Information on the final reorganization of RAO UES of Russia

The reorganization of RAO UES of Russia will be the logical completion of the electricity sector restructuring and the formation of the industry's new demonopolized structure. While competitive relations will be developing among new stand-alone electricity market players, RAO UES of Russia will cease to exist as a "state-owned monopoly" and will be transformed into several state-owned and private companies.
Pursuant to the decisions approved by the Board of Directors of RAO UES of Russia on July 28, August 30, September 22, October 27, 2006, and March 2, 2007, the Company's reorganization is divided into two stages:
The first stage of the reorganization was completed on September 3, 2007. At this stage, WGC-5 and TGC-5 will be spun off from RAO UES of Russia. These companies were chosen to be spun-off during the first stage of the reorganization as the were ready to operate independently in the power sector and to implement long-term investment projects to the fullest extent. Besides, WGC-5 and TGC-5 have successfully issued additional shares, which allowed them to attract strategic investors to participate in their authorized capitals and invest in the development of these companies. After the spin-off the shareholding owned by the government in the authorized capital of these companies will not be less than 25% + 1 share (a blocking shareholding). As the result of the first reorganization the shareholders of RAO UES of Russia will receive, in addition to their shares in RAO UES of Russia, the shares in WGC-5 and TGC-5 in proportion to their shareholdings in the authorized capital of the energy holding. At the same time the number of shares owned by these shareholders in RAO UES of Russia remained the same. The interest of the Russian Federation in the authorized capital of WGC-5 after the completion of the first stage of the reorganization amounted to 26,43%, and 25,09% in the authorized capital of TGC-5.
At the second stage (to be completed on 1 July 2008), there will be completion of structural transformations in which assets of the energy holding are involved. As a consequence, all companies that will make up the target structure of the industry (FGC, WGCs, TGCs etc.) will be spun off from RAO UES of Russia, and RAO UES of Russia will cease to exist after its merger with and into FGC UES.
A two-stage approach is chosen because it is necessary, during the first reorganization, to evaluate the ability of large private generation companies to independently attract investments, manage their development, participate in the wholesale electricity market and, in the case of territorial generation companies, in the thermal energy segment. Another reason why RAO UES of Russia is reorganized on a stage-by-stage basis is that it is necessary to work out the Company's reorganization mechanism.