Moscow, 29 September 2006. The Board of Directors of RAO "UES of Russia" approved the "second tier" of projects to place additional shares in WGCs and TGCs in order to attract investments in the development of thermal generation facilities. The list of projects includes: OAO "WGC-1", OAO "WGC-2", OAO "WGC-6", OAO "TGC-1", OAO "TGC-4",OAO "TGC-5", OAO "Volzhskaya TGC" ("TGC-7"), OAO "Southern Generation Company TGC-8", OAO "TGC-10", OAO "Kuzbassenergo" ("TGC-12"), and OAO "TGC-13".

The key eligibility criteria were the degree of completion of corporate restructuring at the companies and the extent to which investment projects are ready for implementation, including the feasibility studies.

The Russian Government broadly approved the use of additional share issues in the electricity industry at its session held 7 June 2006. The Government also instructed that a complete list of such projects be prepared by 1 October 2006. On 23 June 2006, the Board approved the list of pilot projects for such share issues, which includes OAO "WGC-3", OAO "WGC-4", OAO "WGC-5", OAO "Mosenergo" (OAO "TGC-3"), and OAO "TGC-9". The additional share issue plans for OAO "WGC-3", OAO "WGC-4", and OAO "WGC-5" were approved on 28 July 2006 and 30 August 2006.

Today, the Board noted the draft programmes for the preparation and placing of additional shares within the framework of the second-tier projects.

The Management Board of RAO "UES of Russia was given the task to submit for consideration by the Board of Directors the Strategy for Additional Share Issues for "Second-tier" WGCs and WGCs and Sale of Such Shares. The Strategy is to be drafted taking into account the opportunities offered by capital markets in meeting the generation companies' demand for funds, the need for RAO "UES of Russia" to maintain its stakes in the generation companies after the additional share issues (which are of interest to strategic investors), and the necessity to concentrate resources on the key projects in the areas suffering from energy shortages.

The Board resolved to create an Investment Committee under the Board of Directors to review the investment programmes of RAO UES subsidiaries, including the financing structure of such programmes. The Committee will comprise government officials, representatives of minority shareholders, and the Company's senior managers. The Board instructed the Management Board and the Strategy and Reform Committee to nominate, taking into account the Board's suggestions, candidates for the new Committee and submit the nominations at the next Board meeting.

The Management Board was also given the task to involve, through a competitive process, the leading investment banks and advisors in the process to review the proposed terms of additional share issues, the placing order, timeframes and mechanisms, and to appraise the market value of WGC and TGC shares for the purpose of share placings.

After that, the Management Board will need to revise the programme for the preparation and placing of additional shares in the second-tier WGCs and TGCs in order to determine an optimal structure of equity and debt financing for the investment projects.

The generation companies may prepare additional share issues and offer them to investors already in 2007-2008. The shares will be placed through a competitive process, involving a public offering or private placement with a strategic investor, or a combination of both.

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The Board of Directors of RAO "UES of Russia" approved the establishment of OAO "TGC-13" as a wholly-owned RAO UES subsidiary at its meeting held 24 June 2005. The company's target structure comprises OAO "Krasnoyarskaya Generatsiya" and OAO "Khakassia Generation Company". The company's establishment is scheduled to be completed on 1 December 2006. After that, RAO "UES of Russia" will hold a 57.0028 percent stake in OAO "TGC-13".

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The Board received and noted the information regarding the preparations for concluding long-term contracts for gas supply to RAO UES power plants and procedure for negotiating the gas supply to new generation facilities.

The Board approved the key lines of activity relating to the preparation for concluding new long-term gas supply contracts for the existing power facilities, participation of generation companies in the competitive trading segment of the natural gas market, reviewing and changing the procedure for granting permits for power plants' fuel modes, and the procedure for developing and coordinating the investment programmes at RAO "UES of Russia" and OAO "Gazprom" relating to the development of gas infrastructure for the electricity industry.

The Management Board of RAO "UES of Russia" was instructed to continue work along the above lines and report the results at a Board meeting before end-2006.

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The Board of Directors approved the procedure for the reorganization of OAO "TGC-9"* through merger of OAO "Komi Regional Generation Company" with and into TGC-9.

By now, the first phase of TGC-9 reorganization, which provides for the merger of OAO "Perm Generation Company" and OAO "Sverdlovsk Generation Company" with and into TGC-9, has been completed. On 1 July 2006, OAO "Komi Regional Generation Company", a spin-off of OAO "Komienergo", was granted official registration.

After that, it was planned to place an additional share issue of TGC-9 to be exchanged for shares in OAO "Komi Regional Generation Company". However, the Board of Directors of RAO "UES of Russia" on 28 July 2006 decided that it would be more appropriate to merge OAO "Komi Regional Generation Company" with and into OAO "TGC-9", which is in line with the general approach to the creation of TGCs as unified operating companies.

In the event that the shareholders in OAO "Komi Regional Generation Company" do not approve the merger with TGC-9, TGC-9 will carry out an additional share issue. These shares will be exchanged for the shares in OAO "Komi Regional Generation Company" owned by RAO "UES of Russia" and minority shareholders which supported the reorganization of the regional generation company or did not vote on the merger proposal.

At today's meeting, the Board approved the following conversion ratios for the merger of OAO "Komi Regional Generation Company" with and into OAO "TGC-9":**

• 1/189 of an ordinary share in OAO "Komi Regional Generation Company " of RUB0.65 par value is to be converted into one additional share of OAO "TGC-9" of RUB0.003 par value;
• 1/173 of an preferred share in OAO "Komi Regional Generation Company " of RUB0.62 par value is to be converted into one additional share of OAO "TGC-9" of RUB0.003 par value;

The Board of Directors instructed RAO UES representatives at OAO "TGC-8" and OAO "Komi Regional Generation Company" to vote at Board meetings and general meetings of shareholders FOR the approval of all resolutions required to complete the creation of the target structure of OAO "TGC-9".

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** The conversion ratios were calculated by ZAO "United Financial Group", the investment bank, on the basis of the appraisal report determining the market value of shares prepared by a consortium of independent appraisers, ZAO "Ernst & Young Valuation Advisory Services", ZAO "ENPI Consult", OAO "International Appraisal Center". These appraisal reports received a positive opinion of Deloitte & Touche.

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The Board received and noted a report on the preparations at RAO UES companies for the 2006-2007 winter period.

Within the framework of repair works, by 1 August 2006, 15,216 MW of turbine capacity had been repaired at RAO UES thermal power plants; power boilers had been repaired with an aggregate output of 71,361 t/h, and hot water boilers with a steam output of 4,025 Gcal/h. Also, 187.9 km of heating networks had been replaced. By year-end, over RUB43 billion is planned to be spent on the repair work.

The repair teams of OAO "UES FGC" have carried out vegetation management in over 20,200 hectares of transmission line rights-of-way, and replaced 39,900 insulators in transmission lines. All scheduled work was completed to replace lightning protection cables, repair the 110-750 kV autotransformers, and shunt reactors. In addition, in 2006, OAO "UES FGC" will commission 602.6 km of new transmission lines and 2,476 MVA of transformer capacity.

The Management Board reported to the Board of Directors that the growing prices of services, materials and machinery, equipment and fuel outpace the electricity and heat tariffs, which are increased at fixed rates, which makes it impossible to replace and repair worn equipment in a timely and sufficient manner, which poses an additional risk of emergency.

All energy companies of RAO "UES of Russia", including the energy retail companies, have created commissions to carry out winter readiness check. They will focus on ensuring the possibility of changing over the generating equipment to a back-up fuel on a prompt basis.

Special attention will be given to the winter preparations in the energy systems located in "peak load" areas, which include the cities of Moscow and St.-Petersburg, Moscow Region, Belgorod Region, Kaluga Region, Tyumen Region, Leningrad Region, Kaliningrad Region, and Astrakhan Region, Khanty-Mansi Autonomous Okrug and Yamalo-Nenets Autonomous Okrug, Krasnodar Kray, Republic of Karelia, Republic of Dagestan, Republic of Ingushetia, Republic of Khasassia, and Republic of Tyva.

The Board of Directors noted that, as of 1 September 2006, the fuel inventories are stockpiled according to the schedule. However, due to the steady increase in electricity use, the lower water inflow levels in the Volga-Kama basin, and the possible restrictions of gas supply during the autumn and winter months, the energy companies will need an additional 29 million tonnes of coal and 8.3 million tonnes of fuel oil.

According to RAO UES estimates, this will result in additional fuel costs of over RUB22.9 billion. In order to ensure reliable operation during the autumn/winter period, the power plants of RAO "UES of Russia" will increase their required fuel reserves. By 1 January 2007, fuel oil inventories are to increase by 1.1 million tonnes, and coal inventories by 830,000 tonnes.

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The Board approved the private placement by OAO "Mosenergo" of additional shares to a strategic investor.

Today, the Moscow Energy System is facing a rapid growth of energy use; the available generation and network capacity is not sufficient to meet the growing demand for electricity and capacity in the capital city. In May 2006, RAO "UES of Russia" and the Moscow City Government signed an agreement to implement a large-scale investment programme until 2011 providing for the construction and putting into operation of new capacity in the city of Moscow and the surrounding region. The programme is designed to increase the reliability of energy supply to customers. The total amount of investments in the construction of generation and network facilities is estimated at over RUB450 billion.

As a result, the generation capacity of OAO "Mosenergo" will increase by 2,400 MW to 13,000 MW.

The additional share issues by OAO "Mosenergo" will be used to finance several investment projects, including the construction of four combined-cycle units at the CHPP-21 (GRES-21), CHPP-26 (GRES-26), and CHPP-27 (GRES-27).

The Board of Directors of RAO "UES of Russia" instructed RAO UES representatives to vote at the shareholder meeting of OAO "Mosenergo" FOR the approval of the maximum number of additional shares the company is authorized to issue at 11.5 billion shares, par value RUB1 each, and to approve the increase of the charter capital of OAO "Mosenergo" by RUB11.5 billion.

The additional ordinary shares of OAO "Mosenergo" will be sold by private placement to a strategic investor. The placing price will be determined as an average weighted price of trading on the RTS and MICEX stock exchanges over the period of six months before the shareholder meeting of OAO "Mosenergo", at which the shareholders will approve the additional share issue, but not less than RUB5 per share. The meeting is to be held in December 2006, and the shares are expected to be placed in March 2007.

According to the Board resolution, as a result of the share issue the stake held by RAO "UES of Russia" in OAO "Mosenergo" will be at least 25 percent plus one share (blocking stake).

OAO "Mosenergo" will raise no less $2.1 billion as a result of the transaction.

In order to control the investment projects of OAO "Mosenergo" financed with the funds raised through the additional share issue, it is planned to establish a simple partnership comprising RAO "UES of Russia", the strategic investor, and OAO "Mosenergo". In this connection, the Management Board was given the task to review and submit for Board consideration the feasibility of an agreement of simple partnership.

The Board of Directors also instructed RAO UES representatives in the Board of Directors and shareholder meeting of OAO "Mosenergo" to vote FOR the approval of the resolutions required to carry out the additional share issue.

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The generation company, OAO "Mosenergo" (OAO "TGC-3"), was set up on 1 April 2005 as a result of restructuring of the regional energo, OAO "Mosenergo". The company comprises 17 power plants located in the city of Moscow and the surrounding Moscow Region, except for the TPP-4 (GRES-4), TPP-5 (GRES-5), TPP-24 (GRES-24), and the pumped storage power plant, Zagorskaya PSPP. RAO "UES of Russia" currently holds a 50.9 percent stake in OAO "Mosenergo". Mosenergo shares are traded on the major Russian stock exchanges, ZAO "MICEX Stock Exchange" and NP "RTS Stock Exchange".

* * *

The Board of Directors appointed new members to the Valuation Committee.

On the proposal of Andrey Bugrov, member of the Board of Directors of RAO "UES of Russia", Dmitry Kuskov was replaced by Alexey Matvienko, Investment Manager of ZAO "Interros Holding Company".

The Valuation Committee under the Board of Directors of RAO "UES of Russia" was created in April 2002. The Committee is responsible for developing the policies for market valuation of assets and business of OAO RAO "UES of Russia", its subsidiaries and dependent companies, and the new companies established in the course of the reform.

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The Board of Directors of RAO "UES of Russia" gave voting instructions to RAO UES representatives at some of the Company's subsidiaries and dependent companies.

The Board instructed the Company's representatives at OAO "Yakutskenergo" to vote FOR increasing the authorized capital of OAO "Sakhaenergo". According to the Board resolution, OAO "Sakhaenergo" will issue 43,610,800 ordinary shares, par value RUB10 each, worth a total of RUB436,108,000. The shares will be placed through closed subscription to shareholders of OAO "Yakutskenergo". Payment for these shares will be made in form of assets –- electricity and heat generation, transmission, dispatching, and distribution facilities. Currently, these facilities are leased by OAO "Sakhaenergo" from OAO "Yakutskenergo".

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* OAO "Sakhaenergo" is a wholly-owned subsidiary of OAO "Yakutskenergo". The company supplies electricity and heat in the Republic of Sakha (Yakutia), which has an area of 2.2 million sq. km and the population of 147,600 people.

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The Board of Directors of RAO "UES of Russia" took a number of decisions aimed at completing the creation of the target structure of OAO "TGC-11".* The Board instructed RAO UES representatives at OAO "TGC-11", OAO "Omsk Electricity Generation Company", and OAO "Tomskenergo" to vote FOR the merger of OAO "Omsk Electricity Generation Company" and OAO "Tomskenergo" with and into OAO "TGC-11".

Also, the Board of Directors instructed the representatives of RAO "UES of Russia" at OAO "TGC-11" to vote FOR increasing the company's authorized capital. OAO "TGC-11" will additionally issue 1.1 trillion ordinary shares, par value RUB0.01 each, worth a total of RUB11 billion. The shares will be placed in exchange for shares in OAO "Omsk Electricity Generation Company" and OAO "Tomskenergo".

The Board of Directors of RAO "UES of Russia" approved the ratios for the exchange of shares in OAO "Omsk Electricity Generation Company" and OAO "Tomskenergo" for TGC-11 shares. The following amounts of the companies shares will be converted into one ordinary share of OAO "TGC-11":

• 0.000004912 of an ordinary share in OAO "Omsk Generation Company", par value RUB1,516.40 [per share].
• 0.000005363 of a Type A preferred share in OAO "Omsk Generation Company", par value RUB1,516.40 [per share];
• 0.019000301 of an ordinary share in OAO "Tomskenergo", par value RUB1 [per share];
• 0.020746342 of a Type A preferred share in OAO "Tomskenergo", par value RUB1 [per share].

The Board of Directors of RAO "UES of Russia" adopted a similar resolution at its meeting held on 21 April 2006. However, the general meeting of shareholders of OAO "Tomskenergo" held in June 2006 did not approve the merger of OAO "Tomskenergo" with and into OAO "TGC-11", because OAO "YUKOS Oil Co." voted against the merger.

After that, additional negotiations were held with YUKOS regarding the proposed merger of Tomskenergo with OAO "TGC-11" . In this connection, it is advisable to hold another shareholder meeting to consider the merger on the same terms and conditions.

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