1. Presentation by Anatoly Chubais, Chief Executive Officer, RAO UES of Russia 25 June 2002Moscow

2. 2 The new managers team has worked out and implemented the antirecessionary program of Holding development Three year results and medium-term program of the Holding development The program of achieving the strategy goal of increase in energy business efficiency and profitability, for Holding, and its aggregate value growth within Russian power sector reform Year 2001: The antirecessionary management period is finished, the switch to regular working regime is completed, the concept for further development is worked out 1998 - 20012002 - 2004 «3 + 3»

3. 3 STATUS OF ELECTRIC POWER SECTOR OF RUSSIA 21 AO-Energos filed for bankruptcy Negative financial and economic developments Non-payment crisis: cash collection no more than 20% Strikes Turnover of shadow and semi- criminal economics up to US$ 8 bln. Drop in liquid assets indices and solvency Early to mid 1990s : electric power sector in light of social and political situation in Russia

4. 4 Results: 1998-2001 Tendency of Last Years - Increase in Power Generation and Power Consumption 1074 1062 1002 945 856 840 828 813 809 832 863 800 850 900 950 1000 1050 1100 19901991199219931994199519961997199819992000 Bln. kW/h In 1999, for the first time after the crisis power consumption grew by 2,8 % or 22,9 bln. kWh 2002 (forecast) Bln. kW/h 199920002001 600 700 622,8 602,2 628,7 634,2 Generated by RAO UESR Energy Consumption 880 875 2002(forecast)2001

5. 5 in 2001, 97. 28% of the time IPS/UPS maintained within UCTE standards IPS/UPS operation dynamics 49.88 49.92 49.99 78.6 94.6 99.94 49.82 49.84 49.86 49.88 49.9 49.92 49.94 49.96 49.98 50 199619982000 Frequency, Hz 60 65 70 75 80 85 90 95 100 % calendar time 100.00 50.00 2001 IPS/UPS operation at standard frequency over a 1 year period Average frequency Results: 1998-2001

6. 6 0 1 2 3 4 5 6 7 8 9 0 2 3 6 7 9 10 11 12 13 14 15 0 20 40 60 80 100 120 Q2Q4 1998 Q2Q4 1999 Q2Q4 2000 Q2Q4 2001 112 17 22 48 92 101 199819992000 1000 3000 4000 5000 6000 7000 8000 7891 3154 0 104 9696 Q1 2002 Total losses of RAO UESR due to non-payments and barter, mln. euros (according to Deutsche Bank estimates) 0 0 2 3 electricity supplied Solving the Non-payments Problem in RAO UESR: 1998 - 2001 Results: 1998-2001

7. 7 1 4 5 8 11 15 22 26 33 36 37 40 43 44 47 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 * The figures have been calculated taking into account the purchasing power of ruble as of December 31, 2001 Billion rubles 0 2 3 6 7 9 10 12 13 14 16 17 18 19 20 21 23 24 25 27 28 29 30 31 32 34 35 38 39 41 42 45 46 48 49 50 199920002001 (forecast) Operating revenue is growing 260.0 352.0 400.0 grew by 135% grew by 114 % Results: 1998-2001

8. 8 Cost reduction structure of the Holding in 2001 9% 6% 3% 4% 2% 1% 16% 20% 35% 4% Fuel balance - Fuel rate Fuel - other Refurbishment Wages Non-core services Management expenditures Property surplus Non-core Others Cost reduction programmes stimulate management of companies to reach greater bottom line results through targeted cost reduction 12.3 billion rubles were earned through implementation of the Cost Reduction Programme in the Holding in 2001 Results: 1998-2001

9. 9 1 4 5 8 11 15 22 26 33 36 37 40 43 44 47 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Annual payments to the consolidated budget of the Russian Federation Payments to the consolidated budget of the Russian Federation Billion rubles 0 2 3 6 7 9 10 12 13 14 16 17 18 19 20 21 23 24 25 27 28 29 30 31 32 34 35 38 39 41 42 45 46 48 49 50 23.5 24.7 39.6 73.1 1998199920002001 grew by 160.3% grew by 105.1% grew by 184.6 % Results: 1998-2001

10. 10 The international audit by Pricewaterhouse Coopers: 47 billion rubles of the net profit in 2001 (preliminary figure) In 2000 the Group for the first time obtained operating profit of 7.9 billion rubles and net profit of 1 billion rubles. Net profit of the Group, billion rubles -500 -100 0 100 - 11.9 - 532.3 19981999 1.01.0 2000 47.0 2001 (forecast) * The figures were calculated taking into account the purchasing power of ruble as of December 31, 2001 Results: 1998-2001

11. 11 Measures for increasing of RAO “UES of Russia” capitalization Strategy «3 + 3» Discussion with shareholders Approval by the Board of Directors according to discussion results Elaboration of a strategic program of corporate development for the next 3 years Attract experts to improve communications with investors and minority shareholders Increase Holding Efficiency through cost reduction and income growth Results: 1998-2001 0 1 2 3 4 5 6 7 8 9 3 Q4 Q 1 Q 10 12 14 16 10,68 12,26 16,14 2 Q 20012002 14,82 The Dynamics of average equities price

12. 12 Competition complete liberalization of electric power sector State monopoly Price liberalization Non-discriminatory access to grid Private investments 1990s: World trends in electric power sector Russia (2001) France (2000) Hungary (1999) Tailand (1996 ) Italy (1999) Great Britain (1990) Ukraine (1997) Skandinavia (1992) EU Directive (1996) Argentina (1990 ) Brazil (1995) SAR (2000) Greece (2000) Kazakhstan (1998) Moldova (1999) California (1995)

13. 13 Reforms: separation of natural monopoly and competitive sectors Competitive sectors Competitive sectors Natural monopolies Natural monopolies Liberalisation of price- setting mechanisms and stimulation of market participation Market rules GRIDS Regulated tariffs Securing equal access to grids. Establishment of technical and commercial infrastructure for the market GENERATION SUPPLY DISPATCH Prospect: 2002-2004. Russian power sector reform

14. 14 December 17, 2001 July 11, 2001 Basic guidelines of the power sector reforms were approved by the Government Decree # 526 The Government Decree # 873 establishes a Governmental Commission responsible for power sector reforms The Governmental Decree # 226 approves price-setting methods for electric power and heat April 2, 2002 April 26, 2002 The package of draft laws on power sector reforms was introduced by the Prime Minister to the Federal Assembly of the Russian Federation The Federal Law “On the Power Sector” Amendments to the Federal Law “On the State Regulation of Tariffs” Amendments to the Civil Code Amendments to the Federal Law “On Natural Monopolies” Amendments to the Federal Law “On Competition...” Amendments to the Federal Law “On Energy Saving ” Prospect: 2002-2004. Russian power sector reform Legislative Base for Reforms

15. 15 RAO “UES of Russia”: reforms in the coming two years RAO “UES of Russia” System Operator Federal Transmission Company Administrator of Trade System 100% АО-энерго AO-energo 100% О Г К Wholesale generating companies Basic reform model 20022004 System Operator Federal Transmission Company АО-энерго О Г К Wholesale generating companies Interregional grid companies АО-энерго Territorial generating companies 52/48% state 52% minority shareholders 48% state AO-energo Holding 52/48% Prospect: 2002-2004. Russian power sector reform

16. 16 8 3 4 9 The regional projects launched: order № 200 Defines priorities for regional energy companies reforms Obligates the AO-energoes general directors to organize consultation with the parties interested RAO UES Order № 200, 05.04.2002  For 100% subsidiaries – АО-energo – till August 1, 2002  Other subsidiaries - АО-energo – till October 1, 2002 Sets the time limits for decisions on new companies creation Foresees negotiations by the general directors of AO-energoes with creditors to reach the agreement about debt adjustment Prospect: 2002-2004. Russian power sector reform

17. 17 Base model for AO-energo restructuring was approved by the UES Board of Directors on 6.03.2002 Regional projects: base model AO-ENERGO GENERATION GRIDS SUPPLY GRIDSGENERATIONSALES RESTRUCTURING MANAGEMENT COMPANY  Reorganisation of AO-energo in the form of separation  Transfer of management of newly created companies to management companies  Transfer high voltage transmission lines of AO-energo to interregional grid companies, transfer of the property of regional dispatch units to the System Operator Prospect: 2002-2004. Russian power sector reform

18. 18 5 6 7 8 0 2 3 6 7 9 Prospect: 2002-2004. Russian power sector reform Regional projects at different stages of the approval procedures at RAO UES Execution of the RAO UES order # 563 of 17.10.2001 “Measures to Reform subsidiaries and dependent companies» RAO UES is currently examining 57 reform projects concerning 68 regional energy system The following projects has approved by Management Board - 7 Reform Committee - 3 UES’s Board of Directors - 14 23 agreements and 7 letters of intent concerning the reform have been signed with regional governors

19. 19 Principles of Conducting Transactions with RAO UESR Assets Independent valuation of assets Possibility for shareholders to make their propositions as to which appraisers to employ Open tenders when selling assets Public disclosure of information Equality of conditions for every shareholder when buying out securities No reduction in the level of payables Market asset prices based on the independent valuation Possibility of shareholders’ participation in founding of daughter companies Preservation of the shareholding structure and amount of shares of each shareholder in newly created companies as a result of restructuring Prospect: 2002-2004. Russian power sector reform

20. 20 1 4 5 8 0 1 2 3 4 5 6 7 8 9 Prospect: 2002-2004. Russian power sector reform Key Decisions on Restructuring are Made in Cooperation with Minority Shareholders 1 4 0 1 2 5 7 8 is functioning within corporate procedures 47 14 15 Reforming Committee under UESR’s Board of Directors Board of Directors of RAO UESR Project preparation UESR’s Project Committee reflects the position of the Government as a company’s shareholder Governmental Commission on Russian Power Sector reforming General Shareholders’ Meeting The Evaluation Committee is functioning under the Board of Directors. The Committee has chosen Deloitte & Touche to create common methods for valuation of power companies Minority shareholders Boards of Directors of power companies

21. 21 Prospect: 2002-2004. Investment Short-term Investment Program «5000 МWt»: Projects for 2002 Pskov CPS, 215 MWt North-West TPS (CCGT), 450 MWt Transaction goal - to attract a strategic investor to complete the 2nd power generating unit Transaction type: tender for 25% +1 share with an option for other 25% Transaction goal - to attract a strategic investor Transaction type: tender for 25%+1 share with gradual increase of investor share in the capital up to 51%

22. 22 Prospect: 2002-2004. East-West strategy UCTE IPS/UPS 1991 1996 1994 1999 2001 UCTE expansion 1995 GDR 1997 Poland Hungary Slovakia Czech Rep. Planning Romania 1987 Spain Portugal Morocco Algeria Tunisia Greece Russia USSR MIR Russia intercon’d CIS intercon’d UCTE is expanding, Eastern interconnection is restored. This has lead to the inevitable alternative: back-to-back station or global synchronization Change in the European Power Systems’ Borders: 1991- 2002 1997

23. Thank you for your attention