Anatoly Chubais Chief Executive Officer RAO “Unified Energy System of Russia”

1. Anatoly Chubais Chief Executive OfficerRAO “Unified Energy System of Russia” Annual Conference for IG “Renaissance Capital” Investors 3 June 2003, Moscow

2. Capitalization increase factors Since September 2002 capitalization of RAO “UES of Russia” has grown by three times Market capitalizationof RAO “UES of Russia” 300% RTS index CapitalizationUS$ 9.858 bn. 280% 260% 240% 220% CapitalizationUS$ 3.229bn. 200% 180% 160% 140% 120% 100% 24.09.2002 08.10.2002 22.10.2002 05.11.2002 19.11.2002 03.12.2002 17.12.2002 31.12.2002 14.01.2003 28.01.2003 11.02.2003 25.02.2003 11.03.2003 25.03.2003 08.04.2003 22.04.2003 06.05.2003 20.05.2003 30.05.2003 2

3. Capitalization increase factors External • Russian political and business elite considerably changed their viewpoints on the power sector reforms at federal and regional levels • Russian business entered into RAO “UES of Russia”: both into the parent company and its daughter companies • Federal laws on the Russian power sector reform came into force Corporate • Company’s management fully abides by its “Seven Steps towards Shareholders” made public in September 2002 • Financial and industrial performance of the Holding improved • The Concept of RAO UES “5+5” Reforming Strategy for 2003-2008 was approved • Corporate ethics standards were adopted following management's proposal (Basic Principles for Operations with Securities by Members of the Board of Directors and Executive Board of RAO UES were approved on 29 April 2003)

4. Capitalization increase factors Political and business elite changed their viewpoints on the reform process Historical opponents Current opponents Adviser tothe Russian President and Deputy Energy Minister, supported by some senior officials Conservatively-minded energy specialists and scientists 5 Deputy Energy Minister 1 1 Majority of regional Governors led by the Moscow Mayor and influential presidents of republics 2 RF Government and RAO “UES of Russia” RF Government and RAO “UES of Russia” Most senators in the Federation Council 6 Some foreign minority shareholders Influentialoligarch groups 7 3 Key political factions in the RF Duma (Fatherland,People’s Deputy, Russian Regions, Agrarian Party of Russia, Yabloko, Communist Party of the RF) Two political factions in the State Duma: Yabloko (G. Yavlinsky), Communist Party of the RF (G. Zyuganov) 2 4 RF President and the RF Government are playing a key role at every stage of the reform On April 1st, 2003, the Law on the Electric Power Industry became effective

5. Capitalization increase factors Evaluation of the Ownership Structure of the Holding • New shareholders of the daughter companies have invested circa USD 1.2 billion into acquisition of blocking stakes in over 30 AO-energoes • New shareholders of the mother company have invested circa USD 800 million into acquisition of approximately 10% stake of RAO “UES of Russia” In total about USD 2 billion Basic investors: • MDM Group • SUAL Holding • YUKOS • Lukoil • Norilsky Nikel / INTERROS • NLMK • … blocking stake blocking stake (allegedly) no blocking stake Results of the AGM of 30 May 2003: the Board of Directors sees considerable number of strategic investors and change in representation of portfolio investors

6. Capitalization increase factors Financial and industrial performance in 2002 Proceeds and profit of Holding*, RUB billion Electricity generation per employee, thousand MWh\person 564.7 60 600 50 500 453.6 40 0.98 400 335.7 0.98 29.5 30 0.96 300 20 200 14 0.94 9.5 0.94 0.93 10 100 0.92 0 0 0.90 2000 2002 2001 2000 2001 2002 Net proceeds Net profit * Russian accounting standards

7. Capitalization increase factors Cost reduction programs mean improvement of business efficiency Trends for costs reduction 18 • Separation of repairs and maintenance services and making them competitive • Optimization of fuel costs • Optimization of the personnel structure and number of employees • Sale of non-core businesses 14 17.1 RUB billion 13.8 10 12.3 6 2001 2002 2003 (target) Costs reduction structure in 2002 Other costs 9% Fuel 34% Wages 10% Non-core assets 10% Reducing electricity transmission losses Repairs and maintenance 16% 21%

8. Capitalization increase factors Adoption of the Concept of RAO UES “5+5” Strategy The Draft Concept was elaborated in collaboration with the shareholders and consortium of Alfa-Bank and Merrill Lynch consultants The Concept was UNANIMOUSLY approved by the Board of Directors 8 April 2003 24 April 2003 23 May 2003 29 May 2003 2002 Concept was taken up with the Board of Directors Concept together with the Action Plan for the Program of Power Sector Reforming for 2003-2005 were presented at the meeting of the RF Government Commission on Energy Reform and were taken as a basis The Concept was discussed by the Board of Directors, then made available at the official site of RAO UES for public discussion

9. Reaction of the market to the changes in power industry Adoption of the energy reform package of laws Russian business entering into power sector Approval of the «5+5» Strategy Concept Improvement of financial and industrial performance of the Holding Changing of the elite’s attitude towards the reform Adoption of corporate ethics standards Increase of capitalization of RAO UES undoubtedly proves that the reform was accepted and supported by the business

10. Key prospects External • Adopting appropriate standards and regulations (by-laws), including: • Launching a competitive 5 – 15% part of the wholesale electricity market • Action Plan for the Program of Power Sector Reforming for 2003-2006 • Rules and regulations for the wholesale electricity market • List and structure of wholesale generating companies • Resolution on launching a transition period market • Rules and regulations for non-discriminatory access to the grid • Rules and regulations for the retail electricity markets in transition Corporate • Launch of the “5+5” Strategy • Improving financial and industrial performance along with further cost reduction • Advance in corporate governance

11. Capitalization growth is top priority Company’s mission RAO “UES of Russia”, acting for the benefit of its shareholders, seeks to ensure a sustained growth of the valueof its shares and the shares of the companies that will be established in the course of restructuring through a successful implementation of the reform and increased efficiency and transparency of its operations as well as the operations of the companies established in the restructuring process From the Concept of RAO UES “5+5” Strategy for 2003-2008, adopted by the Board of Directors on 29 May 2003

12. Capitalization growth is top priority Reform Stages Transition period 2003-2004, 1st stage 2004 – 2006, 2nd stage 2006 – 2008, 3rd stage Initial stage of restructuring (pilot projects and second turn of AO-energos’ restructuring, launch and adjustment of the 5-15% market and a regulatory base) Completion of market infrastructure and of AO-energos’ restructuring Launch and functioning of liberalized market Final decision is to be made by the RF Government

13. Capitalization growth is top priority “5+5” philosophy: transformations in the interests of shareholders • Proportional allocation of shares is the shareholders’ right rather than duty The wholesale generating companies’ stakes belonging to RAO UES that are not demanded on the proportional exchange basis shall be auctioned • Consolidation of the newly created power market entities: • Setting up circa 20 territorial generating companies instead of 32 • Establishment of 5 inter-regional distribution grid companies instead of 7 • Transition to the unified share (where possible) in all the newly created market entities, except hydroelectric wholesale generating companies • Other shareholders of wholesale generating companies shall enjoy the right to put their shares up for auction jointly with wholesale generating companies’ shares owned by RAO UES • If one or several shareholders acquire control of a 30% stake and over of the newly created companies, the government or RAO UES shall support the right of any shareholder to sell shares for the same price

14. Capitalization growth is top priority New initiatives in the Company’s performance and corporate governance Company’s performance • To toughen cost-reduction programs considerably and to revise their principles • To sell non-core assets • To plan for financial and economic indicators: • To approve the financial and economic indicators in order to evaluate Company’s efficiency and make proper forecasts • To reduce accounts preparing timeline • To start setting up an integrated system of accounting, centralized asset and equipment maintenance investments management Corporate governance • To advance corporate governance: • Improving operation of the Board of Directors. • Regulating the information policy. • Developing standards of corporate ethics. • Introducing corporate governance ratings and corporate audit system.

15. Capitalization growth is top priority Company’s tariff policy is being revised Our viewpoint • Restrict electricity tariffs fluctuations by the inflation index, linking at the same time trends for electricity tariffs increase with the anticipated gas price rise • Eliminate the cost-base approach in pricing Our proposals • With the marginal electricity tariffs growth being established for 2004, it is imperative that the following is set as well: • Tariff caps for the next two years • Tariffs differentiated by subjects of the Russian Federation • Separately - for the population, due to the problem of cross subsidizing

16. Capitalization growth is top priority Advance in corporate governance Improvement of operation of the Board of Directors • Setting up an efficient system for distribution of authority between management bodies of the companies • Increase in the number of independent directors Regulation of the information policy • Establishing the list and scale of information disclosure, its schedule, methods and periods • Regulating the interaction of members of the Board of Directors and the Management Board with the public community Progress of corporate ethics standards • Members of the Board of Directors and the Executive Board shall be obliged: • To comply with the principles of executing transactions with Company’s shares • To advise the Company Board of Directors on possessing the Company’s shares, as well as on a conflict of interests while executing transactions • To be liable for any damage to the Company and to be responsible for disclosure of confidential information Introduction of corporate governance ratings and corporate audit system

17. Capitalization growth is top priority Strategic priority of the management is to ensure further increase of capitalization Management priorities for the nearest years Launch of the “5+5” Strategy in the interests of shareholders Launch of a competitive 5 – 15% part of the wholesale electricity market New positioning in the tariff policy Improvement of the Holding’s financial and industrial performance Advance in corporate governance Company’s Mission is to ensure that the overall capitalization of the newly created companies is greater than that of RAO “UES of Russia” currently