1. Anatoly Chubais Chief Executive Officer RAO Unified Energy System of Russia 6th Annual Russian Economic Forum 3 rd April 2003, London

2. 2 RAO UES of Russia is one of the biggest power companies in the world Key data * As of 2nd April 2003 ** Preliminary data  Generates 70% of all electricity output in Russia (617.4 bn. kWh)  Market capitalization – USD 5.4 bn. *  Sales volume in 2002 – USD 17 bn.**  632,000 employees 3.9 1.2 1.1 0.8 0.6 0.5 0.4 0.3 0 2 4 6 USARussia India Brazil Russian power market is the fourth largest in the world 26.5%8.4%7.2%5.7%3.9%3.7%3.6%3.5%2.5%2.2% % of global production Bn. MWh China JapanFRG FranceUK Canada

3. 3 5-year results of RAO UES of Russia Key indicators 1998 2002 Net profit (loss), USD billion Share of cash collections, %** Unauthorized cash flow, USD billion Average length of wages in arrears, months Generation of electrical power per employee, kWh Number of AO-energoes subject to bankruptcy procedure Number of former Soviet republics operating in parallel mode with the UES of Russia Total duration of UES operation with violation of electrical power frequency standard, hrs (18.1) 1.3* 17 102 10 14 21 3.7 977.1 899.0 36 0 0 0 7.5 0 Mid-year 1998: new UES management team was put in place * 2001 financial year ** As percentage of total sales

4. 4 Competitive sectors Natural monopolies  Free price-setting  Stimulating market entry Market rules Regulated tariffs  Securing equal access to grids  Establishing the market infrastructure GENERATION SUPPLY TRANSMISSION DISTRIBUTION DISPATCHING Reform basics: separation of monopoly and competitive sectors

5. 5 International trends of power sector development Deregulation Privatisation France (2000) Hungary (1999) Thailand (1996) Italy (1999) California (1995) Great Britain (1990) Ukraine (1997) Scandinavia (1992) Private property State property Argentina (1990) Brazil (1995) SAR (2000) Moldova (1999) State Regulation Competitive market Russia (2001) Kazakhstan (1998) Tajikistan Kyrgyzstan (2001) Belarus (2002)

6. 6 Majority of regional Governors led by the Moscow Mayor and influential presidents of republics Conservatively-minded energy specialists and scientists Certain foreign minority shareholders RF Government and RAO UES of Russia Political aspects of the reform process Historical opponents On April 1st, 2003, the Law on the Electric Power Industry became effective RF Government and RAO UES of Russia Current opponents RF President and the RF Government are playing a key role at every stage of the reform Influential oligarch groups The adviser to the Russian President and the Deputy Energy Minister, supported by certain senior officials Most Council of the Federation senators Key political factions in the RF Duma (Fatherland, People’s Deputy, Russian Regions, Agrarian Party of Russia, Yabloko, The Communist Party of the RF) Deputy Energy Minister Two political factions in the State Duma: Yabloko (G. Yavlinsky), The Communist Party of the RF (G. Zyuganov) 1 2 3 4 5 6 7 1 2

7. 7 8 Russian business has entered the Russian power sector Russian business… … accepted the concept of reforms in the power sector … started to believe that the reform will be carried out … has strategic rather than portfolio interests  New shareholders of the daughter companies have spent circa USD 800 million on acquisition of blocking minority stakes in AO-energoes:  June 2002 – 8; March 2003 – 40 RTS index Common stock of RAO UES Improvement in UES market capitalization in the last 6 months (%) Total USD 1.5 billion 100 140 180 September October November December JanuaryFebruaryMarch %  New shareholders of the mother company have spent circa USD 700 million on acquisition of approximately 10% stake of RAO UES of Russia Foreign companies have not occupied strategic positions in the Russian power sector yet

8. 8 UES Reform: shareholders’ rights protected Sale of assets of wholesale and regional generating companies Methods of reforming RAO UES of Russia Reorganizing through separation Pro rata distribution of shares in the newly created companies (on both mother and daughter level) _______________________________________________ Article 4 of Federal Law ‘On Features of Electric Power Industry Operation during the Transition Period’ No. 36 as of March 26, 2003

9. 9 Electrical power industry reform  Restructuring of RAO UES of Russia  Creation of an electrical power market in Russia Further management improvements  Improvement of corporate governance  Improvement of operational results Business development  Expansion into municipal heat  Expansion into municipal power  Acquisition of power assets in CIS Further steps: key elements of the strategy  Strategic management priorities in the three coming years include increasing the overall capitalization of RAO UES of Russia and of the newly created companies  The overall capitalization of the newly created companies is expected to be greater than that of RAO UES of Russia currently

10. Anatoly Chubais Chief Executive Officer RAO Unified Energy System of Russia 6th Annual Russian Economic Forum 3 rd April 2003, London