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Press-release

RAO UES Board of Directors Holds its Meeting in Form of Absentee Voting

Moscow, 25 April 2008. At its in absentia meeting on April 25, 2008 the RAO "UES of Russia" Board of Directors addressed the issue of holding the annual general meeting of the company’s shareholders.

The Board of Directors approved the project of the final 2007 annual report of RAO "UES of Russia" and submitted it for approval to the meeting of shareholders. The structure of the 2006 report was the basis for this year’s report, yet contains a number of significant additions.

The report shall traditionally include priority directions of the company’s activities and key corporate events related to the sectors’ restructuring in 2007: the entry of the head Company into the final stage of the reorganization, development of the investment process, results of operation of the wholesale and retail power markets in compliance to new rules, as well as the recommendations of the Association of Investor Protection (AIP) and the Standard&Poor’s rating agency.

As to the additions, since this report shall be the last in the history of RAO "UES of Russia", the Key Events of the Company section shall reflect on the main points of the holding company’s activities during the past 10 years.

The Board of Directors, having reviewed the issue of the operating bodies for the general meeting of RAO "UES of Russia" shareholders, approved its’ Presidium comprised of Board of Directors members and its’ Secretariat made up of employees of the RAO "UES of Russia" executive office. The Board also approved the text and form of voting papers and notes.

The annual general meeting of shareholders of RAO "UES of Russia" shall be held on May 28, 2008 in DK "Zelenograd" (Moscow, Zelenograd Administrative Area). The list of shareholders who have the right to participate in the meeting was drawn up as of April 15, 2008.

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The Board of Directors acknowledged the information on the functioning of the Project Centre for the Completion of the Reorganization of RAO "UES of Russia" during the period starting March 5 and up to June 30, 2008.

This structural unit, created upon the order of RAO "UES of Russia" on March 5, 2008, is responsible for preparing the company for the completion of the reorganization and the handover of assets, rights and liabilities to its’ legal successors pursuant to the Separation Balance Sheet.

The organization structure of the Project Centre includes three project groups: for the legal procurement of the completion of the reorganization, for the preparation of intermediate accounting and financial reports, for enforcing shareholder rights during the reorganization. As of July 1, 2008 the total number of Project Centre employees shall amount to 131 persons and shall decrease with all necessary functions being completed by certain ones of them.

The Project Centre shall function as part of the structure of IDGC Holding Company from July 1, 2008 to December 31, 2008.

Pursuant to the decision of the RAO "UES of Russia" Board of Directors 922 mln rubles shall be appropriated to fund the activities of the Project Centre. Of these 500 mln rubles shall be received from the decrease of cash funds being handed over to FGC UES during the merger of RAO "UES of Russia", as the expenses of completing the reorganization were included in the FGC tariff for 2008. The remaining 422 mln rubles shall be received from the sale of non-core assets of RAO "UES of Russia", which were assigned for the funding of the Budget of expenses of the RAO "UES of Russia" reorganization pursuant to the decision of the RAO "UES of Russia" Board of Directors of May 25, 2007.

Expenses of formation and current operation of the Project Centre until the reorganization, i.e. July 1, 2008, shall total 4 mln rubles. The operation financing scheme of the Project Centre of the Reorganization as part of the IDGC Holding Company includes the acquisition of debt securities of Centre for Settlement Optimization (CSO) by RAO "UES of Russia" before June 1, 2008. Implementation of this particular scheme of funding the activities of the Project Centre is due to the fact that IDGC Holding shall only be formed by July 1, 2008.

The Board of Directors approved the transaction for the acquisition of CSO debt securities. The management board of the company has been commissioned to initiate and conduct corporate procedures for the issue of debt securities and placing the proceeds in a deposit account of a bank with a long-term rating no lower than sovereign according to the scale of Standard&Poor’s, Fitch Ratings or Moody’s agencies.

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The Board of Directors commissioned RAO "UES of Russia" representatives to governing bodies of HydroWGC to support the placement of additional HydroWGC shares to a value of 4.3 bln rubles, par value 1 ruble, through private subscription in favour of the State.

The placing price of additional shares shall be determined by the HydroWGC Board of Directors on the basis of the report of an independent appraiser, approved by the Appraisal Committee of the RAO "UES of Russia" Board of Directors. According to the appraisal report the market value of one HydroWGC share equals 2.02 rubles.

Payment for additional shares shall be made out of federal budget funds for 2008. The proceeds, received as a result of the placement of the additional issue, shall be used to fund priority projects of the HydroWGC investment program including the Zagorsk HPSPP-2.

It is expected that the HydroWGC Board of Directors shall address issues related to the additional issue of shares at its meeting on May 14. Subsequently the issue "On the increase of the authorized capital" shall be introduced to the annual meeting of the company’s shareholders which shall be held on May 25. The placement of additional shares is scheduled for the second semester of 2008.

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The Board of Directors also commissioned the company’s representatives to the Board of Directors of Irganaisk HEPP and NC Cascade of HEPPs to assist the sale of a total of 0.445% HydroWGC shares owned by these companies.

The stake of Irganaisk HEPP in the authorized capital of HydroWGC amounts to 0.3815 % or 748 132 019 shares, the stake of NC Cascade of HEPPs – to 0.0633% or 124 216 303 shares. The sale of shares shall be conducted at a weighted average market price of HydroWGC shares on the MICEX during the past 3 weeks. The buyer of these shares shall be a wholly-owned subsidiary of HydroWGC – Hydroinvest.

This scheme of share disposal shall allow to avoid the redemption of treasury stock which shall develop from the merger of Irganaisk HEPP and NC Cascade of HEPPs into HydroWGC in June 2008. The shares shall remain on the balance of Hydroinvest until a favourable opportunity for their disposal arises after the reorganization of RAO "UES of Russia". The proceeds gained by Hydroinvest from the sale of HydroWGC shares are planned to be used to fund the HydroWGC investment program.

Pursuant to the decision of the RAO "UES of Russia" Board of Directors the issue of further disposal of Hydroinvest-owned shares in HydroWGC shall be submitted for review of the HydroWGC Board of Directors in 2009.

HydroWGC is Russia’s largest generation company and second in the world of all hydrogeneration companies by installed capacity. The installed capacity totals 25 GW. The share of HydroWGC on the electric power market of Russia amounts to about 15%.

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The Board of Directors approved the sale of RAO "UES of Russia"-owned shares in Insurance Broker "Energozashita".

This decision was made as part of the strategy of RAO "UES of Russia" to cease participation in all assets and subsidiaries that do not form the sector’s target structure.

At present RAO "UES of Russia" owns 61 000 common shares in the company which amounts to 61% of the authorized capital of Insurance Broker "Energozashita".

The said shareholding shall be sold through open auction with a starting price no lower than the market price determined on the basis of the report of an independent appraiser and approved by the Appraisal Committee of the RAO "UES of Russia" Board of Directors.

The value of the said shareholding, according to the report of the independent appraiser, totals 91 mln rubles.


Insurance Broker "Energozashita" was established by means of transforming "Finance Optim Group". The company provides services of insurance coverage of electric power industry companies.

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The Board of Directors approved the sale of 100% of shares in "Aviaenergo" airline owned by RAO "UES of Russia".

This decision was made as part of the strategy of RAO "UES of Russia" to cease participation in all assets and subsidiaries that do not form the sector’s target structure.

The shareholding comprised of 182 449 153 common shares par value 0.5 rubles shall be sold through open auction with a starting price no lower than the market price determined on the basis of the report of an independent appraiser.

It is expected that the appraisal report shall be reviewed at one of the upcoming meetings of the Appraisal Committee of the RAO "UES of Russia".

The balance value of this shareholding totals 91.225 mln rubles.

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Contact Information:

Stas Degtyarev
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