MOSCOW, June 7, 2004 – Responding to allegations made by Anatoly Chubais, CEO of RAO UES, RUSAL today issued the following statement:

While it is true that RUSAL’s shareholders have invested in the electricity sector, RUSAL is not and has never been a shareholder in RAO UES, or in the Krasnoyarsk Hydroelectric Station. It is not a plaintiff in the legal action challenging the privatization of the Sayano-Shushenskaya Hydroelectric Station property complex and has taken no initiatives concerning the Boguchanskaya Hydroelectric Station. None of these matters belong within the sphere of RUSAL investment interests.
 
However, RUSAL is one of the largest electricity users in Russia, directly and indirectly consuming about 10 percent of Russia’s electrical power. Precisely because of this, we are eagerly watching the electricity reforms being implemented by UES management, and seek to understand where they will lead: On the one hand, to more transparency, cost reduction, more investment for development, and a stable and long-term tariff policy; or, on the other hand, merely to increased tariffs for all consumer groups including both residents and industry. In this regard, tariffs interest us not only as a direct electricity consumer, but also as one of the largest investors in the Russian economy. We are well aware that raising tariffs is one of the most important inflation factors decreasing Russia’s investment attractiveness and restraining industrial growth.

Regrettably, today we are seeing a complete lack of concrete action by UES management to execute its unambitious plans for new power capacities. Instead of using market mechanisms to attract investment financing,  UES management is relying entirely on the blunt and inefficient instrument of increased tariffs and subscriber fees to build the company’s capital investment budget.  We regard the introduction of clear and comprehensive rules for long-term tariff setting and energy market functioning as essential preconditions for the execution of large investment projects in Russia. Instead of taking a modern and rational approach to capital expenditure planning and capital raising, UES wants to develop long-term projects with short-term money. 

We hope that the process of reform of the natural monopolies, as well as the results, will be transparent, and will allow the involvement of all interested parties and society in discussion and control.   Groundless accusations and attacks by RAO UES will not prevent us from openly and publicly expressing our views on these matters.