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Foreign Investor Interest Crystallizing in $15-Billion Tourism Project in Russia

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New Agreement Signings Add Impulse to Planned Mega-Development of Caucasus Mountain Skiing, Hot Springs Spa and Caspian Sea Beach Resorts –Cardinal Emphasis on Ecological Sustainability

Sochi, RUSSIA – Foreign investors will join Russian political and commercial elite in this southern seaside resort town tomorrow at a high-profile government economic conference to sign the first large-scale international agreements toward development of a sustainable tourism industry in the North Caucasus, Europe’s most unspoilt alpine region. Against the backdrop of the 10th Annual Sochi International Investment Forum, the first ground-breaking deals involving French, Korean and German companies are scheduled to be inked, providing impetus for the stream of international investment that will be required to implement this $15-billion development project.

President Dmitri Medvedev announced plans earlier this year to build a constellation of varied resorts spanning the several republics of the North Caucasus from here on the Black Sea coast across to the shores of the Caspian, some 600 miles to the southeast. The federal government has committed to develop leisure and ecotourism sites in strictest accordance with international ecological standards to safeguard the territory’s natural and cultural heritage, deemed globally significant by conservationists worldwide. A program of state guarantees will be available covering up to 70 percent of investments in the project in special economic zones, which is a part of a comprehensive, top-priority national initiative for the economic and social revitalization of the North Caucasus.

The Sochi Forum, which is to be attended by Prime Minister Vladimir Putin, is expected to attract unprecedented international interest from companies also eyeing opportunities associated with the 2014 Winter Olympic Games, which are set to take place 40 km from here in the Western Caucasus. Emphasis on sustainable development in the Caucasus region will be highlighted at a Forum roundtable entitled “Preserving the North Caucasus Ecosystem,” which will take place under the aegis of the Russian UNESCO Commission atop the ski slopes of Krasnaya Polyana, a future Olympic site.

The gathering will feature speakers from Russian and international environmental groups such as the All-Russia Society for Nature Protection, founded in 1924, and the World Wildlife Fund (WWF), the leading organization in wildlife conservation; experts on ecological policy in the European Alpine nations; federal and regional government officials; and representatives from SC OlympStroi, the state corporation responsible for construction of the Winter Games’ sites, and from state-run OJSC Northern Caucasus Resorts Company (NCRC), the overall coordinator for development of the North Caucasus system of tourist complexes, which is to include the largest skiing resort project in the world.

The centerpiece accord scheduled to be signed tomorrow is a strategic joint venture between NCRC and Caisse des Depots, a French state-owned group and long-term investor serving the public interest and the goal of sustainable development. The signing will represent the culmination of a process started by President Medvedev and President Nicolas Sarkozy at the G-8 Summit last May in Deauville aimed at putting French industry’s world-leading experience in environmentally secure mountain resort and coastal development at the disposal of Russia.

NCRC Chairman Akhmed Bilalov said his company will own 51 percent of the joint venture, while a subsidiary of Caisse des Depots will hold 49 percent. The new enterprise will act as a means of funneling advanced French technical, legal, planning and environmental expertise to NCRC, as well as direct investment to ski lift, hotel, airport, mountain tunnel and other construction projects from a wide range of French companies. Currently some 20 French contractors have expressed interest in participating.

The joint venture will also act as a strategic consultant to NCRC for defining and packaging projects broadly for other international and Russian investors, which together with the Russian government are collectively expected to spend up to $15 billion to develop the array of skiing, thermal bath spa and seaside resorts across the North Caucasus Federal District, Krasnodar Region and the small pristine forested Republic of Adygea, an enclave that includes Lagonaki, a protected UNESCO World Heritage site. Further details of the terms of the joint venture are expected by the end of November.

Energy-efficient, clean technology for supplying power and heating for the tourism development project is the subject of a memorandum of understanding (MOU) set to be signed tomorrow between NCRC and state-owned Korean Western Power Co., Ltd. (KOWEPO), joined by CHT Korea. It is contemplated that Seoul-based KOWEPO, under a planned joint venture with NCRC, will develop a network of high-tech power plants, prospectively integrating renewable energy from wind and solar sources, across the broad network of travel resorts. KOWEPO advances its commitment to sustainability through participation in the United Nations Global Compact, a public-private initiative dedicated to furthering environmental preservation and other corporate social responsibility principles.

The German ‘green’ building and engineering company Drees & Sommer AG, in a consortium with the Russian financial advisory firm Astor Capital Group, is set to sign a letter of intent with NCRC for providing a range of building and financial services to support the development of the mountain resorts. The initial focus of business cooperation is expected to be the planned Lagonaki Skiing Resort in Adygea and the Mamison Skiing Resort in the Republic of North Ossetia. With a heritage of 40 years in high-profile building operations, from management consulting to certification, Drees & Sommer covers all sustainable building services, as well as ‘green’ building labels. NCRC will also signature an MOU at the Forum with Russian developer InvestTourService and the regional government of Adygea for a public- private partnership toward construction of the Lagonaki complex.

Besides Lagonaki and Mamison, NCRC plans to develop mountain resorts at Matlas in the Republic of Dagestan and Arkhyz, known as the ‘pearl of the North Caucasus, in the Republic of Karachay-Cherkessia. A fifth resort is planned for Mount Elbrus, in Karachay-Cherkessia and Kabardino-Balkaria, near the Russian border with Georgia. At 5,642 meters in elevation, Elbrus is the tallest mountain in all of Europe. Sport and nature enthusiasts are expected to visit the resorts from Russia and surrounding countries and from Western Europe and the Mideast starting in 2014. The new regional tourist industry, which will provide 200,000 new jobs, is expected to attract up to five million visitors a year.

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