Moscow. 1 October 2004. At its regular meeting held today, the Board of Directors of RAO "UES of Russia" has approved the establishment of OAO "WGC-3", which will incorporate, at the first stage, OAO "Kostromskaya TPP", OAO "Pecherskaya TPP", OAO "Gusinoozerskaya TPP", OAO "Kharanorskaya TPP", OAO "Cherepetskaya TPP", and at the second stage, OAO "Yuzhouralskaya TPP".

The Board of Directors approved the participation of RAO "UES of Russia" in OAO "WGC-3" on the following terms and conditions:

• the authorized capital of OAO "WGC-3" shall be RUB16,629,846,629 (sixteen billion six hundred and twenty-nine million eight hundred and forty-six thousand six hundred and twenty-nine Rubles);
• category, type, par value of the shares to be placed at the time of establishment of the company: registered ordinary shares, par value RUB1 (one Ruble) per share;
• the number of shares to be placed: 16,629,846,629 (sixteen billion six hundred and twenty-nine million eight hundred and forty-six thousand six hundred and twenty-nine shares);
• form of payment for the shares:
  • property whose money value is RUB16,609,346,628.68 (sixteen billion six hundred and nine million three hundred and forty-six thousand six hundred and twenty-eight Rubles sixty-eight kopecks);
  • RUB 20,500,000.32 (twenty million five hundred thousand Rubles thirty-two kopecks) in funds.

Demonopolization of the generation function is a key condition for the launch of a competitive electricity market. In order to achieve that, it is necessary to ensure, within the shortest time possible, that the generation companies are prepared for the separation from OAO RAO "UES of Russia", i.e. establishment of such companies and, if possible, subsequent consolidation within each WGC.

Under the Guidelines for Reforming the Electric Power Industry of the Russian Federation adopted by Resolution of the Government of the Russian Federation No. 526 of 11 July 2001, at the initial stage of the sector reform the generation companies that are participants of the wholesale electricity market are to be formed as wholly owned subsidiaries of RAO "UES of Russia".

On 26 September 2003, the Board of Directors of OAO RAO "UES of Russia" approved the "basic" method for the creation of the WGCs, which envisages the transfer by RAO "UES of Russia" of the property of power plants and shares in the Federal AO-power plants as contribution to the authorized capital of WGCs at the first stage. At the second stage, AO-power plants spun off from regional energos will merge with and into the WGCs, and the establishment of the WGCs will thus be completed. In thermal WGCs, it is also planned that the subsidiaries will be consolidated through share exchange for WGC shares.

In accordance with this schedule, at the first stage OAO "WGC-3" will be established as a wholly-owned subsidiary of RAO "UES of Russia". Contributions to the authorized capital of the subsidiary will be made in form of shares of the federal power plants: OAO "Kostromskaya TPP"" (51% stake), OAO "Pechorskaya TPP" (51% stake), OAO "Gusinoozerskaya TPP" (100% minus 1 share), OAO "Kharanorskaya TPP" (100% minus 1 share), and OAO "Cherepetskaya TPP" (55.79% stake).

According to the resolution of the Board of Directors, at the second stage of formation of OAO "WGC-3", it is planned to appraise shares of OAO "Yuzhnouralskaya TPP", OAO "WGC-3" and the power plants comprising it. The Board of Directors of RAO "UES of Russia" is to consider the question of additional issuance of shares of OAO "WGC-3" for the purpose of including OAO "Yuzhnouralskaya TPP" into OAO "WGC-3" and consolidation of the power plants. As a measure to complete the establishment of OAO "WGC-3", WGC-3 will invite minority shareholders of the power plants to exchange their shares for the shares in the generation company. The Board of Directors gave the Management Board of RAO "UES of Russia" to ensure completion of the consolidation within the WGC not later than Q3 2005.

The Board of Directors of RAO "UES of Russia" resolved, on the proposal of the Strategy and Reform Committee, that the Boards of Directors of the WGCs being established must include representatives of minority shareholders of the Company.

The Board of Directors requested the Management Board of RAO "UES of Russia" to supply the Board of Directors with information on the place of registration and the composition of the executive bodies of all WGCs being established.

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The Board of Directors of RAO "UES of Russia" approved the establishment by OAO RAO "UES of Russia" of the following interregional distribution grid companies: OAO "Centre and North Caucasus Interregional Distribution Company" ("OAO Centre and North Caucasus IDC"), OAO "North West Interregional Distribution Company" ("OAO North West IDC"), OAO "Urals and Volga Interregional Distribution Company" ("OAO Urals and Volga IDC"), OAO "Siberia Interregional Distribution Company" ("OAO Siberia IDC").

These four interregional distribution companies will be created through the establishment of a wholly-owned subsidiary on the following conditions:

• the authorized capital of RUB10,000,000 (ten million Rubles), divided into 100,000,000 (one hundred million) uncertificated registered ordinary shares of RUB0.10 (ten kopecks) par value;
• procedure for and form of payment for the shares: in cash, in accordance with the laws on joint-stock companies currently in force.

The Board of Directors of RAO "UES of Russia" instructed the representatives of OAO RAO "UES of Russia" on the management bodies of the IDCs to vote for the approval of the resolutions required to carry out the additional issue of shares of the IDCs. After the creation of the Interregional Distribution Companies and registration of their first share issue, it is planned to carry out a second share issue, with the additional shares in the IDCs to be paid for in shares of the distribution grid companies (DCs). Taking into account the long time needed to form the distribution grid companies, at present it is possible to give only an estimated value of the additional share issue of the IDCs.

In this connection, the Board of Directors of RAO "UES of Russia" approved the transfer of shares in DCs which will be received by OAO RAO "UES of Russia" in exchange for shares in IDCs on the terms and conditions determined by the Management Board of RAO "UES of Russia". According to the resolution of the Board of Directors of RAO "UES of Russia", the money value of DC shares should correspond to the market value of these shares determined by an independent appraiser accredited by OAO RAO "UES of Russia".

The Board of Directors decided to consider the results of appraisal of IDC and DC shares at Board meetings as they are ready and presented to the Board of Directors.

The Board of Directors also decided to include representatives of the Company's minority shareholders on the Boards of Directors of the IDCs.

The Board of Directors approved the acquisition by OAO RAO "UES of Russia" of equity stakes in the IDCs by exchanging the shares in DCs received by OAO RAO "UES of Russia" for additional shares in the IDCs.

According to the resolution of the Board of Directors, minority shareholders in DCs will be invited, within the additional share issue of IDCs, to exchange their shares for the additional shares in the IDCs on the same terms and conditions as OAO RAO "UES of Russia".

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The Board of Directors of RAO "UES of Russia" approved the Board's work plan for Q4 2004.

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The Board of Directors of RAO "UES of Russia" considered the question of determining the stance of RAO UES representatives regarding items of business of shareholder meetings and meetings of the Boards of Directors of the subsidiaries and dependent companies of OAO RAO "UES of Russia".

The Board of Directors instructed the representatives of RAO "UES of Russia" to vote FOR the approval of the following agenda included on the item "Determination of the agenda of the extraordinary general Meeting of shareholders of OAO "UEUK":

• Early termination of the powers and election of members of the Board of Directors of OAO "UEUK".

The Board of Directors instructed RAO UES representatives to vote FOR establishment by OAO "Tulenergo" of a wholly-owned subsidiary OAO "Tulenergosetremont" on the following terms and conditions:

• the authorized capital of OAO "Tulenergosetremont" is RUB12,000,000 (twenty-one million Rubles) divided into 21,000,000 (twenty-one million) registered ordinary shares, par value RUB1 (one Ruble) per share;
• The shares shall be paid for in property whose market value has been determined by an independent appraiser at RUB16,210,260 (sixteen million two hundred and ten thousand two hundred and sixty Rubles) and cash in the amount of RUB4,789,740 (four million seven hundred and eighty-nine thousand seven hundred and forty Rubles).

The Board of Directors instructed the representatives of OAO RAO "UES of Russia" to vote FOR the participation of OAO "Saratovskaya HPP", OAO "Nizhegorodskaya HPP", OAO "Geortherm", OAO "Bureyskaya HPP", OAO "Kirishskaya TPP", OAO "Severo-Zapadnaya CHPP", and OAO "Kharanorskaya TPP" in the All-Russian Power Industry Employers Association (MOORE) on the following terms and conditions:

• amount of the admission fee: RUB30,000 (thirty thousand Rubles);
• form of payment of the admission fee: cash;
• The amount of the membership fee shall be determined by the Association's bylaws.

The Board of Directors instructed representatives of OAO RAO "UES of Russia" to vote FOR the Approval of the following agenda of the Board meeting of OAO "Belgorod Retail Company":

• Early termination of the powers of the members of the Board of Directors of the Company and election of members of the Board of Directors of the Company.

The Board of Directors instructed representatives of OAO RAO "UES of Russia" to vote FOR the approval of the following agenda of the general meeting of shareholders of OAO "Nizhegorodskaya HPP":

• Approval of the appointment of the Company Auditor.

The Board of Directors instructed representatives of OAO RAO "UES of Russia" to vote for the approval of the following agenda of the general Meeting of shareholders of OAO "Saratovskaya HPP":

• Election of members of the Audit Commission of the Company;
• Approval of the appointment of the Company Auditor.

The Board of Directors instructed representatives of OAO RAO "UES of Russia" taking part in the Board meeting of OAO "Zelenchukskie HPPs" to vote FOR the approval of the following agenda on the item of business "Approval of the EGM agenda":

• Approval of the Simple Partnership Agreement between OAO RAO "UES of Russia" and OAO "Zelenchukskie HPPs", which constitutes an interested party transaction.