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Uralkali, Polymetal Investor to Pay $1 Billion for Railcar Plant

Dec. 2 (Bloomberg) -- Russian billionaire Alexander Nesis, an investor in OAO Polymetal and OAO Uralkali, plans to spend $1 billion on a railcar-factory project to meet domestic demand for transporting raw materials from mines and smelters.

“We reckon upon a simple thing,” he said in an interview. “Russia has one of the largest railcar fleets in the world and the majority of these are old and need to be replaced soon.”

Nesis’s ICT Group will invest the money in the Tikhvin railcar factory that’s set to begin annual output of at least 10,000 vehicles from the second half of 2011. The plant in Tikhvin, in Leningrad region, northwest Russia, may sell shares through an initial public offering at some point, Nesis said.

Russia has about 1 million railcars in operation, according to Brunswick Rail Leasing, while private cargo carriers are building up their own fleets. State-owned vehicles have a lifespan of about 20 years, according to OAO Russian Railways.

The Tikhvin plant says it signed long-term contracts with Russian Railways subsidiaries and private operators including Transgarant. The factory will employ 3,500 people, about a quarter of the workers used in Russian facilities that have similar production volumes, Nesis said. The company built a new operation at the site of a Soviet-era producer of tractors using technology from Wabtec Corp. of the U.S.

“We decided to spend $200 million on building apartments in Tikhvin to attract workers from other regions,” Nesis said in Moscow. “We are offering them houses, mortgage loans and the work that allows them to repay these loans.”

To contact the reporters on this story: Ilya Khrennikov in Moscow at ikhrennikov@bloomberg.net.

To contact the editor responsible for this story: Amanda Jordan at ajordan11@bloomberg.net.

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