Moscow, 26 February 2006. The Board of Directors of RAO "UES of Russia" unanimously approved the Supplement "Generation Companies of the Wholesale Electricity Market" to the Company's Strategy Concept for Years 2003-2008 "5+5".*

The Supplement covers the principles for the establishment of WGCs, as well as the procedures and principal stages needed to achieve the intended pattern of WGCs' operation. Also, the Supplement contains a description of the WGC configuration, stating the approximate timings for the final establishment of WGCs and floatation of their shares on stock exchanges.

Pursuant to the laws of the Russian Federation on the reform of the electricity industry, seven WGCs have been established, of which six are based on thermal power plants, and one is based on hydropower plants. At the first phase, all WGCs were established as wholly-owned subsidiaries of RAO "UES of Russia".

According to the Supplement, the target model for thermal WGCs provides for the establishment of WGCs as unified operational companies through merger of AO-power plants concerned with and into the respective WGC. In this connection, the Supplement reflects the principal phases for the WGC formation. In particular, it contains a description of the transitional model for WGC operation.

It is also provided that, in the process of WGC consolidation through merger of the subsidiary power plants, the power plants' shareholders will be invited to exchange their shares in the power plants for WGC shares in the share exchange/conversion ratios accompanied with fairness opinions prepared by investment banks. The fairness opinions are to be based on the valuation reports determining the [fair] market value of shares of the WGCs and AO-power plants, which, in their turn, were issued by consortia of appraisal firms.

The Supplement emphasizes that in the establishment of thermal WGCs it is necessary to address the strategic goal of attracting investments in the electricity sector, which may be achieved, inter alia, through issuance of additional shares to be sold to portfolio and strategic investors, and through debt financing (issuance of bonds, Eurobonds, credit linked notes, the use of project finance, etc.)

The funds raised will be used to implement key investment projects to build new generation facilities, primarily those located in the areas experiencing energy shortages, to modernize the existing equipment and the technologies employed.

It is expected that the steps to attract investors will be accompanied with a gradual increase in the share held by private investors in the thermal WGCs.

It is planned that, in the process of reorganization of RAO "UES of Russia", the thermal WGCs will be spun off, and their shares will be distributed pro rata among RAO UESR shareholders. The Supplement also states that, in the future, the state will endeavour to divest its shareholdings in the thermal WGCs.

The target model for operation of OAO "HydroWGC" provides for the establishment of an operational company uniting its branches (hydropower plants). OAO "HydroWGC" may establish subsidiaries or affiliates for the purpose of engaging in new activities (businesses) and implementing investment projects.

The Supplement contains a description of the phases of HydroWGC establishment.

During the first phase, the subsidiaries in which HydroWGC holds 100% minus one share will be reorganized through their merger with and into OAO "HydroWGC"; alternatively, the subsidiaries in which HydroWGC holds 100% minus one share will transfer their HPP assets as contribution to the capital of OAO "HydroWGC".

At the second stage, the rest of the AO-hydropower plants (subsidiaries of OAO "HydroWGC") will merge with and into OAO "HydroWGC", provided that the Russian Federation maintains at least 50% plus one share in the HydroWGC's capital after RAO "UES of Russia" is reorganized.

In order to ensure that the Russian Federation holds the required stake of 50% plus one share in the authorized capital of OAO "HydroWGC" (after the reorganization of RAO "UES of Russia") and to achieve the target model for HydroWGC operation, it is envisaged that the payment for additional shares in OAO "HydroWGC" may be made in form of funds from the federal budget and in hydrogeneration assets owned by the Russian Federation.

In order to boost liquidity of HydroWGC shares and increase its shareholder value, the Company will seek admission of its shares to trading on Russian stock exchanges and, possibly, foreign stock exchanges (through Depositary Receipts programs). The Company's shares are expected to become one of the most attractive energy assets for investors.

* The Strategy Concept of RAO "UES of Russia" for Years 2003-2008 "5+5" was adopted at RAO UESR Board meeting held 23 May 2003.

At its meeting held 3 February 2005, the Board of Directors adopted the first Supplement to the Strategy Concept for Years 2003-2008, "Territorial Generation Companies to be Established on the Basis of Assets of RAO UESR Holding Company".

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The Board of Directors of RAO "UES of Russia", performing the functions of EGM of OAO "UES FGC", approved amendments and additions to the FGC Charter.

The amendments authorize the Board of Directors of OAO "UES FGC" to create committees of the Board of Directors, appoint and terminate committee members, and approve regulations on the committees of the Company's Board of Directors. An article defining the functions and powers of the committees was added to the Charter.

The committees of the FGC Board of Directors are being created as part of the effort to improve efficiency and performance of the Company's management bodies, as well as its transparency.

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The Board of Directors of RAO "UES of Russia" reviewed the progress report on the project to establish OAO "Norilsk-Taymyr Energy Company" ("NTEC").*

OAO "NTEC" was set up as an operating company which leased energy assets from OAO "MMC Norilsk Nickel" and OAO "Taymyrenergo". Based on the comparison of various metrics of OAO "Taymyrenergo" and PO "Norilskenergo" (branch of OAO "MMC Norilsk Nickel" engaged in heat and electricity generation), RAO "UES of Russia" received a 49% stake in the authorized capital of OAO "NTEC", while OAO "MMC Norilsk Nickel" received a 51% stake.

On 1 October 2005 OAO "NTEC" started operations. The Regional Energy Commission of the Krasnoyarsk Kray set heat and electricity tariffs for NTEC for Q4 2005 and 2006.

The Board of Directors of RAO "UES of Russia" noted that OAO "Taymyrenergo" had completed the lease of its movable and immovable property to OAO "NTEC" under the previously made lease and sub-lease contracts. The contract of lease of immovable property is undergoing state registration with the Main Directorate of the Federal Registration Service for Krasnoyarsk Kray, Evenk and Taymyr (Dolgano-Nenets) Autonomous Okrugs.

In order to implement the resolutions of the Board of Directors of RAO "UES of Russia", a special technical commission was formed, comprising representatives of OAO "Taymyrenergo" and OAO "NTEC". This commission will control the use of the leased property by OAO "NTEC".

At the same time, pursuant to the resolution of the Board of Directors of RAO "UES of Russia" of 23 December 2005, a process is underway to divest the holdings of RAO "UES of Russia" in OAO "Taymyrenergo". In particular, steps have been taken to determine the market value of shares of OAO "Taymyrenergo". The valuation report has been agreed with the Appraisal Committee under the Board of Directors of RAO "UES of Russia" and the Federal Agency for Federal Property Management.

Currently, work is in process to agree and finalize the auction documentation (auction rules, etc.) and prepare for the sale of Taymyrenergo shares through a public auction. The auction is expected to be held after the relevant resolution is passed by the Government of the Russian Federation.

* The participation of RAO "UES of Russia" in OAO "NTEC" and the lease of Taymyrenergo's assets to NTEC was approved by the Board of Directors of RAO "UES of Russia" on 25 March 2005.

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The Board of Directors noted the report presented by the Management Board of RAO "UES of Russia" on the global and national practices in corporate directors and officers' liability insurance.

The report was commissioned by the Board of Directors of RAO "UES of Russia" in March 2005.

At today's meeting, the Board of Directors commissioned the Management Board to draft the Regulation on Liability Insurance of Members of the Management Board and Board of Directors of RAO "UES of Russia", and to submit the draft to the Board of Directors in Q2 2006.

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The Board of Directors of RAO "UES of Russia" instructed RAO UES representatives on the Board of Directors of OAO "HydroWGC" to vote for HydroWGC taking a stake in OAO "Corporation for Development of the Krasnoyarsk Kray".

The Corporations is to be established to administer the Development Programme for the Lower Angara Area, the key element of the Programme being the completion of the Boguchanskaya HPP. The principal objectives of OAO "Corporation for Development of the Krasnoyarsk Kray" are to create a pool of investment projects for the Lower Angara Area and attract investments required for those projects; to create the "points of growth" for the region's economy by providing the necessary infrastructure (availability of transport facilities; electricity surplus); to establish a mechanism for interaction among the ministries, government agencies, and potential investors interested in the implementation of the Development Programme. Moreover, the Corporation will initiate requests for funding from the Investment Fund of the Russian Federation required for such investment projects.

The participation in the Corporation will enable HydroWGC to achieve one of its strategic goals, viz. creation of a pool of investment projects to create energy intensive production facilities that might become potential consumers of the company's energy.

The authorized capital of OAO "Corporation for Development of the Krasnoyarsk Kray" will be RUB120 million. It is expected that the stakes in the Corporation will be taken by the Krasnoyarsk Kray Administration through its Agency for Management of Municipal Property (25% stake), OAO "HydroWGC" (25% stake), OOO "Basic Element" (25%), and Vnesheconombank (25%).

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The Board of Directors instructed RAO UES representatives to vote for the inclusion on EGMs of OAO "Center and North Caucasus IDC", OAO "North-West IDC", OAO "Urals and Volga IDC", and OAO "Siberia IDC"* of the items of business: election of new members of the Board of Directors, election of the Auditing Commission, and approval of some internal documents regulating the activities of the IDCs' management and control bodies.

The election of the Board of Directors at the IDCs was initiated by a letter from the Ministry of Economic Development and Trade of the Russian Federation. The letter stated that, in the event that IDCs are consolidated through share exchange, it would be advisable to preserve state control over those companies after RAO "UES of Russia" is reorganized. In this connection, Vyacheslav Kravchenko, Director of Department at the Ministry of Industry and Energy of Russia, was nominated for election to the Boards of Directors at the IDCs.

* OAO "North-West IDC", OAO "Urals and Volga IDC", and OAO "Center and North Caucasus IDC" were established and registered with the authorities in December 2004 to February 2005. The state registration of OAO "Siberia IDC" took place on 7 July 2005.

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The Board of Directors of RAO "UES of Russia" approved the strategy for administration of shares held by OAO "Sakhalinenergo" in OAO "Okhinskaya CHPP". The first three power units at the Okhinskaya CHPP were put online back in 1960-1961. Today, the power plant is in urgent need of modernization, as its steam turbines and generators have reached the end of their economic life.

At present, OAO "Sakhalinenergo" does not have sufficient funds to carry out modernization of the power plant which is estimated at RUB935.9 million. The funds are needed, in particular, to replace the two turbines and generators, carry out the cooling tower refurbishment, upgrade the obsolete electric equipment that has reached the end of its economic life, and implement a series of measures to increase the earthquake resistance of the buildings and the metal structures of the main building after the 1995 earthquake, as well as prepare for the next heating season. The management of OAO "Sakhalinenergo" and OAO "Okhinskaya CHPP" have on numerous occasions urged the Sakhalinskaya Region Administration and the Regional Energy Commission to include the investment component in the power plant's tariff, but to no avail.

The power plant is the only supplier of electricity and heat to consumers in the north-eastern part of Sakhalin Island. If the plant is not modernized, this may put electricity supply in the area to hazard, as the area's electricity system is an isolated one. It should be pointed out that the Okhinskaya CHPP is heavily dependent on OAO "Rosneft-Sakhalinmorneftegaz", which consumes 62% of the electricity and 35% of the heat generated by the power plant, and is the only fuel supplier to the power plant. Moreover, OAO "Rosneft-Sakhalinmorneftegaz" is exploring the possibility of building its own generation facilities as an alternative to the Okhinskaya CHPP, so as to ensure reliable supply of power to its production facilities.

According to the strategy approved by the Board of Directors of RAO "UES of Russia", it is proposed to increase the authorized capital of OAO "Okhinskaya CHPP" through private placement of ordinary shares worth RUB935.9 million to OAO "Rosneft Oil Company". Also, it is provided that, after the shareholder meeting of OAO "Okhinskaya CHPP" approves the capital increase and until the placement of the power plant's additional shares is completed, OAO "Sakhalinenergo" and OAO "Rosneft Oil Company" will enter into a contract for fiduciary management [by the latter] of shares in OAO "Okhinskaya CHPP". The resolution to issue additional shares of the power plant and the formation of the contract for fiduciary management of shares in OAO "Okhinskaya CHPP" for the period until the share issue is completed will enable OAO "Rosneft-Sakhalinmorneftegaz" to start preparations for the new 2006/07 heating season at the power plant as soon as early May this year.

The Board of Directors of RAO "UES of Russia" instructed the Company's representatives on the Board of Directors of OAO "Sakhalinenergo" to vote for the inclusion on the agenda of the shareholder meeting of the proposal to increase the authorized capital of OAO "Okhinskaya CHPP" through placement of additional shares to Rosneft at a price set by the Board of Directors of OAO "Okhinskaya CHPP", in exchange for a cash payment. At the meeting scheduled for April this year, the Board of Directors of RAO "UES of Russia" is planning to determine the position of RAO UES representatives with respect to voting at Board meetings of OAO "Sakhalinenergo" on the issues relating to voting at the shareholder meeting of OAO "Okhinskaya CHPP" on the increase of the authorized capital and the formation of the contract for fiduciary management of shares in OAO "Okhinskaya CHPP".

Besides, the Management Board of RAO "UES of Russia" was instructed to explore the possible sale of the 49% stake in OAO "Okhinskaya CHPP" owned by OAO "Sakhalinenergo".