Moscow, 9 February 2007. The Board of Directors of RAO "UES of Russia" approved the Regulations on the Commission for Investments and Ensuring Fuel Deliveries Needed for Investment Projects under the Board of Directors.

The Regulations were drafted by the Company's Management Board and the Strategy and Reform Committee pursuant to the Board resolution of 8 December 2006. At today's meeting, the RAO UES Board of Directors decided to extend the scope of authority of the Investments Commission under the RAO UES Board* and to change the name of the Commission to "Commission for Investments and Fuel Supply for Investment Projects and Ensuring Fuel Deliveries Needed for Investment Projects ".

Andrey Zadernyuk, Technical Director of OAO "Mezhregionenergo" was named the Commission Chairman. Mr. Zadernyuk is member of the Strategy and Reform Committee under the Board of Directors of RAO "UES of Russia". Andrey Zadernik was nominated to the chair position by David Herne, Chairman of the Strategy and Reform Committee.

The Board also approved the appointment of the other Commission members:

The Board of Directors also approved the list of Commission experts:

* The decision to set up the Investments Commission was taken by the Board of Directors on 28 November 2006. The Commission is responsible for the review of investment projects of the Parent Company and its subsidiaries and dependent companies (SDCs) prior to submission for the Board approval.

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Information in this Press Release is Not Intended for Distribution in Australia, Canada, Japan or the United States of America

The Board of Directors approved the sale of the 25.03% stake held by RAO "UES of Russia" in OAO "WGC-5"*. This step is intended to attract a strategic investor and raise investments in the company and electricity sector.

The shares will be sold as a single lot through a public auction to be arranged by an independent agent. The auction start price will be equal to the fair market value of RUB24.658 billion determined by an independent appraiser.** After the sale, the stake held by RAO "UES of Russia" in OAO "WGC-5" will decline to 50 percent from 75.03 percent.

The auction is to be held in Q2 2007 after expiration of the lock-up period which started on 10 November 2006 (the date of WGC-5 public offering). WGC-5 raised USD459 million, or RUB12.1 billion, through the public offering of 5.1 billion shares (which makes about 14.1 percent of the company's post-IPO capital). The offering proceeds will be used to finance the investment projects,

specifically, the investment programmes being implemented by OAO "UES FGC" and OAO "OAO "HydroWGC", and to create a reserve for the reorganization of RAO "UES of Russia". The Board will allocate funds for these purposes taking into account the results of the offering of the 25.03 percent stake in OAO "WGC-5". The Board will consider the creation of a reorganization reserve for RAO "UES of Russia" after it approves the reorganization budget.

Currently, corporate actions are underway to spin off OAO "WGC-5 " and OAO "TGC-5" from RAO "UES of Russia", which is part of the first stage of the Parent Company's reorganization. In this connection, at one of its upcoming meetings, the RAO UES Board will review the memorandum prepared with the involvement of an investment advisor on the best possible way to sell the WGC-5 shares and decide on the reorganization of WGC-5 with a view to maximizing return from the sale of WGC-5 shares.

Upon completion of the sale of WGC-5 shares and its spin-off from RAO "UES of Russia", the Government will hold at least 25% plus one share in WGC-5.

* OAO "WGC-5" comprises the Konakovskaya TPP, Nevinnomysskaya TPP, Reftinskaya TPP, and Sredneuralskaya TPP. The installed capacity of the company's power plants is 8,672 MW. WGC-5 shares were admitted to trading on ZAO "MICEX Stock Exchange", OAO "RTS Stock Exchange", and NP "RTS Stock Exchange" in September 2005.

** On 21 December 2006, the RAO UES Valuation Committee considered the independent appraiser's valuation report and recommended to use it for setting the auction starting price.

* * *

The Board of Directors of RAO "UES of Russia" approved the schedule of auctions to sell shares in energy retail companies (ERCs), which will be announced in March 2007. At the auctions, shares in the following companies will be put up for sale:

• OAO "Belgorod Retail Company",
• OAO "Vologda Energy Retail Company";
• OAO "Kolskaya Energy Retail Company";
• OAO "Kuban Energy Retail Company";
• OAO "Kuzbass Energy Retail Company";
• OAO "Nizhny Novgorod Retail Company";
• OAO "Orenburgenergosbyt";
• OAO "Sverdlovenergosbyt".

The auction dates are expected to be announced in March 2007 and held in April 2007.

The Management Board of RAO "UES of Russia" was given the task to report the auction results at the Board meeting to be held in May.

The decision in principle on the divestiture by RAO "UES of Russia" of the ERCs was taken by the Board on 8 December 2006. It is planned that the energy retail companies will be disposed of before RAO UES reorganization in 2008.

According to the Board resolution, the principal method to be used for the disposal of ERC will be the sale through a public auction with the start price not lower than the fair market value determined by an independent appraiser.

The ERC sale will significantly increase the number of independent energy retailers employing advanced methods of retailing, expand the range of services and improve the quality of services provided by them owing to the growing market competition among the retailers.*

* * *

The Board approved the disposal by RAO "UES of Russia" of its holdings in subsidiaries which are not part of the post-reform sector structure.*

According to the RAO UES Strategy Concept, the holdings to be divested include the non-core assets and shares in R&D, repair and maintenance, and energy retail companies. The terms of disposal will be determined by the Board of Directors of RAO "UES of Russia" specifically for each asset group.

As a measure to implement the restructuring of the R&M business of RAO "UES of Russia", the Board approved some changes to its previous resolutions setting out the procedure for the divestiture of R&M companies.

The procedure that was previously in place involved a lengthy approval process and multi-stage auctions, as well as a complicated decision-making process relating to passing from one stage to another. Moreover, there was no centralized monitoring of the R&M divestiture process.

The Board of Directors gave the Management Board of RAO "UES of Russia" a task to determine the division within the Company's executive administration responsible for the decision-making with respect to non-core asset disposition.

As resolved by the Board of Directors, the new procedure for the divestiture of R&M companies is as follows. During the first phase, the companies' shares will be sold through a public auction open to all bidders. The auction start price will be equal to their fair market value determined by an independent appraiser.

If the auction fails due to the lack of bidders, the competent body will take a decision on the alternative sale procedure. One of the possible options is to offer the shares to the general public with the initial price equal to the start price of the failed auction. In this case the competent body will determine the minimum price for such offer. Another option is offer the R&M stakes for sale without setting a start price. In that case the shares will be sold to the highest bidder.

If the public sale fails due to the lack of bidders, the competent body will decide on the sale without setting a start price.

The Board of Directors of RAO "UES of Russia" also resolved that the divestiture of its R&M businesses is to be completed by 31 December 2007. The Board of Directors also resolved that decisions to divest of R&M companies of the WGCs and TGCs are to be taken on a case-by-case basis during the four month period preceding the offering of additional shares by each WGC or TGC. If the sale of the R&M companies is not deemed advisable, the sale will not take place.

The Board of Directors of RAO "UES of Russia" charged the Management Board with the task to ensure disclosure of information about the preparations for sale of such assets and the sale itself.

The Board stated that these resolutions will accelerate the reform of the energy repair and maintenance business of RAO "UES of Russia" and foster market relationships between customers and contractors on the R&M marketplace, which will ultimately improve the reliability of the entire energy system.

* The post-reform asset structure will include shares in the WGCs, TGCs, HydroWGC, FGC, IDCs, DCs, RGCs, islanded regional energos, UES SO-CDA, as well as the plant assets owned by the SDCs of RAO "UES of Russia" used in dispatching, generation and transmission of electricity and heat.

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The Board of Directors of RAO "UES of Russia" broadly approved the RAO UES and TNK-BP project to construct the third power unit of 800 MW at the Nizhnevartovskaya TPP controlled by OAO "WGC-1".

The new power unit will deliver reliable and uninterrupted power to customers in the Tyumen Region in the face of rapid increase in power use (10 percent in 2006, 7 percent yoy in January 2007) and the anticipated shortage of the generation capacity in the area.

The new power unit will be equipped with combined-cycle turbines, which will raise its efficiency to 51% (compared to no more than 40 percent offered by conventional turbines). This helps save up to 20-25% of fuel and reduce hazardous gas emissions threefold.

For the final approval of the transaction, the Management Board of RAO "UES of Russia" was given the task to submit for Board approval at the next meeting the appraisal report on the Ninzhevartovskaya TPP, the terms of the shareholders agreement between WGC-1 and TNK-BP, terms of the long-term gas and electricity supply contracts, as well as the amount of expenses to create the grid infrastructure to deliver the capacity of power unit 3, identifying the sources of finance and determining the possibility of including the project, in full or in part, in the FGC investment programme.

It is planned that WGC-1 will set up a new company to implement the project, ZAO "Nizhnevartovskaya TPP". Contributions to the company capital will be made in plant assets of the Nizhnevartovskaya TPP valued at not less than the midpoint of the fair market value range determined by an independent appraiser.

At a later time, WGC-1 and TNK-BP will establish a joint venture, NVG Ltd., to implement the construction of power unit 3 at the Nizhnevartovskaya TPP. The founders will hold up to 70 percent and up to 30 percent in NVG Ltd., respectively. In consideration for shares in the new company, WGC-1 will contribute 100 percent in ZAO "Nizhnevartovskaya TPP", and TNK-BP will contribute cash equal to 30 percent of the investment project value.

In order to sell the electricity generated by the new power unit, it is planned that long-term contracts will be made (for a term of at least 15 years) on a take or pay basis, as well as contracts to supply natural gas for the Nizhnevartovskaya TPP by TNK-BP or its affiliates. The claims on these contracts will serve as security for the loan which ZAO "Nizhnevartovskaya TPP" expects to raise to finance the construction of the new power unit.

* * *

The Board approved the sale of part the Company's shareholding in OAO "Altayenergosbyt". After the transaction, RAO "UES of Russia" will hold at least 36.75% in Altayenergosbyt.

At its meeting of 23 December 2005, the Board approved the "non-basic" restructuring plan for OAO "Altayenergo", which seeks to achieve a turnaround in its financial position. The restructuring of Altayenergo provides for the unbundling of its retail business by setting up OAO "Altayenergosbyt", a wholly-owned subsidiary of RAO "UES of Russia".

In December 2005, RAO "UES of Russia", OAO "Altayenergo" and the Altay Kray Administration signed an agreement designed to create a single point of responsibility for supplying electricity to households in the Altay Kray. The key requirement is that the local authorities should acquire 25 percent plus one share in OAO "Altayenergosbyt" from RAO "UES of Russia".

In this connection, the Board resolved that RAO "UES of Russia" may divest of part of its shareholding in OAO "Altayenergosbyt" in two ways. The first possible way is the direct sale of its 25 percent plus one share stake to the Altay Kray Administration. The second way is to sell up to 1,147,499,999 ordinary shares in Altayenergosbyt, at a price equal to the fair market value determined by an independent appraiser, to the company's shareholders as of the date of its official registration.

OAO "Altayenergosbyt" was registered with the Inspectorate of the Federal Tax Service of Russia for the Oktyabrsky District of the city of Barnaul on 12 July 2006. The authorized capital of the Company is RUB30 million and is divided into 3 billion ordinary shares of RUB0.01 par value each. The Company is headed by Director General Yury Lyubchich.

* * *

The Board of Directors noted the progress report on the electricity reform in Russia and reviewed its results since the Board last considered the issue on 25 November 2005.

The restructuring of RAO UES entities is carried out pursuant to the laws and regulations of the Russian Federation, resolutions of the Russian Government and the Board of Directors of RAO "UES of Russia", the Strategy Concept of RAO "UES of Russia" for 2003-2008 ("5+5"). The reform implementation is supervised by the Russian Government. Resolutions on matters relating to the sector reform are taken by the state representatives together with the representatives of other shareholders on the RAO UES Board.

The sector reform is being implemented along the following lines:

Reforming the Wholesale Electricity (Capacity) Market

On 1 September 2006, new rules for the electricity (capacity) market were introduced.

Instead of the regulated segment and free trade segment of the wholesale market, the new rules envisage a system of regulated contracts between electricity buyers and sellers.

The first regulated contracts were made for a term until 31 December 2006, and with effect from 2007, long-term contracts are made for a period of one year or more.

The volumes of electricity sold/purchased under long-term regulated contracts will be reduced on a year-by-year basis , which will make it possible to gradually expand the scope of competition on the wholesale electricity market and pave the way for transition to a fully competitive wholesale market. As of 1 January 2007, the proportion of electricity sold at regulated prices was set at 95 percent of the forecast balance of generation and consumption, and included in the wholesale electricity (capacity) market for the transition period. As provided by the Russian Government resolution of 30 November 2006, the share of electricity sold at prices not regulated by the state will be gradually increased from 5 percent effective 1 January 2007, to 10 percent effective 1 July 2007, to 15 percent effective 1 January 2008, to 25 percent effective 1 July 2008, to 30 percent effective 1 January 2009, to 50 percent effective 1 July 2009, to 60 percent effective 1 January 2010, to 80 percent effective 1 July 2010 and to 100 percent effective 1 January 2011.

The electricity volumes not covered by regulated contracts will be sold at market prices under unregulated bilateral contracts and on the day ahead market. In unregulated bilateral contracts, market participants are free to choose their counterparties, and determine the prices and volumes of supply. The day-ahead market is based on the competitive selection by NP "ATS" of price bids and offers, suppliers and buyers one day before the electricity delivery, with prices and delivery volumes determined for each hour of the day. In case of deviations from the delivery volumes planned day ahead, market participants will buy or sell the relevant volumes on the balancing market.

Reforming the Retail Electricity Markets

Simultaneously with the launch of the new wholesale electricity (capacity) market, the Government resolution approved the rules for operation of the retail markets during the electricity reform. Under the rules, the guarantee supplier will become the key participant of the wholesale market. It will be obliged to enter into contracts with any consumer wishing to do so, if such consumer is located in the guarantee supplier's area of operation. The terms of contracts with the guarantee suppliers' customers will be determined by the retail market rules.

Other energy retail companies will also sell electricity to retail customers. The terms of contracts between such parties are not regulated.

After the new rules for the wholesale and retail markets are introduced, the unregulated prices of the wholesale electricity market will be translated to the retail markets, that is, the electricity purchased by retailers on the wholesale market at unregulated prices will be sold to end customers also at unregulated prices. This provision will have no effect on electricity sales to households. Until the end of the transitional period of the sector reform, all electricity to such customers will be sold only at prices regulated by the state.

Addressing the Cross-Subsidization Issue

Under the Federal Law "On Federal Budget 2007" signed by the Russian President on 21 December 2006, the Government allocated as much as RUB15 billion to address the issue of interregional cross-subsidies in the electricity sector. The authorities are exploring the possibility of implementing pilot projects in some regions designed to eliminate cross-product subsidization (subsidizing the electricity consumed by households at the expense of industrial consumers).

Electricity Industry Restructuring

As of 1 February 2007, the Board of Directors of RAO "UES of Russia" approved the restructuring plans for 71 regional energos (50 companies were restructured according to the "basic" plan and 14 companies were restructured using scenarios other than the basic plan; 7 "non-basic" reorganizations are currently underway). Functional unbundling was completed at 65 regional energos, which includes all of the regional energy companies to be restructured under the basic plan. Official registration was granted to 261 new joint-stock companies set up as a result of reorganization of the SDCs of RAO "UES of Russia".

Shares of 56 new companies are traded on the Russian stock market, including 41 energy retail companies, 11 generation companies, and 4 distribution companies.

Consolidation of Facilities of the Unified National Electricity Grid (UNEG)

The process is underway to consolidate bulk transmission assets. As of 31 December 2006, 55 out of 56 regional trunk grid companies (TGCs) were created as a result of regional energos' restructuring. Beginning in 2006, all of the UNEG assets were transferred for use to OAO "UES FGC".

At the annual general meeting held 28 June 2006, RAO UES shareholders approved a new share issue by OAO "UES FGC". Payment for such shares will be made with the shares held by RAO "UES of Russia" in the trunk grid companies (i.e. transmission companies) spun off from regional energos. Pursuant to the shareholders' resolution, shares in 42 trunk grid companies (the so-called "first phase") were contributed in August 2006 to the capital of OAO "UES FGC". Shares in another 9 trunk grid companies will be transferred to OAO "UES FGC" as consideration for another share issue scheduled for June 2007. By end-November 2007, all of the trunk grid companies and six interregional trunk grid companies are expected to merge with and into OAO "Center ITC".

The Board of Directors of RAO "UES of Russia" approved on 27 October 2006 the reduction in the Company's stake in FGC from 100 percent to 76.94 percent after the sale of part of new shares to the Federal Agency for Federal Property Management of Russia in order to ensure that the government participates in funding the FGC investment programme. At the EGM held 6 December 2006, the shareholders approved the acquisition by RAO "UES of Russia" of RUB10 billion worth of new shares in OAO "UES FGC".

Creation of Interregional Distribution Companies (IDCs)

As of 1 February 2007, as part of the process designed consolidate the distribution assets, 26 distribution companies transferred the functions of their chief executives to management companies of the respective interregional distribution companies.

RAO "UES of Russia" has developed an action plan designed to ensure stepwise transition of the distribution companies, with effect from 2008, to a tariff regulation system based on economically justified yield on the capital invested. The plan provides for the unbundling of the existing interregional distribution companies and establishment of 12 new IDCs.

The draft Distribution Sector Development Strategy of RAO "UES of Russia", including the proposed procedure for changing the IDC ownership structure, was approved in principle by the Interdepartmental Commission for Electricity Reform in December 2006, and is expected to be reviewed by the Board of Directors of RAO "UES of Russia" in Q1 2007.

Creation of Wholesale Generation Companies (WGCs)

To date, all six thermal WGCs completed their establishment as unified operating companies. The companies' shares were floated on stock markets. In 2007, OAO "HydroWGC" will continue the process to achieve its planned structure.

On 31 October 2006, WGC-5 held its initial public offering. In the IPO, WGC-5 sold 5.1 billion ordinary shares (which represents 14.4 percent of its capital) at 9 US cents per share, with the demand exceeding the supply eightfold. The IPO proceeds—USD459 million—will be used to finance the construction of new and modernization of the existing generation capacity.

Creation of Territorial Generation Companies (TGCs)

To date, the Board of Directors of RAO "UES of Russia" has approved the plans for the establishment of all 14 TGCs. 13 TGCs (except for TGC-12, which will be created as a result of OAO "Kuzbassenergo" acquiring the generation assets from OAO "Altayenergo") have already been granted official registration. By now, the target structure has been achieved at TGC-3 (OAO "Mosenergo"), TGC-4, TGC-5, TGC-9 and TGC-14. Kuzbassenergo (TGC-12) has signed an agreement to acquire the generation assets form Altayenergo. TGC-6 has built up its shareholdings in subsidiaries. TGC-1, TGC-2, TGC-8, TGC-10 and TGC-13 completed the first phase of their reorganization. All TGCs are expected to complete their restructuring during 2007.

Energy Retail Companies

As of 31 December 2006, 56 energy retail companies (TGCs) were created as a result of regional energos' restructuring. The Board of Directors of RAO "UES of Russia" approved the "basic" plan for disposal of shares in the ERCs, a measure designed to improve their financial strength during the transitional period. Under the plan, RAO "UES of Russia" will transfer the right to vote ERC shares to TGCs, which will enter into fiduciary management with RAO "UES of Russia" for a term of one year.

In addition, according to the resolution of the Board of Directors of RAO "UES of Russia", pilot projects were implemented at 8 energy retail companies providing for transfer of shares into fiduciary management: 3 companies will be run by regional administrations, 1 company by a WGC, 3 companies by independent retail companies, and shares of 1 company will be sold through a public auction.

As of 1 January 2007, the fiduciary management agreements were concluded by 42 energy retail companies out of the 45. The first pilot project involving the sale of the retail company through a public auction, was completed on 6 July 2006. As a result of the auction, RAO "UES of Russia" sold its 47.36 percent stake in Yaroslavl Retail Company. The highest bids exceeded the start price 2.3-fold.

At its meeting held on 8 December 2006, the Board of Directors of RAO "UES of Russia" approved the strategy for the disposal of shares in energy retail companies. It was resolved that the principal method to be used for the disposal of ERC shares will be sale through a public auction. The start price at such auctions may not be lower than the fair market value determined by an independent appraiser.

The regional regulatory authorities have granted the status of guarantee suppliers to energy retail companies of RAO "UES of Russia" and the regional energos which have not yet been restructured.

Reorganization of RAO "UES of Russia"

As resolved by the Board of Directors of RAO "UES of Russia" at its meetings held 28 July, 30 August, 22 September, and 27 October 2006, the Company will be reorganized in two phases.

• During the first phase scheduled to take place in 2007, two generation companies, OAO "WGC-5" and OAO "TGC-5", will be spun off from RAO "UES of Russia". These companies have been chosen primarily because they have completed their restructuring, they have highly professional teams of managers and are fully prepared to operate independently and implement promising investment projects. After OAO "WGC-5' and OAO "TGC-5" are spun off from RAO "UES of Russia" and issue additional shares, the Government will hold at least 25 percent plus one share (i.e. a blocking stake) in these companies.

• During the second phase, which is scheduled for 2007-2008, RAO "UES of Russia" will cease its activity, and the sector's target companies–OAO "UES FGC", OAO "UES SO-CDA", WGCs, TGCs, IDCs, etc.–will be spun off from RAO "UES of Russia".

At the EGM held on 6 of December 2006, RAO UES shareholders approved the first reorg phase, including the spin-off of OAO "WGC-5" and OAO "TGC-5", and approved the conversion ratios to be used for the exchange of RAO UES shares for TGC-5 and WGC-5 shares.

At today's meeting, the Board of Directors gave the Management Board of RAO "UES of Russia" the task to submit the plan to complete the Company's reorganization. Under the plan, the proceeds from the sale of shares in the thermal generation companies will be invested in Federal Grid Company, System Operator, and HydroWGC.

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The Board approved the strategic approach to implementing the project designed to increase electricity exports from Russia to China. This project is the result of the understandings reached between RAO "UES of Russia" and China's State Power Grid Corporation in 2005-2006.

The strategy envisages stepwise increase in electricity exports to China by expanding generation capacity in the Russian Far East.

During the first stage of the project, which is slated to start in 2008, RAO "UES of Russia" will supply 3.6-4.5 billion kWh of electricity to China annually. A 145 km 500 kV transmission line will be built to connect the East IES and the Heilongjiang province in the North-East of China. OAO "UES SO-CDA" and ZAO "Agency for Power Balance Forecasting" have confirmed the feasibility of electricity exports and availability of excess electricity in the East IES required for such exports.

During the second phase, which is expected to start by 2012, electricity exports will grow by 18 billion kWh. For that purpose, two HPPs with the combined capacity of 3,600 MW will be built in the vicinity of the existing open-pit coal mines.

During the third phase, electricity deliveries to China will further increase by 38 billion kWh. To that end, it is planned to build several coal-based power plants with the aggregate capacity of 7,200 MW. In addition, RAO "UES of Russia" will explore the possibility of exporting the electricity generated by the newly-built HPPs. Russia's exports to China will ultimately reach 60 billion kWh annually.

The Board of Directors of RAO "UES of Russia" approved the establishment of a wholly-owned subsidiary, OAO "Eastern Energy Company", which will implement the project. OAO "Eastern Energy Company" will conclude the relevant export contract and make contracts to purchase electricity on the Russian energy market. Besides, the company will enter into all agreements needed to implement the project – on the connection to the power grids, on transmission through networks, and on dispatching services. The Company will have an authorized capital of RUB50 million, which may be increased in the future. The Board of Directors instructed the Management Board to draft the strategy for the development of Eastern Energy Company, and report on the strategy for the development of the promising electricity export projects.

Increased electricity exports to China will facilitate economic development of East Siberia and the Far East of Russia. It is expected that the project will contribute significantly to the Gross Regional Product of these areas owing to construction of new capacity and large-scale exports. The tax and other payments collected by the regional authorities will make up to USD1 billion annually. Up to 5,000 jobs will be created in the Far East's construction sector, and at least 4,000 new jobs in the electricity sector, without taking into account the coal industry. The project will also help reduce the migration of population from the Far East to other regions of Russia. Part of the cash generated by the project may be used to finance modernization of the ageing infrastructure in course of the project implementation. The new generation capacity brought on line as a result of the project will be used not only for exports to China, but also to supply power to the existing and future consumers in Russia.

The Russia-China energy project will give an additional boost to the development of the electricity industry, as well as the allied sectors. It involved the use of significant local resources: contractors for design, materials supply and construction, suppliers of power equipment, and Russian design institutes.

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Information in this Press Release is Not Intended for Distribution in Australia, Canada, Japan or the United States of America

The Board of Directors approved the conditions of the additional share offering of OAO "WGC-4".

Today, this issue was considered by the Board of Directors in accordance with its previous resolution of 30 August 2006, which approved an increase of the authorized capital of OAO "WGC-4" in order to raise funds needed to finance the company's investment programme. The Board also gave the Management Board the task to submit for the approval by the Board revised proposals regarding the number of additional shares authorized for issuance by WGC-4.

At today's meeting, the Board of Directors instructed the representatives of RAO "UES of Russia" at the shareholder meeting of OAO "WGC-4" to vote FOR the approval of the maximum number of additional shares that WGC-5 is authorized to issue at 23,000,000 ordinary shares, as provided by Article 4.2. of its Charter.

The shares in WGC-4 will be offered to the public in exchange for cash payment. The offering price will be determined by the WGC-4 Board after the expiration of the pre-emptive right available to WGC-3 shareholders to acquire additional shares. RAO "UES of Russia", being a major shareholder, will not exercise its pre-emptive right to purchase additional shares in WGC-4. In course of the offering, RAO "UES of Russia" may sell its shares in OAO "WGC-4", subject to the Board resolution.

The company will use the offering proceeds to finance its generation capacity expansion projects at the Shaturskaya TPP, Yaivinskaya TPP, Berezovskaya TPP and Surgutskaya TPP-2.

The Board of Directors of RAO "UES of Russia" approved the reduction in the Company's interest in OAO "WGC-4" from 89.60 percent to not less than 61 percent.

The decision to establish OAO "WGC-4" as a wholly-owned RAO UES subsidiary was approved at the Board meeting held 24 November 2004. OAO "WGC-4" was registered with the state authorities on 4 March 2005 in the city of Surgut. The target structure of OAO "WGC-4" was finally formed on 1 July 2006. WGC-4 comprises the Berezovskaya TPP, Smolenskaya TPP, Shaturskaya TPP, Surgutskaya TPP-2, and Yaivinskaya TPP. The company is headed by Director General Andrey Kitashev.

* * *

The Board took a number of decisions aimed at completing the restructuring of OAO "Volzhskaya Interregional Distribution Company" ("Volzhskaya IDC").*

At the Board meeting of RAO "UES of Russia" held 3 September 2004, the Board of Directors approved the restructuring plan for OAO "Samaraenergo", OAO "Saratovenergo", OAO "Ulyanovskenergo", and OAO "Orenburgenergo". Pursuant to the plan, OAO "Samaraenergo", OAO "Saratovenergo", and OAO "Ulyanovskenergo" co-founded OAO "Volzhskaya IDC" and contributed their distribution assets to the newly established interregional distribution company.

In April 2006, OAO "Samara Distribution Company", OAO "Saratov Distribution Company" and OAO "Ulyanovsk Distribution Company" were spun off from OAO "Samaraenergo", OAO "Saratovenergo", and OAO "Ulyanovskenergo", respectively. The key assets transferred by the regional energos to the spin-off companies were their shares in OAO "Volzhskaya IDC".

In order to ensure that the spin-off companies' shareholders are given direct shareholdings in OAO "Volzhskaya IDC", the spin-off companies -- OAO "Samara Distribution Company", OAO "Saratov Distribution Company", and OAO "Ulyanovsk Distribution Company" -- will be reorganized and merged with and into OAO "Volzhskaya IDC".

The Board of Directors of RAO "UES of Russia" instructed its representatives at the board meetings and general shareholders meetings of OAO "Samara Distribution Company", OAO "Saratov Distribution Company", OAO "Ulyanovsk Distribution Company", and OAO "Volzhskaya IDC" vote for the resolutions needed to proceed with the mergers.

One of the proposals to be voted on is that OAO "Volzhskaya IDC" issue additional shares, 12,969,823,845 ordinary shares and 185,795,517 preferred shares.

A consortium consisting of CIT Finance Investment Bank and OOO "Institute of Entrepreneurship Problems" was engaged to conduct a fair market valuation for the proposed share issue. The Consortium prepared its recommendations, taking into account the shareholders' views, on the reorganization terms, including the details of the share issue of Volzhskaya IDC and the share conversion ratios for the distribution companies' merger with the IDC. It was resolved that the preferred shares to be issued by OAO "Volzhskaya IDC" will make approximately 1.5% of the total number of shares proposed for issuance. This means that only 7.8% of the total number of preferred shares held by a distribution company shareholder will be converted into preferred shares of OAO "Volzhskaya IDC". The remaining preferred shares are to be converted into ordinary shares of the IDC.

The proposed conversion ratios were set so as to ensure that the interest in ordinary shares in OAO "Volzhskaya IDC" held by RAO "UES of Russia" after the merger is at least 50 percent plus one share.

The Board of Directors of RAO "UES of Russia" resolved that the following quantities of shares be converted into one ordinary share in OAO "Volzhskaya IDC":

• 1570000/2745000 of an ordinary share and 1570000/2513871 of a Type A preferred share in OAO "Samara Distribution Company", par value RUB0.25 and RUB0.48 per share, respectively;
• 1570000/1290000 of an ordinary share and 1570000/1181382 of a Type A preferred share in OAO "Saratov Distribution Company", par value RUB0.03 and RUB0.03132 per share, respectively;
• 1570000/54885000 of an ordinary share and 1570000/50263683 of a Type A preferred share in OAO "Ulyanovsk Distribution Company", par value RUB3 per share.

The conversion ratio for preferred shares: the following quantities of distribution companies' preferred shares will be converted into one preferred share in OAO "Volzhskaya IDC":

• 1437806/2513871 of a Type A preferred share in OAO "Samara Distribution Company", par value RUB0.48 per share;
• 1437806/1181382 of a Type A preferred share in OAO "Saratov Distribution Company", par value RUB0.03132 per share;
• 1437806/50263683 of a Type A preferred share in OAO "Ulyanovsk Distribution Company", par value RUB3 per share.

If a shareholder in the company being merged is entitled to receive a fractional number of shares, the fraction will be rounded up or down using conventional rounding rules.

* OAO "Volzhskaya Interregional Distribution Company" was registered with the authorities on 26 August 2005 in the city of Saratov and started operations on 1 January 2006.

The company's core business is electricity transmission and distribution to household and industrial customers in the Saratov, Samara , and Ulyanovsk Regions.

OAO "Volzhskaya IDC" provides services in three regions (oblasts) with the total area of 200,280 sq. km. The company has 7 branches in the Saratov Region, 4 branches in the Samara Region, and 4 branches in the Ulyanovsk Region.

Its plant assets include 1,023 substations of 35 kV and above with the installed capacity of 26,290 MW, 21,103 transformer substations of 3 10/0.4 kV with the installed capacity of 3,590 MW, 109,626 km of electrical lines of different voltages.

* * *

The Board of Directors approved the sale of the shares held by RAO "UES of Russia" in its repair and maintenance subsidiaries -- OAO "ATP Yarenergo-Holding", OAO "Permenergoremont", OAO "Permenergospetsremont", and OAO "Sverdlovsk Energy Services Company".

As provided by the Strategy Concept of RAO "UES of Russia", the post-reform sector structure will include a repair & maintenance services market with independent R&M companies as market participants. At its meeting held on 31 October 2003, the Board of Directors of RAO "UES of Russia" approved the sale of the shareholdings in R&M subsidiaries owned by regional energos and AO-power plants to persons not affiliated with RAO "UES of Russia" and its SDCs, or to establish integrated companies on the basis of such subsidiaries, which is to be followed by the sale of shares in such companies.

According to the resolution of the Board of Directors of 25 November 2005, the shares in R&M companies will be sold through auctions using the approach applicable to the sale of non-core assets of RAO "UES of Russia" and its SDCs.

In particular, the shares will be sold at an auction with a start price equal to the fair market value determined by an independent appraiser. Only bidders not affiliated with RAO "UES of Russia" or its SDCs will be allowed to take part in the auctions. However, these qualification criteria do not apply to minority shareholders of RAO "UES of Russia" and its SDCs.

If the auction fails due to the lack of bidders, the shares will be offered to the public. The initial price will be equal to the start price of the failed auction, and the minimum price will be equal to 50% of the initial price of the public offer for sale. If the sale through a public offer fails due to lack of buyers, the Management Board will inform the Board of Directors of the fact, and the latter shall decide on other ways to sell such repair or maintenance company.

Independent appraisers have determined the following fair market values for the R&M shareholdings: the 47.36 percent stake (10,253,240 ordinary shares) in OAO "AATP Yarenergo-Holding" is valued at RUB86.5 million; the 48.999988 percent stake (23,306,580 ordinary shares) in OAO "Permenergoremont" is valued at RUB97.665 million; the 48.999988 percent stake (23,306,580 ordinary shares) in OAO "Permenergospetsremont" is valued at RUB171.937 million; and the 48.999989 percent stake (341,718,216 ordinary shares) in OAO "Sverdlovsk Energy Service Company" at RUB348 million.

* * *

The Board of Directors of RAO "UES of Russia" instructed the Management Board to make the necessary preparations for the capital increase of ZAO "Inter RAO UES" by transferring the shares held by RAO "UES of Russia" in OAO "Severo-Zapadnaya CHPP" ("North-West CHPP"), OAO "Kaliningradskaya CHPP-2", OAO "Sochinskaya CHPP", OAO "Ivanovskie PGU", AO "Sangtuda HPP-1" (i.e. the generation companies which did not merge with WGCs and TGCs).

The Board of Directors of RAO "UES of Russia" cancelled its previous decision of 25 November 2005 which provided for the disposal of the stake in OAO "Severo-Zapadnaya CHPP" (25 percent plus one share) owned by ZAO "Inter RAO UES".

The Board of Directors broadly approved the Development Strategy for ZAO "Inter RAO UES" and gave the Management Board the task to explore the possible ways in which the Government could build up a controlling stake in ZAO "Inter RAO UES", in light of the forthcoming reorganization of RAO "UES of Russia". It also instructed the Management Board to incorporate in the Development Strategy for ZAO "Inter RAO UES" a list of key measures designed to liberalize the export/import operations on the Russian wholesale electricity market.

The Board of Directors of RAO "UES of Russia" stated that it is advisable to implement a management incentive programme at ZAO "Inter RAO UES" and gave the Management Board a task to produce such programme and submit it for the Board approval in Q1 2007, including the price and quantity of shares [that may be acquired under the stock option plans].

ZAO "Inter RAO UES" is the subsidiary of RAO "UES of Russia" (60 percent) and FGUP "Rosenergoatom" (40 percent). The company is the Russian electricity export/import operator. Inter RAO UES owns or manages generation and distribution assets in Russia and abroad.

* * *

The Board of Directors of RAO "UES of Russia" gave instructions to RAO UES representatives for voting at the general shareholder meetings and Board meetings of some SDCs of RAO "UES of Russia".

Specifically, the Board instructed RAO UES representatives on the Boards of Directors of WGC-3 and Southern Generation Company TGC-8 to vote FOR the establishment of OOO "WGC-3 Finance" and OOO "SGC-Invest", respectively. These companies will be used as vehicles for implementing the stock option programmes of WGC-3 and SGC TGC-8, respectively.

* * *

The Board of Directors of RAO "UES of Russia" instructed RAO UES representatives on the Board of Directors of TGC-4 to vote FOR the disposal by TGC-4 of its interest in OAO "Ryazanenergoremont". The 100 percent stake (57,263,900 shares) in the company having a book value of RUB55.7 million will be sold to the highest bidder, without setting a start price. The sale of Ryazanenergoremont is part of the programme being implemented by RAO "UES of Russia" aimed at complete or partial divestiture of its interests in R&M business.

* * *

The Board of Directors of RAO "UES of Russia" instructed the RAO UES representatives on the Board of Directors of TGC-5 to vote FOR the proposed supplementary agreement to the property lease agreement between TGC-5 and the Kirov City Municipality.

Under the agreement made in 2005, TGC-5 leased the municipal district heating infrastructure from the Kirov authorities for a term of 49 years. The supplementary agreement will settle the arrears owed by the municipal authorities to the energy company due to non-payments for the heat consumed. The settlement of that debt is linked directly to the lease payments under the property lease agreement.

Russian law requires market valuation of the municipal property leased out in order to determine the property book value as of the beginning of next year. In this connection, an independent appraisal was made of the property leased by TGC-5, and the rental amount was to be adjusted accordingly in the supplementary agreement.

* * *

The Board of Directors of RAO "UES of Russia" instructed RAO UES representatives on the Board of Directors of OAO "Kolymaenergo" to vote FOR the establishment by Kolymaenergo of two wholly-owned subsidiaries, OAO "Ust-Srednekanskaya HPP" and OAO "Ust-SrednekanGESstroy".

This resolution is designed to spin off the construction project of the Ust-Srednekanskaya HPP of OAO "Kolymaenergo" consisting of the power plant under construction and the construction units. The plant's construction in progress assets will be transferred to OAO "Ust-Srednekanskaya HPP" and its construction units will be transferred to OAO "Ust-SrednekanGESstroy".

Such spin-off procedure will increase the transparency of services pricing, and ultimately that of the electricity rates. Another benefit will be a much simpler cost management process.

* * *

The Board instructed the RAO UES representatives on the Board of Directors of OAO "TGC-1" to vote FOR the approval of the company's participation in the establishment of OAO "Khibinskaya Heat Company".

The new company will implement a project approved by the Murmansk Region Government to build a heating main from the Apatiskaya CHPP owned by TGC-1 to the city of Kirovsk, and to modernize the heating unit at the Apatitskaya CHPP and a boiler plant in Kirovsk.

The new district heating system will significantly improve the economic efficiency of the Apatitskaya CHPP thanks to a better utilization of its installed capacity, and reduce the heating rates for customers in Kirovsk after the city's boiler plants cease to supply heat.

The founders of the new company will be OAO "TGC-1" and OAO "Apatit". OAO "Khibinskaya Heating Company" will have an authorized capital of RUB40 million, with each of the shareholders owning a 50 percent stake.

In the future, it is planned to increase the company's capital through issuance of additional shares in favour of the Murmansk Region Government The payment for the additional shares will be made in cash and in kind. As a result the capital will increase to RUB533.3 million. TGC-1 will hold 57.8 percent in the new company, OAO "Apatit" 35.5 percent, and the Murmansk Region Government 6.7%.

* * *

The Board of Directors of RAO "UES of Russia" received the report on the activities of the Management Board of the Company in Q4 2006 and approved the work plan for Q1 2007.

* * *

Information in this Press Release is Not Intended for Distribution in Australia, Canada, Japan or the United States of America

The Board of Directors of RAO "UES of Russia" approved the updated Programmes for the preparation and issuance of additional shares of OAO "TGC-1" and OAO "TGC-9" and instructed the RAO UES representatives to vote for the approval of the proposed share issues.

The capital increase by OAO "TGC-1" and OAO "TGC-9" is primarily aimed at raising funds needed to modernize the existing and build new capacity.

The Board of Directors of RAO "UES of Russia" first considered the issuance of additional shares in OAO "TGC-9" and OAO "TGC-1" at its meetings held on 30 August and 29 September 2006, respectively. The Management Board was given the task to review the Programmes for the preparation for and issuance of additional shares by these companies and submit it for Board approval.

The modifications that need to be made to these programmes of TGC-1 and TGC-9 primarily involve the extension of the list of the investment programmes to be financed with the proceeds from the share offerings, as well as adjustments to the offering procedure and other conditions.

At today's meeting, the Board of Directors instructed the RAO UES representatives at the general shareholders' meeting of OAO "TGC-1" to vote FOR the increase of the number of additional shares authorized for issuance by 1,875,228,129,448 ordinary shares, par value RUB0.01 per share, which represents 64.01% of the TGC-1 capital prior to the new share offering and 39.03% of the TGC-1 capital after the offering).

OAO "TGC-9" expects to issue 3,673,132,973,944 ordinary shares, RUB0.003 par value each (which represents 64.46 percent of TGC-9 capital prior to the offering and 39.2 percent of TGC-9 capital after the offering).

The companies' share will be offered to the general public ("open subscription") with payment to be made in cash. The offering price for TGC-1 and TGC-9 will be set through a competitive bidding process (the bidders will include both strategic and financial investors). If a strategic investor offers the best price, all of the shares in the offering may be sold to such investor. The share price for the shareholders having a right of first refusal to buy such shares and for other persons will be the same.

If RAO "UES of Russia" decides to sell its own stake in OAO "TGC-1", such shares will be offered together with the new share issue.

If the shareholding to be sold to a strategic investor after the book building process is closed and the existing TGC-9 shareholders exercise their pre-emptive right to purchase the new shares is less than 25 percent plus one share, such investor will be offered an opportunity to build up a blocking stake by offering an option for the TGC-9 shares owned by RAO "UES of Russia". However, the stake held by RAO "UES of Russia" in TGC-9 must be at least 25 percent plus one share. The Board approved the grant of such option exercisable during one year and one months after the offering date.

The Board of Directors approved a change in the stake held by RAO "UES of Russia" in OAO "TGC-1" from 55.62 percent to at least 33.91 percent, and in OAO "TGC-9" to at least 25 percent plus one share.

The Board of Directors of RAO "UES of Russia" approved the establishment of OAO "TGC-1" and the lease of the generation assets from OAO "Kolenergo", OAO "Lenenergo", and OAO "Karelenergogeneratsiya" at its meeting held 26 November 2004. The company comprises 56 power plants located in four constituent entities of Russia—St.-Petersburg, the Republic of Karelia, Leningrad Region, and Murmansk Region. Its generation assets include different kinds of power plants (thermal, hydraulic, diesel, and combined heat and power plants). The company also has over 860 km of heating lines. OAO "TGC-1" is a strategic supplier of heat to customers in St.-Petersburg, Petrozavodsk, Murmansk, the city of Kirovsk in the Leningrad Region, and the city of Apatity in the Murmansk Region.

The company was granted official registration on 25 March 2005 and launched operations on 1 October 2005.

Since 1 November 2006 (when OAO "Petersburg Generation Company", OAO "Kolskaya Generation Company", OAO "Apatitskaya CHPP", and OAO "Karelenergogeneratsiya" merged with OAO "TGC-1") the TGC-1 has been operating as a single interregional joint stock company. In Q2 2007, shares in OAO "Murmanskaya CHPP" will be exchanged for additional shares in TGC-1 approved for issuance by TGC-1 shareholders on 21 July 2006. As a result of the transaction, OAO "Murmanskaya CHPP" will become a subsidiary of OAO "TGC-1".

The major shareholders of TGC-1 are RAO "UES of Russia" (55.7 %), Fortum (25.7%), and Interros (7.2%).

TGC-1 shares are traded on OAO "RTS Stock Exchange" and ZAO "MICEX Stock Exchange". Listing on the stock exchanges is scheduled for Q2 2007 (B Quotation List).

The aggregate installed generation capacity controlled by TGC-1 is 6,248.4 MW of electricity and 14,735 Gcal/h of heat.

The Board of Directors of RAO "UES of Russia" approved the establishment of OAO "WGC-9" as a wholly-owned subsidiary of RAO "UES of Russia" at its meeting held 3 September 2004. The Company was granted official registration 9 December 2004 in the city of Perm. On 1 February 2007, it completed all legal and corporate formalities required to consolidate its assets and now includes the assets of Komi Regional Generation Company, Perm Generation Company, and Sverdlovsk Generation Company.

TGC-9 shares were admitted to trading on ZAO "MICEX Stock Exchange", OAO "RTS Stock Exchange", and NP "RTS Stock Exchange" in September 2006.

The aggregate installed generation capacity of TGC-9 is 3,215 MW of electricity and 16,870 Gcal/h of heat.