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RAO UES Prepares RAO UES Group's Unaudited Preliminary Consolidated Financials for 2007 under IFRS

Moscow, 28 May 2008. RAO "UES of Russia" has prepared for its AGM the RAO UES Group's Preliminary Unaudited Consolidated Financial Statements for 2007 under the IFRS. The Auditor's Report is expected to be prepared in the second half of June.

Consolidated Balance Sheet as at 31 December 2007

The Group's total assets increased in 2007 by RUB797 billion to RUB2,341 billion as at year-end. Of that amount, the Group's non-current assets amounted to RUB1,739 billion, up RUB480 billion, while the current assets were RUB477 billion, an increase of RUB197 billion from the beginning of the year.

As of 31 December 2007, the Property, Plant, and Equipment (PP&E) of RAO UES Group stood at RUB1,562 billion, an increase of RUB345 million from 1 January 2007 (RUB1,218 billion). The increase in the value of the PP&E and construction in progress was due to the revaluation of these assets** as a result of changes in the IFRS Accounting Policy and an increase in capital expenditures for the construction of new and modernization of existing power grid and generation facilities.

The Group's accounts receivable grew in 2007 by RUB118 billion to RUB253 billion. The increase in the accounts receivable was due to the emergence of debt owed to RAO "UES of Russia" for the shares in OAO "Mosenergo" and RAO UES' share repurchase from shareholders.

In 2007, due to the additional share issues of certain companies in RAO UES Group and the sale of shares in some SDCs of RAO "UES of Russia", the cash and cash equivalents increased by RUB71 billion to RUB125 billion.

The accounts payable amounted to RUB197 billion at end-2007, which represents an increase of RUB85 billion from 1 January 2007. This was largely due to the creation of a provision for the repurchase by RAO "UES of Russia" of its shares.

The non-current and current debt amounted to RUB259 billion, up RUB50, which was due to the borrowings raised by the RAO UES Group companies to finance the construction and modernization of energy facilities. As of 31 December 2007, the Company reclassified RUB45 billion of its long-term debt into short-term debt. As at the reporting date, the Company's creditors had the right to demand acceleration of these loans because general shareholder meetings of a number of RAO UES Group companies approved the companies' reorganization.

In 2007, there were some changes in the RAO UES Group's structure due to the additional share issues by some companies of RAO UES Group and the sale by RAO "UES of Russia" of its stakes in some SDCs. Specifically, some subsidiaries were reclassified as "dependent companies" and certain companies as "assets held for sale".

Further to the resolutions of RAO "UES of Russia" to divest some of its SDCs, on 31 December 2007, these companies' assets worth RUB125 billion were reclassified as "assets held for sale". ****

In September 2007, RAO "UES of Russia" completed the first phase of its reorganization which included the spin-off of OAO "WGC-5" and OAO "TGC-5". As a result, the Group's net assets decreased by RUB77.4 billion.

Consolidated Statement of Operations for year ended 31 December 2007:

In 2007, the Group's revenues from continuing operations***** (without taking into account the disposal of subsidiaries and equity investments of RAO "UES of Russia") amounted to RUB822 billion, up RUB124 billion (17.8%) compared to the same period of 2006. The increase in the Group's revenues from continuing operations was mostly due to the revenues from sale and transmission of electricity.

The Group's continuing operating costs in 2007 grew by RUB116 billion, or 18.7%, to RUB739 billion. This figure was most significantly affected by the increased expenses on electricity purchased by RAO UES Group's companies, increased depreciation charges as a result of PP&E revaluation, as well as an increase in expenses on electricity and heat transportation through networks owned by the companies that are not part of the Group.

The Group's net profit in 2007 grew yoy RUB16 billion to RUB165 billion. This was largely due to the sale of the stakes held by RAO "UES of Russia" in its SDCs***.

Consolidated Cash Flow Statement for the year ended 31 December 2007

The reporting period saw continued trend towards growth in capital investments at RAO UES Group. In 2007, the total amount of funds allocated for capital investment grew almost twofold to RUB234 billion

* RAO UES Group consists of RAO "UES of Russia" (the Parent Company) and its subsidiaries and dependent companies. The Group's IAS/IFRS financial statements have been prepared since 1997.

** Before 1 January 2007, in accordance with the RAO UES Group's IFRS Accounting Policy, the Group used the model for recording property, plant and equipment at original cost less the impairment reserve. After 1 January 2007, the Group changed its accounting policy and started to state PP&E at the revalued amount. Under this approach, the PP&E are included in the financial statements at their fair value determined by a consortium of independent appraisers headed by Ernst and Young and Deloitte & Touche.

***The RUB195 billion profit from the sale of the Group's subsidiaries and dependent companies was received as a result of including in the statements the proceeds from the sale of shareholdings in seven retail and generation companies of the Group, and the additional share issues of the Group's companies. In the Group's IFRS financial statements, this gain was calculated as the difference between the selling price of the shareholdings and the Group's share of total assets according to the IFRS.

****The assets and liabilities of OAO "TGC-1", OAO "TGC-8", OAO "TGC-9", OAO "WGC-4", OAO 'TGC-11", OAO "MTK", OAO "Novomoskovskaya TPP", OAO "Murmanskaya CHPP", OAO " Kuban Generation Company", OAO "Kostroma Energy Retail Company", OAO "Novgorod Energy Retail Company", OAO "Oryol Energy Retail Company", OAO "OAO "Kolskaya Energy Retail Company", OAO "Energosbyt Rostovenergo", OAO "Stavropolenergosbyt", OAO "Bryansk Energy Retail Company", OAO "Komi Energy Retail Company", OAO "Astrakhan Energy Retail Company", OAO "Khakasenergosbyt", OAO "Udmurt Energy Retail Company", OAO "Marienergosbyt", OAO "Buryatenergo", OAO "Tomsk Energy Retail Companies", OAO "Vladimir Energy retail Company", OAO "Tula Energy Retail Company", OAO "Perm Energy Retail Company", and OAO "Kirov energy Retail Company" were classified as assets held for sale.

*****The companies listed in footnote ****, and OAO "Mosenergo", OAO "TGC-9", OAO "WGC-4", OAO "WGC-3", OAO "TGC-5", OAO "WGC-5", OAO "Kuzbasenergo" (TGC-12), OAO "Kuban Energy Retail Company", OAO "Sverdlovenergosbyt", OAO "Nizhny Novgorod Retail Company", OAO "Kuzbass Energy Retail Company", OAO "Belgorod Retail Company", OAO "Vologda Retail Company", OAO "Orenburgenergosbyt", OAO "Kurgan Energy Retail Company", OAO "Tver Energy Retail Company", OAO "Voronezh Energy Retail Company", OAO "Karelia Energy Retail Company", OAO "Omsk Energy Retail Company", and OAO "Lipetsk Energy Retail Company" were reported as discontinued operations. The other companies of the RAO UES Group were reported as continuing operations.


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