Moscow. 5 November 2004. Standard & Poor's Ratings Services said today it raised its long-term issuer credit ratings on Russian power and heat utility RAO UES of Russia (RAO UES) to 'B+' from 'B'. At the same time, Standard & Poor's affirmed its 'ruA+' Russia national scale rating on the group. The outlook is stable.

According to Standard & Poor's, the upgrade reflects the strengthening financial profile of RAO UES and the gradual improvement of the Russian power and heat markets following continued economic improvement in Russia. The upgrade also reflects the slow improvement of tariff regulation toward being more transparent and cost-reflective.

The Company's continued control of the Group's assets and cash flows is, in Standard & Poor's view, a supportive factor at least in the medium term.

Following the upgrade of RAO "UES of Russia", S&P also raised its long-term issuer credit ratings for the ruble and dollar denominated bonds issued by RAO UES wholly-owned subsidiary, OAO "UES Federal Grid Company", to 'B+'. At the same time, Standard & Poor's affirmed its 'ruA+' Russia national scale rating on OAO "FGC". The outlook is stable.