RAO UES of Russia : Investment Stage of the Reform

1. RAO UES of Russia: Investment Stage of the Reform Anatoly Chubais Chairman of the Management Board RAO “UES of Russia” 9thRussian Economic Forum London 24.04.2006

2. Electric Power Industry: New Trends Load of UES of Russia: Approaching a new consumption maximum Source: RAO UES of Russia Maximum Load of Russian Power Plants 160.1 153.1 157 150 148.3 143.5 144.7 142 141.6 Thsd MW 139.1 138.6 136.5 135.3 134.1 133.5 133.4 130.3 125 100 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

3. Regional Energy Systems : Exceeding the consumption maximum of the Soviet period 180 Source: RAO UES of Russia 2006vs. 1990, % 170 1990 = 100% 160 160 150 140 130 124 121 120 115 110 110 108 110 106 105 104 102 100 Udmurtia Tyumen Kuban Moscow Astrakhan Karelia Dagestan Vologda Belgorod Leningrad Kaliningrad Russian power industry needs badly full scale long term investments On March 28, 2006 the list of top-priority projects for 19 400 MW was approved.

4. Investments and the Reform Electric Power Industry Reform: adjusting tactics while keeping strategy intact The main initial target of the Reform is to launch the investment process Key Components of the Reform: Completion Status Reform Components % of completion Year of Completion 1. Split-up of vertically-integrated companies and separation of power generation from grids 90% 2006 70% 2007 2. Consolidation of trunk grids and consolidation of the dispatching vertical 3. Setting up generation companies (WGCs and TGCs) 70% 2007 4. Development of a markets system (for electric power, capacity, and ancillary services). 70% 2007 The target of the Reform is not subject to change. The tactics for Reform completion require adjustment Main Point of Adjustment: Large-scale investments during the final stage of the Reform rather than upon completion of the Reform.

5. Investments and the Reform The Finishing Line was close … but had to be pushed two years further along the road FINISH FINISH 2006 2007 2007 2008 Investment section of the road 2005 2006

6. Investment Deployment Concept Investments: Concept, sourcesandobjects, volumes Reform Concept Investment Deployment Concept Competitive sectors (primarily – thermal power generation) Private investments Monopolistic sectors Budget investments Annual volumes of investments in RAO UES of Russia:2005-2006– about$5 bn, by 2008-2009 – about$15 bn.

7. Project financing Direct private investments in local projects Investment guarantee mechanism Additional share issue of WGCs and TGCs Privateplacement Publicplacement Thermal power generation - a top priority object for investments 2/3 of electric power generation in Russia Investment Deployment Concept Thermal Power Generation: Mechanisms to attract investments

8. Selection of project consultants is starting as well asmeetings with potential investors. Special conference for investors into above projects is planned for June 2006. New Companies: Top-priorityProjects Additional Share Issue of WGCs and TGCs Long list of generation companies – top candidates for additional issue and placement of shares has been reviewed and approved by RAO UES management board In all cases,placement of additionally issued shares is a tool for attracting investments in preselected projects with total capacity of 6,700 MW WGC-3, WGC-4, WGC-5, TGC-1, TGC-3, TGC-5, TGC-8, TGC-9, TGC-10 3-4 companies selected from the approved list of candidates will comprise a short list to make a decision on additional issue and placement of shares. June 2006: RAO UES Board of Directors is expected tomake a relevant decision on 3-4 companies to undergo share issue. The logic and sequence of actions was proposed by management andpreliminarily approved by the Board of Directors. It is up to the Russian Government to make key decision.

9. New Companies: Top-priorityProjects Additional Share Issue of WGCsand TGCs: Timeline 2006 '01-03 '04 '05 '06 '07 '08 '09 '10-12 Implementation of pilot projects • Preparation and approval of the top candidates list • Selection of consultants • Consultations with potential investors • Negotiations with shareholders Selection of 3 to 4 pilotWGCsandTGCsfromthe top candidates list and approval of their share placement plans Preparation for share placement

10. $ bln WGC5 Prior to trading estimates Current Mcap 4.0 • Installed Capacity – 8,672 MW • (5.53% of overall RAO UES’ installed capacity) 3.0 2.39 2.0 1.5 0.962 1.0 0.9 • Shares are traded on RTS, MICEX • GDRs will be traded on London and Frankfurt stock exchanges Independent Appraiser’s evaluation Analyst evaluation (min/max) 14 Sep. 05 (1st trading day) Current Mcap 19 Apr. 06 New Companies: Top-priorityProjects WGC-5: Example of preparedness for share placement Sources: MICEX; analysts reports (Aton, TroikaDialog, RenCap, MegatrustOil)

11. Reorganization of RAO UES of Russia: Pro rata principle for protection of shareholder rights RAO UES of Russia Shareholders Meeting (in 2008) Shareholders Meeting (before the end of 2006)… • Spin-off of 1-2 generation companies • from the following candidates: • WGC-3, WGC-5, TGC-5 • Reorganization of RAO UES of Russiaby wayofsplit-up; • Pro rata distribution of the Company’s assetsamong shareholders; • Transfer of functions to the Government andinfrastructural entities of the energy industry

12. “The train departs in 2006-2008 . . . . . . and the best seats are in the first car!”