Moscow. 24 June 2005. The Board of Directors of RAO "UES of Russia" heard and noted the results of the investigation by the Company's Task Force into the causes of the blackout in the Moscow energy system on 25-26 May 2005 and unanimously approved the guidelines of the action plan to increase reliability of the UES of Russia.

The Board of Directors gave the Management Board of RAO "UES of Russia" a task to prepare an Action Plan to Improve Reliability of the UES of Russia taking into account the comments made, and to approve it at the Management Board meeting by 1 September 2005. Proposals on the matters requiring approval by the Board of Directors should be submitted for consideration by the Board of Directors.

In the course of the discussion, the members of the Board of Directors unanimously spoke against linking the causes of the power blackout to the electricity reform, and against reconsideration of the reform content or cancellation of the reform.

Yet, as was noted at the Board meeting, the blackout calls for adjustment of the strategic business priorities of RAO "UES of Russia", the corporate governance methods used at the Holding Company, and certain elements of electricity reform, as well as the pace at which it is implemented.

In order to prevent similar blackouts in the future, the strategic business priorities will be adjusted to raise the importance of modernization and re-equipment compared to the construction of new facilities, primarily the new construction projects, and investments in network facilities compared to generation facilities; domestic projects compared to foreign ones. Moreover, taking into consideration the blackouts that occurred over the past few years in the countries of Western Europe and Russia, an in-depth analysis will be undertaken to compare the options of synchronous versus asynchronous interconnection in terms of reliability as part of the preparation of the feasibility study for the project to integrate the energy systems of UES/IES and UCTE.

With regard to adjustment of certain elements of the electricity reform processes, it is proposed to speed up the consolidation of the power grid and dispatch/control components of the UES of Russia. It is necessary to expedite the adoption of the relevant organizational and legal resolutions to unbundle regional energos, establish DCs, IDCs and ITCs, separate the RDAs and transfer them to the IDAs.

At the same time, it is proposed to slow down the process of reducing the level of affiliation of the repair units separated from regional energos and review the criteria for including power grids in the Unified National Electricity Grid (UNEG) and referring the 110 kV grids to the UNEG.

As part of the process to improve the wholesale and retail market rules, the development of the system of regulated and free bilateral contracts and the mechanism of the systemic services markets will focus on strengthening the strategic role of consumers in stimulating reliable electricity supply.

Adjustment of the concept of Key Performance Indicators (KPIs) for all divisions of the Holding Company and the members of the Company's Management Board will become one of the mechanisms to achieve reliability and improve corporate governance.

Simultaneously, the technical management system is to be strengthened at all levels of RAO UES Holding Company. Within this process, efforts will be stepped up to develop the entire system of corporate standards designed to improve reliability of the UES of Russia. Furthermore, the rights and duties of chief engineers of the Business Units and SDCs and their powers in the business planning and budgeting processes will be clearly defined.

Along with general corporate measures it is planned to implement a number of local projects intended to prevent blackouts. Thus, in the areas affected by the blackout, comprehensive projects will be implemented to modernize the relay protection equipment, emergency control equipment, telecommunications and operational control procedures, and the 110-220 kV networks and substations.

Projects of the investment programmes of RAO "UES of Russia", OAO "UES FGC", and OAO "UES SO-CDA" for 2006 will also be adjusted with respect to the financing of the projects to enhance reliability.

The Guidelines provide for the development of additional measures to strengthen anti-terrorist protection of the vital facilities of the UES of Russia; a number of steps will be taken to improve the professional and vocational training of dispatching and production personnel at all levels, and to prepare additional scenarios for emergency response drills and to hold such drills.

As was noted at the Board meeting, in order to further prioritize reliability, a number of measures is to be taken by the state. In particular, it is necessary to speed up the development of standards and technical regulations for operation of electricity enterprises, improve the state regulation of relationships among suppliers and consumers, strengthen the functions and role of the State Technical Supervision authorities, reinforce the professional training system for the electricity industry, and develop the procedure for interaction of the sector enterprises with the government and law enforcement bodies at the federal and regional levels.

The Board of Directors resolved to introduce a position of Chief Technical Manager of RAO "UES of Russia" who will be a member of the Management Board and appointed Boris Weinsicher to this position. Previously, Boris Weinsicher worked as Executive Director of the Kirishskaya TPP.

The Task Force to investigate into the causes of the blackout was formed pursuant to the order of the Chairman of the Management Board of RAO "UES of Russia" of 26 May 2005. Viktor Pauli, Deputy Head of the Corporate Center of RAO "UES of Russia", was appointed Chairman of the Task Force.

 * * *

The Board of Directors of RAO "UES of Russia" took a number of resolutions designed to complete the establishment of OAO "Fifth Generation Company of the Wholesale Electricity Market" (OAO "WGC-5")*.

By now, the first stage of the process to establish OAO "WGC-5" has been completed by contributing the shares in OAO "Nevinnomysskaya TPP", OAO "Konakovskaya TPP", and the property of the Reftinskaya TPP and Sredneuralskaya TPP owned by RAO "UES of Russia" to the authorized capital of OAO "WGC-5".

The establishment of OAO "WGC-5" is to be completed through consolidation of its subsidiary power plants by exchanging the shares in OAO "WGC-5" for the minority shareholders' shares in OAO "Konakovskaya TPP" and the one share in OAO "Nevinnomysskaya TPP" remaining in the ownership of RAO "UES of Russia".

In this connection, the Board of Directors of RAO "UES of Russia" instructed its representatives on the management bodies of OAO "WGC-5" to vote FOR the proposal to invite the minority shareholders of OAO "Konakovskaya TPP" to exchange their ordinary shares in the power plant for ordinary shares in OAO "WGC-5" at a ratio of 19 shares in OAO "WGC-5" for 1 share in OAO "Konakovskaya TPP".

The representatives of RAO "UES of Russia" on the Management Board of OAO "WGC-5" were also instructed to vote for completion of the establishment of OAO "WGC-5" through merger of OAO "Nevinnomysskaya TPP" and OAO "Konakovskaya TPP" with and into OAO "WGC-5" on the terms and conditions of the Merger Agreement, and for approval of said Agreement.

It is proposed to approve the maximum number of additional shares that OAO "WGC-5" is authorized to issue at 4,105,388,300 shares of RUB1 par value, and to increase the authorized capital of OAO "WGC-5" through exchanging these additional shares for shares in OAO "Nevinnomysskaya TPP" and OAO "Konakovskaya TPP" being merged with and into OAO "WGC-5".

One additional share in OAO "WGC-5" of RUB1 par value are to be exchanged for:

• 0.01449 ordinary share of OAO "Nevinnomysskaya TPP" of RUB10 par value each;
• 0.05263 ordinary share of OAO "Konakovskaya TPP" of RUB1 par value each**.

If such conversion results in a fractional number of shares, the number of shares shall be rounded in accordance with the generally accepted rules. If as a result of such rounding off a shareholder is not entitled to receive any shares, such shareholder will receive one ordinary share in OAO "WGC-5".

The Board of Directors of RAO "UES of Russia" instructed its representatives in OAO "WGC-5" to take steps to facilitate the approval by shareholder meetings of OAO "Nevinnomysskaya TPP" and OAO "Konakovskaya TPP" of the companies' merger with and into OAO "WGC-5" and the approval of the Merger Agreements and the Transfer Deeds.

Representatives of RAO "UES of Russia" on the Board of Directors of OAO "WGC-5" were instructed to vote FOR the approval of the following agenda of the Joint General Meeting of OAO "WGC-5", OAO "Nevinnomysskaya TPP", and OAO "Konakovskaya TPP": "On Making Amendments and Additions to the Charter of OAO "WGC-5".

The Board of Directors gave the Management Board of RAO "UES of Russia" the task to initiate actions required to remove the relevant provisions from the Charter of OAO "WGC-5" on the number, par value, categories (classes) of "declared" shares of the Company (i.e. additional shares the Company is authorized to issue under its Charter) and the rights carried by such shares upon completion of the merger of OAO "Nevinnomysskaya TPP" and OAO "Konakovskaya TPP" with and into OAO "WGC-5".

It is planned to complete the share exchange at OAO "WGC-5" by Q3 2005 and the merger of the subsidiary power plants with and into OAO "WGC-5" by the beginning of Q1 2006.

As a result of the tender, the Company selected the consortium of investment banks, OAO "Alfa-Bank" and Merryll Lynch International, to determine the share exchange and conversion ratios that would be fair for shareholders, taking into account the results of share valuation by the consortium of appraisal firms, and to hold negotiations with the participating shareholders on the share exchange and merger of AO-power plants.

* * *

The Board of Directors of RAO "UES of Russia" took a number of resolutions designed to complete the establishment of OAO "Third Generation Company of the Wholesale Electricity Market" (OAO "WGC-3") by way of consolidation of the subsidiary power plants via a share exchange*.

By now, the first stage of the process to establish OAO "WGC-3" has been completed by contributing the shares in OAO "Kostromskaya TPP", OAO "Pechorskaya TPP", OAO "Gusinoozerskaya TPP", OAO "Kharanorskaya TPP", and OAO "Cherepetskaya TPP" owned by RAO "UES of Russia" to the authorized capital of OAO "WGC-3".

At the final stage of the establishment of OAO "WGC-3", OAO "Yuzhnouralskaya TPP" spun off from OAO "Chelyabenergo" will merge with and into OAO "WGC-3" and the latter's subsidiaries will exchange their shares for WGC-3 shares.

It is proposed to exchange the shares of the subsidiaries—OAO "Kostromskaya TPP", OAO "Pechorskaya TPP", OAO "Cherepetskaya TPP", and OAO "Yuzhnouralskaya TPP"—owned by the minority shareholders of these power plants for additional shares in OAO "WGC-3".

In this connection, the Board of Directors of RAO "UES of Russia" instructed its representatives on the Board of Directors and General Meeting of shareholders of OAO "WGC-3" to vote FOR the approval of the maximum number of additional share the Company is authorized to issue, 14,144,629,100 ordinary shares of RUB1 par value, and for increasing the authorized capital of OAO "WGC-3" through issuance of such additional shares by closed subscription among the shareholders of OAO "Kostromskaya TPP", OAO "Cherepetskaya TPP", OAO "Pechorskaya TPP" and OAO "Yuzhnouralskaya TPP". The additional ordinary shares of OAO "WGC-3" are to be placed at a price of RUB1.04 per share.

The Board of Directors approved the ratios for share exchange**. One additional ordinary share of OAO "WGC-3" of RUB1 par value may be exchanged for:

• 2.755713 ordinary shares and 2.755713 Type A preferred shares OAO "Yuzhnouralskaya TPP " of RUB0.11 par value each;
• 0.002047 ordinary shares in OAO "Kharanorskaya TPP" of RUB1,000 par value each;
• 0.000319 ordinary shares in OAO "Gusinoozerskaya TPP" of RUB0.50 par value each;
• 0.164781 ordinary shares in OAO "Kostromskaya TPP" of RUB0.50 par value each;
• 0.290781 ordinary shares in OAO "Pechorskaya TPP" of RUB1 par value each;
• 0.000252 ordinary shares in OAO "Cherepetskaya TPP" of RUB460 par value each.

If such conversion results in a fractional number of shares, the number of shares is to be rounded in accordance with the generally accepted rules. If as a result of such rounding off a shareholder is not entitled to receive any shares, such shareholder will receive one ordinary share in OAO "WGC-3".

The Board of Directors determined the price of the 2,698,237,190 ordinary shares in OAO "Yuzhnouralskaya TPP" owned by RAO "UES of Russia" at RUB1,018,881,013. These shares will be paid as consideration for 979,693,282 additional shares in OAO "WGC-3". The Board of Directors approved the transfer of this shareholding as an interested party transaction. The Board of Directors decided that the resolution on determining the price of the shareholding of OAO "Yuzhnouralskaya TPP" owned by RAO "UES of Russia" and the resolution on its transfer will become effective subject to approval of the Federal Agency for Federal Property Management of Russia.

The Board of Directors instructed the representatives of OAO "WGC-3" at the EGMs of OAO "Kostromskaya TPP", OAO "Cherepetskaya TPP", OAO "Pechorskaya TPP", OAO "Kharanorskaya TPP", OAO "Gusinoozerskaya TPP" to vote for approval of the merger of these companies with and into OAO "WGC-3", approval of the Merger Agreement and the transfer deed.

The Board of Directors of RAO "UES of Russia" also instructed its representatives on the Board of Directors and at the General Meeting of shareholders of OAO "Yuzhnouralskaya TPP" to vote FOR the reorganization of these companies through merger with and into OAO "WGC-3", and the approval of the Merger Agreement and the Transfer Deeds.

Representatives of RAO "UES of Russia" on the Board of Directors of OAO "WGC-3" were instructed to vote FOR the approval of the following agenda of the Joint General Meeting of OAO "WGC-3", OAO "Kostromskaya TPP", "Cherepetskaya TPP", "Pechorskaya TPP", "Yuzhnouralskaya TPP", "Kharanorskaya TPP", and OAO "Gusinoozerskaya TPP": "On Making Amendments and Additions to the Charter of OAO "WGC-3".

It is planned to complete the share exchange at OAO "WGC-3" by Q4 2005 and the merger of the subsidiary power plants with and into OAO "WGC-3" by the beginning of Q1 2006.

The Board of Directors gave the Management Board of RAO "UES of Russia" the task to initiate actions required to remove the relevant provisions from the Charter of OAO "WGC-3" on the number, par value, categories (classes) of "declared" shares of the Company and the rights carried by such shares upon completion of the merger of OAO "Kostromskaya TPP", "Cherepetskaya TPP", "Pechorskaya TPP", "Yuzhnouralskaya TPP", "Kharanorskaya TPP", and OAO "Gusinoozerskaya TPP" with and into OAO "WGC-5".

As a result of the tender, the Company selected the consortium of investment banks, ZAO "United Financial Group" and OOO "Deutsche Bank", to determine the share exchange and conversion ratios that would be fair for shareholders, taking into account the results of the share valuation by the consortium of appraisal firms, and to hold negotiations with the participating shareholders on the share exchange and merger of AO-power plants.

* * *

The Board of Directors of RAO "UES of Russia" approved the basic approach to managing the energy retail companies during the transition period. The approach involves the transfer of shares in the energy retail companies established as a result of regional energos' restructuring for management to the respective TGCs (based on their territorial configuration) for a term of one year. The basic approach is designed to:

• maximize the level of payment of electricity bills by consumers;
• ensure performance by energy retailers of the contractual obligations and make scheduled payments to the infrastructure organizations and other wholesale and retail electricity market participants;
• ensure financial stability of energy retail companies, including the achievement of the targets for key performance, financial and other indicator set by the laws and regulations of the Russian Federation in respect of energy retailers.

The Board of Directors resolved that it would be possible to implement not more than 10 projects providing for other options of disposing of retail companies' shares. Decisions on such transactions are to be taken by the Board of Directors on a case-by-case basis.

The Management Board was given the task of submitting for consideration by the Board of Directors of RAO "UES of Russia":

• by 1 October 2006, draft pilot projects for disposal of shares in energy retail companies so that decisions can be taken on an individual basis;
• in April 2006, the results of work of energy retail companies during the 2005/2006 autumn-winter peak load in order to determine the strategy for further organization of retail activities at the companies of RAO "UES of Russia" Holding Company.

* * * 

The Board of Directors of RAO "UES of Russia", performing the functions of the AGM of shareholders of OAO "UES Federal Grid Company" (OAO "UES FGC")*, approved the Annual Report**, annual financial statements, income statement of the Company for 2004, and the profit allocation for FY2004.

The Board resolved to pass the dividends on ordinary shares of OAO "UES FGC" for 2004 and to allocate the net profit of RUB2,166,760,000 made in the previous financial year to the Company's reserve fund.

The Board set the maximum number of ordinary shares OAO "UES FGC" is authorized to issue in addition to those already outstanding at 160 billion shares of RUB0.50 each for a total value of RUB80 billion.

The Board approved the Revised Charter of OAO "UES FGC". Specifically, the Revised Charter incorporates the amendments proposed by the Audit Chamber of the Russian Federation, the standard amendments and additions proposed by the Management Board of RAO "UES of Russia", and the amendments and additions approved by the Board of Directors of OAO "UES FGC". Upon registration with the authorities, the Revised Charter will be published on the website of OAO "UES FGC".

The Board of Directors of RAO "UES of Russia" elected the Board of Directors of OAO "UES FGC" consisting of the following members:

The following members were elected to serve on the Auditing Commission of OAO "UES FGC":

 ZAO PricewaterhouseCoopers was appointed as Auditors of OAO "UES FGC". The audit firm was named the winner of the tender to select Auditors for OAO RAO "UES of Russia", the Group and its SDCs which will prepare their financial statements (accounts) in accordance with the Russian Accounting Standards (RAS) and the International Financial Reporting Standards (IFRS) for 2005.

 Production and Financial Highlights of OAO "UES FGC":

In 2004, OAO "UES FGC" prepared the Scheme for the Development of the Unified National Electricity Grid (UNEG) of Voltages of 220 kV and Above for the Period 2003-2012. The Scheme elaborates the goals, tasks and principal trends of the long-term development of the UNEG for a ten-year period.

The plan for network facilities commissioning in 2004 was fully implemented.

In particular, the following important power grid projects were commissioned:

• 500 kV line "Primorskaya TPP - Khabarovskaya" with the "Khekhtsir" 500 kV Substation (section of Primorskaya TPP – Khabarovskaya transmission line),
• Circuits linking the Amurskaya - Khabarovskaya 500 kV line to the Bureyskaya HPP,
• Kalininskaya NPP - Cherepovets HV transmission line of 750 kV with Belozerskaya Substation of 750 kV, with HV links of 500 kV,
• Berkut Substation of 500 kV with HV links of 500, 220 and 110 kV,
• 500-kV Pskov - Yuzhnaya Substation.

Repair and modernization projects were completed at the Bologoe, Klyuchiki, Veshkayma, Novokuznetskaya, Rubtsovskaya, Barnaulskaya substations. The Company put into operation 705.3 km of transmission lines, 2,352 MVA of transformer capacity, and 1,129.7 MVAr of reactive power capacity at the substations.

During the construction of the Kalininskaya NPP – Cherepovets line of 750 kV, an advanced "under tension" technology of conductor installation procedure was used. This technology makes it possible to reduce the cost and time needed to build a transmission line and reduce energy losses and expand the life of wires.

In 2004, OAO "UES FGC" began to borrow funds to finance its capital investment programme. By year-end 2004, the amount of borrowed funds in the Company's liabilities structure rose to RUB6.5 billion. These funds were used to finance the projects to build or modernize transmission lines and substations. In July to October 2004, OAO "UES FGC" raised short-term loans from OAO "Alfa-Bank", OAO "Vneshtorgbank" and OAO "Savings Bank of Russia" (Sberbank). In December 2004, in order to optimize the debt structure, increase the term of liabilities, and reduce the debt servicing costs, OAO "UES FGC" issued RUB5 billion of bonds maturing in December 2007.

On 11 June 2004, Standard & Poor's rated OAO "UES FGC" at B (international credit ratings) and ruA+ (national credit rating). On 4 November 2004, S&P upgraded the international credit rating of OAO "UES FGC" from B to B+, with the national rating remaining unchanged at ruA+. On 20 December 2004, the rating agency assigned the additional credit rating of ruA+ to the bond issue of OAO "UES FGC".

On 28 December 2004, the Board of Directors of OAO "UES FGC" approved the Company's investment programme for 2005 in the amount of RUB27,695.0 million, of which the amount of borrowed funds may reach RUB9.3 billion. Previously, the Russian Government approved the FGC investment programme within the framework of the electricity industry investment programme for 2005.

As part of the process to reform the electricity industry and consolidate the UNEG facilities, the Government of the Russian Federation approved Order No. 1939-r on 29 December 2003 instructing the Russian Fund of Federal Property of Russia to act on behalf the Russian Federation jointly with OAO "UES FGC" as a founder of seven Interregional Transmission Companies (ITCs).

Pursuant to these resolutions, in February 2004, seven ITCs were established with the authorized capitals of RUB150,000. OAO "UES FGC" acquired a 15% interest and the Russian Fund of Federal Property a 85% interest in the ITCs and paid contributions to their authorized capital.

As a measure to create a centralized system for management of the distribution network facilities, maintaining its reliability, efficient functioning and development during the reform period, the Board of Directors of RAO "UES of Russia" (Minutes No. 168 23 April 2004) deemed it advisable to transfer the shares of Interregional Distribution Companies (IDCs) for management to OAO "UES FGC". In accordance with the decisions taken, shares of the distribution companies established in the course of restructuring on the basis of regional energos' electricity grids not included in the UNEG will be transferred to the authorized capital of the IDCs.

As of the date of the AGM of OAO "UES FGC", the authorized capital of OAO "UES FGC" was RUB121,607,241,779.5 (one hundred and twenty-one billion six hundred an seven million two hundred and forty-one thousand seven hundred and seventy-nine Rubles 50 kopecks). The capital was divided in to 243 214 483 559 (two hundred and forty-three billion two hundred and fourteen million four hundred and eighty-three thousand five hundred and fifty-nine ) registered ordinary shares of RUB0.50 par value each.

Pursuant to Article 4 of the Federal Law On Specific Features of Functioning of Electric Power Industry During the Transitional Period No. 36-FZ of 26 March 2003, RAO "UES of Russia" is to contribute to the authorized capital of OAO "UES FGC" its shareholdings in organizations established as a result of regional energos' reorganization which own the UNEG-related electricity grid facilities.

By now, as a result of regional energos' restructuring 4 transmission companies (TCs) have been created to which the UNEG facilities have been transferred under the balance sheet of the regional energos.

In order that the shares in TCs owned by RAO "UES of Russia" can be contributed to the authorized capital of OAO "UES FGC", a resolution is needed to increase the authorized capital of OAO "UES FGC" through issuance of additional shares. The additional shares in OAO "UES FGC" may be issued within one year after the date of state registration of the share issue with the securities market regulator. The contracts for purchase/sale (or exchange) of shares by OAO "UES FGC" will be made between RAO "UES of Russia" and OAO "UES FGC" as state registration of TCs takes place after the market value of TC shares is determined, and the management bodies of RAO "UES of Russia" and OAO "UES FGC" take decisions relating to the purchase of TC shares by OAO "UES FGC".

Moreover, it is expected that payment for the additional shares in OAO "UES FGC" will be made in property—the electricity grid facilities owned by RAO "UES of Russia" and the shares in scientific institutes that are subsidiaries and dependent companies (SDCs) controlled by the Networks Business Unit—and cash.

As it is impossible to determine, at the time of approval of the increase of the authorized capital of OAO "UES FGC", the market value of all property expected to be transferred towards payment of the authorized capital, the number of "declared" shares (i.e. shares the Company is authorized to issue in addition to the outstanding shares) and the number of additional shares of OAO "UES FGC" has been approved at 160,000,000,000 worth RUB80,000,000,000, which is more than the number of shares that will be paid for by RAO "UES of Russia" in the future.

According to the Standard for Issuance of Securities and Registration approved by the FSFM of Russia, it is possible to issue fewer securities during the securities placement period than is provided for in the Resolution of the Issue (Additional Issue) of Securities. In that case, the number of shares of this issue (additional issue) is to be reduced by the number of shares that were not placed, according to the share placement report.

** The full text of the Annual Report of OAO "UES FGC" can be viewed on the Company's website, (www.fsk-ees.ru).

* * *

The Board of Directors of RAO "UES of Russia" noted the report of the Audit Committee under the Board of Directors for years 2004/2005.

In September 2004 to June 2005, the Audit Committee held 15 meetings and submitted an interim report on its activities to the Board of Directors at the Board meeting held 25 February 2005.

As a result of its work over the period, the Audit Committee came to the conclusion that the audited consolidated financial statements of RAO "UES of Russia" prepared in accordance with the IFRS met the requirements imposed on information disclosure. The Committee recommended going over to independent (i.e. without hiring consultants) preparation of IFRS financials at RAO "UES of Russia", OAO "UES FGC", ZAO "Inter RAO UES" effective 1 January 2006.

The report of the Audit Committee also states that the process to select, appoint and control the quality of work of audit firms for the entire RAO UES Group meets the requirements of using the services of independent auditors.

Moreover, throughout the year, the Audit Committee proactively interacted with the management of RAO "UES of Russia" in the most critical issues of internal control. This interaction made it possible to adopt a more strict, comprehensive approach to identifying the monitoring and risk management at RAO "UES of Russia" and create a Controlling Service of RAO "UES of Russia" in accordance with the recommendations of the Audit Committee.

According to the members of the Audit Committee, the next Corporate year is to be used by the controlling bodies of RAO "UES of Russia" and the new Audit Committee to analyse the effectiveness of new internal control systems which will be introduced at RAO "UES of Russia" in 2005-2006.

* * *

The Board of Directors of RAO "UES of Russia" approved the restructuring plan for OAO "Kuzbassenergo". The energy company will be restructured in accordance with the basic scenario through spin-off of the following companies (with the current ownership structure preserved):

• OAO "Kuzbass Regional Electricity Grid Company";
• OAO "Kuzbass Energy Retail Company";
• OAO "Kuzbassenergo Trunk Electricity Grids", which will own the power grid facilities that are part of the Unified National (All-Russia) Electricity Grid (UNEG);

Under the plan, the generation assets and heating mains are to remain the property of OAO "Kuzbassenergo".

The Board of Directors approved the conclusion in 2005, prior to the spin-off of OAO "Kuzbassenergo Trunk Electricity Grids", of an agreement with OAO "Center ITC" for use of the UNEG facilities owned by OAO "Kuzbassenergo". The Board of Directors approved the transfer, with effect from 2006, of the UNEG facilities owned by OAO "Kuzbassenergo" for use to OAO "UES FGC", with a transmission tariff established for OAO "UES FGC".

The plan also involves contribution of shares in OAO "Kuzbassenergo Trunk Electricity Grids" owned by RAO "UES of Russia" as payment for the additional shares in OAO "UES FGC" and a merger of OAO "Kuzbassenergo Trunk Electricity Grids" with and into OAO "Center ITC".

The Board of Directors of RAO "UES of Russia" decided that if, before the reorganization of OAO "Kuzbassenergo" is completed, the regional energo still owns shares in OAO "Kuzbass Energy Repair Company", OAO "Kuzbassenergoservis", OAO "Kuzbasstekhenergo Engineering and Analysis Center", ZAO "Kuzbassenergo Autotransport Enterprise", ZAO "Energetik MSCh Health Center", and other long-term investments, said shares (stakes, units) should remain owned by OAO "Kuzbassenergo".

In the event that, before the completion of restructuring of OAO "Kuzbassenergo", the Company owns shares of OAO "Kuzbassetremont", a network repair company, the ownership of said shares is to be transferred to OAO "Kuzbass Regional Electricity Grid Company". The plan also provides that if, before the completion of restructuring of OAO "Kuzbassenergo", the regional energo owns a stake in OOO "Sbytenergo", an energy retail company, the ownership of said stake is to be transferred to OAO "Kuzbass Energy Retail Company".

In view of the possibility that OAO "Kuzbassenergo" may occupy a monopoly position in the wholesale electricity market being established, the Board of Directors deemed it advisable to sell the generating assets of OAO "Kuzbassenergo"—the Zapadno-Sibirskaya CHPP and the Yuzhno-Kuzbasskaya TPP—and instructed the Management Board of RAO "UES of Russia" to submit for consideration by the Board of Directors of RAO "UES of Russia" a resolution on the timing and procedure for sale of said generation assets of OAO "Kuzbassenergo". This resolution must be agreed with the ministries and agencies concerned and the minority shareholders of OAO "Kuzbassenergo".

In connection with this resolution, the Board of Directors of RAO "UES of Russia" made alterations to its resolution of 23 April 2004 and approved a new configuration of the territorial generation companies, TGC-11 and TGC-12.

• TGC-11 will be established on the basis of the generating assets of OAO "Omskenergo" and OAO "Tomskenergo";
• TGC-12 will be established on the basis of the generating assets of OAO "Altayenergo" and OAO "Kuzbassenergo" (except for the generation facilities to be spun off).

* * *

The Board of Directors approved the divestment of a number non-core companies,

such as OAO "TEMBR-Bank", OAO "EEEK Interbank Association", ZAO "Agency for Investments and Development of Fuel and Energy Complex", and OAO "Moscow Central Depository", by selling the companies' shareholdings in accordance with the procedure approved by the Board of Directors of RAO "UES of Russia":

• 1.11% shareholding in OAO "TEMBR-Bank" (1,343,324 ordinary shares having a book value of RUB1,343,313.85 and a market value determined at RUB1,767,772);
• 2.7% shareholding in OAO "EEEK Interbank Association" (33 ordinary shares having a book value of RUB33,000 and a market value determined at RUB331,000);
• 5% shareholding in ZAO "Agency for Investments and Development of Fuel and Energy Complex" (25 ordinary shares having a book value of RUB25,000 and a market value determined at RUB100,000);
• 0.00057% shareholding in OAO "Moscow Central Depository" (7 ordinary shares having a book value of RUB33,261 and a market value determined at RUB1,598).

This decision was taken by the Board of Directors in accordance with the Strategy Concept of RAO "UES of Russia" for 2003-2008 and resolution of the Board of Directors of RAO "UES of Russia" No. 111 of 6 March 2002 on the divestment of non-core assets. Under these documents, the sale of non-core assets is one of the measures intended to cut costs, optimize the assets structure, and increase the Company's capitalization.