RAO “UES of Russia” Action Plan on Reliability Improvement of Unified Power System of Russia

1. RAO “UES of Russia” Action Plan on Reliability Improvement of Unified Power System of Russia August 29, 2005

2. Complex reliability of “UES of Russia” and components to guarantee • Working out and realization of complex program of “UES of Russia” development up to 2030: creating reserves of transmission and generation capacities • Guaranteed consumers connection and provision of reliable schemes of connecting • Усиление ролиIndustrial power consumers to provide reliability of UES Consumers power supply reliability Reliability of management system Equipment reliability • Recognizing of problem zones • Systematization and carrying out of all approved and documentary decisions on accidents results • Introduction of low cost technology and decision with a short payback term aimed at quality improvement of exploitation and repair of power industry objects of subsidiary companies • Development of complex program of RAO “UES of Russia” on management of human resources • Starting with 2006 applying of pilot projects on quality management system introduction • To increase responsibility ofRAO “UES” managers and subsidiary companies by changing the system of efficiency key indices

3. Reliability of management system Provision of management system reliability Measures to provide reliability of “UES of Russia” Main goal: achievement of the best practices in organizing production activity and personnel management • Implantation of control system over subsidiary companies activities to provide complex reliability • Establishing of reliability committees at subsidiary companies’ Board of Directors • Structure of the committee: representatives of «Energotechnadzor», subsidiary companies, business-unit, миноритарныхshareholders • Main functions: subsidiary companies’ investment and repair programs examination, evaluation of the measures in accordance with the accident results and major technological failures, report control; workvaluation of General Directors and technology managers of subsidiary companies from the reliability provision point of view • Development of new complex of key indices of efficiency for the managing offices of RAO and subsidiary companies with priority of reliability guarantee indices • Work regulation of subsidiary companies’ Chief Engineers • Introduction of quality control system • Development and realization of complex program of RAO for human resources management • Quality improvement of cooperation and information exchange between RAO “UES of Russia” and Ministry of Catastrophes

4. Equipment reliability Equipment reliability assurance Measures to provide reliability of “UES of Russia” Main goal:minimization of accidents and technological failures caused by equipment breakdowns • Development of corporate standards system aimed at UES reliability improvement • Systematization and carrying out all approved and documentary registered decisions on accidents results • Coordination of maintenance and investment programs of subsidiary companies by Technology Director office • Forming of reliability committees at subsidiary companies to control reliable and safe exploitation of subsidiary companies’ energy objects and also to control condition of subsidiary companies’ fixed assets

5. Provision of guaranteed energy supply for consumers Measures to provide reliability of “UES of Russia” Main goal: guaranteed connection of consumers Consumers power supply reliability • Development and realization of complex program of RAO “UES of Russia” development for 15-20 years period • Working out of development scheme for UES as a whole, counties’ energy systems and cities’ energy zones based on prognosis of perspective consumption • Development of rules for balanced market and services market; stimulation of power stations and energy consumers to regulate voltage • Guarantee of economy based pricing which guarantees consumers connection and connection schemes reliability • Development ofcomplex investment projects aimed at crisis prevention,

6. Activity priorities shift towards guaranteed reliability In case of accident at a subsidiary company 2006 2005 General Director was not paid annual bonus, but the accident didn’t affect his position Consideration of an issue about General Director’s qualification for the position!!!

7. Measures to improve system reliability of “UES of Russia” June-August 2005 Improvement of operating reliability of power grids objects • 59 000 km of power lines and 2 531 substations were examined if they meet technical exploitation requirements. Corresponding measures were included into maintenance programs of 2005-2006. • 28 units of current and voltage transformers and 6 917base-shackle insulators at 110-750 kV substations were replaced. • 40 084 km air power lines (3 159 kmin Moscow and Moscow area) were examined • 2 750 km of swaths cut in the woodsfor air power lines were cleaned (including 1 554 km in Moscow and Moscow area) • as a top priority projecting of complex re-equipment and reconstruction of the following 500 kV substations has begun: Chagino, Ochakovo, Beskudnikovoand other power industry objects of Moscow. • 155 trainings of operation repair-maintenance personnel of power grids and 340 industrial anti-accident trainings of dispatching personnel were held4 more than 2000 people took part in this trainings Reliability improvement of generating equipment; preparation for 2005 – 2006 autumn-winterperiod (as forAugust 1, 2005) • repair of the following equipment has been completed: turbines of 11 859 MW total capacity, power-generating boilers of 55.5 thousand t/h steam production, hot-water boilers 3 637 Gcal/h; 259.08 kmof heating pipelines were replaced. • turbines repair of hydropower stations of 436 MW total capacity is completed in accordance with the schedule. • before the end of 2005 more than 50 billions rubles will be spent on realization of RAO “UES of Russia” Maintenance Program.

8. Improvement of the business planning system As for subsidiary companies’ business-plans: • Maintenancesection of subsidiary company business-plan has only cost indices • Business plan doesn’t include analysis of repairing equipment share • Maintenance section of business plan is approved only by Business-Unit of RAO “UES of Russia” • Business-plan doesn’t include valuation indices of equipment condition 2006 2005 • Maintenancesection of subsidiary company business-plan will include both cost and material indices • Business-plan will include analysis of repairing equipment share (dynamically) • Maintenance section will have to be approved by Business-Unit and Technology Director Office ofRAO“UES of Russia” • Business-plan will include key efficiency valuation indices of fixed assets’ condition Business-plan has to be signed by Chief Engineer of power company

9. Organization of the process of RAO “UES of Russia” Reliability ImprovementProgram realization RAO establishes UES Reliability Office for the Program realization Authority: Key goals: • Actions coordination of different enterprises of RAO “UES of Russia for realization of measures aimed at UES reliability improvement • Control and valuation of subsidiary companies Technical Offices activity • Management of realization of UES reliability improvement program • Provision of common technical policy • Composing, coordinationand approval of operation plans for realization of UES reliability improvement program • Initiation of some projects related to realization of UES reliability improvement program • Expertise of investment and maintenance programs of subsidiary companies and their reports • Valuation of completeness and adequacy of measures taken after accidents and technological failures; control of measures fulfillment • Actions valuation of General directors and subsidiary companies’ Technical managers Elimination of accidents prerequisites in problem zones This Office is responsible for realization of UES Reliability Improvement Program

10. Structure and goals of Reliability Improvement Office • Management of Reliability Improvement Office • Correction and approval of decisions Technical Director • Provision of Reliability Improvement Office functioning • Organization ofReliability Improvement Office functioning • Preparation of drafts of organizational-administrative documents Staff Executive Committee • Includes: • Technical managers of Business-Units, Federal Power Grid Company (FPGC) and System Operator • Authority representatives of FPGC, System Operator, Reforms’ Managing Center • Chiefs of: Business Planning Department, Corporate Management Department, Economics Policy Department, Personnel Management Department • Analysis of coming-in information • Preparation of decisions projects • Provision of approved decisions realization (according to subsidiary companies’ Board of Directors voting) One of the key goals of Reliability Improvement Office is making a quarterly summary report about conditions of fixed assets of “UES of Russia” and about exploitation quality of the Holding’s equipment • Gathering, consolidation and systematization of information about reliability guarantee at subsidiary company • Preparation of the data base for making decisions Reliability Committee of Subsidiary Company Board of Directors Reliability Improvement Office is organized according to approved regulations and given budget for realization of independent projects according to UES Reliability Improvement Program