А.  А. Project possibilities description

А1. Project name:

а. Short name:

«Production of hydraulic units for «BelAZ»dump-trucks»

b. Full name:

«Technical reequipment for the purpose of production of hydraulic units for «BelAZ» dump-trucks»

c. Brief description:

The purpose of the project is expansion of production cooperation for the manufacturing of hydraulic and pneumatic
units for the «BelAZ» automobiles.The project envisages starting the production of dry disk brakes of front and rear wheels of the «BelAZ»
automobiles with load capacity from 80 to 320 tons for 2007-2010 years.

А2. Project status:

 Preliminary technical and economic studies of project are executed by organization, the business- plan is developed, which was examined in the routine order in the Ministry of Industry of the Republic of Belarus and the Minsk regional administration of “Belarusbank” Joint Stock Company, the technology of production and the list of basic equipment is determined.

 In 2007-2008 the total project expenditures amounts to 1418 mln. rubles, own means – 400 mln. rubles , innovation fund - 755 mln. Rubles, сredit means – 263 mln. Rubles including. 3 un. Of 16ГС25ФЗ1МП lathes with programmed operation, 1 band saw, 5 pcs. of frequency regulators, 2 universal konsol-milling machine tool of the ОРША-ФЗ2У 31 modification, the СМ 5/75-500 ТВО climatic chamber ( made in St.Petersburg ) and other equipment was purchased.

 The contract of financial rent (leasing) was concluded NPK "Накал" Joint-Stock Company located in Solnechnogorsk for purchasing of PKM, ПЛ, НКО furnaces for the total 1601,6 thousand roubles of Russian Federation/125 million Belorussian roubles, etc.

 Within the framework the implementation of program for 2005-2006 years based on documentation of PО « BelAZ » the production of more than 30 names of parts (units of the system of pneumo-hydrocontrol of the drive of undercarriage and braking of dump trucks «BelAZ» ).The volume of production of these parts in 2006 amounted to 3,5 billion rbl. (20,7 % of the total production volume). Approx. 60 units of equipment are used to manufacture production for PО « BelAZ ».

 In 2007-2008 35 positions of parts for RUE « BelAZ » were produced for the total amount of 8,9 billion roubles in selling prices with VAT. Among them 7 positions for the total amount of 2140 million rbl. were newly mastered. Technological processes were developed, production preparation was carried out, manufacturing of parts unit of the boot-tree for brakes was started.

 The specific weight of production for RUE « BelAZ » in the total volume of production makes 18,5 per cent. During project realisation in 2007-2008 7 workplaces and 22 workplaces were created and modernised.

А3. Organisations involved and their roles (contact persons, phone, fax, e-mail address, home-page):

(“Zenit-BelOMO” Joint Stock Company is the project developer, director - Alexander V. Radchenko,
tel./fax: (01771) 3-99-55, 3-99-52; e-mail:
zenit@zenit-belomo.com.

А4. Project description (approach, objectives, components, outputs,
phases, duration, total financing, benefits, transition impact, etc.):

 Together with RUE «BelAZ» the program of the mastery of components and units for the hydraulic brake systems of heavy
duty automobiles for 2006 – 2010 years was developed in 2005. In 2009-2010 years the output volume of production for «BelAZ» no less than
6,5, and 7,0 billion. roubles accordingly is planned. The business-plan of the investment project envisages measures for the technical
reequipment of production with the financing for the sum total of 4594 mln.rubles, including the own means of the enterprise - 1881
mln.rubles (41,0%). Investment project “Technical reequipment for the purpose of production of the hydraulic units «BelAZ» is included
in the projects for the creation of new enterprises and most important productions, new productions in the existing enterprises and the
modernizations of productions on the basis of introduction of the new and high technologies, included in the State program of the innovation
development of the Republic of Belarus for 2007-2010 years, affirmed by the first Deputy Prime-Minister of the Republic of Belarus
V. Semashko on 15 March,2007. It is also included in the Republican program of the innovation development of the Republic of Belarus
during the years 2007 - 2010.

 The realization of project will make it possible to increase production of units for staffing of the dump-trucks
«BelAZ» to 7 mlrd. roubles by 2010 annually, to operate 1000 m² of the non-used areas, to create new work sites in the quantity of 20 units.,
to modernize 39 work sites, to increase quality and reliability of output production, to decrease energy content, and, as a result, to
stabilize the financial position of the enterprise. Modernization of the acting production provided by the project requires the purchase
of new highly productive equipment in the quantity of 20 units and the modernization of the processing centers in the quantity of 18 units.
The urgency of project lies in the fact that production is intended for the «BelAZ» conveyor and expenditures for marketing are reduced
considerably.

А5. Background / history / overall program / related or similar projects:

 “Zenit-BelOMO ” Joint Stock Company was designed and built as the specialized enterprise for the production of cameras with the program of production of 1 mln. 200 thousand pieces per year. The year of foundation - 1973.

 The specialized powers for the production of cameras in the quantity of 720 thousand annually were created by 1983. By 1990 powers for the production of the items of special technology were additionally created.

 Machining, foundry, stamping equipment, equipment for finishing - in general, specialized and special (automation and semiautomatic lines, aggregate machine tools, etc). Equipment for the fitters work, which occupied more than 40% labor expense - horizontally - the locked conveyor lines, assembly-line automats and semiautomats.

 Since 1994 subcontracting enterprises in Russia and in the Ukraine considerably reduced the volumes of production of component products of the photographic equipment (objectives, photographic exposure meters, automatic releases, etc), which caused the sharp decrease of the volumes of production of cameras at the enterprise. The solution to start the restructuring of enterprise was accepted for this reason, reorienting it from the assembly-line into the machine assembly. In the period from 1995 until 2007 the enterprise mastered 132 new articles (including in 1997 - 11, in 1998 - 7, in 1999 - 13, in 2000 - 14, in 2001 - 9, in 2002 - 18, in 2003 - 6, in 2004 - 4, 2005 -14, 2006 -15, 2007 - 13 ). The enterprise passes from product output with the mass and large-scale production to the production of articles with the series and small-scale production. The nomenclature of the produced articles considerably increases.

 In 1995-1999 years power for the production of cameras, special production were converted for the production component product of tractor machine building, weight items technology, articles of medical technology and consumer goods.

 The resolution of Minsk regional executive committee dated September 13, 2000 No.609 registered “Zenit” OM RUE, the identification No. 600102155. The place of location – 222410, Vileyka, Minsk region, Chapaev Str., 26.

 “Zenit-BelOMO” Joint Stock Company is one of the founders of “RRB - bank”.

 “Zenit-BelOMO” Joint Stock Company entering the Belorussian optical-mechanical association (BelOMO), is in the departmental subordination of the Ministry of industry of the Republic of Belarus and is the conversion enterprise. Since 2003 reprofiling production to the manufacturing of new forms of production was actively carried out. The specific weight of new production in the total production volume comprised : 2,3% in 2003 ; 31,1% in 2006 ; 38,2% in 2007 ; 36,3% in 2008. At present basic efforts of the enterprise are concentrated on the production of components and units for the pneumohydraulic systems of the heavy duty dump-trucks «BelAZ». In 2007 the complete units for the total of 3,9 billions. rubles were produced. In 2008 the complete units for the total of 5,0 billions. rubles in the selling prices with VAT were produced. At present the development of production is influenced by the technological possibilities: the enterprise is equipped in general with the specialized equipment for the production of small parts. The deterioration of the existing equipment comprises more than 83,9%, thermal equipment by 100%. It is necessary to increase the labor productivity and to reduce the energy expenses.

А6. Environmental impact summary:

The outbursts of withdrawals, harmful substances into the atmosphere and into the water basin did not exceed the maximum
permissible standards at the enterprise. The proposed project will not increase negative influence on the environment.

А7. Possible obstacles / problems / risk assessment:

The most essential risk, which influences the realization of project is the increase of the prices for the raw material and materials.

А8. Project implementation and payback period (years):

6,01 years, including last year of the project realization of 2,5 years.

А9. Project industry:

Machine-building

B. Capital Cost Items (investment requirements for the Project):

В1. Physical components:

В2. Capital investment, M$:

Initial costs and assembly of equipment (Possible country- suppliers - Republic of Belarus, Russia, the Ukraine, Austria, the USA)

2,141

Expenditures for the formation of the pure working capital:

1,486

Other expenditures:

0,183

Total:

3,810

C1. Types of resources (grants, investments, equity/ownership, etc.):

Own means:

0,876

D1. Financing required, type of financial assistance:

Financing of the equipment purchase is necessary.

D2. Sources of financing:

D3. Type of financial instrument:

D4. Amount, M$

Investor’s funds

Direct foreign investments

1,265

D5. Data about financial institutions involved into the Project
implementation:

E. Demand (users) and revenues:

E1. Type of users/ markets, volumes, pricing, revenues, benefits/savings:

The main customer – the initial equipment for RUE “BelAZ” .

Е2. Financial sources:

ЕЗ. Revenues (sales) M$:

Incomes from production sales without taxes

72,385

F. Operating and Maintenance Costs

F2. Cost item

F3. Amount, M$:

Raw materials, materials, fuel and energy for technological purposes:

22,593

Costs for staff:

27,369

Amortisation:

4,765

Others:

10,828

Total:

65,555

G. Net income

G1. Net income and value

G2. Amount, M$:

Profit from sales

6,830

Net profit

3,450

Н. Project Information Source

Н1. The form is completed by (full name and position)

Tatyana G. Suboch, the chief economist

Н2. Organization (name and address):

“Zenit-BelOMO” Joint Stock Company: Republic of Belarus, 222410, Minsk region, Vileyka, 26 Chapaev Str.

Н3. Tel. \ Fax \ E-mail:

tel./fax : (01771) 3-99-55, 3-99-52; e-mail:
zenit@zenit-belomo.com

Н4. Date:

29 February, 2008

Н5. The project is subordinate to/ under the jurisdiction of:

Ministry of Industry of the Republic of Berlarus