URALCHEM seeks Criminal Proceedings in connection with the Illegal Asset withdrawal from Togliattiazot

URALCHEM OJSC has submitted documents to the Investigative Committee of the Russian Federation in the Samara region to initiate criminal proceedings under Part 4 of Art. 159 of the Criminal Code against the management and shareholders of Togliattiazot.

Moscow, Russia (January 18, 2013) -- URALCHEM OJSC has submitted documents to the Investigative Committee of the Russian Federation in the Samara region to initiate criminal proceedings under Part 4 of Art. 159 of the Criminal Code (fraud committed by an organized group or on a large scale) against the management and shareholders of Togliattiazot.

URALCHEM has knowledge that, in 2010, the management of Togliattiazot sold the operating methanol production facilities, which have a capacity of 450,000 tons-per-year, to the company Tomet. The sale was conducted without notice to the shareholders and at a price substantially below the fair market value of the property. In particular, the sale of equipment totalled 130.39 million roubles (around $4.32 mln USD) and the land on which the production facilities are located was sold for 2.06 million roubles (around $600,000 USD). At the same time, a similar unit was launched in Russia by another enterprise, which was priced at 13.54 billion roubles (around $450 mln USD).

Therefore, Togliattiazot effectively gave away property worth more than 13.543 billion roubles (around $450 mln USD) to Tomet. This property comprised more than 48% of the book value of Togliattiazot's assets. Moreover, the sale of the methanol production unit significantly reduced the sources of income for Togliattiazot and resulted in a sharp fall in its profits.

Registration documents confirm that Tomet, through a chain of non-resident companies located in offshore jurisdictions, is affiliated with Togliattiazot's majority shareholders and management, namely members of the Makhlais family and their partners, the Zivys family.

URALCHEM has been a shareholder in Togliattiazot since 2008, owning 9.74% of the company's shares. During this period, numerous violations of corporate law and company law have been committed against Togliattiazot's minority shareholders. The violations have been confirmed by various decisions of Russia's Federal Financial Markets Service and courts.

URALCHEM also holds evidence showing that much of the rest of the production equipment, buildings and facilities of Togliattiazot have also been withdrawn from the company. In particular, an ammonia production unit, gasholders, ammonia storage units, pipelines, overpasses, a gas-distributing station, access roads and plots of land have been sold to Tomet at reduced prices, in circumvention of the necessary corporate procedures. As a result, the state has not received tax from potential property sale revenue and the enterprise itself has suffered damage to the amount of about $1 billion.

URALCHEM intends to seek criminal proceedings for each case of the withdrawal of assets from Togliattiazot, as the packages of documents, that are needed to apply to the law enforcements authorities, are put together.

In December 2012, following URALCHEM's report, the Investigative Committee of the Samara region launched a criminal investigation of the management of Togliattiazot under Part 4 of Art. 159 of the Criminal Code (a large scale fraud). In this case, a fraudulent scheme was used to sell the company's products to affiliated traders at lower prices. As a result of this scheme, during the period from 2008 to 2011, $550 million was withdrawn from the company.

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PR department
URALCHEM, OJSC
Tel: +7 (495) 721 89 89

URALCHEM, OJSC is one of the largest producers of nitrogen and phosphate fertilisers in Russia and the CIS with production capacities of over 2.5 million tonnes of ammonium nitrate, 2.8 million tonnes of ammonia, 0.8 million tonnes of MAP and DAP, 0.8 million tonnes of complex fertilisers and 1.2 million tonnes of urea. URALCHEM, OJSC is the second largest ammonium nitrate producer in the world and number one in Russia, the second largest producer of nitrogen fertilisers in Russia. Key production assets of URALCHEM, OJSC include Azot Branch of URALCHEM, OJSC in Berezniki, Perm Region; OJSC Minudobrenia, Perm; MFP Kirovo-Chepetsk Chemical Works, OJSC Branch in Kirovo-Chepetsk, Kirov region; Voskresensk Mineral Fertilisers, OJSC in Voskresensk, Moscow region.

Some of the information in this press release may contain projections or other forward-looking statements regarding future events or the future financial performance of URALCHEM. We wish to caution you that these statements are only predictions. We do not intend to update these statements and our actual results may differ materially from those contained in our projections or forward-looking statements, including, among others, the achievement of anticipated levels of profitability, growth, cost and synergy of our recent acquisitions, the impact of competitive pricing, the ability to obtain necessary regulatory approvals and licenses, the impact of developments in the Russian economic, political and legal environment, financial risk management and the impact of general business and global economic conditions.

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