1. RUSSIA POST ELECTIONS: GREAT EXPECTATIONS VIII ANNUAL INVESTOR CONFERENCE Moscow, Russia 22.06.2004 Speech of the Chairman of the Management Board of RAO «UES of Russia» A. Chubais RAO «UES of Russia»: The energy of the reform

2. 2 TWh Overview of Russia and Russian Electricity Sector Positive Consumption Trend Russia: 4th Largest Power Producer in the World in 2003 3,864 1,472 1,033 889 588 580 577 546 383 328 0 1,000 2,000 3,000 4,000 5,000 USChinaJapanRussiaCanadaGermanyIndiaFranceUKBrazil 25.0%9.5%6.7%5.7%3.8%3.7%3.7%3.5%2.5%2.1% % of World Total TWh Optimistic Scenario Pessimistic Scenario 750 1,000 1,250 1,500 1,750 19901995199619971998199920002001200220032004200520102015 1,073 841828 813809 832 863875879 889 945 911 1,135 1,020 1,315 1,100 1,545 1,200 897 2020 Source: IEA Source: Energy Recearch Institut, Russian Academy of Sciences

3. 3 RAO “UES of Russia” Today: Operating Highlights Source: RAO “UES of Russia”, IEA The World’s Ten Largest Electricity Companies (2003) >156RussiaRAO UES Capacity (GW)Home-baseCompany 42South AfricaESKOM 43GermanyRWE 45ItalyENEL 49FranceSUEZ 54GermanyE.ON 59JapanTEPCO 121FranceEDF 151ChinaSPCC 42USA AEP Key Facts Except for nuclear capacity and several large independent generators, UES controls the electricity industry in Russia  72% of Russia’s installed generation capacity  69% of Russia’s electricity output  32% of Russia’s heat production  96% of Russia’s power transmission lines

4. 4 Russian Electricity Sector: Today’s Structure Federal Grid Company System Operator 32 Federal Power Stations Generation Transmission & Distribution Grids Supply Dispatching Services Russian Federation Minority Shareholders of the Parent Company Independent AO-Energos: Irkutskenergo Tatenergo Bashkirenergo RosEnergoAtom Government 10 Nuclear Stations 73 Regional Power Companies - AO-Energos From 49% to 100% 52% 48% 100% From 50 to 100% RAO UES of Russia

5. 5 RAO “UES of Russia” Today: Key Financial Data 2003 (Forecast Data): Revenue – around $19,6 bn 2002: Revenue – $15,83 bn US$ m9 months ended 30 Sept 2001 9 months ended 30 Sept 2002 9 months ended 30 Sept 2003 Revenue8,47410,32813,720 Net Profit909669543 EBITDA1,0701,4942,720 EBITDA Margin12.6%14.5%19.8% Operational Margin1.2%0.6%8.9% Net Margin10.7%6.5%4% Fixed Assets24,20125,83429,293 Shareholder Equity14,40416,73019,733

6. 6 Growth of the market capitalisation of RAO «UES of Russia» (RTS data) 440% 420% 400% 380% 360% 340% 320% 300% 280% 260% 240% 220% 200% 180% 160% 140% 120% 100% 80% Capitalisation of RAO «UES of Russia» RTS Index 08/06/2004 02/09/2002 In the recent two years the stocks of RAO «UES of Russia» were largely outperforming the Russian securities market as a whole Oct-Dec 2002 Jan-Mar 2003 Apr-Jun 2003 Jul-Sep 2003 Oct-Dec 2003 Jan-Mar 2004 Adoption of a package of laws on electricity industry

7. 7 Power sector reform after adoption of a package of laws: restructuring of RAO «UES of Russia»  Approval of a configuration of Wholesale Generation Companies;  Approval of a configuration of Territorial Generation Companies;  Approval of a configuration of Interregional Distribution Companies and Interregional Transmission Companies;  Approval of the corporate strategy concept (“5+5”);  Ongoing consolidation of transmission and operational control assets (within AO “Federal Grid Company” and AO “System Operator”);  Adoption of restructuring decisions by 17 AO- Energos. Restructuring of the first utility (“Kalugaenergo”) has been completed;  Ongoing spin-off of repair and maintenance businesses;  A management company for AO “North-West CHPP” (an international consortium involving ENEL and ESN Energo) has been chosen through a public tender procedure.  Establishment of new market participants: -10 wholesale generation companies (WGCs), -Up to 20 territorial generation companies (TGCs) -5 interregional distribution companies (IDCs); ! Sale of thermal WGCs and TGCs to private investors;  Completion of the restructuring of AO-Energos: by the end of 2004, 40 AO-Energos will have held restructuring shareholders meetings);  Completion of the consolidation of transmission and operational control assets;  Attracting initernationally recognized strategic investors into the Russian power sector Results Plans

8. 8 Power sector reform after adoption of a package of laws: formation of the market  Since November 2003, electricity trading sessions have been going on in the competitive sector 5-15  Within the first 7 months of its operation, the trading exchange of the Non-Commercial Partnership «ATS» became one the ten largest specialized trading exchanges of the world by trading volumes  The free sector of the market represents some 8% of the total electricity generation and consumption in European Russia and Urals  Implementation of the current model of the competitive wholesale electricity market throughout the Russian territory (with the exception of isolated power systems and the Far East)  Development of a new target model of the market  Establishment of regional liberalized retail market (subject to the elimination of the cross subsidisation practices) Results Plans

9. 9 Volume and price dynamics in the competitive sector of the wholesale market Source: NP ATS Power sector reform: formation of the market

10. 10 Improvement of management Corporate Center Reform Management Center Business Unit 1 Business Unit 2 Business Unit «Grids» Business Unit «Hydro Generation» Business Unit «Service» SO-CDU Hydro WGCs (4), Hydro Power Stations under construction Thermal WGCs (3), TGCs (8), Corresponding Regional Energos Thermal WGCs (3), TGCs (6), Corresponding Regional Energos Repair and Service Companies Management Board The new organizational structure of RAO UES of Russia must stimulate the reform progress in the electric power sector of Russia Federal Grid Company, IDCs, Export-import, Foreign assets

11. 11 Participation in assets management, Export  In addition to the traditional exports, RAO «UES of Russia» has launched a new stage of its strategy abroad based on the acquisition of foreign assets. The company has acquired energy assets in Georgia and Armenia.  Expansion of the geographical scope of exports, attraction of investments into the export- oriented core business development projects.  Participation in assets management or acquisition or foreign assets in the CIS area (Moldova, Ukraine, Kazakhstan, Kyrgyzstan,Tadjikistan) and foreign countries (Slovakia, Bulgaria, Poland, Romania, Turkey). Results Plans  Approval of the key parameters of the Feasibility Study of synchronous interconnection by the European Commission.  The Union for the Co-ordination of Transmission of Electricity (UCTE) has prepared draft Terms of Reference for the development of a Feasibility Study of the synchronization project. Synchronization of the electricity systems of Russia and European countries.

12. 12 «OK, Mr. Chubais, I agree that a quality of your reform is more important than its terms… But… Time is money, isn’t it?!» RAO “UES of Russia” Restructuring: Terms and Quality

13. 13 RAO “UES of Russia” Restructuring: Wholesale Generation Companies (WGC) Arrangement Projects for the first five Wholesale Generation Companies will be discussed at the RAO UESR Directors Board Meeting on 25.06.2004 I stage: Wholesale Generation Companies are set up as 100 % daughter companies of RAO UES (based on the assets and stocks of federal power plants belonging to RAO UES) July-August, 2004: setting up of Wholesale Generation Companies №№ 1, 2, 4, 5, 6 2 stage: Auctions to sell out Wholesale Thermal Power Generation Companies Auctioning mechanism should be approved by the Russian Government

14. 14 RAO “UES of Russia” Restructuring: Territorial Generation Companies (TGC) Arrangement Projects for the first two Territorial Generation Companies will be discussed at the RAO UESR Directors Board Meeting on 25.06.2004 April 2004: RAO UES Directors Board has endorsed the scheme of the Territorial Generation Companies being established on the basis of the rented generation equipment of AO-Energos. Based on this scheme Territorial Generation Companies №№ 9 and 14 will be set up. It is planned that Territorial Generation Companies №№ 9 and 14 will start operating since 01.01.2005. Territorial Generation Companies №№ 9 and 14 could be sold to investors after their formation has been completed (2006).

15. 15 25.06.2004: Time to make a choice Setting up and further splitting off WGCs and TGCs– the biggest actors on the future electric power competitive market in Russia Breach of time schedule of setting up electric power competitive market in Russia -+

16. 16 THANK YOU FOR YOUR ATTENTION