Moscow. 28 July 2006. At its first meeting, the new Board of Directors* of RAO "UES of Russia" unanimously approved the appointment of Alexander Voloshin** as Board Chairman, and Victor Khristenko, Minister of Industry and Energy of Russia, as Deputy Chairman of the Board of Directors.

The Board of Directors approved the list of matters to be considered at the Board meetings in July 2006 through June 2007.

** Alexander Voloshin has been Chairman of the Board of Directors of RAO "UES of Russia" since 1999.

* * *

The Board of Directors of RAO "UES of Russia" approved certain changes in the membership of the Committees under the Board of Directors. The rotation of Committee members is due to the election of new members of the Board of Directors of RAO "UES of Russia" by the AGM held 28 June 2006, as well as the staff changes in the federal executive authorities and corporations.

In the HR and Remunerations Committee, Vladimir Rashevsky, Director General of OAO "SUEK", who was not elected to the Board of Directors of RAO "UES of Russia", was replaced by Grigory Berezkin, Board Chairman of OOO "ESN Energo" and Board member of RAO "UES of Russia".

Alexey Semeyko, Vice President of ZAO "ESN", and Vasily Zubakin, member of the Management Board of RAO "UES of Russia", were removed from the Appraisal Committee. They were replaced by Dmitry Akhanov, Head of the Strategy Department at the Reform Management Center of RAO "UES of Russia", and Yuri Katz, Director General of OOO "ESN Energo".

The following members were removed from the Strategy and Reform Committee: Andrey Zadernyuk, Advisor to the Ministry of Economic Development and Trade of Russia; Vasily Zubakin, member of the Management Board of RAO "UES of Russia"; Vadim Kleiner, Corporate Research Director at Hermitage Capital Management; Vyacheslav Kravchenko, Deputy Director of Department at the Ministry of Industry and Energy of Russia; Antonio Craparotta, Vice President of OOO "EvrazHolding", and Alexander Chikunov, member of the Management Board of RAO "UES of Russia".

The new Strategy and Reform Committee members are: Alexander Branis, Director of Prosperity Capital Management; Andrey Gabov, Head of Corporate Management and Shareholder Relations Department of RAO "UES of Russia"; Alexey Kachay, Deputy Head of Strategy Department at the Reform Management Center of RAO "UES of Russia"; Mikhail Kurbatov, Deputy Head of Department at the Ministry of Economic Development and Trade of Russia; Alexander Nikulov, Director General of ZAO "Promregion Holding"; Yuri Redkin, Head of the Energy Department of the Russian Government; Anatoly Romanovsky, Investment Director, Hermitage Capital Management; Alexey Sukhov, Deputy Director of Department at the Ministry of Industry and Energy of Russia; Mikhail Buyanov, Head of Electricity Directorate of the Federal Energy Agency (Rosenergo); Ilya Yuzhanov, Chairman of the Supervisory Board of NOMOS-Bank (ZAO).

The following persons previously involved in the Committee's activities as experts without the right to vote were dismissed from the Committee: Nandita Parshad, Senior Banker of the EBRD; Alexander Branis, Director of Prosperity Capital Management; Leonid Dushatin, First Deputy Director General of OOO "National Reserve Corporation"; and Alexander Nikulov, Director General of ZAO "Promregion Holding". The Board of Directors also approved the participation of Andrey Zadernik, Technical Director of OAO "Mezhregionenergo"; Margarita Mesonzhnik, EBRD Banker; Antonio Craparotta, Vice President of OOO "Evrazholding"; and Alexander Starchenko, Deputy Director General for Energy Sector of OOO "Rumelko".

The following members were removed from the Audit Committee: Vladimir Rashevsky, Director General of OAO "SUEK", who was not elected to the Board of Directors of RAO "UES of Russia" at the AGM of RAO "UES of Russia" held 28 June 2006, and the Committee experts, Maxim Bystrov, Department Director of the Ministry of Economic Development and Trade of Russia; and Igor Ishchenko, Finance Director of ZAO "Complex Energy Systems" ("KES"). The following persons were elected to the new Audit Committee as experts without the right to vote: Andrey Gabov, Head of Corporate Management and Shareholder Relations Department of RAO "UES of Russia"; Alexey Glushchenko, Senior Vice President for Asset Management of ZAO "Complex Energy Systems" (KES); and Mikhail Kurbatov, Deputy Head of Division of Department of the Ministry of Economic Development and Trade of Russia.

The lists of new members of the Committees under the Board of Directors of RAO "UES of Russia" will be released on the Company's website.

* * *

The Board of Directors approved the merger of OAO "Kuban Generation Company" with and into the OAO "Southern Generation Company TGC-8"*, thus completing the establishment of the target structure of TGC-8.

Earlier, at its meeting held 28 October 2005, the Board of Directors of RAO "UES of Russia" approved the procedure for the establishment of the TGC-8 structure through merger of OAO "Astrakhan Regional Generation Company", OAO "Volzhskaya Generation Company", OAO "Dagestan Heat Generation Company", OAO "Rostov Generation Company", OAO "Stavropol Heat Generation Company"; later on, shares in the generation company to be spun off from OAO "Kubanenergo" would be exchanged for additional shares in OAO "Southern Generation Company TGC-8".

By now, the first phase of the TGC-8 reorganization, which provides for the merger of the above regional generation companies with and into TGC-8, has been completed. On 1 July 2006, OAO "Kuban Generation Company" was granted official registration.

The Board of Directors approved the merger of OAO "Kuban Generation Company" with and into the OAO "Southern Generation Company TGC-8", thus completing the establishment of the target structure of TGC-8. This scenario is in line with the general approach to the creation of TGCs as unified operating companies and fully meets the principles of TGC establishment as set out in the Strategy Concept Paper of RAO "UES of Russia" for 2003-2008 ("5+5").

If the shareholder meeting of OAO "Kuban Generation Company" does not approve the company's merger with OAO "Southern Generation Company TGC-8", then shares in OAO "Kuban Generation Company" may be exchanged for additional shares in OAO "Southern Generation Company TGC-8".

The Board of Directors instructed the Management Board of RAO "UES of Russia" to submit, not later than November 2006, a detailed plan for the merger of OAO "Kuban Generation Company" with and into OAO "Southern Generation Company TGC-8", including the number of shares, conversion/share exchange ratios, and the terms and conditions of the merger agreement.

* OAO "Southern Generation Company TGC-8" was registered with the Inspectorate of the Federal Tax Service of Russia for the Kirovsky District, city of Astrakhan, on 22 March 2005. Director General of the Company is Victor Gvozdev. The Company has been carrying out operations since 1 July 2005. TGC-8 shares are expected to be floated on the stock market by end-Q3 2006.

* * *

The Board of Directors of RAO "UES of Russia" approved changes to the reorganization plan for OAO "TGC-9" and the merger of OAO "Komi Regional Generation Company" with and into the OAO "TGC-9".

According to the previous resolutions of the Board of Directors of RAO "UES of Russia" (approved on 27 May 2005 and 30 September - 4 October 2005), OAO "TGC-9" was to be reorganized through merger of OAO "Sverdlovsk Generation Company" and OAO "Perm Generation Company" with TGC-9; at a later date, shares in OAO "Komi Regional Generation Company" would be contributed to the capital of TGC-9 in exchange for additional shares in TGC-9.

By now, the first phase of the TGC-9 reorganization, which provides for the merger of OAO "Perm Generation Company" and OAO "Sverdlovsk Generation Company" with and into TGC-9, has been completed. On 1 July 2006, OAO "Komi Regional Generation Company", a spin-off of OAO "Komienergo", was granted official registration.

The previous resolution provided for an additional share issue by TGC-9 in favour of OAO "Komi Regional Generation Company". However, the Board resolved that it would be more appropriate to complete the establishment of TGC-9 by merging OAO "Komi Regional Generation Company" with TGC-9, which is in line with the general approach to the creation of TGCs as unified operating companies.

The Management Board of RAO "UES of Russia" was commissioned to submit to the Board of Directors, no later than September 2006, the matters relating to the merger of OAO "Komi Regional Generation Company" with and into OAO "TGC-9".

* OAO "TGC-9" was registered on 9 December 2004 with the Inspectorate of the Ministry for Taxes and Levies of Russia for the Sverdlovsky District, city of Perm. The Director General of OAO "TGC-9" is Valery Rodin. TGC-9 has been operating since 1 April 2005. TGC-9 shares are expected to be floated on the stock market by end-Q3 2006.

* * *

The Board of Directors of RAO "UES of Russia" approved an increase of the stakes held by RAO "UES of Russia" and OAO "UES FGC" in OAO "Sangtuda HPP-1" by acquiring the power plant's shares in its additional share issue. The shares will be placed in favour of the Russian Government, RAO "UES of Russia", OAO "UES FGC" and the Government of Tajikistan pursuant to the Intergovernmental Agreement between the Russian Federation and the Republic of Tajikistan. The company will issue 306,700 shares valued at TJS932.98 million (ca. RUB8 billion). The shares are to be placed within one year after the registration of the additional share issue. The proceeds from the share issue will be used to finance the scheduled construction at the power plant over the period to mid-2007.

In 2006, RAO "UES of Russia" will acquire 2,383 shares in OAO "Sangtuda HPP-1" worth RUB62.45 million, and OAO "UES FGC" will acquire 74,596 shares worth RUB1.96 billion.

As a result of the issue, at end-2006 the Russian Federation will hold a 43.3% of the paid up capital of OAO "Sangtuda HPP-1", RAO "UES of Russia" 4.1%, OAO "UES FGC" 27.3%, ZAO "INTER RAO UES" 0.3%, and the Republic of Tajikistan 25%.

The Board of Directors of RAO "UES of Russia" instructed the Management Board to explore the options for the disposition of shares in OAO "Sangtuda HPP-1" owned by RAO "UES of Russia" and OAO "UES FGC", and submit its proposals to the Board of Directors.

* OAO "Sangtuda HPP-1" is a Russia-Tajikistan joint venture established in 2005 to complete the construction of the hydroelectric power plant on the Vakhsh River. The power plant will have a design capacity of 670 MW.

* * *

The Board of Directors approved the plan for the use of the proceeds from the sale by RAO "UES of Russia" of its shareholdings: 47.36% shares in OAO "Yaroslavl Retail Company" and 100% shares in OAO "Taymyrenergo".

The proceeds from the sale of the companies shares (less all tax and other required payments, as well as appraisal and auction expenses) are expected to be used to finance the investment projects of RAO "UES of Russia" and measures relating to the reorganization of the parent company, RAO "UES of Russia".

Specifically, an amount equivalent to USD190 million* will be contributed to the authorized capital of OAO "HydroWGC" and used to finance the project of the Boguchansk Energy and Metallurgical Association. The Board of Directors instructed the Management Board to explore the possibility of financing investment projects in the electricity industry with the cash proceeds (undistributed balance) from the sale of shares in OAO "Taymyrenergo" and OAO "Yaroslavl Retail Company". Also, the Board of Directors commissioned the Management Board to present proposals on the financing of the Company's reorganization.

The public auctions to sell the 47.36% stake in OAO "Yaroslavl Retail Company" and 100% stake in OAO "Taymyrenergo" were held on 6 July and 19 July 2006, respectively. In both cases, the price at which the shares were sold was much higher than the auction start price; besides, strategic investors came to the companies – OOO "Transneftservis S" and OAO "Zavenyagin Norilsk Mining and Metallurgical Plant".

OOO "Transneftservis S" won the auction by offering RUB425.324 million (as compared to the start price of RUB182.324 million); while OAO "Zavenyagin Norilsk Mining and Metallurgical Plant" won the auction at step 67 with the price of RUB7.29 billion (as compared to the start price of RUB5.95 billion).

* The Board of Directors of RAO "UES of Russia" resolved to contribute USD190 million to the authorized capital of OAO "HydroWGC" on 31 March 2006 after it reviewed the progress report on the project of the Boguchansk Energy and Metallurgical Association ("BEMO"). The project involves the completion of the Boguchanskaya HPP on the Angara River, and the construction of an aluminium smelter, which will be a key consumer of the electricity generated by the plant The project is being implemented, on a parity basis, by OAO "HydroWGC" and OAO "RUSAL".

* * *

The Board of Directors instructed the representatives of RAO "UES of Russia" at the shareholder meeting of OAO "Russian Communal Systems" ("RCS") to vote FOR the proposal to increase the company's authorized capital through issuance of additional ordinary shares worth RUB3 billion.

The proposal to increase the authorized capital was included on the agenda of the EGM of RCS scheduled for 2 August 2006.

An additional 30 million shares in RCS of RUB100 par value are expected to be placed through closed subscription among the shareholders of OOO "KES-Holding" and RAO "UES of Russia". Payment for such shares will be made in cash.

According to the development strategy proposed by RCS shareholders, the company is to ensure capitalization growth in 2006-2008. The first step towards that goal is the additional share issue by RCS, which will increase the company's authorized capital to RUB4 billion.

The proceeds from the share issue will be used for the development of OAO "RCS" and improving its financial position: some part of the funds will be used to repay the company's debts owed to RAO "UES of Russia" and its subsidiaries.

As a result of the additional share issue, the RCS equity will increase, which, together with its positive credit history, will enable the company to raise loans for a term of over three years at the best interest rates.

After the share issue, the share held by RAO "UES of Russia" in RCS will increase to a blocking stake (25% plus one share), which will make it possible for RAO "UES of Russia" to strengthen its control over the company's activities and participate in the consolidated decision making at RCS to promote the interests of RAO "UES of Russia".

In addition, "KES-Holding", which is a controlling shareholder in RCS, has submitted to RAO "UES of Russia" a proposal that will give KES-Holding an option to purchase the shares held by RAO "UES of Russia" in RCS after RAO UES decides to dispose of its RCS stake. Under the proposal, part of the shares will be purchased from RAO "UES of Russia" at a price above the market level.

The acquisition by RAO "UES of Russia" of additional shares in RCS and increase of its stake in RCS authorized capital by acquiring 1 share in RCS, as well as approval of the option agreement on the purchase of RCS shares owned by RAO "UES of Russia" will be considered at the next meetings of the Board of Directors of RAO "UES of Russia".

* OAO "Russian Communal Systems" (RCS) was established on 29 May 2003 as a private provider of utilities services to consumers, implement new technologies and management approaches, create a competitive environment and improve the overall situation of the utilities sector. The authorized capital of OAO "RCS" is RUB1 billion. The Company's shareholders are "KES-Holding" (75%) and RAO "UES of Russia" (25%). Today, the company operates in 13 regions of Russia. In Q1 2006, the net profit of OAO "RCS" amounted to RUB419 million.

* * *

The Board of Directors approved the additional share issue by OAO "WGC-5"* and instructed representatives of RAO "UES of Russia" at the shareholder meeting of OAO "WGC-5" to vote FOR the additional share issue and the approval of its parameters.

This issue was considered in connection with the resolution taken by the Board of Directors of RAO "UES of Russia" on 23 June 2006, in which the Company identified the pilot projects to issue additional shares of WGCs and TGC in order to raise funds needed to develop the thermal generation.

The capital increase at OAO "WGC-5" is designed to raise funds to finance construction of new generation capacity.

The Board of Directors instructed RAO UES representatives at the shareholder meeting of OAO "WGC-5" to vote FOR the approval of the number of ordinary shares (5,100,000,000 shares of RUB1 par value) that the company may issue in addition to the shares outstanding, and to amend the Charter of WGC-5 accordingly. The additional ordinary shares authorized for issuance by OAO "TGC-5" grant their owners the rights provided by the Charter of the Company.

The Board of Directors of RAO "UES of Russia" approved the reduction of the equity interest [held by RAO "UES of Russia"] in the capital of OAO "WGC-5" from 87.67% to 75.03% in connection with the capital increase.

The Board of Directors of RAO "UES of Russia" instructed the Company's representatives at the Board meeting and the shareholder meeting of OAO "WGC-5" to vote for the resolutions to issue shares within the number of additional shares authorized for issuance.

OAO "WGC-5" comprises the Konakovskaya TPP, Nevinnomysskaya TPP, Reftinskaya TPP, and Sredneuralskaya TPP. RAO "UES of Russia" holds a 87.7% stake in OAO "WGC-5". WGC-5 shares were admitted to trading on ZAO "MICEX Stock Exchange", OAO "RTS Stock Exchange", and NP "RTS Stock Exchange" in September 2005. At the same time, an unsponsored GDR programme for WGC-5 shares was established.

* * *

The Board approved the combining by the Management Board members of offices in other entities' management bodies.

Specifically, the Board of Directors approved the membership of Vyacheslav Sinyugin, member of the Management Board and Managing Director of RAO "UES of Russia" (Hydrogeneration Business Unit), in the Board of Directors of OAO "Krasnoyarsk Kray Development Corporation", the Supervisory Board of Non-profit Partnership "Innovations in the Electricity Industry" (NP "INVEL"), and the Supervisory Board of Non-profit Partnership "Hydroenergy of Russia".

Also, the Board of Directors approved the combination by Vasily Zubakin, member of the Management Board of RAO "UES of Russia", of his office with the position of First Deputy Director General of OAO "HydroWGC Management Company".

* * *

The Board of Directors of RAO "UES of Russia" determined the Company's position on the items of business of shareholder meetings and Board meetings at some subsidiaries and dependent companies.

Specifically, the Board of Directors instructed the Company's representatives on the Board of Directors of OAO "Rostovenergo" to vote FOR the disposal by OAO "Rostovenergo" of its 4.09% stake in OAO "Center-Invest Commercial Bank". According to the valuation report prepared by an independent appraiser, the value of the shares is RUB38 million. The decision to dispose of the stake in OAO "Center-Invest Commercial Bank", which is the largest regional bank operating in the Rostov Region, was taken as part of the process at RAO UES energy companies to dispose of their non-core assets.

* * *

The Board of Directors of RAO "UES of Russia" instructed the Company's representatives on the boards of directors of OAO "Omskenergo" and OAO "Chitaenergo" to vote FOR the inclusion on the agenda of the companies' extraordinary general meetings of the proposals to transfer the powers of the one-man executive body of the distribution companies of OAO "Omskenergo" and OAO "Chitaenergo" to the management company, OAO "Siberia IDC".

Similar instructions were given to the RAO UES representatives on the boards of directors of OAO "Vladimirenergo", OAO "Ivenergo", OAO "Nizhnovenergo", OAO "Rostovenergo", OAO "Tulenergo", and OAO "Yarenergo". The powers of the one-man executive bodies at these companies are expected to be transferred to the management company, OAO "Center and North Caucasus IDC".

* * *

The Board of Directors of RAO "UES of Russia" instructed the Company's representatives on the boards of directors of OAO "Kubanenergo", OAO "Kuban Generation Company", OAO "Kuban Trunk Grids", and OAO "Kuban Energy Retail Company" to include the proposal to amend the companies' charters on the agenda of their shareholder meetings.

The proposed amendments would increase the number of members of the companies' boards of directors from 10 to 11. Thus, with the current ownership structure (minority shareholders hold 48% of voting shares), RAO "UES of Russia" will be able to elect 6 Board members at OAO "Kubanenergo" and its spin-off companies. This proposal is intended to optimize the activities of the companies' boards of directors and improve their corporate governance standards.

* * *

The Board of Directors of RAO "UES of Russia" instructed the RAO UES representatives on the board of directors of ZAO "INTER RAO UES" to vote FOR the capital increase to RUB1.14 billion from RUB60 million.

The authorized capital of ZAO "INTER RAO UES" will be increased by RUB 1,08 billion through capitalization of its retained earnings undistributed in the previous years.

For the purpose of the capital increase, ZAO "INTER RAO UES" will issue additional ordinary shares, par value RUB100 each, which will be distributed among the existing shareholders pro rata to the number of shares held currently.

This resolution was due to the fact that the current authorized capital of ZAO "INTER RAO UES" has remained the same since 2002 and does not reflect the Company's status as a parent company of an international corporation. The current potential of INTER RAO UES Group is much greater than the insignificant capital of the parent company, which does not contribute to the positive image and prestige of the company.

Moreover, the size of the company's current authorized capital makes attraction of longer-term financing more difficult, because domestic and foreign creditors are cautious about long-term borrowings by companies with a small authorized capital. This suggest that it is necessary to increase the authorized capital of ZAO "INTER RAO UES".

RAO "UES of Russia" holds a 60% stake in ZAO "INTER RAO UES", and "Rosenergoatom" holds 40%.

* * *

The Board of Directors of RAO "UES of Russia" noted the report on the activities of the Management Board of the Company in Q2 2006 and approved the work plan for Q3 2006.

* * *

The Board of Directors of RAO "UES of Russia" approved the Principal Terms of the stock option programme for Directors General and top managers of the Holding Company's subsidiaries and dependent companies.

The stock option programme a measure to incentivize the SDC managers, improve labour productivity, maintain the HR potential to ensure further development of these companies and provide incentives for the SDC managers to increase shareholder value.

Under the Principal Terms, the Board members, Director General (Chairman of the Management Board), senior executives, and employees of the SDCs may participate in the stock option programme.

The stock option programmes are to be introduced in SDCs of RAO "UES of Russia", namely WGCs, TGCs, and IDCs. At OAO "HydroWGC", the programme will be implemented taking the account the company's peculiarities after the reorganization of RAO "UES of Russia". The stock option programme will be introduced only in the companies which have a liquid market for their shares.

Under the approved Principal Terms of the stock option programme, the price per share will be determined based on its average weighted market price during the year prior to the transaction date. If the shares are traded on a stock exchange for less than a year from the date of floatation to the date of the share purchase contract, but not earlier than after 6 months. The aggregate number of the SDCs' ordinary shares in the existing contracts provided for by the stock option programme may not exceed 2% of the total number of the company's outstanding ordinary shares. The maximum possible number of shares which may be allotted at the launch of the stock option programme may not be exceed 1% of the total number of the outstanding ordinary shares.

* * *

The Board of Directors considered reviewed the progress in reorganization of OAO RAO "UES of Russia".

The reorganization of OAO RAO "UES of Russia" will be implemented in two phases. In 2006-2007, one or two generation companies will be spun off from RAO "UES of Russia". In 2007-2008, RAO "UES of Russia" will be separated, and the shareholders of the Parent Company of RAO "UES of Russia" will receive its shares in WGCs, TGCs, OAO "FGC", etc. pro rata to their holdings in the authorized capital of RAO "UES of Russia".

The Board approved the Parent Company's reorganization in 2006-2007 through spin-off simultaneously with a merger. During the first phase of the reorganization, a joint stock company holding a 50% stake in OAO "WGC-5" will be spun off from OAO RAO "UES of Russia".

The remaining stake (25% plus one share) held by RAO "UES of Russia" in OAO "WGC-5" will be sold as a single lot through a public auction after the placement of additional shares in OAO "WGC-5". The sale of this shareholding will help attract strategic investors in OAO "WGC-5" and provide money to finance investment projects in the electricity industry, including those provided by the programme of OAO "UES FGC".

The Board of Directors also instructed the Management Board to explore the possibility of carrying out one more spin-off in 2006-2007.

In this connection, the Board of Directors of RAO "UES of Russia" instructed the Management Board to draft and present to the Board of Directors the documents needed to carry out the reorganization of RAO "UES of Russia" in 2006-2007 (the separation balance sheet, information of the share purchase price, etc.).

In August 2006, the Management Board will submit for consideration by the Audit Committee under the Board of Directors of RAO "UES of Russia" the Parent Company's the separation balance sheet prepared for the purpose of its reorganization. In August-October 2006, the Management Board will submit to the Board of Directors of RAO "UES of Russia" the proposal to hold an EGM of OAO "RAO UES of Russia" to consider the Company's reorganization.

The Management Board was also given the task to determine the market value of the 25% stake in OAO "WGC-5" held by RAO "UES of Russia" and submit to the Board of Directors of RAO "UES of Russia" the proposals on all required corporate actions. The Board of Directors instructed the Management Board to explore the possibility of using shares of RAO "UES of Russia" as payment instrument in the sale of the 25% stake in OAO "WGC-5".