• Eng

Uralkali and FAS have signed a settlement agreement

06.03.2008
JSC "Uralkali" (Uralkali) and the Federal Antimonopoly Service of the Russian
Federation (FAS) have signed a settlement agreement to resolve the dispute
arising from the FAS decision and prescriptions made on April 23, 2007. In April
2007 the FAS found that Uralkali violated Russian antimonopoly law by abusing
its dominant position and establishing monopolistically high domestic potash
prices. Based on these findings, the FAS sought to set a maximum average
weighted domestic potash price for 2007 and required Uralkali to pay
approximately RUR 62 million to the federal budget for the first quarter of
2007. The FAS findings, prescriptions and penalties were invalidated by the
Russian arbitration court in October 2007. However, the FAS appealed this
decision.

The settlement agreement with the FAS takes effect only if approved by the
Russian arbitration court. The relevant hearing is currently due to take place
on March 12, 2008.

Pursuant to the settlement agreement, Uralkali has agreed to pay RUR 49 million
to the federal budget in respect of Uralkali's domestic potash prices for the
nine months ended September 30, 2007. The FAS has acknowledged in the agreement
that Uralkali's domestic potash prices for the fourth quarter of 2007 were
compliant with Russian anti-monopoly law. In addition, Uralkali and the FAS have
agreed a formula for determining Uralkali's domestic potash prices going
forward. The formula links domestic prices to certain minimum export market
prices (currently - FOB China), while adjusting for certain export costs.
According to the agreement, this formula will be effective for five years,
subject to an automatic extension for a further five years if neither party
objects to the extension. Uralkali and the FAS also agreed that Uralkali's
potash sales to domestic farmers would be subject to a minimum discount of 30%,
assuming such a discount does not result in Uralkali incurring losses on such
sales on a Russian GAAP basis.

The formula in the settlement agreement has the same effect as the formula used
in the five-year contracts Uralkali entered into at the beginning of 2008 with
its major domestic customers - "Eurochem" and "Fosagro".

Uralkali believes that the settlement reflects important progress in its
relationships with the FAS and its major domestic customers and, if approved by
the court, will help ensure the stable long-term development of the Russian
potash market.
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