Mosenergo

1. Mosenergo A Leader In The Russian Electricity Sector

2. Contents • Mosenergo - A Leader In The Russian Electricity Sector • MosenergoOn The Verge Of Restructuring • Reforming Moscow’s Electricity Sector • Appendices

3. Mosenergo - A Leader In The Russian Electricity Sector

4. Russia’s Largest Regional Energo • By Electricity Production • By Heat Production • By Size Of Territory Served • Mosenergo has an installed electricity capacity of 15,020 MW, or 7% of Russia’s • total. • In 2001, the company generated 71.4 billion kWh, or 8% of Russia’s total. • Mosenergois one of the largest heat producers in the world. • The company has an installed heat capacity of 34,800 Gcal/h. • In 2001, the company produced 69.1 million Gcal of heat, or nearly 5% of • Russia’s total. • Mosenergosupplies electricity & heat to the Moscow region, which has an area • of 47,000 square metres and a population of 16 million people. • The company serves in excess of 4 million customers.

5. Russia’s Largest Regional Energo • By Composition & Asset Base Value • By Key Economic Indicators • Mosenergo’sasset base includes 21 power stations, including Russia’s only hydro pump station located in Zagorsk. • The company’s fixed assets are valued at US$ 3.2 billion. • The average life of the company’s generation assets is about 15 years, with an operational useful life of 30-35 years. • In 2001, Mosenergo’s net revenues were US$1,487 million, including US$985 million from electricity sales and US$448 million from heat sales.

6. Company Structure GENERAL DIRECTOR 12 Power Plants Electricity Generation 13 Electricity Transmission Line Units 3 Repair & Maintenance Units Heat Transmission Network 10 Services Units Electricity Supply 8 Non-core Units

7. Strong Reputation In The International Investment Community Depositary Receipts The first Russian company to place ADRs in 1995, with total proceeds of US$22.5 million. EBRD-MFK US$50 million loan for financing of construction of Zagorsk hydro pump station; maturity date – August 2009. Foreign Loans In 1997, the company issued a 5-year eurobond in the amount of US$200 million. Mosenergo has met all its eurobond obligations. Eurobonds An international credit rating of B-/Stable outlook by Standard & Poor’s. International Credit Rating Publication of annual US GAAP financials and independent audits since 1995, аs well as semi-annual unaudited financials. International Audit

8. Shareholder Structure Mosenergo’s charter capital stands at RUB28,267,726,000 and includes 28,267,726,000 common shares Mosenergo has over 25,000 shareholders

9. Mosenergo: On The Verge Of Restructuring

10. Factors Affecting Business Results

11. Tariff Forecasts CURRENT TARIFF-SETTING MECHANISM Residential tariffs are considered by Moscow City & Moscow Region Governments REC’s expert group analyses the data & gives its conclusion to RECs RECs consider proposed tariff increases The company provides its costs data to the REC RECs approve tariff increases FORTHCOMING CHANGES Setting of economically sound tariffs, stimulating the development of energy-saving technologies TERMINATION OF CROSS-SUBSIDISATION The Federal government implements tariff reform TARIFF REFORM CREATION OF A UNIFIED TARIFF-SETTING UNIT Removal of political influence on tariff setting

12. Consumption Forecast Electricity Consumption Forecast Heat Consumption Forecast

13. Cost Forecast Cost Structure Type of Costs ForecastComments Fuel Gas tariff increases are regulated by FEC; Mosenergo strives to optimise its fuel balance by reducing losses 40.4% WageThe company has controlled its wage Costs; staff reductions 17.8% Materials & Spare PartsContract prices; increase in share of purchases by tender 12.0% 11.5% Repair & MaintenancePrice determined by tender DepreciationEquipment reaching end of useful life 7.1% 11.2% Other costsCost control; cost optimisation

14. Necessity For Restructuring • Fixed Assets Wearing Out: up to 50% wear-out level of key equipment • Insufficient Level of Investment: absence of private investment - lack of economic incentives • Cost-plus Price-setting Mechanism • Lack of cost reduction incentive as a result of absence of competition & current imperfect tariff-setting mechanism • Cross-subsidising

15. Reform & Restructuring of the Moscow Region Electricity Sector

16. Mosenergo’s Restructuring Strategy • Strategic Goals • Create a high level of competitiveness in the electricity, capacity and services markets • Expand client base by attracting consumers from other regions • Create conditions that attract investment into the company, and insure investor profits • Ensure stable electricity and heat supplies to Moscow region consumers

17. Implementing Restructuring KEY TASKS To Be Completed Prior To Launch Of Reforms Eurobond Redemption Necessary legal condition for Mosenergo’s re-organisation Reaching an Agreement With Minority Shareholders Protecting the rights & interests of Mosenergo minority shareholders Tariff Reform Creating positive economic conditions for the split of Mosenergointo core companies Define the legal & economic conditions and the order of transferring Mosenergo’s assets Creating Asset Transfer Mechanism

18. Stages Of Restructuring OPTIMISATION (Preparatory) By 2003 REORGANISATION (Structural Changes) By 2004 INTEGRATION After 2004 • Introduction of separate accounting by line of business • Selling (transfer) of social sector assets • Exiting non-core businesses • Registration of ownership rights • Decreasing payables & receivables • Elimination of non-core expenses • Implementing restructuring by way of separation of generation, supply, repair & maintenance, & services companies • Distribution of receivables & payables among the newly created companies • Participation in the formation of the Federal Grid Company • Organisation of the management process & creation of new economic relations • Participation of the newly created companies in the inter-regional integration • Participation in the formation of the structure of the System Operator

19. Moscow Transmission Company Supply Companies Generation Companies Supply Company 1 (based on Energosbyt) Supply Company 2 Moscow City Generation Company Service Companies Moscow Region Generation Company Mosenergoremservice Mosenergoproyekt Assets To Be Included In The Wholesale Gencos Non-core Companies (Agriculture, Trade, etc) Assets To Be Included In Federal Grid Company Mosenergo Restructuring Model

20. Generation Restructuring UES - 50.87% Separation with distribution of shares on a pro rata basis Separation with distribution of shares on a pro rata basis Minority Shareholders 49.13% Moscow Region Generation Company Installed capacity 5,341 MW Moscow City Generation Company Installed capacity 9,758.8 MW Separation with distribution of shares on a pro rata basis Assets to be included in wholesale gencos ?

21. Restructuring of Supply & Transmission Businesses UES – 50.87% Separation with distribution of shares on a pro rata basis Separation with distribution of shares on a pro rata basis Minority Shareholders 49.13% Supply Company 1 To be formed based on Energosbyt’s assets & organisational structure Supply Company 2 Create competition conditions Separation with distribution of shares on a pro rata basis Transmission Company To be formed based on the transmission line assets (except for assets to be transferred to the FGC), heat network

22. Summary Of Moscow Electricity System Restructuring • Creation of the Moscow retail electricity market infrastructure • Creation of economically efficient & financially stable energy companies, attractive for direct and portfolio investors • Creation of conditions for development of energy supply business in the region • Attract customers in a competitive market by offering them high quality products & services at lower prices • Retaining government, corporate, & administrative control over the functioning of the Moscow region energy sector • Growth in the market capitalisation of energy companies

23. Timeline For Moscow Electricity System Restructuring INTEGRATION PREPARATORY MACROECONOMIC PARAMETERS REORGANISATION STAGES OF RESTRUCTURING

24. Appendices

25. Russia’s Largest Regional Energo Mosenergo Russia Total Installed Electricity Capacity, MW ‘000213.9 15 7% Electricity Production, kWh bln875.8 71.4 8 % Heat Production, Gcal mln1,451 69.1 5 % Structure of Generation Assets Gas Turbines – 4% Hydro Pump Stations – 8% Steam Turbines – 21% Thermal Power Plants – 67%

26. Electricity Production & Supply Demand in the Moscow region has been growing in the past two years, thanks to increasing consumption in the industrial & residential sectors. Production & Supply Dynamics, kWh bln

27. Heat Production & Supply Production & Supply Dynamics, Gcal mln

28. Key Balance SheetFigures US GAAP Consolidated Balance Sheet, US$ mln

29. Key Cash Flow Statement Figures US GAPP Cash Flow Statement, US$ mln

30. Key US GAAP Financial Results US GAAP Income Statement, US$ mln

31. Financial Debt Rouble Debt • RUB300 million – loans from Russian banks • RUB2,041.98 million – other long-term loans • Redemptiondate – December 2005 Foreign Currency Loans • US$39.35 million.Redemption by 2009 • EUR3.8 million. Redemption by August 2003 Eurobonds • US$109.97 million • Redemption Date - October 2002 Mosenergo services its debt obligations fully & on time