1. RUSSIAN POWER. IN ANTICIPATION OF NEW PACES LONDON, 12.03-13.03.2012 INNOVATIONS IN THE RUSSIAN ELECTRIC POWER INDUSTRY. HOW TO ATTRACT INVESTMENTS? Pavel Shatsky, First deputy to General Director of Gazprom Energoholding

2. Priority development of electric power sector is an indispensable condition for a secure power and heat supply and inadmissibility of economic growth limits 2 Market model should foster sustainable development of this industry sector INNOVATIONS IN THE RUSSIAN ELECTRIC POWER INDUSTRY. HOW TO ATTRACT INVESTMENTS? Structure of an electric power cluster Equipment and engineering market Assets of TGK and OGK Fuel market Infrastructure services market Electric power sector regulation model FINAL CONSUMERS

3. New technologies should become a driving force in modernizing electric power field assets 3 The field efficiency improvement is not possible without development of new technologies Innovative projects of companies belonging to the Gazprom Energoholding group COAL COMBUSTION TECHNOLOGIES Novocherkassky Power Plant – first Russian construction project of coal power unit 330 MW using the circulating fluidized bed technology (CFB). GAS-VAPOR TECHNOLOGIES Kirishy Power Plant – a new schematic circuit developed with unique three-flow heat-recovery unit with intermediate superheating and natural circulation, as well as a project of technical upgrade of the existing vapor turbine К-300-240 LMZ for a К-245-13.3 GAS-TURBINE ADD-ONS TEZ-9 (Moscow) – a pilot prototype of the first gas turbine unit GTE-65 manufactured by the JSC Power Machines. INNOVATIONS IN THE RUSSIAN ELECTRIC POWER INDUSTRY. HOW TO ATTRACT INVESTMENTS?

4. Accomplishment of the General Scheme of supplying Power Stations with capital investments will require 10 trillion rubles up to 2030 4 30 GW of power delivery contract will not solve the technical upgrade problem of electric power field Main electric power equipment in this sector has a high rate of obsolescence and physical deterioration 18 33 43 37 12 1 1991-2010 1981-1990 1971-1980 1961-1970 1951-1960 before 1950 Russia: introduction of structures by years, GWRussia: need for technical upgrades, GW 50 43 33 144 18 INNOVATIONS IN THE RUSSIAN ELECTRIC POWER INDUSTRY. HOW TO ATTRACT INVESTMENTS?

5. The actual distribution of incomings doesn’t cover the requirements of generating companies in their need for functioning and development 5 Market model of this field doesn’t reflect the priority of capacity upgrading Generating companies receive only 25% of sale proceeds of final consumers FUEL SUPPLY OPERATION OF POWER PLANTS TRANSMISSION AND DISTRIBUTION SALES ≈20-25% INNOVATIONS IN THE RUSSIAN ELECTRIC POWER INDUSTRY. HOW TO ATTRACT INVESTMENTS?

6. Thermal generation (ТGК) finds itself in a worse situation than OGK because of the scenario conditions of the early period of reforms, whilst having higher needs for modernization 6 Efficiency of business models in generating company blunts Tendencies of electric power field in 2009-2011 in view of OGK and TGK Operating efficiencyConverting the potential Expenses for fuel / Income, % 2009201120092011 44.36ТGКТGК49.6347.33ОGКОGК55.40 Growth rate (Income / Average headcount), % 2009201120092011 18.83ТGКТGК19.77–1.48ОGКОGК14.43 EBITDA profitability, % 2009201120092011 14.93ТGКТGК9.6812.99ОGКОGК12.87 Growth rate of market capitalization, % 2009201120092011 –18.73ТGКТGК7.08–45.86ОGКОGК4.28 INNOVATIONS IN THE RUSSIAN ELECTRIC POWER INDUSTRY. HOW TO ATTRACT INVESTMENTS?

7. The actual situation with necessary and guaranteed volumes of financing causes conservation of equipment obsolescence 7 Existing mechanisms don’t provide guarantees of a return on innovation investments Existing investment encouraging tools 2008-2020 Upgrading capacities ≈ 35% The guarantees on return of innovation investments (standard CAPEX for new construction) doesn’t cover risks of innovation projects New construction ≈ 55% Innovation projects ≈ 10% 30 GW 20 GW NO TOOLS TO ENCOURAGE INVESTMENTS Cost of construction Implementing projects of Power Delivery Contracts ≈30% Volume of financing covered by guarantees on return of innovation investments INNOVATIONS IN THE RUSSIAN ELECTRIC POWER INDUSTRY. HOW TO ATTRACT INVESTMENTS?

8. GROUP 1GROUP 2 When not expensive “long” money for new construction are lacking, one should look at the projects of deep modernization with more attention 8 It is necessary to add new tools to the economic model of the industry modernization Possible investments stimulation tools 2012-2020 Standard CAPEX for new construction Capital intensive projects ≈ 90% from 50% to 70% of standard CAPEX Noncapital intensive projects ≈ 10% from 30% to 50% of standard CAPEX 20 GW NO GUARANTEE OF INVESTMENTS RETURN Cost of construction Limits of compensation of construction price at the cost of competitive power take-off – 118 thousand rubles/MW per month The cost of competitive power take-off doesn’t cover more than 50% of expenses INNOVATIONS IN THE RUSSIAN ELECTRIC POWER INDUSTRY. HOW TO ATTRACT INVESTMENTS?

9. THANK YOU FOR YOUR KIND ATTENTION RUSSIAN POWER. IN ANTICIPATION OF NEW PACES LONDON, 12.03-13.03.2012