OGK-2: New issuer of the Russian power market Konstantin Saurov, Corporate Governance Director,

1. OGK-2 OGK-2: New issuer of the Russian power market Konstantin Saurov, Corporate Governance Director, Conference «Emerging Europe» Istanbul, 2006 October, 5-6

2. First stage of Russian power sector reform envisages establishing of new companies generating and selling power at free market Under Russia's power sector reform seven OGKs have been established: six of them are based on heat power plants, and one OGK is based on hydro generation assets. OGK-2 is one of six heat power plants Power industry restructuring

3. March 09, 2005 - OGK-2was founded according to the resolution of RAO United Energy Systems (UES). OGK-2 unifies five large federal thermal power plants: Serovskaya TPP, Pskovskaya TPP, Troitskaya TPP, Stavropolskaya TPP and Surgutskaya TPP. The powers of the sole executive body were delegated to OGK-2 since first quarter of 2005 September, 29 2006 - OGK-2 carried out a conversion to a single share and began functioning as an integrated operating company 3,35 ml. USD - total volume of dividends for first six months of year 2006. History

4. To become the leader in electricity generation and sales branches among thermal electricity generating companies by applying advanced management and production technologies. We aim to become a company chosen by shareholders, employees and partners. To twice the company’s capitalization and attract private investors through: Continuous improvement of business efficiency and corporate governance standards, ensuring the stable, long-term development of the company Transparency for all parties, especiallyfor potential private investors OGK-2: Mission andObjectives (up to 2010) Our mission Our objectives (up to 2010)

5. Share capital structure

6. Authorized capital – 1 bln. USD Capitalization of OGK-2 – 2 bln. 300mln. USD ( 03.10.2006) Shares are traded on two main Russian stock exchanges (MICEX and RTS) since July 2006 OGK-2 plans to hold IPO in 2007 Securities market

7. Power Plant Locations Surgutskaya TPP3280МWТ Stavropolskaya TPP2400МWТ Troitskaya TPP2059МWТ Serovskaya TPP526МWТ Pskovskaya TPP430 МВТ Branches of OGK-2 are located in the West Siberia, Urals, South and Noth-West regions of Russia . Headquarter is located in Moscow.

8. Branches capacity and generation Installed capacity Power generation The output of OGK-2 power plants in 2005 Electricity 41,2 GWh Heat 2,4 bln. Gkal

9. Usage of installed capacities • Usage of installed capacities of OGK-2 is one of the most efficient in comparison with other OGKs • During 6 months 2006 usage of installed capacities improved up to 62%

10. Conditions of branches development Surgutskaya TPP - location in the power-hungry Tyumen oil region. Stavropolskaya TPP– to double export (Turkey, Rumania, Azerbaijan, Bulgaria),increase of regional power consumption up to 10% in 2010. Pskovskaya TPP - increase in export (Baltic states, Belorussia) up to 8%, increase in regional power consumption up to 10% in 2010. Serovskaya TPP– development of steel and aluminum business in Urals, increase in regional power consumption up to 650 МWт each year. Troitskaya TPP– industrial development of Chelyabinsk region, increase in regional power consumption up to 250 МWт each year.

11. Large-scale and efficient power plants (Pskovskaya TPP, Surgutskaya TPP,Stavropolskaya TPP) Independence from heat market andmanoevring of power (allTPPs) Location in the power-hungry regions Huge opportunities for export deliveries (Stavropolskaya TPP,Pskovskaya TPP,Troitskaya TPP) Power plants are located nearfuel resources (coal, gas) Diversified fuel balance of power plants (coal, gas) Company’s main advantages

12. Intensive and sustainable power generation Improvement of power plants capacity To double capitalization Increase in net income – 85% Cost reduction – 10-15% Expansion of generation and powersales Strategic targets

13. OGK-2: Scheme of Objectives WGC-2: Value to Double Business efficiency Transparency of activities Improvement of competitiveness and increase of capacity factor (at least 60% for operating units) Development strategy clear for investors Corporate structure transparent for investors Cost reduction by 10-15% Investor-friendly disclosure standards Expansion of possible capacity utilisation IR programme Development of condensing units, and ensuring their long-term competitiveness SAP implementation

14. Market: All fields of the wholesale power market: the day-ahead market, the real-time market, vesting contracts, bilateral contracts Retail power market Clients: large industrial power consumers, supply companies, InterRAO (long-term contracts, such as vesting contracts andbilateral contracts) Retail clients Heat powerresellers Strategic issues: market

15. OGK-2: Production Strategy Key measures: • Finding ways to improve reliability and efficiency • Improvement of the technological features of the units, including: • Expansion of capacity range for power generation • Increasing the generator’s ability to vary load level within the range • Improvement of the reliability of operating capacities • Providing for GRES participation in frequency adjustment • Dealing with environmental issues, such as the utilization of ash disposal areas, emissions, etc. • Reduction in production costs • Energy conservation • Improving equipment operation, including reducing the fuel expenditure rate • Applying advanced power efficient technologiesto reduce fuel expenditure, and improve installed capacity • Case study of GRES coal diversification • Repair programme optimization • Reduction of repair terms • Reducing the cost of material and technical resources, repair work, and other services, at the expense of applying regulated purchasing procedures • New power plants equipment – 1,2 Gwt (slide 18)

16. Control over the emissions amount and the plants’ dumping to the circumambient air and water Control over the condition of the environment Organization of ecological training for the personnel of all TPPs; Installation of equipment measuring emissions to the environment Implementation of measures preventing emergency and other major emissions and dumping to the environment Landscaping at the TPPs’ territories Selling quotes in the framework of Kyoto agreement Environmental issues

17. Development of a unified commercial centre operating on the electricity wholesale market, with centralised business processes in all segments of the electricity wholesale market Development of own power marketing business via establishment of supply company operating in the electricity and heat retail markets Projects aimed at providing reliability and increasing the efficiency of existing capacity; also, adding new capacity Introduction of a quality assurance system in accordance with ISO 9001:2000 Development and introduction of a well-balanced system of indicators, monitoring instruments; controlled introduction of a corporate information and analytical system. Corporate automated system that manages production and commercial operations with SAP R/3 OGK-2 Projects Summary List for the Period until 2012

18. Key investment projects • Stavropolskaya GRES construction of the gassteam energy block 450 MWt (560 mln USD) • TroitskayaGRES – construction of thecoal energy block 500 MWt (720 mln USD) • Serovskaya GRES – construction of the coal energy block 330 MWt (520 mln USD) Total investments – 1 800mln USD

19. Investment schedule (mln USD)2007 – 2012

20. Financing • IPO – 750 mln USD • Loans – 800 mln USD • Bonds – 250 mln USD

21. Under the strategy of OGK-2 RAO UES will reduce its part in authorized capital from 81% to 51% (preliminary) OGK-2 plans to sell 30% of shares during IPO to different types of investors Free float after IPO – 49%

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