EVRAZ plc has signed an agreement for disposal of its Russian railcar operating subsidiary EvrazTrans to Russian freight rail operator NefteTransService (NTS) for RUB 9,450 million (approximately US$300 million) cash consideration on the basis of RUB 150 million (approximately US$4.8 million) of working capital, no cash and no debt. Completion is subject to receipt of certain customary corporate approvals and delivery by NTS of relevant authority approvals and is expected to take place by the end of 2012.

EVRAZ will apply the sales proceeds for general corporate purposes, including, but not limited to, the repayment of some of its debt.

Under the contract with NTS, EVRAZ has agreed to sell its participatory interest in the share capital of EvrazTrans, the owner of 4,114 gondola cars with an average age of 5.5 years. EVRAZ will retain ownership of and continue to operate hoppers previously owned by EvrazTrans.

As at 31 October 2012, EvrazTrans had gross assets, which are the subject of the transaction, of US$243 million (under Russian GAAP). For the financial year ended 31 December 2011, EvrazTrans gondola business produced a profit before tax of US$49.8 million, according to EVRAZ management estimates. This figure reflects results of operation of EvrazTrans gondola business as a captive rail freight operator to EVRAZ and is not representative of EvrazTrans gondola business operations on a stand-alone basis.

EVRAZ has also signed a five-year off-take service contract with NTS in respect of approximately 30% of EVRAZ’s rail transportation requirements. The services provided by NTS to EVRAZ will be at market prices negotiated quarterly.

Alexander Frolov, EVRAZ’s CEO, said, "The sale of EvrazTrans is in line with EVRAZ’s strategy of divesting non-core assets. The recent transactions in the rail cargo transportation sector in Russia are evidence that this market is now undergoing consolidation. The divestment of EvrazTrans will unlock the value of the asset for EVRAZ while the long-term off-take service agreement will guarantee continuity of services for transporting EVRAZ’s products."