The main objective of investment policy of NIKOCHEM Group of Companies is formation of diversified chemical Technology Park located on Volgograd industrial site where the main production assets are currently concentrated.

Efficiency of such organization of producing units complex is considerable costs reduction on raw materials transportation, i.e. major products and co-products of one venture are raw materials for another one, and diminution of expenses on maintenance of the available infrastructure due to the joint use of it.

Formation of a diversified Chemical Park in Volgograd with promotion of national and international investors will enable the following:

• to create favorable organizational and financial conditions for implementation of scientific and technological projects including without limitation those belonging to risk business and to shorten the period of their results commercialization;
• to accelerate the development and introduction of scientific and technical achievements and implement high-technology industrial processes;
• to involve the enterprises of the Park into integrated technological cycle: products of some enterprises are the raw material for the others (product by product).

Nikochem Group has leading positions among its competitors in innovating developments, this provides long-term sustainable progress.

Leaders of world engineering cooperate with NIKOCHEM Group:

• ANDRITZ
• ASAHI KASEI
• CHISSO
• UHDE
• LURGI
• MOELLERS
• САС
• DOW

The Company has the experience in setup for production units in partnership with foreign and Russian companies:

• ZIRAX, United Kingdom – production of special chemical agents;
  
• SEALED AIR, USA – production of barrier films;
  
• PRAXAIR, USA – production of industrial gases;

Within the concept of the Technology Park (alongside with attracting partners) the Group is planning implementation of its own projects. At the present moment the most elaborated projects are the following projects of NIKOCHEM Group of Companies to be implemented at Volgograd industrial site:

Investment project is being implemented by CJSC NikoMag jointly with JSC Rusnano

The main project objective is to ensure competitiveness and sustainable development of NIKOCHEM Company due to formation of profitable, high-technology and competitive in the world market production of nanostructured magnesium hydroxide based on complex use of natural raw materials source – bischofite mineral of Svetly Yar deposit in the Volgograd region. The Company is fully provided with raw materials – already explored reserves of bischofite and obtained licenses for its extraction ensure raw materials supply of the project within the next 150 years. Bischofite brine which comes through the pipeline from Svetly Yar deposit containing high purity magnesium chloride (up to 98-99%), which ensures minimum expenses on brine treatment, will be used to obtain nanostructured magnesium oxide. Magnesium hydroxide manufacturing technology is the development of the Scientific and Production Center of JSC Kaustik (NIKOCHEM Group). Obtained by this technology magnesium hydroxide with modified surface has been tested as a flame retardant additive in various polymer compositions. The tests were conducted jointly with a number of leading Russian manufacturers of polymer compounds. According to the results of carried out tests it has been revealed that usage of nanostructured magnesium hydroxide with modified surface as a flame retardant provides a number of advantages compared to its submicron analogue.

Another unique product is high purity magnesium oxide which is widely used in various industries: waste water treatment, in production of various magnesium compounds, gases treatment, production of transformer steel, as a filler in production of rubber, plastics, putties, adhesives, in fertilizers production, in medicine and perfumery, in production of chemicals.

In June 2009 the project was approved by Supervisory Council of the Government Corporation (now JSC) Rusnano and currently the project is in the stage of implementation.

Project implementation place	Volgograd industrial site
Essence of the project	Setup for production of nanostructured magnesium hydroxide and oxide with modified surface
Capital expenditures, Mio Rub.:	3,083.46
Overall production capacity, tons (at attainment of projected capacity):
including:
magnesium oxide, tpa	30,000.00
magnesium hydroxide, tpa	25,000.00
magnesium chloride flakes, tpa	30,000.00
Proceeds at attainment of projected capacity, Mio Rub. per year	3,946.00
EBIT DA at attainment of projected capacity, Mio Rub. per year	1,353.40
Internal rate of return, IRR	16.7%
Payback period, PB (years)	6.4
Budgetary and social efficiency:
Taxes and duties paid to the budgets of various levels and extra-budgetary funds at attainment of projected capacity, Mio RUB per year	266.7
Creation of additional jobs, men:	118

• Specification of Magnesium Oxide;
• Specification of Magnesium Hydroxide.

The main objective of the project is formation of profitable, high-technology and competitive in the global market production of marketable grades of basic polymers and other petrochemical products. The project was developed jointly with Linde AG, Germany, and stipulates the processing of 800 thousand tons of straight-run naphtha with annual output of 600 thousand tons of polyvinyl chloride, 160 thousand tons of most needed polypropylene grades and more than 100 thousand tons of the most valuable aromatic products, totaling 45 bln. Rub. per year.

The implementation of the project will ensure the integration of chemical site into a complex of balanced producing units including without limitation those of chlorine and caustic soda, and use of the mentioned products as raw materials for the manufacture of products with higher added value (polyvinyl chloride, nanostructured magnesium hydroxide /oxide and caustic soda pearls). The result of such an approach will be the stabilization of the situation in the domestic market of caustic soda and chlorine – the products used in majority Russian industries.

The project involves establishment of production of highly efficient nanocatalysts designed for synthesis of ethylene and polypropylene and developed by Boreskov Institute of Catalysis SB RAS. Efficiency of these catalysts is assessed at the same level as the best world analogues made by ALBEMARLE, SЬD CHEMIE, DOW, etc. The economic benefit from nanocatalysts use is 50% to 400% (in a scale of final product yield as an effectiveness index of synthesis reaction). Employment of modern synthesis technologies using nanocatalysts enables to obtain high quality products being in demand both in domestic and foreign markets.

Due to the use of nanocatalysts in chemical processes:

• rate of reaction increases, as well as productivity does;
• power costs and costs of production decrease;
• yield of target products boosts
• possibility to manufacture products of the same quality as the best world analogues emerges.

Considering the current lack of such nanocatalysts made in Russia domestic petrochemical enterprises are bound to use imported analogues.

As a consequence the implementation of the project will enable not only to meet the in-house requirements in contemporary catalysts of the Group but also to satisfy the domestic demand for these highly efficient reactants and thus to reduce export dependance of Russian petrochemical industry.

As a result of the implementation of the project a modern complex, one of largest chemical enterprises of Russia with a complete technological cycle of products manufacture will appear in Russia. A perfect combination of high-technology chemical and refining capacities will provide a wide range of marketable products and as a result of this high economic effectiveness of the future manufacture.

Project implementation place	Volgograd industrial site
Essence of the project	Formation of petrochemical complex based on hydrocarbons advanced processing
Capital expenditures, Mio Rub.:	70,000
Overall production capacity, tons (at attainment of projected capacity):
including:
PVC, tpa	600,000
Polypropylene, tpa	162,735
NaOH membrane pearls, tpa	203,000
Benzene, tpa	63,820
Toluene, tpa	33,297
Xylene mixture, tpa	13,874
C9 fraction (paraffin), tpa	30,522
Pyrolysis resin, tpa	19,423
Proceeds at attainment of projected capacity, Mio Rub. per year	37,299
EBIT DA at attainment of projected capacity, Mio Rub. per year	21,670
Internal rate of return, IRR	20%
Payback period, PB (years)	7.3
Budgetary and social efficiency:
Taxes and duties paid to the budgets of various levels and extra-budgetary funds at attainment of projected capacity, Mio RUB per year	4,220
Creation of additional jobs, men:	1,490