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February 20, 2009

Transport infrastructure of Russia: specific features of investment. February 20, 2009. Market situation and expectations of participants: mid- 2008. Surplus of capital against the backdrop of assets deficit and glowing expectations for further market growth. Current situation: early 2009.

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February 20, 2009

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  1. Transport infrastructure of Russia: specific features of investment February 20, 2009

  2. Market situation and expectations of participants: mid-2008 Surplus of capital against the backdrop of assets deficit and glowing expectations for further market growth

  3. Current situation: early 2009 Excess of assets against the backdrop of capital deficit and sharp drop of the demand for railway transportations

  4. Mid-2008 Early 2009 Monthly freight turnover volume 113.7 mln. tons -35% 74.4 mln. tons Railway tariff growth +16% -69% +5% Market of railway transportation: comparison of indicators Price of an open car 2.6 mln. rbl. 1.5 mln. rbl. -45% Cost of loan capital 10% +100% 20%

  5. Cardinal change of the correlation between the demand and supply on the market of railway transportation • Rapid change of market expectations: depressed mood instead of rosy forecasts • Financial difficulties of many private operators who advocated aggressive investment policy amid mistakes in financial risk management: • Long-term investments in railway assets were financed by short liabilities, including those in foreign currency • Ruble revenues and financial obligations in foreign currency • Mass collection of collateral under credits and lessees’ refusal to fulfill obligations обязательств Situation on the railway transportation market: current state Emergence of non-core participants on the market who became owners of railway assets

  6. Rolling stock (non-core assets) concentration on balance sheets of lending institutions Desire to sell rolling stock to mobilize their monetary funds and to preserve the capital Prospect of further decline of rolling stock market prices due to lack of demand Need for coordinated actions in the new market conditions to preserve investment attractiveness of the industry Situation on the market of railway assets: redistribution Process of consolidating the railway operating ndustry

  7. Proposals for faster checking and recovery of old cars Proposals for programmes of government support of operator companies and rolling stock manufacturers Proposals for placing some part of the inventoried car fleet into the government reserve Situation on the market of railway transportation: government efforts of stabilization Proposals for creating ВГКand consolidation of “problem” rolling stock on its balance Process of consolidating the railway operating industry

  8. Centers of consolidation Market of railway transportation: Possible development options RRW’s subsidiaries Large private operators

  9. RRW’s subsidiaries Government support Market of railway transportation: possible centers of consolidation Dominant lead of RRW: volume of assets, influence Other participants: passive participation

  10. Large private operators Market of railway transportation: possible centers of consolidation Possibility of parity relations between banks and business Flexible terms of shareholder value realization in future

  11. Thank you for your attention! Pavel Iljichev Finance director of “Eurosib” GC “Eurosib” CJSC phone:+7 (812) 326-81-01 fax: +7 (812) 326-81-10 www.eurosib.biz

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