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RAO UES Anatoly Chubais, CEO UBS Annual Conference November 15, 2007 2008 Reform Completion: Unlocking shareholder value


Disclaimer This document is confidential and has been prepared by RAO UES (the “Company”) solely for use at the conference and may not be reproduced, retransmitted or further distributed to any other person or published, in whole or in part, for any other purpose. THIS DOCUMENT MAY NOT BE DISTRIBUTED IN OR INTO THE UNITED STATES OR TO A RESIDENT, NATIONAL OR CITITZEN OF THE UNITED STATES. This document does not constitute or form part of any advertisement of securities, any offer or invitation to sell or issue or any solicitation of any offer to purchase or subscribe for, any securities of the Company in any jurisdiction, nor shall it or any part of it nor the fact of its presentation, communication or distribution form the basis of, or be relied on in connection with, any contract or investment decision. These written materials are not an offer of securities for sale in the United States. 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Two final chords of the reform Corporate and legal actions taken according to the plan Coordinated Agreed Synchronized Reform


Competitive and Monopolistic Sectors: Target Structure Companies Reform


Functional unbundling Legal unbundling Ownership unbundling The issue is not settled yet for the majority of EU countries: Ownership unbundling of VICs and spin-off of distribution grids EU countries Deadline for ownership unbundling of RAO UES (Federal Law No. 250, November 4, 2007) Russia July 1, 2008 ?? Power Sector: Functional, Legal and Ownership Unbundling Reform


Total: > $20 bn (average price: ~$581 /kW) + Other OGKs/TGKs planned share placements and competitive sales: ~ $20 billion by April 2008 Funds raised From share placements and competitive sales to strategic investors USD in billions OGK-5 OGK-3 TGK-5 TGK-3 OGK-5 OGK-4 TGK-1 OGK-2 TGK-8 OGK-3 Reform


Schedule: OGKs/TGKs Share Placements and Competitive Sales Schedule for placing additional shares in OGK-6 to be specified Reform


Government maintains control over transmission, hydro generation… HydroOGK and FGC: Consolidation timeline Starts trading on a stock market Transfer to a single share (merger of RTCs and spin-off) HydroOGK FGC August 2007 July 2008 Aug 2008 Transfer to a single share (swap of shares and merger) Spin-off from UES Starts trading on a stock market Conversion ratios approved (valuation of all hydro plants & HydroOGK Conversion ratios approved (valuation of all RTC & FGC) Minorities ~ 22% UES ~ 78% Minorities <49% State >51% State >76% Minorities <24% Reform


…and distribution New configuration of IDCs: 11 companies + Far East Distrbution Co Conversion ratios approved (valuation of RDCs) Transfer to a single share: EGMs – merger of RDCs and IDCs, swap of shares Consolidation is completed IDCs start trading on a stock market October 2007 February 2008 April 2008 June 2008 Reform IDCs: Consolidation timeline


Redemption Issues Shareholders of UES who vote ‘against’ or do not vote on the reorganization can request UES to redeem shares1 Based on the independent valuation by Deloitte as of 1st of April 2007 following redemption prices have been approved by UES BoD: 32.15 RUB ($ 1.23) for one ordinary share 29.44 RUB ($ 1.13) for one preferred share 45 days 30 days Redemption period Repayment period EGM on reorganisation According to the Federal Law “About Joint Stock Companies” redemption amount is limited by 10% of UES NAV 26 Oct End of redemption period 10 Dec End of repayment period 10 Jan Ordinary share redemption price Preferred share redemption price Ordinary share market price Preferred share market rpice Price, $US UES reorganization Valuation Date 1 April 2007 0,3 0,4 0,5 0,6 0,7 0,8 0,9 1 1,1 1,2 1,3 1,4 1,5 1,6 09.01.07 06.02.07 06.03.07 03.04.07 01.05.07 29.05.07 26.06.07 24.07.07 21.08.07 18.09.07 16.10.07 13.11.07


Unlocking the value through unbundling Source: broker reports, Bloomberg. Market data as of November 8, 2007 ¹ As per RAO 2006 full year consolidated IFRS financials ($bn net to RAO UES) 53 Thermal GenCos Miscellaneous assets 79 RAO Sum Of Parts Current market cap. UES reorganization


UES reorganization Target Structure Companies: Liquidity guaranties At the moment of distribution to UES shareholders all of the spinning off Target structure companies will be listed locally and will have GDRs (exceptions: IDC Holding и Far East Energy Systems – as to be created just at the moment of spinning off from UES) Local listing Issuing GDRs TGK-11 HydroOGK FGC Sochinskaya TES (INTER RAO) IDC Holding Energy Systems ot the Far East All thermal OGKs/TGKs HydroOGK FGC Sochinskaya TES (INTER RAO) IDC Holding Energy Systems ot the Far East


Competitive wholesale market: Supply/Demand Equation Prices Source: Administrator of Trade System (ATS) Average prices (Europe+Urals and Siberia), Rb/MWh Day (Apr 07) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 01.10.07 08.10.07 15.10.07 22.10.07 29.10.07 Week and month Markets


Power Market Development Pace of liberalization: government’s plan and actual progress All new capacity and consumption commissioned after 2007 go to the free market 0% 5% 10% 15% 25% 30% 50% 60% 80% 100% 0% 20% 40% 60% 80% 100% Excluding electricity consumption by households actual pace of liberalization (facts and estimates) mandatory increase of the liberalized market share ~ 25% ~35% ~40% ~60% ~70% ~90% 100% Markets


Power market model: Electricity, capacity and ancillary services markets Markets


Electricity demand growth outlook: Mid-term and long-term view Source: Ministry of Industry and Energy (Minpromenergo); UES estimates Investments


2006-2010 RAO UES Capacity Commissioning Program MW 2006 2007 2008 2009 2010 2006-2010 Thermal generation OGKs, TGKs, RAO UES 1 186 1 545 2 050 5 788 14 364 24 934 Hydro OGK 67 690 420 1 224 1 612 4 013 Total commissioning 1 253 2 235 2 470 7 089 15 919 28 947 0 5,000 10,000 15,000 20,000 MW 2006 2007 2008 2009 2010 Investments


2006-2010 Sources of financing $ bn ~41.8 (31%) ~22 (16%) ~7 (5%) ~33.4 (24%) ~33.6 (24%) Investments Total: $137.8 bn


New Investors, New Generation New Opportunities

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