Moscow, 23 December 2005. The Board of Directors of RAO "UES of Russia" heard and noted a report on the functions currently performed, in full or in part, by RAO "UES of Russia", which are to be transferred to the state authorities in the course of the Company's reorganization.

Before the functions of OAO RAO "UES of Russia" are transferred to the state and infrastructural companies, it is necessary to hold discussions on what the industry management system is to be like in an environment of private thermal generation and the absence of OAO RAO "UES of Russia".

The fundamental functions which are to be created in the industry management system include the functions to support market development, create reliability standards, control the market forces, prevent violations of access to power grids, forecast the energy industry functioning and formulate the technical policy.

The performance of those functions is expected to be transferred to the state regulatory bodies and infrastructural companies created in the course of the industry reform (OAO "UES System Operator-Central Dispatch Administration" (OAO "UES SO-CDA"), OAO "UES Federal Grid Company" (OAO "UES FGC"), and NP "Administrator of Trading System" (NP "ATS")).

In particular, it is expected that the bulk of the work to develop the market must be concentrated in NP "ATS" and carried out under the control of the state regulator. The main role in the reliability management system must be performed by OAO "UES SO-CDA", an entity responsible for ensuring the reliability of the UES of Russia. It must be granted the powers to involve other industry entities in the efforts to raise reliability. To achieve that, OAO "UES SO-CDA" must be granted the right to control the industry members as well as economic instruments to incentivize them.

The antimonopoly control functions must be fully transferred to the state.

The functions of technical policy development are expected to be transferred to the entities established in the course of the sector reform — wholesale generation companies (WGCs), interregional distribution companies, and OAO "UES FGC", whereas the functions relating to exchange of information in the development and implementation of the policy must be entrusted to the energy industry-related ministry.

Also, the state should assume the functions relating to the collection of reporting information and preparation of preliminary calculations and balances which are currently performed by RAO "UES of Russia". Preferably, these two functions will be transferred to the Balances Agency that will perform the functions under the state control.

* * *

The Board of Directors of RAO "UES of Russia" approved the reorganization of OAO "WGC-1"* through merger of OAO "Nizhnevartovskaya TPP", OAO "Urengoiskaya TPP", OAO "Iriklinskaya TPP", OAO "Kashirskaya TPP-4", and OAO "Permskaya TPP" with and into OAO "WGC-1", and approved the Merger Agreement.

By now, RAO "UES of Russia" has contributed the property of the Verkhnetagilskaya TPP and 100% stake minus one share in OAO "Permskaya TPP" owned by it to the authorized capital of OAO "WGC-1".

It is planned to consolidate OAO "WGC-1" and its subsidiaries through merger of OAO "Nizhnevartovskaya TPP", OAO "Urengoiskaya TPP", OAO "Iriklinskaya TPP", OAO "Permskaya TPP", and OAO "Kashirskaya TPP-4" with and into OAO "WGC-1".

In order to ensure that OAO "WGC-1" is established in accordance with the configuration provided by Resolution of the Russian Government No. 1254-r, it is suggested that RAO "UES of Russia" contribute, prior to completion of WGC-1 reorganization, its shares in OAO "Kashirskaya TPP-4" as payment for additional shares in OAO "Nizhnevartovskaya TPP", a wholly-owned subsidiary of RAO "UES of Russia".

As part of the process to complete the establishment of OAO "WGC-1", the Board of Directors of RAO "UES of Russia" approved the increase in the authorized capital of OAO "WGC-1" through placement of 30,573,177,700 additional ordinary shares, par value RUB1 [each].

According to the conversion [i.e. share exchange] ratios approved by the Board of Directors of RAO "UES of Russia", the following amounts of shares will be exchanged for one ordinary share in OAO "WGC-1":

 - 0.8003/25.3471 of an ordinary share in OAO "Nizhnevartovskaya TPP";

 - 0.8003/1.9380 of an ordinary share in OAO "Urengoiskaya TPP";

 - 0.8003/50.4100 of an ordinary share in OAO "Iriklinskaya TPP";

 - 0.8003/0.2148 ordinary shares in OAO "Kashirskaya TPP-4";

 - 0.8003/20.3526 of an ordinary share in OAO "Permskaya TPP".

It is planned to complete the reorganization of OAO "TGC-1" in Q3 2006.

* The decision on the establishment by RAO "UES of Russia" of OAO "WGC-1" as a wholly-owned subsidiary was taken by the Board of Directors of RAO "UES of Russia" at its meeting held 24 December 2004. The state registration of OAO "WGC-1" was effected by Inspectorate No. 3 of the Federal Tax Service of Russia for Tyumen Region on 23 March 2005. The Director General of OAO "TGC-1" is Vladimir Khlebnikov.

Pursuant to Order of the Government of the Russian Federation No. 1254-r of 1 September 2003, the following companies were included in OAO "WGC-1": OAO "Nizhnevartovskaya TPP", OAO "Urengoiskaya TPP", OAO "Iriklinskaya TPP", OAO "Permskaya TPP", and OAO "Kashirskaya TPP-4".

** For the purpose of determining the market value of shares of the subsidiary power plants and shares of OAO "WGC-1", the Company hired a consortium of appraisal firms consisting of OOO "Pacioli. Audit Company", OOO "KO-Invest", ZAO "Tsentr Professionalnoy Otsenki" ("Professional Appraisal Firm"), accredited with OAO RAO "UES of Russia".

As a result of the tender, the Company selected the consortium of investment banks, Morgan Stanley & Co. Ltd. and ZAO "Troika Dialog", to determine the market value of shares of OAO "WGC-1" and the AO-power plants included in its configuration that would be fair for the shareholders, and conversion of shares taking into account the results of share valuation by the consortium of appraisal firms, and to hold negotiations with the participating shareholders on the share exchange and merger of AO-power plants.

* * *

The Board of Directors of RAO "UES of Russia" took a number of decisions aimed at completing the formation of the target structure of OAO "WGC-4".

By now, RAO "UES of Russia" has contributed the 100% stake minus one share in OAO "Berezovskaya TPP" owned by it to the authorized capital of OAO "WGC-4".

It is planned to consolidate OAO "WGC-4" and its subsidiaries through merger of OAO "Berezovskaya TPP-1", OAO "Surgutskaya TPP-2", OAO "Smolenskaya TPP", OAO "Shaturskaya TPP-5" and OAO "Yaivinskaya TPP" with and into OAO "WGC-4".

In order to ensure that OAO "WGC-4" is established in accordance with the configuration provided by Resolution of the Russian Government No. 1254-r, it is suggested that RAO "UES of Russia" contribute, prior to completion of WGC-4 reorganization, its shares in OAO "Smolenskaya TPP", OAO "Shaturskaya TPP-5", OAO "Yaivinskaya TPP" as payment for the additional shares in OAO "Surgutskaya TPP", a wholly-owned subsidiary of RAO "UES of Russia".

As part of the process to complete the establishment of OAO "WGC-4", the Board of Directors of RAO "UES of Russia" approved the increase in the authorized capital of OAO "WGC-4" through placement of 45,012,738,300 additional ordinary shares, par value RUB1 [each].

As a result, the following amounts of shares will be converted into one ordinary share of OAO "WGC-4":**

 - 0.8588/13.6336 of an ordinary share in OAO "Berezovskaya TPP-1";

 - 0.8588/96.1906 of an ordinary share in OAO "Surgutskaya TPP-2";

 - 0.8588/11.2039 of an ordinary share and/or 0.8588/10.2605 of a Type A preferred share in OAO "Smolenskaya TPP";

 - 0.8588/0.1247 ordinary shares in OAO "Shaturskaya TPP-5";

 - 0.8588/56.0173 of an ordinary share and/or 0.8588/51.3006 of a Type A preferred share in OAO "Yaivinskaya TPP".

It is planned to complete the reorganization of OAO "WGC-4" in Q3 2006.

* OAO "WGC-4" was established as a wholly-owned subsidiary of RAO "UES of Russia". It was registered on 4 March 2005 with the Inspectorate of the Federal Tax Service of Russia for the city of Surgut. The Director General of OAO "WGC-4" is Andrey Kitashev.

OAO "WGC-4" comprises OAO "Berezovskaya TPP-1", OAO "Smolenskaya TPP", OAO "Surgutskaya TPP-2", OAO "Shaturskaya TPP-5", and OAO "Yaivinskaya TPP".

** For the purpose of determining the market value of shares in the subsidiary power plants and shares of OAO "WGC-4", the Company hired a consortium of appraisal firms consisting of ZAO "Central Finance and Appraisal Company", OAO "DISTAN", OOO "Institute for Appraisal of Property and Financial Activity", OOO "LAIR", accredited with OAO RAO "UES of Russia".

As a result of the tender, the Company selected the consortium of investment banks, Morgan Stanley & Co. Ltd. and ZAO "Troika Dialog", to determine the market value of shares of OAO "WGC-4" and the AO-power plants included in its configuration that would be fair for the shareholders, and conversion of shares taking into account the results of share valuation by the consortium of appraisal firms, and to hold negotiations with the participating shareholders on the share exchange and merger of AO-power plants.

* * *

The Board of Directors took a number of decisions aimed at completing the formation of OAO "WGC-6".*

By now, the first stage of the process to establish OAO "WGC-6" has been completed by contributing the shares in OAO "Ryazanskaya TPP", OAO "Kirishskaya TPP", OAO "Novocherkasskaya TPP", and OAO "Krasnoyarskaya TPP-2" owned by RAO "UES of Russia" to the authorized capital of OAO "WGC-6".

As a measure to implement the second stage of the WGC-6 establishment and consolidate its subsidiaries, the Board of Directors approved the increase of the authorized capital of OAO "WGC-6" through placement by closed subscription of 4,096,167,800 additional ordinary shares, par value RUB1 each.

Payment for the additional shares will be made in shares of OAO "TPP-24" and OAO "Cherepovetskaya TPP" owned by RAO "UES of Russia" and minority shareholders; in property supporting the power plant's technological reliability, and receivables against OAO "Ryazanskaya TPP" in connection with the investment of funds by RAO "UES of Russia" in the construction of production facilities at the power plant under the Company's investment programme.

The target model for OAO "WGC-26" is to be achieved through reorganization of OAO "WGC-6" by way of merger of OAO "TPP-24", OAO "Kirishskaya TPP", OAO "Krasnoyarskaya TPP-2", OAO "Novocherkasskaya TPP", OAO "Ryazanskaya TPP", OAO "Cherepovetskaya TPP" [with and into OAO "WGC-6",] on the terms provided by the Merger Agreement.

According to the conversion (share exchange) ratios approved by the Board of Directors of RAO "UES of Russia", the following amounts of shares will be converted into (exchanged for) one ordinary share in OAO "WGC-6"**:

 - 1.2253/0.0530 ordinary shares in OAO "TPP-24"; and/or

 - 1.2253/30.6237 of an ordinary share in OAO "Kirishskaya TPP"; and/or

 - 1.2253/30.0806 of an ordinary share in OAO "Krasnoyarskaya TPP-2"; and/or

 - 1,2253/28,7851 of an ordinary share in OAO "Novocherkasskaya TPP"; and/or

 - 1.2253/35.0035 of an ordinary share in OAO "Ryazanskaya TPP"; and/or

 - 1.2253/135.1777 of an ordinary share in OAO "Cherepovetskaya TPP".

It is planned to complete the share exchange at OAO "WGC-6" in Q2 2006, and the merger of the subsidiary power plants with and into OAO "WGC-6" in Q3-4 2006.

* The decision on the establishment by RAO "UES of Russia" of OAO "WGC-6" as a wholly-owned subsidiary was taken by the Board of Directors of RAO "UES of Russia" at its meeting held 24 December 2004. OAO "WGC-6" was registered on 17 March 2005 with the Inspectorate of the Federal Tax Service of Russia for Leninsky District, city of Rostov-na-Donu. The Director General of the Company is Valentin Sanko.

Pursuant to Order of the Government of the Russian Federation No. 1254-r of 1 September 2003, the following companies were included in OAO "WGC-6": OAO "Ryazanskaya TPP", OAO "TPP-24", OAO "Novocherkasskaya TPP", OAO "Kirishskaya TPP", OAO "Krasnoyarskaya TPP-2", and OAO "Cherepovetskaya TPP".

** For the purpose of determining the market value of shares of the subsidiary power plants and shares of OAO "WGC-6", the Company hired a consortium of appraisal firms consisting of OOO "Expert Consulting Group" and OOO "Baker Tilly Russaudit" accredited with OAO RAO "UES of Russia".

As a result of a tender process, the Company selected a consortium of investment banks, OOO "Metropol Investment & Finance Company" and ZAO "ING Bank", to determine the share exchange and conversion ratios that would be fair for shareholders, taking into account the results of the share valuation by the consortium of appraisal firms, and to hold negotiations with the participating shareholders on the share exchange and merger of the AO-power plants.

* * *

The Board of Directors took a number of decisions to implement the procedure for the formation of OAO "TGC-6" approved by the Board on 28 October 2005.

The Board of Directors approved the interested party transactions between RAO "UES of Russia" and OAO "TGC-6" on the following terms: OAO "TGC-6" will sell, and RAO "UES of Russia" will buy additional ordinary shares in OAO "TGC-6" in the maximum possible number calculated according to the procedure and in the form of payment for the additional shares indicated in the resolution of the General Shareholder Meeting of OAO "TGC-6".

The Board of Directors approved the transfer of shares in OAO "Nizhny Novgorod Generation Company", OAO "Ivanovo Generation Company", OAO "Penza Generation Company", OAO "Vladimir Generation Company", OAO "Mordovia Generation Company", and OAO "Mordovia Heat Network Company" as payment for the additional shares in OAO "TGC-6".

The Board of Directors approved the purchase the additional ordinary shares in OAO "TGC-6".

The Board of Directors of RAO "UES of Russia" instructed RAO UESR representatives on the Board of Directors of OAO "TGC-6" to vote for the approval of acquisition by OAO "TGC-6" of stakes in other entities on the terms provided by the resolution of shareholder meeting of OAO "TGC-6" on the increase of the TGC-6 authorized capital through placement of additional shares by closed subscription.

On 28 October 2005, the Board of Directors of RAO "UES of Russia" approved the scheme for the completion of establishment of OAO "TGC-6": the generation companies will merge with and into OAO "TGC-6", and the latter's authorized capital will be increased through issuance of additional shares which will be placed through closed subscription.

Payment for the additional shares in OAO "TGC-6" may be made in shares of OAO "Mordovia Heating Network Company", and, depending on the results of EGMs of OAO "Nizhny Novgorod Generation Company", OAO "Ivanovo Generation Company", OAO "Penza Generation Company", OAO "Vladimir Generation Company" and OAO "Mordovia Generation Company", payment may be made shares in one or all of the above generation companies.

* * *

The Board of Directors approved the conclusions of contracts between RAO "UES of Russia" and OAO "TGC-1" for fiduciary administration of ordinary shares of OAO "Murmanskaya CHPP" and OAO "Apatitskaya CHPP".

The fiduciary administration contracts are to be made for a term of one year. RAO "UES of Russia" will transfer to the fiduciary administrator, OAO "TGC-1" the entire scope of rights certified by shares in OAO "Murmanskaya CHPP" and OAO "Apatitskaya CHPP". The fiduciary administration is carried out in the interests of RAO "UES of Russia" and concerns only the exercise of rights attached to the shares.

The amount of remuneration to be paid to the fiduciary administrator ([i.e.] the amount of each fiduciary administration contract to be made between RAO "UES of Russia" and OAO "TGC-1") shall be equal to 50% of the amount of dividends actually payable (declared) in respect of all shares in the CHPP concerned transferred by RAO "UES of Russia" into fiduciary administration. The amount of such remuneration will be determined based on the number of calendar days in a period for which dividends are declared (become payable) when the fiduciary administration of CHPP shares was actually carried out.

The transfer of shares into fiduciary administration will make it possible to continue development of restructuring plans for OAO "Murmanskaya CHPP" and OAO "Apatitskaya CHPP" while preserving efficient management of the power plants.

* The principal terms and conditions of fiduciary administration of ordinary shares in OAO "Murmanskaya CHPP" and OAO "Apatitskaya CHPP" generally correspond to the list of principal terms of a contract for fiduciary administration of shares in a energy retail company to be made between RAO "UES of Russia" and the TGC, as approved by the Board of Directors of RAO "UES of Russia" on 1 July 2005. Pursuant to this resolution, the Board of Directors of RAO "UES of Russia" on 28 October 2005 approved the conclusion of contracts between RAO "UES of Russia" and OAO "TGC-1" for fiduciary administration of OAO "Petersburg Retail Company", OAO "Karelia Energy Retail Company", and OAO "Kolskaya Energy Retail Company".

* * *

The Board of Directors of RAO "UES of Russia" made amendments to the previously adopted restructuring plans of OAO "Altayenergo" and OAO "Kuzbassenergo", and approved the plan for establishment of OAO "TGC-12".*

Under the amended plan to restructure OAO "Kuzbassenergo", the regional energo is to be unbundled by lines of business by spinning off the following companies (which will have the same equity ownership structure of that of OAO "Kuzbassenergo"):

 - OAO "Kuzbassenergo - Regional Electricity Grid Company";

 - OAO "Kuzbass Energy Retail Company";

 - OAO "Kuzbassenergo Electricity Transmission Grids", to which the power grid facilities of OAO " Kuzbassenergo" relating to the Unified National Electricity Grid (UNEG) are to be transferred in accordance with the separation balance sheet, as well as funds in an amount necessary to compensate for the expenses.

The plan also provides for the spin-off of two power plants owned by OAO "Kuzbassenergo", Zapadno-Sibirskaya CHPP and Yuzno-Kuzbasskaya CHPP", with the special procedure for the distribution of shares in these companies.

OAO "Kuzbassenergo" (the generation company) will acquire controlling stakes (50%+1 share) in the spin-off power plants. The remaining shares will be distributed pro rata among the shareholders in OAO "Kuzbassenergo".

At the next stage, RAO "UES of Russia" and OAO "Kuzbassenergo" plan to divest their shares in OAO "Zapadno-Sibirskaya CHPP" and OAO "Yuzhno-Kuzbasskaya TPP" by selling them at public auction on the following terms:

 - auction organizer: a specialized independent company;

 - auction subject: shares in OAO "Zapadno-Sibirskaya CHPP" and OAO "Yuzhno-Kuzbasskaya TPP";

 - auction items: 2 lots, shares in OAO "Zapadno-Sibirskaya CHPP" and shares in OAO "Yuzhno-Kuzbasskaya TPP";

 - selling price: not lower than the value determined by an independent appraiser;

 - Procedure and deadline for payment: [The payment shall be made] in cash prior to the transfer of ownership of the shares to the buyer, but not later than 14 days after the date on which the [purchase] contract is signed.

It is expected that, during the first phase of the project to restructure OAO "Altayenergo", OAO "Altayenergo" will transfer to OAO "Kuzbassenergo" its property intended for electricity and heat generation and heat transmission, and shares in OAO ""Barnaulteplosetremont" and OAO "Altayenergotekhremont".

Apart from that, OAO "Altayenergo" will transfer to RAO "UES of Russia" its network facilities that are part of the Unified National Energy Grid (UNEG). These facilities will subsequently be contributed to the capital of OAO "UES FGC" as payment for additional shares in OAO "UES FGC". The power distribution networks that are not part of the UNEG will remain the property of OAO "Altayenergo".

As a measure to separate the distribution function at the regional energo, RAO "UES of Russia" will establish a wholly-owned retail subsidiary, OAO "Altayenergosbyt", which will subsequently acquire the retail assets of OAO "Altayenergo".

After that, the shares in OAO "Altayenergosbyt" owned by RAO "UES of Russia" will be sold to shareholders in OAO "Altayenergo" at a price determined by an independent appraiser. In the transaction, each shareholder in OAO "Altayenergo" will be entitled to purchase from RAO "UES of Russia" shares in OAO "Altayenergosbyt" pro rata to their stake in OAO "Altayenergo".

As concerns the formation of OAO "TGC-12", the Board of Directors of RAO "UES of Russia" resolved that OAO "Kuzbassenergo" will use the proceeds from the sale of the company's stakes in OAO "Zapadno-Sibirskaya CHPP" and OAO "Yuzhno-Kuzbasskaya TPP" to purchase the generation and heating grid assets from OAO "Altayenergo".

If it is impossible for OAO "Kuzbassenergo" to directly purchase the generation assets owned by OAO "Altayenergo", RAO "UES of Russia" will establish a wholly-owned subsidiary, OAO "TGC-12". After that, OAO "TGC-12" will purchase the generation and heating grid assets from OAO "Altayenergo", to be followed by merger of OAO "TGC-12" with and into OAO "Kuzbassenergo". As provided by the Company's Charter, the Board of Directors of RAO "UES of Russia" will take decisions on the terms of merger of OAO "TGC-12" with and into OAO "Kuzbassenergo".

* The Board of Directors of RAO "UES of Russia" on 24 June 2005 approved the restructuring plan of OAO "Kuzbassenergo" and made alterations to the TGC configuration approved by the Board of Directors on 23 April 2004 relating to TGC-11 and TGC-12.

With the new configuration of TGC-12 to be based on the assets of OAO "Altayenergo" and OAO "Kuzbassenergo", there may arise a risk that OAO "Kuzbassenergo" will have a monopoly position on the emerging wholesale electricity market. In this connection, the Board of Directors deemed it advisable to sell the generation assets of OAO "Kuzbassenergo"—the Zapadnaya CHPP and Yuzhno-Kuzbasskaya TPP.

The Management Board of RAO "UES of Russia" was instructed to explore the term and methods to be used for the sale of generation assets of OAO "Kuzbassenergo" (Zapadno-Sibirskaya CHPP and Yuzhno-Kuzbasskaya TPP).

The restructuring plan of OAO "Altayenergo" approved by the Board of Directors on 12 March 2004 provides for the reorganization of the energy company according to the basic scenario. In connection with the critical situation in the regional energo, the implementation of the restructuring plan has been suspended.

* * *

The Board of Directors of RAO "UES of Russia", performing the functions of EGMs of OAO "WGC-1", OAO "WGC-2", OAO "WGC-6"*, approved the payment of dividends in respect of the companies' shares for nine months of 2005.

The dividend amount to be paid on ordinary shares of OAO "WGC-1", OAO "WGC-2" and OAO "WGC-6" (par value RUB1) will make RUB0.001406, RUB0.006264, and RUB0.01398098, respectively. The dividends are to be paid within 60 days after approval of this resolution.

Previously, at the Board meeting of RAO "UES of Russia" held 29 July 2005, the Board of Directors took a number of resolutions designed to ensure receipt of interim dividend payments from WGCs, TGCs, RGCs, and AO-power plants. In particular, after interim dividends for the first six or nine months of 2005 are approved by shareholder meetings of AO-power plants comprising the WGCs, this matter is to be submitted for consideration by the Boards of Directors or general shareholder meetings of the WGCs concerned.

The resolution to establish OAO "WGC-1", OAO "WGC-2" and OAO "WGC-4" as wholly-owned subsidiaries of OAO RAO "UES of Russia" was approved by the Board of Directors of RAO "UES of Russia" at the meeting held 24 December 2004.

OAO "WGC-1" was registered on 23 March 2005 with Inspectorate No. 3 of the Federal Tax Service of Russia for Tyumen Region, OAO "WGC-2" on 9 March 2005 with Inspectorate No. 2607 of the Federal Tax Service of Russia for the city of Izobilny, Stavropol Kray; and OAO "WGC-6" on 17 March 2005 with the Inspectorate of the Federal Tax Service of Russia for the Leninsky District, Rostov-na-Donu.

The Director General of OAO "WGC-1" is Vladimir Khlebnikov, OAO "WGC-2" Mikhail Kuzichev, and OAO "WGC-6" Valentin Sanko.

The authorized capital of OAO "WGC-1" is RUB16.78 billion, OAO "WGC-2" – RUB10.8 billion, and OAO "WGC-6" RUB23 billion.

OAO "WGC-1" comprises the Verkhne-Tagilskaya TPP, OAO "Nizhnevartovskaya TPP", OAO "Urengoiskaya TPP", OAO "Iriklinskaya TPP", OAO "Permskaya TPP", OAO "TPP-4"; OAO "WGC-2" comprises OAO "Pskovskaya TPP", OAO "Serovskaya TPP", OAO "Stavropolskaya TPP", OAO "Surgutskaya TPP-1", OAO "Troitskaya TPP"; OAO "WGC-6" comprises OAO "Ryazanskaya TPP", OAO "TPP-24" (OAO "Mosenergo), OAO "Novocherkasskaya TPP-1", OAO "Kirishskaya TPP", OAO "Krasnoyarskaya TPP-2", OAO "Cherepovetskaya TPP".

* * *

The Board of Directors approved the sale by RAO "UES of Russia" of 100% stake in OAO "Taymyrenergo"* at a public auction organized by an accredited agent.

The auction is to be held after the relevant resolution is taken by the Government of the Russian Federation. The draft resolution is now being agreed at the Ministry for Economic Development and Trade of Russia and the Ministry of Industry and Energy of the Russian Federation.

The auction start price must be not less than the market value determined by an independent appraiser, RUB5.95 billion. The cash proceeds from the sale of shares in OAO "Taymyrenergo" (less all required tax and other mandatory payments, as well as appraisal and auction expenses) are expected to be used to finance the investment projects of RAO "UES of Russia".

Earlier, at the Board meetings held on 2 September and 28 October 2005, the Board of Directors resolved to sell the shares of OAO "Taymyrenergo" and approved the set of relevant measures.

* OAO "Taymyrenergo" is a wholly-owned subsidiary of RAO "UES of Russia". The authorized capital of the Company is RUB629,770,078 and is divided into 1,259,540,156 ordinary shares of RUB0.5 par value each.

Pursuant to the resolution of the Board of Directors of RAO "UES of Russia" of 25 June 2004, OAO "Taymyrenergo" is classified as an energy system with limited competition. Such energy systems may be reorganized using scenarios different from the "basic" restructuring plan. This is due to the peculiarities of the Norilsk isolated energy area: the local energy system does not have any links to the country's power grid; another factor is that OAO "Norilsk Nickel MMC" consumes 97% of the electricity generated by OAO "Taymyrenergo". Besides, OAO "Norilsk Nickel MMC" has its own generation and power grid facilities.

* * *

The Board of Directors approved the contract between RAO "UES of Russia" and OAO "WGC-6" for fiduciary administration of ordinary shares in OAO "Vologda Retail Company" to be made for a term of one year.*

Under the contract, RAO "UES of Russia" will transfer to the fiduciary administrator, OAO "WGC-6", the entire range of rights attached to the shares of OAO "Vologda Retail Company". The fiduciary administrator acts in the interests of RAO "UES of Russia" while exercising the rights attached to such shares.

The amount of remuneration and amount of the fiduciary administration contracts is equal to 100% of the amount of dividends on all shares transferred by RAO "UES of Russia" into fiduciary administration during the period of actual administration of such shares.

The fee charged for the services of fiduciary administrator on each of the contracts to be made may not be 2% or more of the carrying amount of assets of RAO "UES of Russia" according to the financial statements as of 1 October 2005.

* The resolution of the Board of Directors of RAO "UES of Russia" of 24 June 2005 provides for the transfer of shares in energy retail companies established as a result of regional energos' restructuring into fiduciary administration to the relevant TGC (according its territorial configuration) for a term of one year as a basic approach to running energy retail companies during the transition period. This resolution approved implementation of up to 10 projects employing alternative scenarios to dispose of energy retail companies' shares ("pilot projects").

At the meeting held 30 September 2005, the Board of Directors of RAO "UES of Russia" approved the types of such pilot projects and the list of energy retail companies in which such projects were to be implemented. One of these projects involves the transfer of an energy retail company's shares to a WGC for fiduciary administration.

* * *

The Board of Directors approved the formation of the target structure of OAO "TGC-2" through merger of OAO "Arkhangelsk Generation Company", OAO "Kostroma Generation Company", OAO "Novgorod Generation Company", OAO "Tver Generation Company", OAO "Yaroslavl Energy Company", and OAO "Vologodskaya CHPP".

The preferred scenario for the establishment of the target structure of OAO "TGC-2" is merger of all of the above regional generation companies (RGCs) with and into OAO "TGC-2".

In the event that shareholders in one or more RGCs do not approve their companies' merger with and into OAO "TGC-2", the latter will issue additional shares to be exchanged for shares in such RGCs. RGC shareholders that support the reorganization or do not take part in the shareholder meeting on that issue will be able to purchase such additional shares in OAO "TGC-2".

The Board of Directors of RAO "UES of Russia" approved the ratios for conversion (exchange) of shares in the RGCs merging with and into OAO "TGC-2": In order to ensure that the stake held by RAO "UES of Russia" in OAO "TGC-2" is no less than 50%+1 voting share and to boost the liquidity of TGC-2 shares, taking into account the resolution of the Strategy and Reform Committee under the Board of Directors of RAO "UES of Russia", ordinary shares in the RGCs concerned will be converted into (exchanged for) ordinary shares in OAO "TGC-2", and RGCs' preferred shares will be partly converted into (exchanged for) ordinary shares and partly into (for) preferred shares in OAO "TGC-2".

Thus, 92.6% of the total number of preferred shares in the merging RGCs held by their shareholders will be converted into (exchanged for) additional ordinary shares of OAO "TGC-2", and the remaining 7.4% preferred shares in the RGCs held by RGC shareholders will be converted into preferred shares of OAO "TGC-2".

At the first phase, if all 6 RGCs merge [with and into OAO "TGC-2"], preferred shares will make not more than 5% of the authorized capital of OAO "TGC-2".

One ordinary share of OAO "TGC-2" of RUB0.01 par value may be exchanged for:

 - 1/196.53938205 of an ordinary share and/or 1/179.99076608 of a Type A preferred share of OAO "Arkhangelsk Generation Company", par value RUB1.4 [per share];

 - 1/275.95084571 of an ordinary share and/or 1/252.71578450 of a Type A preferred share of OAO "Kostroma Generation Company", par value RUB2.4 [per share];

 - 1/293.00003778 of an ordinary share and/or 1/268.32943460 of a Type A preferred share of OAO "Tver Generation Company", par value RUB2.69 [per share];

 - 1/393.44271260 of an ordinary share and/or 1/360.31483620 of a Type A preferred share of OAO "Novgorod Generation Company", par value RUB0.25 [per share];

 - 1/14191.96685104 of an ordinary share and/or 1/12997.00324218 of a Type A preferred share of OAO "Yaroslavl Generation Company", par value RUB160 [per share];

 - 1/2266.70151548 of an ordinary share in OAO "Vologodskaya CHPP", par value RUB20 [per share].

One preferred share in OAO "TGC-2" of RUB0.01 par value may be exchanged for:

 - 1/196.53938205 of a Type A preferred share in OAO "Arkhangelsk Generation Company", par value RUB1.4 [per share];

 - 1/275.95084571 of a Type A preferred share in OAO "Kostroma Generation Company", par value RUB2.4 each;

 - 1/293.00003778 of a Type A preferred share in OAO "Tver Generation Company", par value RUB2.69 [per share];

 - 1/393.44271260 of a Type A preferred share in OAO "Novgorod Generation Company", par value RUB0.25 [per share];

 - 1/14191.96685104 of a Type A preferred share of OAO "Yaroslavl Generation Company", par value RUB160 [per share].

The conversion (exchange) ratios were calculated by ZAO "Troika Dialog Financial Broker" on the basis of market valuation of the merging companies performed by the independent appraisers—OOO "Pacioli. Audit Company", OOO "KO-Invest", and ZAO "Tsentr Professionalnoi Otsenki" ("Center for Professional Appraisal").

If such calculation results in a fractional number of shares, the number of shares is to be rounded [up or down] in accordance with the generally accepted rules. If as a result of such rounding a shareholder is not entitled to receive any shares, such shareholder will receive one ordinary share in OAO "TGC-2".

The Board of Directors of RAO "UES of Russia" instructed RAO UESR representatives at the Board meetings and shareholder meetings of OAO "TGC-2" and the above RGCs, and at the joint shareholder meeting of the companies being reorganized, to vote FOR the approval of all resolutions required to complete the establishment of the target structure of OAO "TGC-2".

* OAO "TGC-2" was registered with the Inspectorate of the Federal Tax Service of Russia for Leninsky District, city of Yaroslavl, on 19 April 2005. The Director General of OAO "TGC-2" is Vasily Nesvetaylov.

The resolution to establish OAO "TGC-2" as a wholly-owned subsidiary of RAO "UES of Russia" was approved by the Board of Directors of RAO "UES of Russia" on 25 February 2005.

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The Board of Directors approved the conclusion of a contract for purchase/sale of shares in OAO "Sangtuda HPP-1" between RAO "UES of Russia" and the power plant.*

Earlier, at the Board meeting of 2 September 2005, the Board of Directors of RAO "UES of Russia" approved the Company's acquisition of a stake in OAO "Sangtuda HPP-1".

Under the contract, which will become effective when approved by the Federal Agency for Federal Property Management, RAO "UES of Russia" purchase 14,545 additional shares in OAO "Sangtuda HPP-1" at par value of RUB395.3 million.

The additional shares are being issued as a measure to increase the authorized capital of OAO "Sangtuda HPP-1" in accordance with the provisions of the Agreement between the Government of the Russian Federation and the Government of the Republic of Tajikistan on the procedure for and conditions of shared participation in the construction of the power plant dated 16 October 2004 and the Order of the Federal Tariff Service of 17 December 2004.

The additional share issue is designed to attract funds from the federal budget of Russia, RAO "UES of Russia", and OAO "UES FGC" to finance the construction of the power plant in 2005-2006. Besides, the funds will be used to purchase the construction in progress facilities of Sangtuda HPP-1 owned by the Tajik side.

As a result of the share issue, the stake held by RAO "UES of Russia" in the power plant will be no less than 5.5%, the stake held by the Russian Federation 37%, and the stake of OAO "UES FGC" no less than 32%. The stake of ZAO "Inter RAO UES" will fall by 74% to less than 1%. Thus, the stake controlled by the Russian participants will be at least 75%.

* OAO "Sangtuda HPP-1" is a Russia-Tajikistan joint venture established in 2005 to complete the construction of the hydroelectric power plant on the Vakhsh River. The power plant will have a design capacity of 670 MW.

* * *

The Board of Directors of RAO "UES of Russia" approved its work plan for Q1 2006.