCTIVITY UDMURTIA 26 last year of cadastral LIPETSK REGION 56 VOLGOGRAD REGION 15 p.p. 291.3 49% 34% 16% 35 evaluation in the region (permitted use VORONEZH REGION 95 SARATOV REGION 24 p.p. No data type 2 applied — land plots for construction AGRICULTURAL OUTPUT PER KALININGRAD REGION 62 TVER REGION 17 p.p. 284.6 69% 9% 22% 64 of production and PERSON EMPLOYED IN THE VOLGOGRAD REGION 36 administrative facilities). INDUSTRY IN 2017 (RUB MILLION /PERSON) SARATOV REGION 38 TVER REGION 37 Sources: Co-Invest (2017), regional laws and regulations on tariff setting, Rosstat (2017), PwC analysis Source: Rosstat (2017) AVERAGE FOR RUSSIA 5 111 PETROLEUM REFINING ADVANTAGES OF INVESTING 110 IN UDMURTIA

RAW MATERIALS GUTSERIEV OIL AND GAS INSTITUTE (OGI) MADE IN UDMURTIA MADE IN UDMURTIA

Average passing score of students in Udmurtia who major in applied M M geology, mining, oil and gas engineering and 11 TONNES 79 М3 IN 2021 69 77% geodesy study at OGI Approximate annual crude oil Approximate annual associated LUKOIL PERM is going to launch production in Udmurtia petroleum gas production in oil production at two new fields Cooperation agreements training practice contracts for Udmurtia in Udmurtia: Polushkinskoye and with employers OGI students Source: Rosstat (2017) Bykovskoye 20 27 EXPECTED BUSINESS COSTS OF CAPITAL CONSTRUCTION

RUSSIAN REGION CONSTRUCTION* LAND** UTILITY CONNECTIONS price advantage RUB/sq m Power (%) Water (%) Heat (%) Total (RUB million) vs the average for OGI ALUMNI EMPLOYEES FOR GRADUATES Russia (p.p.) * The cost of construction advantage is calculated as ━ CEO of Belkamneft the difference between ━ UDMURTIA 5 p.p. 189.8 68% 19% 13% 31 the Russia’s average ━━ CEO of Ulyanovsk Neft construction cost index and the regional construction ━━ CEO of Orenburg-Gazprom Neft, IRKUTSK REGION 7 p.p. 194.5 27% 64% 8% 82 cost index. For example, a etc. 10 p.p. advantage means ASTRAKHAN REGION 21 p.p. 137.7 the construction cost index 41% 42% 17% 45 in the region is 10 p.p. lower than the average for Russia. TATARSTAN 13 p.p. 279.2 12% 2% 86% 87 ** The cadastral value of industrial land plots is Source: Main Information and Computer Centre (GIVTs), Higher Education Monitoring, 2018, OGI 20 p.p. 412.6 ORENBURG REGION 44% 47% 8% 101 specified for the last year of cadastral evaluation in the PERM KRAI 20 p.p. 231.3 74% 25% 1% 115 region (permitted use type 2 applied — land plots for SAMARA REGION 24 p.p. 393.1 51% 43% 7% 67 construction of production and administrative facilities). Sources: Co-Invest (2017), regional laws and regulations on tariff setting, Rosstat (2017), PwC analysis 113 MADE IN UDMURTIA

APPENDIX 3. INVESTMENT PROJECTS IN THE UDMURT REPUBLIC PROPOSED 4.3 FOR JOINT IMPLEMENTATION 115 MODERNISATION OF THE IZHGET ELECTRIC 114 MODERNISATION OF THE WATER SUPPLY TRANSPORT FLEET IN IZHEVSK IN THE CITY OF IZHEVSK KEY PROJECT PARAMETERS KEY PROJECT PARAMETERS CITY ELECTRIC TRANSPORT FLEET TOTAL INVESTMENTS 113 136 75 КМ RUB 15 BN WITHIN 15 YEARS Trams Trolleybuses length of tram in the first 6 years: RUB 6–10 BN tracks

All vehicles in running condition IZHEVSK WATER SUPPLY IN 2018 ━━ supply over 53m m³ of drinking water a year; PASSENGER TRAFFIC ━━ networks over 1,700 km long; ━━ over 80 pumping stations; 86 MILLION ━ 2 water intakes with water preparation stations ━ The project entails updating the fleet of electric vehicles passengers per year The project entails the modernisation of the water supply and modernising the tracks in Izhevsk. Total wear of the and water disposal systems operated by Izhvodokanal, (from Izhevsk Pond and the Kama River); equipment is 80%. About 10% of tram tracks require major ━━ concession a municipal company in Izhevsk. Izhvodokanal supplies ━ sewage system treatment facilities; repairs, and 40% current repairs. POSSIBLE more than 600,000 esidents of Izhevsk with drinking water, ━ ━━ crediting MUE IzhGET collects wastewater from the population and industrial ━ 23 artesian wells in remote residential areas. Modernising the electric vehicle fleet will increase efficiency IMPLEMENTATION ━ enterprises, and transports and treats wastewater. and significantly reduce operating costs. The project also MODELS or leasing aims to preserve the existing route network. At the moment, depreciation of fixed assets (networks) is 50–55% (in 2016, depreciation was 60%), while equipment The depot and tracks are managed by IzhGET Municipal depreciation was at 45%. Unitary Enterprise, which is considered the project operator. CURRENT STATUS CURRENT STATUS MUE engages in transportation and maintenance of the Structuring the project and developing the financial model. The following activities are planned under the project: Currently, investment programmes for developing the Izhevsk route network and rolling stock. Repairs of rolling stock In addition to modernising the tram tracks, there is an water supply and water disposal systems have been approved are carried out on a regular basis. In recent years, seven Water supply new trams that were newly made from modern materials option to extend the trolleybus network along Kalashnikov —— Reconstruction of pumping stations, siphons, water supply. by an order issued by the Ministry of Construction, Housing and components in IzhGET workshops as part of an in- Avenue. —— Construction of a water supply system, on-site networks. and Utilities and Energy of the Udmurt Republic on 30 October depth overhaul were rolled out. Specialists at IzhGET MUE —— Installation of a pressure regulator. helped to develop a prototype of experimental production 2018. A financial model is being developed to structure the of modernized trolleybuses based on existing obsolete —— Water supply loopback. project with engagement of funding organisations. designs. PROPOSAL —— Phasing out and dismantling of old water supply facilities. Participation in the project (direct investment/lending/ The last purchase of trolleybuses was carried out in 2010. Water disposal (2 pcs.) Also, articulated tram cars from Germany have leasing). PROPOSAL appeared on the line in recent years. —— Collector reconstruction. Project financing (crediting/leasing). —— Modernisation of treatment facilities. —— Construction of additional water disposal facilities. 117 SPORTS CLUSTER 116 CONSTRUCTION OF AN ONCOLOGICAL CENTRE IN THE CITY OF IZHEVSK KEY PROJECT PARAMETERS KEY PROJECT PARAMETERS VOLUME OF INVESTMENTS IMPLEMENTATION TERM RUB ~650 M 10–15 YEARS Ice Palace INVESTMENTS FOR COMMISSIONING PROJECT IMPLEMENTATION 2022 RUB 2.5 BILLION (Philips proposal) EXPECTED ATTENDANCE FOLLOWING COMMISSIONING The project provides for the development and OF ALL SPORTS VENUES AND IMPROVEMENT OF THE Currently, an oncology centre built in 1963 operates in implementation of a single concept to enhance the sports Izhevsk, with buildings located in different parts of the city. CURRENT STATUS cluster in Izhevsk. The territory includes high-level sports QUARTER grounds that can host international competitions. Construction of a modern oncology centre with a hospital A decision from the Udmurt Republic leadership on the and diagnostic departments is planned. The centre will optimal organisational and legal structure of the project The project contributes to the development of the sports provide high-tech specialised cancer care, including with potential of the Republic by creating high-quality sports 800,000 PEOPLE A YEAR nuclear medicine. (PPP) is expected. A medical technical specification has been infrastructure and enhancing the urban environment. developed. Priority measures include reconstruction of the Izhstal Ice Palace, construction of a 50-metre pool and other CURRENT STATUS enhancements. A concession agreement on pool construction has been PROPOSAL Izhstal Ice Palace is one of the main sports facilities in signed. The project is at the implementation stage. The Ice Izhevsk and serves as the home arena of the Izhstal Hockey Participation in the project (crediting/concession Club. The arena was opened in 1971, and today the facility Palace reconstruction project is at the structuring stage agreement) requires major repairs. The arena is 11,000 sq m with a (a technical examination of the Ice Palace building has capacity of 3,900 seats. been carried out, a financial model has been developed, The facilities will meet accessibility requirements for people a concession agreement has been drafted and a design with limited mobility. organisation has been selected). In the nearest future, a design layout of the new concept is expected.

PROPOSAL Participation in the project (crediting/concession agreement) 119 CONSTRUCTION OF MODERN HOSPITALS 118 PRODUCTION OF WEAR-RESISTANT PARTS FOR TECHNOLOGICAL EQUIPMENT HEALTHCARE FACILITIES PLANNED FOR CON- KEY PROJECT PARAMETERS STRUCTION IN 2020–2023 IMPLEMENTATION TERM

IZHEVSK Construction of a modern medical complex at the Budgetary Healthcare 1.5 YEARS Institution at Udmurt Republic City Clinical facility construction and launch of production Hospital No. 2 TOTAL INVESTMENTS IZHEVSK Republican Tuberculosis Hospital of the Ministry of Health of the Udmurt Republic in Izhevsk RUB 1.8 BN RUB 0.9 BN total volume of from AO TVEL (parent IZHEVSK Construction of a general hospital with an investments company of AO CMP) The project involves the establishment and construction inpatient emergency department in Izhevsk Establishment of the production of parts for equipment of new modern hospitals in the Udmurt Republic. The used in the extraction and processing of mineral raw buildings of the newly erected hospitals are expected to be materials with a longer life cycle compared with standard high-rise, which will make it possible, among other things, IZHEVSK Construction of a new building for the products (from 3 to 5 times) by casting. RUB 0.9 BN to free up inefficiently used areas. Republican Clinical Oncology Centre in loans The project will be implemented in the city of Glazov by a Izhevsk resident of Glazov PSEDA. WILL CREATE Planned production output is 3,060 tonnes a year. IZHEVSK Acquisition of premises for prenatal clinic at the Udmurt Republic City Clinical Hospital The project was initiated by AO Chepetsk Mechanical Plant. No. 7 under the Ministry of Healthcare 110 of the Udmurt Republic in the Stolichny new jobs residential area CURRENT STATUS VOTKINSK Construction of a clinic in Votkinsk at Mira ━ Obtaining a resolution from the investment committee St 132 ━ at AO TVEL. MOZHGA Construction of a children’s polyclinic in ━━ Obtaining residency status at the Glazov PSEDA. Mozhga ━━ Search for a co-investor (project financing. ━━ or acquiring a share with subsequent redemption of the CURRENT STATUS share by the project initiator). The project is at the initiation stage. A medical technical specification has been developed. PROPOSAL ━━ Participation in the project (project financing; or acquiring PROPOSAL a share with subsequent redemption of the share by the Participation in the project (crediting/concession agreement/ project initiator). leasing). ━━ Project debt financing in the amount of RUB 0.9 billion. 121 IТ PARK/IТ QUARTER 120 FUNDRAISING FOR THE CONSTRUCTION OF APARTMENT BUILDINGS (12 BUILDINGS IN IZHEVSK AND MOZHGA) KEY PROJECT PARAMETERS KEY PROJECT PARAMETERS TOTAL INVESTMENTS IMPLEMENTATION TERM RUB 700 M 2020–2021 LOANS FOR CURRENT STATUS THE PILOT PROJECT The project is at the initiation stage. RUB 300 M PROPOSAL CONSTRUCTION IN MOZHGA As part of the project, a state-of-the-industry multi- ━━ Participation in the project as IT Park operator and The project entails the development of residential buildings WILL COST ABOUT functional IT park will be built. investor. in Izhevsk and Mozhga. About 12 residential apartment blocks are proposed for The IT Park is: ━ Project financing. ━ construction. RUB 1 BN —— A place for work and business development (business according to the incubator, office premises, data processing centre). The pilot project for Izhevsk involves construction of a residential building in the A10 residential area. preliminary estimate —— A place to study and develop (laboratories. —— And classrooms, conference halls, programmes from The development of a new residential area is proposed for leading universities in the Udmurt Republic). Mozhga. CURRENT STATUS —— A place for networking and recreation for IT specialists. The key drivers in developing the city’s infrastructure Documententation and development of the design estimate include the construction of the Ice Palace (commissioning Udmurt Republic Government’s role in November 2019), development of a residential area with for the pilot project is underway. A land plot suitable for —— Provision of a land plot, communication infrastructure and landscaping, a new hotel, kindergarten, and new cafes and construction of a 17-floor building with the total area of organisational and administrative assistance. shops. 9,500 sq m has been allocated. —— Primary filling of the IT Park with residents and The developer is AO Mortgage Corporation of the Udmurt representatives from educational institutions in the Udmurt Republic. ━━ The remaining projects are in the concept formation Republic. and land plot allocation phases. The general contractor is TPO ZhkHUR SUE. —— Organisation of legal support for the IT Park. ━━ A cooperation agreement with DOM.RF is in Investor’s role development. —— Financing construction of the IT Park. —— Participation in the Management Company. PROPOSAL Management company’s role Project financing of construction. —— Administration of the IT Park. —— Conducting specialised IT events. —— Provision of outsourcing services to residents. —— Organisation of educational programmes. 122 CONSTRUCTION OF LARGE LOGISTICS CENTRES CONSTRUCTION OF LARGE LOGISTICS CENTRES 123 UNIVERSAL CONTAINER LOGISTICS CENTRE AT GLAZOV AT HUB RAILWAY STATIONS TERMINAL SARAPUL AT HUB RAILWAY STATIONS HUB RAILWAY STATION KEY PROJECT PARAMETERS KEY PROJECT PARAMETERS THE PROJECT INITIATOR IS OOO INERT-MASTER+ PROJECT INITIATOR PROJECT COST DEVELOPMENT CORPORATION RUB 300 M RUB 50 M RUB 250 M OF THE UDMURT REPUBLIC own funds Financing sources PROJECT COST PRODUCT CONSUMERS NOT DETERMINED INDUSTRIAL, AGRICULTURAL, TRADE ENTERPRISES

Creation of logistics centres to process cargo container AND PRIVATE INDIVIDUALS Creation of logistics centres to process cargo container CURRENT STATUS transports by rail towards China and by water towards transports by rail towards China and by water towards ━━ OAO Russian Railways representatives have visited Central Asia. The logistics centres will contribute to Central Asia. The logistics centres will contribute to PLANNED LAUNCH CREATION OF Glazov to discuss the project and explore prospective development of export potential of Udmurtia and development of export potential of Udmurtia and neighbouring regions. neighbouring regions. sites. Currently, two projects are being developed: 2020 22 Currently, two projects are being developed: ━━ The prospective sites are currently under consideration. —— Construction of the Sarapul universal container terminal. attainment of new jobs —— Construction of the Sarapul universal container terminal. ━━ A meeting was held with Rostransmodernization to —— Construction of a large logistics centre at the Glazov hub projected capacity —— Construction of a large logistics centre at the Glazov hub discuss the possibility of including the site. railway station. railway station. ━━ in the “General Scheme for Developing Transport CURRENT STATUS Logistics Centres in the Russian Federation”. ━━ The land plot has been registered (lease for 49 years). ━━ The financial model and business plan, as well as PROPOSAL construction documentation, are being developed. Participation in the project as a co-investor. ━━ The question of investment memorandum is being worked on with the regional administration.

PROPOSAL Participation in the project as a co-investor. 125 PROGRAMME OF TO REPLACE OLD LIFTS NEW ONES BUILT UNDER 124 IZHEVSK POND EMBANKMENT THE #MADEINUDMURTIA BRAND KEY PROJECT PARAMETERS KEY PROJECT PARAMETERS IMPLEMENTATION TERM IMPLEMENTATION TERM 2019–2020 2020–2022 FINANCING REQUIRED TO ACHIEVE PLANT TOTAL INVESTMENTS UTILISATION RATE OF 100% RUB 1 BN RUB 1 BN A YEAR CURRENT STATUS Under the project, 2,380 lifts will be replaced in Izhevsk CURRENT STATUS The project entails the completion of the reconstruction The architectural concept was developed by Strelka KB as apartment blocks by 2020. of the northern section of the Izhevsk Pond Embankment part of the DOM.RF 40 Cities project. The project is on the A financing mechanism for special accounts owners (lift and adoption of an unused part of city lands to connect the Lift winches will be produced by AO SEGZ and cabins by AO list of priority public space projects according to a public buyers) is being developed. The Housing and Civil Codes improved embankment area with the city centre, Kirov Park. IMZ Axion. Under the project, sites will be arranged to hold various voting held by the Formation of a Comfortable Urban prohibit the application of lease financing and common events, descents to the water with terraces will be built, A lift production plant was built in 2018. A portfolio of Environment project. contracts was formed with 16 Russian regions as of 2019. lending schemes for this type of project. piers will be created, boat rental and sailing and rowing schools will be organised. The construction of children’s Tools: After the lifts are replaced, ownership is handed over to the playgrounds, bikeways and a skateboard park is also residents. PROPOSAL planned. ━━ revise the project concept developed earlier; The area will be visited by about 1.5 million people a year. ━ elaborate the economic component of the project and ━━ Raising a bond-secured loan by a leasing company ━ or a subsidiary of OOO Axion Corporation to provide The total area to be improved is 6.3 ha. residents; unsecured loans or factoring ━━ develop working documentation. ━━ Trade project financing PROPOSAL Attraction of debt financing 127 MAIN BUILDING OF THE ARMS PLANT 126 PRINTING OFFICE SPACE

KEY PROJECT PARAMETERS KEY PROJECT PARAMETERS VOLUME OF INVESTMENTS LAND PLOT AREA RUB 50 M RUB 3–4 BN 9,000 М2 to hold architectural to reconstruct the facility competition PREMISES AREA IMPLEMENTATION PERIOD 3,000 М2 2019–2024 CURRENT STATUS The project provides for the reconstruction and AREA A former printing office located in the central part of transformation of the Main Building and into a cultural Izhevsk is part of the cultural quarter that is currently under The process of developing the concept was launched. This and educational complex. It combines the functions of a development. will help to define the optimal composition of functions modern museum, exhibition space and creative cluster. 2 Renovations are planned for parts of the printing office not and identify potential residents even before the building 21,044.9 М currently in use to enrich this space with new functions. Construction of the main building of the arms plant began renovation. in 1808. The building is a recognised cultural heritage site. The printing office may become the first creative cluster The main building is one of the few remaining examples in Izhevsk, a multifunctional space that includes modern of an admiralty-type factory. There are only four: the main CURRENT STATUS exhibition spaces that can also be used as conference and building of the Izhevsk factory, the main building of the An association of citizens concerned with the dilapidated state PROPOSAL event halls. Offices, cafes and shops are also planned to be Votkinsk factory, the Admiralty in St. Petersburg and the of the main building of the Izhevsk arms plant addressed the located in the building with a general focus on art, design Participation in the project as an investor or resident in the Izhora factory on the banks of the Neva. Governor of the Udmurt Republic with a request to takeover and architecture. creative space. Possibility to sign a concession agreement. Audience outreach: The facility is a symbol of the city, The media offices located around the perimeter will create a symbolic place for all its residents, as well as a tourist and renovate the building. The initiative was supported by the an attraction point for events and residents in the field of attraction. The forecasted attendance is 0.8–1 million Governor. An agreement was signed to transfer the building modern media, culture and art, and proximity to the busiest people a year. for free use to the National Museum of the Udmurt Republic. streets and traffic intersections will direct the necessary The renovation project will enhance the prestige of the city Agreements were reached with patrons and enterprises to flow of visitors there. and provide a new centre of attraction for different groups establish a fund of 40 million roubles for comprehensive of the population. research and development of the renovation project. The Centre for the Development of Design, Urban Environment and Energy Saving of the Udmurt Republic is the operator of the project. The project is planned to be included in the Federal Targeted Investment Programme.

PROPOSAL Attraction of investments for renovations 129 INTERREGIONAL AGRO-INDUSTRIAL PARK 128 AGRICULTURAL COMPLEX FOR CATTLE BREEDING AND MILK PRODUCTION KEY PROJECT PARAMETERS KEY PROJECT PARAMETERS IMPLEMENTATION TERM IMPLEMENTATION TERM 2020–2027 2020–2022 TOTAL INVESTMENTS CREATION OF TOTAL INVESTMENTS RUB BN RUB 1.13 BN RUB 0.23 BN RUB 0.9 BN 45 1,920 Private funds Loans new jobs

The project provides for construction of a multifunctional CURRENT STATUS The project provides for creation of a modern agro- CURRENT STATUS agro-industrial park. ━ The business plan and financial model of the investment industrial complex for breeding livestock and milk Design and estimate documentation has been developed, ━ production in the Sarapul district. The project involves the An agricultural terminal (warehouse logistics, an agricultural project have been prepared. creation of a large dairy farm for 1,200 dairy cows and 1,200 state expert reviews and technical audits have been carried products storage, preparation and transportation centre) is young animals using robotic technologies for milking and ━ The land plots to be formed are under consideration. The out, and a land plot for rent has been registered. planned to be located on the first land plot (20 ha). ━ milk quality control, as well as keeping cows. administration of Sarapul initiated amendments to town The following items will be located on the second land plot The project initiator is Niva SPSSPK. (151 ha): planning regulations, as well as applied to the Ministry PROPOSAL of Construction, Housing and Utilities and Energy of —— refrigeration terminal; Participation in the project as a co-investor. —— production terminal; the Udmurt Republic to adopt a decision on preparing —— centre of agricultural equipment; amendments to the existing Sarapul Land Use and —— hothouse complex. Development Rules. The project initiator is OOO AgroSetInvest. ━━ Development of a project for preparing the territory and a project for construction organisation is scheduled for September 2019.

━━ The constractor is expected to begin territory planning operations in December 2019.

━━ The development of design estimates is scheduled for completion by March 2020.

━━ Documents are being prepared to include the building in the register of residents of Sarapul PSEDA.

PROPOSAL Participation in the project as an investor. 131 ATTRACTION OF INVESTMENT IN HUDWAY HI-TECH COMPANY 130 CONSTRUCTION OF A CHEESE PRODUCTION PLANT

KEY PROJECT PARAMETERS KEY PROJECT PARAMETERS TOTAL INVESTMENTS VOLUME OF INVESTMENTS RUB 100 M RUB 50 M RUB 50 M Potential investor VEB Ventures RUB 1.5 BN (preliminary) REVENUE CURRENT STATUS ━━ Preinvestment studies: business plan development, RUB 34.3 BN market determination. EBITDA: RUB 4.9 BN Net profit: RUB 3.7 BN ━━ Search for a second co-investor for financing. RUB 50 Project NVP: RUB 1 BN HudWay offers professional solutions for projecting million by acquiring a share in the company’s capital Site location: resident of Sarapul PSEDA Project IRR: 40% information on car windshields (HUD, Head-Up Display). (holding negotiations with venture funds). Planned plant capacity: Project payback period: 4 years Investments are required to implement the company’s development plan: ━━ The deal structuring is expected in September 2019. —— 12,000 tonnes of cheese a year —— 5,800 tonnes of dry cheese whey —— development of B2B/B2G segments; CURRENT STATUS —— Milk processing capacity: —— development and conclusion of more than 30 agreements PROPOSAL At the moment, a site for project implementation has been with В2В/B2G companies and structures through 2021; —— 150,000 tonnes of milk a year determined, design documentation and a list of necessary Participation in the project as co-investor by acquiring an RUB 50 OOO Neva Milk: —— software improvement for customers’ needs; equipment have been prepared. —— team strengthening; million share in the company’s charter capital (VEB Ventures is —— The company is the project offtaker and buys out the The project’s success will be ensured by the region’s high raw —— entry into Chinese, CIS and Indian markets. ready to buy out RUB 50 million more). whole volume of manufactured products. The line of food products is represented by such brands as Tysyacha Ozer, material supply, comfortable prices for dairy raw materials, The project initiator is OOO RIT Innovations. Sirtaki, Chislo Mu, Zoloto Evropy, Gorod Syra and Dolce favourable business conditions and positive consumption Granto. The company is responsible for finding a contractor to build trends. the plant, adjust technological processes, recruit staff and Availability of an off-taker with strong sales channels manage production management. represented by OOO Neva Milk. OOO Neva Milk’s experience in the construction and implementation of such projects. More than 20% of the cheese market is held by imported cheese. The potential for import substitution is more than 100,000 tonnes a year.

PROPOSAL Credit/leasing, expected scope of participation in the project is RUB 0.5 billion. 132 CREATION AND DEVELOPMENT OF GLAZOV INNOVATIVE COMPLEX 133 (FORESTRY PARK) IN THE SINGLE-INDUSTRY CITY OF GLAZOV. THE ANCHOR PROJECT IS CONSTRUCTION OF A PLANT FOR THIN EXTRA HIGH DENSITY FIBERBOARD PRODUCTION KEY PROJECT PARAMETERS the company is part of the Elekond Group of Companies. PROPOSAL RUB 220 million has been invested in production Credit/leasing, expected scope of participation in the project development on the site. TOTAL INVESTMENTS is RUB 3 billion. The company has experience in launching a line for RUB 7.165 BN laminating MDF/EHD boards, individual workshops for the production of products from MDF/EHD boards. FORECAST

2022–2029 ESTIMATED COST OF PROJECT LAUNCH RUB BILLION Engineering REVENUE 0.1 EHD production plant Site location: resident of Glazov PSEDA 3.081 Planned capacity of the anchor project: 160,000 cubic RUB 62.6 BN Tar production workshop for board materials 0.11 meters of EHD fibreboard a year (2–18 mm thick, density up EBITDA: RUB 14 BN to 1,100 kg/m3) Floor laminate production workshop EBITDA Profitability: 22% 1.024 Infrastructure construction is planned at the expense of the EBIT: RUB 7 BN Fuel pellets production lines Foundation for the Development of Single-Industry Cities. EBIT Profitability: 11% 0.885 It is is responsible for finding a contractor to build the plant, Net profit: RUB 6.9 BN Timber sawing line 0.3 adjust technological processes, recruit staff and manage Profitability by net profit: 11% production management. Project payback period: 6 years Forestry machines and equipment 1.008 The project provides for deep and complete processing Intrasite infrastructure facilities of raw timber (up to 98% biomass) into products with high CURRENT STATUS 0.657 added value, including laminated, painted veneered EHD/ MDF boards, floor laminates, fabricated door and furniture In the course of work on the investment project, a business TOTAL project costs 7.165 parts, fuel pellets, timber and timber products. idea was formulated, a list of budgeted costs for launching production was determined, technological equipment was selected and suppliers were identified, equipment was associated with the existing industrial buildings and EIA was carried out. As of today, a business plan for the investment project has been prepared. A specialised site with buildings and engineering infrastructure is available. OOO Elekond- Service is the operator of the investment project; CREATION OF SOLAR ENERGY INDUSTRIAL CLUSTER 134

KEY PROJECT PARAMETERS TOTAL INVESTMENTS RUB 7.1 BN RUB 2.5 BN on concentrator solar power panels RUB 0.7 BN on silicon solar panels with an extended temperature range RUB 0.9 BN on flowing energy storage devices RUB 0.5 BN on wind farms RUB 2 BN on photoconverter production to provide 200 MW of concentrator solar power plants RUB 0.5 BN on the co-generation unit for the OAO Elekond production site Export-oriented products, equipment and parts for renewable energy sources are planned to be manufactured as part of an industrial cluster. This is a comprehensive project that includes creation of concentrator solar PAYBACK PERIOD power plants and components, silicon solar panels with an extended temperature range, flowing energy storage devices and wind and solar energy farms. 7 YEARS Site location: resident of Glazov PSEDA, Sarapul PSEDA. IRR 27%, NPV RUB 3.3bn at a rate of 12.9% CURRENT STATUS To date, research and development has been completed and experimental (small-scale) production has been launched. There is a production site with the required infrastructure. There are agreements on the supply of raw materials and accessories. The project initiator, OAO Elekond, is a leading Russian manufacturer of capacitors and supercapacitors, as well as energy storage devices.

PROPOSAL Credit/leasing, expected scope of participation in the project is RUB 7 billion. CONTACT PERSONS IN THE GOVERNMENT OF UDMURT REPUBLIC INVESTORS MAY CONTACT THE RELEVANT REPRESENTATIVES IN THE REGIONAL GOVERNMENT DIRECTLY

DIRECT CONTACT INFORMATION OF UDMURTIA REPRESENTATIVES FOR INVESTORS:

ALEXANDER SVININ MIKHAIL KHOMICH KONSTANTIN SUNTSOV

First Deputy Head of the Permanent representative of the CEO, Development Corporation Government of Udmurt Republic Governor of the Udmurt Republic of the Udmurt Republic to the Russian President, Deputy Chairman of the Udmurt Republic Government

+7 (3412) 49-70-42 +7 (495) 600-62-05 +7 (3412) 22-00-00 +7 (967) 143-58-39 +7 (926) 520-52-97 +7 (909) 057-25-05 [email protected] [email protected] [email protected]

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