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Unified Energy System

May 21, 2008

RAO UES Board of Directors holds its meeting in form of absentee voting

Moscow, 21 May 2008. The Board of Directors of RAO "UES of Russia" on 8 May voted absentee for the resolution to instruct the RAO UES representatives on the Board of Directors of OAO "WGC-1" to vote FOR the approval of EPCM contract to complete the construction of CCGT Unit 4 (800 MW) at the Permskaya TPP of OAO "WGC-1".

This Unit will be built by a consortium of OAO "E4 Group", ZAO "SibKOTES", OAO "Firma Tsentroenergomontazh", and ZAO "Kvarts-Zapadnaya Sibir".

Under the RUB18.8bn contract, the EPCM contractor is to bring on line a new 800 MW unit using the combined-cycle technology by 31 June 2011.


In order to ensure proper financing of the investment programs of some WGCs and TGCs, the Board of Directors authorized the purchase by RAO "UES of Russia" of additional shares in these companies, including under the pre-emptive right.

The Board approved the use of the proceeds from the sale of the "government stake" shares in WGCs and TGCs. After the reorganization of RAO "UES of Russia", the WGC/TGC shares purchased with these funds will be transferred to FGC and HydroWGC controlled by the state. FGC and HydroWGC will then sell these highly liquid shares and use the proceeds to finance their investment programs.

Moreover, the Board of Directors resolved that, in the absence of demand from strategic investors for the entire quantity of shares being offered for sale, the WGC/TGC shares may be offered to the general public. In this case, the additional shares and the "government stake" shares in the respective WGCs and TGCs may be offered to investors not in full volume.

One should be reminded that the issuance of additional shares by the thermal WGCs and TGCs and the sale of government shares in these companies is a key source of private investments needed for the expansion of the electricity industry. To date, additional share offerings and sales of the government stakes have been completed at WGCs and TGCs. The total amount of funds raised from private investors as a result of these transactions is in excess of RUB830 billion.

However, in some companies (e.g., WGC-1 and TGC-14) the scheduled dates for the completion of additional share offerings have been postponed, which is primarily due to the requests received from potential strategic investors to grant them a longer period to take decisions, as well as unstable conditions on the Russian and global stock markets.

The above measures are designed to guarantee the investment projects of WGCs and TGCs during the initial phase. The Board of Directors instructed the Management Board to submit its proposals to the Board of Directors regarding the use of these mechanisms in each individual generation company.

The Board of Directors instructed the RAO UES representatives on the management bodies of HydroWGC to vote for the company's joining the Russian Union of Industrialists and Entrepreneurs (RUIE).

RUIE membership will enable HydroWGC to implement the state policy in the area of electricity industry, environment protection, and other strategic areas of the company's activities. Moreover, members in the RUIE will make it possible for HydroWGC to participate in international and regional enterprises, which will increase the company's visibility both on the national and international arena.


The Board of Directors instructed the RAO UES representatives on the boards of directors of Center IDC, North-West IDC, Urals IDC, Siberia IDC, Center and Privolzhye IDC, North Caucasus IDC, Volga IDC, and South IDC to vote for the companies' participation in the All-Russia Electricity Industry Employers' Association.

This resolution is designed to ensure involvement of the distribution companies in the system of the sectoral social partnership and preserve the possibility for the companies to coordinate their efforts with the other labour market participants.


The Board of Directors approved the deferral of payment in the process of sale of the shares owned by RAO "UES of Russia" in WGC-1, TGC-6, Volzhskaya TGC, TGC-11, Kuzbassenergo, TGC-14, Mosenergosbyt, Petersburg Retail Company, and Tyumenenergosbyt until Q3 2009 (inclusive). The payment must be made in full not later than 1 October 2009

Buyers may make payment for shares in the above companies using banks' promissory notes having credit ratings not lower than the sovereign rating.

The Board of Directors took this decision in connection with the unstable situation on the global financial market, higher cost of borrowing, and the increased discounting rate on securities pledged.

The cost of such deferral will be equal for all participants in the competitive auctions. Potential investors will be able to review the documents on the terms and conditions of payment deferral in data rooms.

The Board of Directors instructed the Company's Management Board to prepare the Procedure for the Grant of Payment Deferral. This document was approved by the Management Board on 12 May 2008.




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