MOSENERGO Restructuring: new challenges

1. MOSENERGO Restructuring:new challenges Dmitry Vasiliev, First Deputy CEO Moscow, 2004

2. Russia's Largest Integrated Energo Mosenergo generation breakdown • Mosenergo’sasset base contains 21 power stations, including Russia’s the only hydro pumped storage plant, located in Sergiev Posad • In 2003, Mosenergo’s net revenues were US$ 2,267 (F)million, including US$ 1,537 (F) million from electricity sales and US$ 654 (F) million from heat sales (according to RAS)

3. Power Reform Priorities Dividing monopolistic (distribution and transmission) and competitive (generation and supply) lines of businesses into separate companies Pro-rata distribution of shares in the newly-established companies

4. Mosenergo Restructuring Market rules Generation Supply Service Generation Companies Competitive sectors • Market price-setting • Incentives to enter market for new players Supply Company Service Companies Moscow City & Moscow Region Electricity Network Companies Distribution Transmission • Equal access to the grids • Setting up market infrastructure Natural monopolies Moscow Heating Network Company Trunk Grid Company Regulated tariffs

5. RAO UES Trunk Grid Company Assets include ITC Center’s shares Target Corporate Structure, Current Shareholders Minority stockholders Moscow Government 51% of capital stock 41% of capital stock 8% of capital stock Distribution power and heat networks 4,195 MW 10,602 MW Mosenergo –Moscow Generation Company Mosenergosbyt – Supply Company WSG-1 Moscow City Electricity Network Company WSG-5 WSG-6 Moscow Region Electricity Network Company WSG-10 Repair companies in the form of JSC Moscow City Heating Network Company Repair and other service activities Non-core companies (agrarian, trade and others)

6. Distribution of Book Value in Mosenergo (RAS) Advisers in Mosenergo restructuring Cleary Gottlieb – USAlegislation, ADR program Institute of Corporate Law and Corporate Governance – Russian legislation Citigroup – Financial Consultant PriceWaterhouseCoopers – Auditor Ernst and Young – Valuation Consultant

7. Specific Features of Mosenergo Restructuring • «Cooperation agreement» between the Government of Moscow, RAO UES and Mosenergo, as well as the «Cooperation agreement» between the Moscow Region Government, RAO UES and Mosenergo as the basis for Mosenergo restructuring • Existence of American Depository Receipts Program issued for e part of Mosenergo shares

8. “Cooperation Agreements” Key Provisions • Mosenergo’s AGM to approve the spin-off and pro rata distribution in the second quarter of 2004 • The Government of Moscow may increase its shareholdings in the Moscow City Electricity Network and Moscow City Heating Network companies up to 51% and above, through closed share issues in these distribution companies* • The Moscow Region Government may increase its shareholding in the Moscow Region Electricity Network company to 51% and above, through closed share issue in the distribution company* • RAO UES is expected to provide direct participation for its shareholders in the generation, regional electricity distribution and repair companies * Share issues will be decided upon by the AGMs of the respective newly created companies

9. Current and Contemplated Shareholders Structures *Figures shown in the table are for illustration only

10. Major Events Following Spin-Off Mosenergo Shareholder Meeting approves the spin-off and the pro-rata distribution of shares in the newly-created companies • Trading and listing of the spun-off companies shares, including possible establishment of ADR programs for some or all of the spun-off companies* • Voluntary and transparent exchange of shares between shareholders (swapping) The Government of Moscow is expected to openly propose to the Moscow City Electricity and Heating Network companies’ shareholders, in the first place to the Mosenergo minorities and then to RAO UES, to exchange their shares in these companies for the shares held by the Government of Moscow in other companies created in the process of Mosenergo restructuring • Share issuance Moscow City Heating and Electricity Network companies’ AGMs will decide whether to issue additional shares which would be allocated to the Government of Moscow through a closed shares issue* Moscow Region Electricity Network company’s AGMs will decide whether to issue additional shares which would be allocated to the Moscow Region Government through a closed shares issue* • Direct participation of RAO UES’ shareholders is expected in the newly established companies – Moscow Generation Company, Moscow Region Electricity Network Company and repairing companies • Integration of Stand-Alone Generation Plants (GRES-4, GRES-5 and GRES-24)into the Wholesale Generation companies (WSG-1, WSG-5 and WSG-6 respectively)* • Integration of the Trunk Grid Company into the Federal Grid Company* * These steps will be approved by the Boards of Directors/AGMs as appropriate of the spun-off companies

11. Indicative Mosenergo Restructuring Time Table EVENT Possible timing 1. Mosenergo Shareholders Meeting approves the spin-off June, 2004 2. Registration of each of newly established companies December, 2004* 3. Registration of the newly established companies’ shares by authority March, 2005* 4. Listing of the shares of newly established companies May, 2005** 5. Regulatory authorization to establish ADR programs Summer, 2005** 6. Exchange of minorities’ shares in Moscow Heating and Electricity Network • companies for Government of Moscow shares in other companies Autumn, 2005** • 7. Possible share issuance in Moscow Heating and Electricity Network • companies and Moscow Region Electricity Network Company to • increase ownership stake of Moscow City/Moscow Region January,2006** • 8. Direct participation of RAO UES’ shareholders in Moscow Generation Company, Moscow Region Electricity Network Company and repairing companies; integration of Wholesale Generation companies, integration of Trunk Grid Company to be determined** • * subject to necessary legal and regulatory actions • ** subject to actions by other parties

12. Key Steps for Implementing the Spin-off from Mosenergo 0f 13 new companies I. BEFORE Mosenergo Shareholders Meeting - Production of separation balance sheet - Negotiations with creditors - Disclosure for shareholders II. AFTER Mosenergo Shareholders Meeting - Mandatory buyback of dissenting shareholders’ shares - Shareholders meetings in every newly established company III. Registration and Licensing of newly established companies - Companies registration - Registration of each new company in state agencies (Tax, Pension Fund, etc) - Tariffs for new companies - Issuance of new licenses for new companies - Access to the wholesale power market - Registration of shares of new companies IV. Following Registration and Licensing - Registration of new companies real estate assets (more than 14 000) - Signing of new contracts between new companies - Forming of new companies staff structures - Transfer of property