International Uranium Enrichment Centre

Global Nuclear Power Development 2 Growing disparity in geographic distribution of reactors under construction and enrichment facilities sets new challenges in securing supplies NEW REACTORS ENRICHMENT FACILITIES Reactors under construction and planned for construction Reactors in operation Uranium enrichment facilities Newcomers to the world nuclear market 4 2

Nuclear Power Industrial Complex of the Russian Federation As a Basis for Mechanism to safeguard Uranium Products Supplies -uranium production(4) - conversion(3) -enrichment (4) - fabrication(2)- NPPs (10) 3 Research Institutes (>50) Many years of experience, reliability, high competitiveness, and diversification of the Russian nuclear industry made Russia possible for it to offer the mechanism of additional assurance for the uranium products supplies. - depleted UF 6 reconversion - projects(2)

Initiative put forward by the President of the Russian Federation 4 The Russian President’s Initiative Saint-Petersburg, EurAsEC Summit, 25 January 2006 «The key element of such an infrastructure should be an international centers network under the IAEA control for the provision of nuclear cycle services, including uranium enrichment» Objectives of the initiative :  To increase the role of nuclear energy in provision of global energy assurance  To develop the global nuclear energy infrastructure via the establishment of an international nuclear fuel cycle centers network  To provide the non-discriminatory and assured access to products and services of the nuclear fuel cycle for those states, which are currently developing nuclear power

5 IUEC in the Global Energy Security WNA Multi-layer and multilateral system for the security of supplies IUEC LEU RESERVE Commercial Supplies (AECC) Commercial supplies (other plants) EUP reserves owned by the state Collective securities issued by Suppliers via commitments made by Governments/IAEA Existing world SWU market

6 IUEC in the Global Energy Security 1.IUEC international status as established by the Intergovernmental Agreement. 2.IUEC obligations stipulated in the commercial contracts with the shareholders/customers. 3.Shareholders’ participation in the IUEC Board of Directors, concurrence and approval of the production program, investment and dividend policies. 4.Establishment of own IUEC’s EUP reserve (in Russia and abroad). 5.Long-term IUEC-AECC agreement to secure assured access to the enrichment and conversion capacities as well as respective infrastructure (storage facilities, customs processing points, transport routes). 6.Future ownership of AECC’s shares by the IUEC. Establishment on the territory of the Russian Federation and at the expense of the Russian Federation of LEU Reserve, sufficient for two 1000MWt reactor re-fuellings at a capacity of 1 GW (quantities: 120 tU). The IUEC shall provide LEU Reserve storage and management. The reserve will be available for access to all the countries, meeting the nuclear non- proliferation requirements, supplies to which have been cut for reasons other than those of commercial. Assurance (when required) of supplies supported by the three other Russian enrichment facilities. SECURITY OF SUPPLY ACHIEVED VIA: LEVEL 3 LEVEL 2 LEVEL 1

IUEC – alternative to development of national enrichment facilities OPTION 1. Development of national enrichment facilities OPTION 2. Participation in IUEC costsadvantages NPP Enrichment facilities $/ kW $/SWU* ~ $/kW* * can be much more for small capacity facilities Argumentation of necessity of enrichment facilities development, guarantees of their peaceful purposes use Financial costs on acquisition of technology and development of enrichment facilities (in addition to NPP construction costs) Significant time expenses from decision-making to first production Technological risks of facilities development Amendment of the state’s legislative basis in accordance with the international standards Participation in the strengthening of international non- proliferation activities IAEA participation in IUEC activity (IAEA safeguards, IAEA participation in the Joint Coordinating Committee) No need for technology acquisition and facilities development; Shareholder participates in the management of IUEC operation and commercial activities through it’s representative in the Board of directors; The contribution to IUEC stock capital is negligible – USD (10 % of shares). IUEC pays shareholders yearly dividends from it’s profit. IUEC operates in the legal framework of the Russian Federation, that corresponds to the international standards; IUEC operates on the basis of the intergovernmental agreement -> the execution of delivery obligations is guaranteed by the RF government No need in facilities development - IUEC reserves capacities of the already existing enrichment enterprise – AECC, with modern technology and well-developed infrastructure Difficulties in the acquisition of technology from its owners (proliferation of sensitive technologies) Political Legal Commercial and Financial Technological 7

Establishment of uranium fuel stock by one consumer Diversification on suppliersUse of contract (quantities, tails) and financial options 1. Freezing of significant financial assets 2. Storage expenses (stock creation, service, container acquisition) 3. Logistic problems & expenses (management of the program of purchases and material flows) 2. Risk of facilities deficiency -> risk of order default -> in case of availability of material on the market - purchase on the spot market at considerably higher price in case of absence – risk of electric power production shortage due to absence of fuel 1. Obligations of the supplier only at contract level, with no government guarantees 1. Risk of facilities deficiency - > failure to deliver option quantities 2. Poor development of financial hedging tools (futures, options) in the uranium market IUEC- alternative to other schemes of supply guarantees Participation in IUEC 4. Provision of physical protection, safety, account and control of nuclear materials measures Other schemes of supply guarantees (as alternatives to development of own enrichment facilities) IUEC also creates an operative stock of uranium fuel for many customers-> due to a high turnover rate the stock works and yields profit. IUEC is ready to consider various tools to attain flexibility of the contract, including financial derivatives. Guarantee of deliveries based on IUEC contract on capacities reservation with AECC (other Russian enrichment enterprises – back-up mechanism). 8

Sales and Procurement System for IUEC Products 9 customer Existing and new shareholders shareholder customer «no enrichment» states «enrichment» states Level 1 availability of excess reserved capacities Level 2 Level 3 availability of excess reserved capacities as Part of Commercial Activities SALES model PROCUREMENT model PROCUREMENT OF SWUPROCUREMENT OF FEED MATERIALS  use of the customer’s own feed material  acquisition of feed material in the market  acquisition of feed material from NAC “Kazatomprom”  Acquisition of SWUs from the AECC  Acquisition of SWUs from the other isotope separation industrial complexes long-term and spot deliveries long-term and spot deliveries

IUEC Key Principles 10 Non-discriminatory conditions of membership for all interested countries  No access to proliferation of the Russian uranium enrichment technology because of retention by the Russian Federation of 50 per cent plus one controlling share in the IUEC.  Transparency of the end use of IUEC products is ensured by the IAEA safeguards application to the IUEC nuclear material. The IUEC is a non-proliferation strengthening tool  The IUEC has been established with such place of business as the AECC, an industrial complex with fifty years of operations, having a reliable and highly competitive technology. The industrial complex has been securing supplies to customers under commercial contracts. Assured access of participating countries to the EUP and uranium enrichment services No destabilizing influence on the existing uranium market  The IUEC has been established, based on the intergovernmental agreement and has an international status, which secures governmental guarantees of EUP deliveries.  Equal rights of the shareholders in the IUEC are guaranteed by the Russian law.  The IUEC’s operations are based on market-oriented relationships, product sale price is based on market-oriented principles.  Advantages from being involved in the IUEC are rewarding to refuse to develop isotope separation facilities of your own (slide No.7).  It is binding for the shareholders in the IUEC that they participate in and meet obligations as part of the Nuclear Non- proliferation Treaty of July 1, 1968 (article 5 – Intergovernmental Agreement of the IUEC establishment).  No expansion of enrichment facilities have been planned as part of the IUEC at stage 1 (political stage), the expansion is possible in the future (investment stage) but for meeting guaranteed demand only.  The IUEC has been organized as an open-type joint stock company, where shareholders are represented in the Board of Directors, concur and approve the production&sales program, as well as investment and dividend policies.

Basic Rights of Shareholders in the IUEC 11 To have an priority option on the uranium enrichment services against other customersAgreement* Voting authority at the General Shareholders’ Meeting Federal Law**, The Articles of Association of the IUEC Dividends right Federal Law, Articles of Association of the IUEC A part of title to be held in case of the liquidation of the company Federal Law, Articles of Association of the IUEC Pre-emptive right to shares in the IUEC, in proportion to the shareholder’s share in the registered capital Federal Law Right to repurchase shares when voting against making a resolution or abstaining from voting on the following issues: on the reorganization of the company; on the approval to complete a major transaction; making changes and additions to the Article of Association or validation of the revised Articles of Association, limiting shareholder’s rights. Federal Law Right to gain access to constituent instruments, reports, and other documents on the IUEC’s activities as per Articles of Association of the IUEC and legislation Federal Law, Articles of Association of the IUEC Right to nominate candidates to the Board of Directors and Audit Commission of the IUEC, propose items to an agenda of the general shareholders’ meeting (for shareholders who hold not less than 2 per cent of shares) Federal Law Right to seek convening of the extraordinary general shareholders’ meeting (for shareholders who hold not less than 10 per cent of shares) Federal Law Right to seek inspection of the IUEC’s financial and business operations by the Audit Commission (for shareholders who hold not less than 10 per cent of shares) Federal Law *Agreement - Agreement between the Government of the Russian Federation and the Government of the Republic of Kazakhstan on the IUEC establishment dated **Federal law – Federal Law No. 208-ФЗ dated “On Joint-Stock Companies"

IUEC Organizational and Legislative Chart 12

LEU Reserve (Fuel bank) at JSC “IUEC” 13 The availability of the LEU reserve does not preclude to use other mechanisms for the assurance of supply Basic Principles Non-exclusive nature Non-discriminatory nature No adverse influence on the existing uranium market No heavy investments required Political issues shall not prevent fuel deliveries from LEU reserve for any country, and all countries have equal rights to such a delivery Generation and use of the security reserve shall not incur expenditures from the IAEA budget or any other additional payments (contributions to the budget) by the IAEA member states  the LEU reserve shall be used only in extra cases after all the market-based mechanisms for the supplies have failed, i.e. in the event of a political force majeure  the products are supplied on a market-oriented basis The idea to establish the low enriched uranium security reserve means to set up a mechanism for the assurance of supplies accessible for all countries meeting the nuclear non-proliferation requirements to which countries the supplies have been stopped for the reasons other than of technical or commercial character. A waiver related to the possibility to develop the nuclear fuel cycle is not required from the member-state by this mechanism.  The reserve shall consist of 120 t of low enriched uranium in the form of UF6 with an assay of 2.00% to 4.95% (~ fuel assemblies depending on the reactor type).  The price of LEU supply based on market spot indicators published by the respective reputable companies averaged over a period, preceding the LEU delivery.

Participation of the IAEA in the decision-making process with the aim to: improve the IUEC operating efficiency resolve disputes between the Parties of the Agreement on establishing the IUEC, including those related to compliance with the requirements of nonproliferation regime Participation of IAEA in IUEC activity 14 Establishment of LEU reserve under the auspices of IAEA Application of IAEA safeguards to IUEC nuclear materials Participation of the IAEA representative in the Joint Advisory Commission (JAC) Compliance with nonproliferation regime while supplying products of the IUEC Assurance of supplies in case level 3 situation occurs (political force majeure)

Procedure of the IUEC new member entry 15 I. Signing by the government of a new state-member separate agreements with the governments of the existing state-members of the IUEC in which the authorized IUEC shareholder-organization from the new state-member is defined (duration of the Agreement is 10 years since the time of signing, the Agreement is extended tacitly for ten-year periods in the absence of the Parties’ objections) II. Approval of the transaction by the Governmental commission on foreign investments control in the Russian Federation, headed by the Head of the Government of the Russian Federation in pursuance of the Federal law dated No. 57-FZ “On the procedure of foreign investments into legal entities of a strategic importance that ensure the defense and security of the country” IV. Execution of corporate procedures to obtain the block of IUEC shares from JSC “Techsnabexport” by the authorized shareholder-organization of the new country III. Approval of the transaction by the President of the Russian Federation in pursuance of the Federal law dated No. 13-FZ “On specifics of management and disposition of the property and assets of organizations that operate in the field of nuclear energy use”. Upon entry - holding a General meeting of shareholders to introduce changes into Board of Directors’ structure: 1.Change (if required) of the number of Board Directors (currently – 7 members); 2.Election of a new shareholder representative to the Board of Directors.

Project financing 16 Political stage Investment stage IUEC Authorized capital ~ US $ 1.05 m. IUEC Authorized capital (additional shares issue) OPTIONS to implement the investment stage:  acquisition of AECC shares by IUEC;  creation by IUEC its own production capacities. The Russian Federation, by means of signing the agreement on reservation of IUEC-AECC capacities, provides to IUEC a certain amount of uranium enrichment capacities to assure the supplies of products to the IUEC shareholders. In case of capacities shortage (in the future) Selling of shares to new shareholders at par (~ US$ per 10% of shares)

September 2006 Statement by Rosatom at the 50 th session of the IAEA General Conference on the establishment of the IUEC on the site of “Angarsk Electrolysis Chemical Complex” (AECC) October 2006The decision of the Republic of Kazakhstan to join the Russian initiative on establishing the IUEC January 2007 Note Verbale of the Russian Ministry of Foreign Affairs to the IAEA on including AECC into the list of Russian Facilities open for the application of the IAEA safeguards 3 August 2007 The Agreement between the Government of the Russian Federation and the Government of the Republic of Kazakhstan on establishing IUEC 5 September 2007Registration of JSC “IUEC” as a legal entity 27 November 2007Registration of JSC “IUEC” shares issue 29 November 2007Decision of the Republic of Armenia ‘s Government to participate in the IUEC. 27 December 2007 An issue of regulation by the Government of the Russian Federation on including JSC ”IUEC” into the list of nuclear fuel cycle facilities that can be subject to the application of IAEA safeguards under the Agreement on the application of the IAEA safeguards in the Russian Federation – INFCIRC/327 January 2008 Note Verbale of the Russian Ministry of Foreign Affairs to the IAEA on including JSC “IUEC” into the list of Russian Facilities which can be subject to the application of IAEA safeguards February 2008 Exchange of diplomatic notes between the Russian Federation and the Republic of Armenia on entering of the Republic of Armenia into JSC “IUEC” 25 August 2008Including of IUEC into the List of Russian legal entities entitled to own nuclear materials September-October 2008Acquisition by IUEC of licenses required for work After completion of internal procedures Conclusion the agreement on purchase and sale of the IUEC shares between JSC“Techsnabexport” and JSC “Armenian NPP” December 2008First delivery Key Dates 17

Project Development Plan 18  Arrangement of storage sites for LEU Reserve and IUEC’s nuclear materials;  Conclusion of agreements with transportation companies;  Arrangement of the IUEC’s office in Angarsk;  Exercising of the supply mechanism;  Long-term operation program elaboration. 1. Short-term period (till the end of 2009) 2. Medium-term period ( ) 3. Long-term period ( )  Finalizing the IUEC’s shareholders structure (Russia – 50%+1 share, Kazakhstan - 10%, Armenia – 10%, block of shares for allocation – 30%-1 share);  Determination capacities’ requirements;  Supplies of products to shareholders;  Evaluation of necessity to start the project investment stage;  If necessary – making a feasibility study of investment project.  If necessary, the project investment stage.