Ministry of Energy of the Republic of Belarus

1

Ministry of energy of the Republic of Belarus

SPA «BELENERGO»

RUE «VITEBSKENERGO»

propose the investment project implementation

Construction

of Beshenkovichi hydro-electric power plant

33 MW

under Public Private Partnership

BOT scheme

(building – operation – transfer)

in the Republic of Belarus

Main information

Reckoning on selection of the hydropower equipment of Beshenkovichi Hydro Power Plant has shown that the preferable capital equipment for the station is turbines with a horizontal axis. Application of various quantity of hydrounits from 3 to 6 units is possible. The maximum expense of water through HPP is 465 m3/s.

In order to secure the carrying capacity of the Zapadnaya Dvina river there is a possibility of construction at the site of the dam of the HPP both of a ship lock and fish passing facilities.

In conformity with the legislation of the Republic of Belarus investment terms and conditions are specified in an investment contract, concluded between the Republic of Belarus and an investor.

The Republic of Belarus guarantees the purchase of the whole energy generated by a hydro-electric power plant and shall at its own expense construct power transmission lines required to secure power supply to the electric power system of the Republic of Belarus.

At present the Decree № 100 of the Ministry of Economy of the Republic of Belarus of June 30, 2011 provides for the following multiplying coefficients for the purchase of electrical energy generated from novel, not traditional and renewable energy sources:

- for the first ten years from the date of putting the plant into operation – 1,3;

- over ten years of the power plant operation – 0,85

for electric energy tariffs for industrial and equivalent consumers with the connected capacity of up to 750 kVA.

Furthermore an investor can propose and economically justify other terms and conditions for the electric energy sale to the Republic of Belarus within the period of the hydro-electric power plant operation which are to be specified in the investment contract.

An investor pretending to implement the investment project and conclude the investment contract shall announce his readiness to the project implementation as well as the date of submission of a draft investment contract and project implementation proposal which is due not later than 3 months from the date of announcement of the readiness to the project implementation.

Project implementation proposal must include economic justification for the terms and conditions of the electric energy sale to the Republic of Belarus as well as economic justification for the operating time of the hydro-electric power plant.

The republican unitary enterprise "Vitebsenergo" is ready in response to an investor’s request to submit additional information available on the project and organize a visit to the projected construction site. For any additional information or in order to organize a visit to the site please contact us at any of the contacts below.

Additional information.

Upon signing of the investment agreement, during implementation of the investment project investors shall:

1. have the right to:

construct facilities provided for by the investment project and concurrently prepare, examine and approve any design documentation required for each stage of the construction according to the established procedure along with planning of successive stages of this construction. If design documentation was prepared according to international design regulations and construction standards adopted in the territory of the Republic of Belarus, a location survey shall be carried out for the facilities with account of the technical requirements for engineering support and the results of geological surveys. Otherwise, any design documentation prepared abroad shall be adjusted to bring it in line with the requirements of the regulations and technical standards of the Republic of Belarus;

lease a land plot of proper size, without any auction for the right to conclude land plot lease agreement, in the selected location for construction of facilities provided for by the investment project (hereinafter – the land plot) executing any documents on allocation of the plot along with construction activities. The investor shall not effect any transactions with the said facilities and/or the land plot leased resulting in (or providing for) transfer of the rights to any third parties until state registration of creation of the facilities provided for by the investment project and origin of the rights thereto is performed according to the established procedure;

construct facilities provided for by the investment project with the right to remove any vegetation without compensation for the cost of plants removed. Any wood thus obtained shall be sold according to the procedure established by law;

full deduction of value-added tax amounts (other than any not deductible amounts subject to legislation), paid when buying (importing to the territory of the Republic of Belarus) any goods (work, services) or property rights used for design, construction (reconstruction) and equipping of the facilities provided for by the investment project, regardless of any amount of value added tax calculated on sales of goods (work, services) or property rights. The amount of value-added tax to be deducted in full is calculated by the method of separate accounting of tax deductions based on to the purpose of acquired (imported into the territory of the Republic of Belarus) goods (work, services) or property rights. Such a deduction shall be based on the list of goods (work, services) or property rights acquired (imported to the territory of the Republic of Belarus) and used for design, construction (reconstruction) and equipping of the facilities provided for by the investment project indicating the respective value-added tax amounts, submitted to the tax authorities by the investor and (or) an organization established by the investor or with the investor’s participation according to the procedure established in the Republic of Belarus.

nominate a general design organization, subcontracting design, construction and other organizations for construction of the facilities provided for by the investment project as well as for repair, reconstruction, restoration and improvement thereof without any tenders;

2. be exempt from:

payment a land lease duty to the republican or local budget or development fund of the relevant free economic zone;

land tax or rent for land in public ownership allotted for the construction of facilities under the investment project, for a period of design and construction of such facilities up to December 31 of the year following the construction completion year;

compensation of any agricultural and/or forestry losses resulting from the retirement of the land plot;

import duties (taking into account international obligations of the Republic of Belarus) and value-added tax levied by the customs authorities on importation of technological equipment (accessories and spare parts thereto) for use in the territory of the Republic of Belarus within the framework of the investment project. The list of goods imported by the investor and (or) an organization established by the investor or with the investor’s participation according to the procedure established in the Republic of Belarus for implementation of investment projects shall be a sufficient basis for remission. This list, unless otherwise established by the President of the Republic of Belarus, shall be approved by a public authority that has concluded the investment agreement or an executive committee or an agency (organization) authorized by the Council of Ministers of the Republic of Belarus;

payment of state fee for permits for employment of foreign nationals to the Republic of Belarus, special work permits for employment in the Republic of Belarus and for foreign citizens and persons without citizenship employed by the investor and (or) organization established by the investor or with the investor’s participation according to the procedure established in the Republic of Belarus - for temporary residence permit in the Republic of Belarus. The period of issue (denial) of special work permits to foreign citizens and persons without citizenship employed by the investor for implementation of the investment project shall not exceed seven calendar days and the period of issue (denial) of permit to employ a foreign citizen or person without citizenship shall not exceed two working days;

value-added tax and income tax payable in connection with free-of-charge transfer of capital constructions (buildings, structures), isolated premises, construction in progress and other fixed assets transferred into ownership of the investor and (or) any organization established by the investor or with the investor’s participation according to the procedure established in the Republic of Belarus, for implementation of the investment project according to the procedure established by law.

Moreover in order to reduce the payback period of the project an investor is granted with the right to provide for additional benefits and preferences in the draft investment contract which are to be justified in the project implementation proposal.

The reasons of investing into the Republic of Belarus.

Nowadays Belarus enjoys favourable legal conditions for investing activities. International financial institutions and private investors highly appreciate the investment legislation of Belarus. In the IFC report and the World Bank’s "Doing Business 2010 report" our country has been ranked the fourth among the most active business reformers worldwide. In 2009 Belarus was ranked 58 of 183 economies in the Ease of Doing Business rating. For three years in succession the Republic of Belarus has been implementing business regulation reforms required both to expand and grow business opportunities and liberalize economic conditions for doing business.

A stable political situation and absence of ethnic or religious conflicts make the country much more attractive for investors.

In 2001 the Republic of Belarus was the first among the CIS states to adopt the Investment Code, a fundamental document regulating legal framework for foreign investments and defining general legal conditions for investment activities in Belarus. The Investment Code is aimed at stimulating investment activities and protecting investors’ rights in the territory of the Republic.

To secure its obligations to provide the international legal defense to investors the Republic of Belarus is a party to the International Convention on Settlement of Investment Disputes between States and Nationals of Other States (March 18, 1965), the Convention Establishing the Multilateral Investment Guarantee Agency (October 11, 1985), and Energy Charter Treaty (December 17, 1994).

Belarus has signed about 60 bilateral agreements on promotion and mutual defense of investments which provide for certain reciprocal guarantees of favourable investment environment, legal protection to foreign investments against nationalization and expropriation, free transfer of investment income to overseas countries, and which grant an investor the rights to appeal the decision of the state authorities on his investments in national and international courts.

Belarus has entered into over 50 comprehensive Agreements for avoidance of double taxation.

In order to create favourable investment environment and free movement of the capital in the member states of the Single Economic Space (SES) there has been developed a draft Agreement on promotion and protection of investment activities and free movement of the capital in the SES member states.

A draft Agreement on promotion and mutual defense of investments in the Eurasian Economic Community member states has been signed by the EurAsEC member states.

Thus, the Belarusian legislation provides for adequate guarantees for secure foreign investments into the national economy.

Current taxes in Belarus on businesses and enterprises operating hydro-electric power plants:

1) taxes paid from production costs:

- land tax;

- social security taxes;

- accident insurance at work;

2) taxes paid on profits:

- real estate tax;

- profits tax;

- local taxes and charges.

The rates of all the taxes and duties paid in the Republic of Belarus are specified in the special part of the Tax Code of the Republic of Belarus (the Law № 71-3 of the Republic of Belarus of December 29, 2009).

The legislation of the Republic of Belarus can be found at the address:

Contact information.

State Production association "Belenergo"

Fax: + 375 17 218 26 39

Contact person:

Sergey Olegovich Ulasik, head of foreign economic cooperation department.

Tel.: + 375 17 218 23 89

Fax: + 375 17 328 39 37

Mobile tel.: + 375 29 6959 163

E-mail:

Republican Unitary enterprise "Vitebskenergo"

Fax: +375 212 47 30 75

Contact person:

Sergey Nikolaevich Nikodimov, head of prospective development department

Tel. +375 212 49 23 40

E-mail: