Mechel to Create New Energy Business

Mechel announces fulfillment of its obligations following the results of the auction to acquire Southern Kuzbass Power Plant
JSC Mechel  (NYSE: MTL) announces the fulfillment of its obligations related to the previously announced acquisition of 93.35% of the shares of Southern Kuzbass Power Plant.
As the result of the auction held on March 29, 2007, Mechel-Energo owned by Mechel has acquired 565,833,970 ordinary shares of Southern Kuzbass Power Plant comprising 93.35% of the charter capital of Southern Kuzbass Power Plant for RUR 6.9 bln.
Pursuant to the terms of the controlling stake sale and purchase agreement, the winner will acquire the ownership of the Power Plant shares after the offer is made to buy the securities from the minority shareholders at the tender sale price within seven days following signing the agreement.

Under the terms of the auction on April 5, 2007 Mechel-Energo made an offer to the shareholders of Southern Kuzbass Power Plant to purchase the power plant shares at the price of RUR 12.19 per ordinary share.

Mechel has performed in full its financial obligations regarding payment for the 93.35% stake in Southern Kuzbass Power Plant in the amount of RUR 6.9 billion. The acquisition will close upon completion of the transferring of the ownership of the ordinary shares and making a respective record in the securities’ register, at which time Mechel will become the fully legitimate owner of the controlling stake in the power plant.

“Mechel has performed as a fair partner having fully fulfilled the terms of its obligations undertaken under the transaction. The acquisition of Southern Kuzbass Power Plant establishes a new power segment in Mechel’s business. It will allow Mechel to produce finished product with high added value in the form of electric and heat energy from Mechel’s own steam coal,” Mechel’s Chief Operating Officer Alexey Ivanushkin commented.