Moscow. 18 January 2008. At its meeting held today, the Board of Directors of RAO "UES of Russia" decided to create the Strategy Committee of the Board of Directors of OAO "UES SO-CDA".

This decision was taken by the Board of Directors in the course of discussion of the energy market participants' involvement in controlling the compliance by the System Operator with the wholesale electricity market rules and regulations.

Currently, such control is exercised by NP "ATS" under an agreement made with the System Operator pursuant to the provisions of the Federal Law On the Electricity Industry. Under the agreement, the System Operator is required to periodically provide detailed reports to ATS on the functioning of the Unified Energy System of Russia, and to give argumented comments if ATS has issues with the data submitted.

The report on the control of the System Operator's activities is submitted on a quarterly basis for review by the Supervisory Board of NP "ATS", which consists of representatives of generation companies, energy retail companies, and electricity consumers. A summary of such report is subsequently published. Another important element of the control system is the participation of the ATS head in the System Operator's Board of Directors.

Also, work is currently underway to finalize the Wholesale Electricity and Capacity Market's rules designed to further formalize the load of power units by the criterion of minimizing the electricity price for consumers.

The RAO UES Board of Directors noted that it is necessary to preserve the existing mechanisms of control over the System Operator's activities by the market participants after the RAO UES reorganization is completed.

Under the applicable Russian laws, the state is to secure a 100 percent stake in the System Operator's capital after the electricity sector restructuring is completed. This means that the System Operator's Board of Directors will be elected by the country's energy-related ministries and agencies.

In this connection, the Board of Directors gave the RAO UES Management Board a task to explore whether it would be possible for a representative of Non-profit Partnership "Market Council" to take part in the System Operator's Board. NP "Market Council" will be created on the basis of NP "ATS" to represent the electricity industry's new participants.

Also, it is planned that a Strategy Committee will be created in the System Operator's Board, which will comprise representatives of the state authorities, NP "ATS" (NP "Market Council"), generation and grid companies, major power consumers, System Operator management, experts and representatives of other organizations, if a resolution to that effect is taken by the System Operator's Board of Directors.

The Strategy Committee will be responsible for providing recommendations for the System Operator's Board of Directors and Management Board on a broad range of issues, including those related to measures needed to develop the Unified Energy System of Russia (electricity consumption growth forecasts, control of implementation of investment projects in the sector, the launch of a system services market, etc.), as well as those designed to improve the System Operator's activities (implementing innovations in the System Operator's activities, information disclosure, analysis of proposals relating to streamlining the internal workflows).

The Board of Directors instructed the Management Board of RAO "UES of Russia" to initiate the corporate acts needed to create the Strategy Committee at the System Operator, including the drafting of the Committee's rules and regulations and nominating candidates for the Committee.

The Management Board of RAO "UES of Russia" was also given the task to submit to the Company's Board of Directors, not later than April 2008, its proposals on the establishment of a similar committee of the FGC's Board of Directors.

The Board of Directors postponed until its next meeting the review of the proposal on the repurchase by the System Operator of its shares from RAO "UES of Russia" and their subsequent cancellation.

***

The RAO UES Board resolved not to limit the number of additional shares to be issued by OAO "TGC-2"* to the amount of funds needed to finance its investment programme (RUB9 billion).

In September 2007, the Board approved the programme for the issuance of new shares by OAO "TGC-2". Under the programme, the company was to raise RUB9 billion in funds by selling up to 440,550,372,372,763 ordinary shares, RUB0.01 par value each (which makes 39.60 percent of the company's capital before the offering and 28.37 percent of its capital after the offering).

The Board also approved simultaneous sale of 372,338,967,050 shares attributable to the "government stake" (which makes 33.47 percent of the company's capital before the offering). The price at which the "government stake" shares will be sold must not be lower than the price of the new shares.

In the course of preparation for the issuance and sale of new TGC-2 shares, it became clear that the strategic investors are interested in the proposed transactions. This makes it possible to expect serious competition among the potential buyers willing to acquire a majority stake in TGC-2. As a consequence, the offering price will be much higher than the price used to calculate the parameters of the new share issue.

However, the high placement price accompanied with the limitation of the number of additional shares to be issued to RUB9 billion will significantly reduce the number of shares to be issued and, as a result, reduce the stake of a potential investor in the company's capital. As a result of the strategic investors' interest in the "government stake" in TGC-2 may decrease.

In order to maximize the price of the offering and share sale while preserving competition among the strategic investors, the RAO UES Board today resolved not to limit the number of additional shares to be issued by OAO "TGC-2" to the amount of funds needed to finance its investment programme (RUB9 billion). This will significantly boost competition in the course of the share issuance and maximize the price not only new shares, but also of "the government stake" to be sold.

Importantly, TGC-2 shares in excess of the amount needed to raise RUB9 billion will be sold to any investor which offers the highest price per share only if such increase in the number of shares is needed for the investor to secure a maximum stake in TGC-2. The maximum number of shares approved for issuance by the RAO UES Board remains 440,550,372,372,763 ordinary shares.

The RAO UES Board of Directors instructed the Management Board hold negotiations with the TGC-2 minority shareholders 2 and the Ministry of Economic Development and Trade in order to determine the maximum amount of new shares and "government shares" in TGC-2 that may be purchased by the potential purchaser.

The additional share issuance and sale of the "government stake" is scheduled to take place March 2008. The proceeds from the additional share issue will be used to implement the company's investment projects: new capacity will be brought on line in all areas were the company operates, primarily in the Vologda, Novgorod, and Yaroslavl energy systems where the energy shortages are especially acute. The proceeds from the sale of the government stake in TGC-2 will be used to finance the deficit of the FGC investment programme.

After the sale of the "government stake and the share offering, RAO UES will hold at least 11.38% of TGC-2.

***

The Board of Directors approved that the auction to sell the 50.9% stake in OAO "Mosenergosbyt" held by RAO "UES of Russia" be moved from May 2008 to March 2008. In order to achieve better results selling the Mosenergosbyt stake, the shares are to be sold in the 4th, not the 5th (final), series of auctions to sell shares in the energy retail companies, as previously planned.

OAO "Mosenergosbyt" is Russia's largest energy retail company which supplies electricity to more than 5 million customers in Moscow and the Moscow Region. In 2007, the company's productive electricity supply was 78 billion kWh, with sales revenue exceeding RUB100 billion.

Mosenergosbyt has the highest market capitalization among the RAO UES energy retail companies, with the capitalization in excess of RUB17 billion.

According to the Government's sector reform plan, RAO "UES of Russia" will cease to exist on 1 July 2008. By that time, RAO UES is to sell its stakes in 52 energy retail companies. 22 of them worth a total of RUB13 billion were sold in 2007. If any of the stakes are not disposed of before 1 July 2008, they will be transferred to OAO "RAO Energy Systems of the East" under a demerger balance sheet.

***

The Board instructed the Management Board to take steps needed to issue new shares in OAO "TGC-14"* simultaneously with the sale of the government's stake in the company.

By 4 March 2008, the RAO UES Management Board is to ensure that TGC-14 holds an EGM to approve the new share issues, specifically, resolutions regarding the number of additional shares authorized for issuance and on the capital increase.

RAO UES hold negotiations with another major shareholder in TGC-14, OAO "Norilsk Nickel Mining and Metallurgical Company" in order to arrange for the sale of the companies' stakes as a single lot.