Moscow, 3 October 2006. Today, OAO "Fifth Generation Company of Wholesale Electricity Market" (OAO "WGC-5")* announced its intention to issue additional shares. The issue proceeds will be used to finance the company's top priority investment projects.

The Russian Government broadly approved the use of additional share issues in the electricity industry at its session held 7 June 2006. On 23 June 2006, the Board of Directors of RAO "UES of Russia" included OAO "WGC-5" in the list of pilot WGCs and TGCs to place additional shares.

RAO "UES of Russia" holds a majority stake (87.67%) in OAO "WGC-5". After the share placing, which was registered with the Federal Service for Financial Markets of Russia (FSFM) on 28 September 2006, RAO "UES of Russia" will hold at least 75.03% in OAO "WGC-5". RAO "UES of Russia" does not plan to acquire any additional shares, stating that it would waive its right of first refusal to purchase such shares.

Besides that, in the course of reorganization of RAO "UES of Russia", at its first stage, OAO "WGC-5" and OAO "TGC-5" will be spun off from RAO UES and become an independent company. As a result of the reorganization, a 50% stake held by RAO "UES of Russia" in OAO "WGC-5" will be distributed pro rata among RAO UES shareholders.

The blocking stake held by RAO "UES of Russia" in OAO "WGC-5" will be sold as a single lot through a public auction after the placement of additional shares in OAO "WGC-5".

Thus, the ownership structure of OAO "WGC-5" will include minority shareholders, a strategic investor and the state.

Issuance of additional shares in WGC-5 is an important step towards implementing the investment stage of the electricity reform in Russia. According to Chairman of the Management Board of RAO "UES of Russia" Anatoly Chubais, the WGC-5 share issue is a major milestone in the process of independent generators entering the stock market. "The electricity reform has not only paved the way for private investments in the sector. It has made the electricity sector attractive for investors. I am confident that investors will appreciate the WGC-5 assets, its strategy and development prospects," said Mr Chubais.

Alexander Chikunov, member of the Management Board and Managing Director of Business Unit No. 1, stated that selection of OAO "WGC-5" as a pilot company to issue additional shares was largely due to the commitment and professionalism of its managers. "The company has a strong financial position and a clearly defined development strategy. In light of that, we hope that the company will successfully place the additional share issue, which has been carefully prepared in such a short time-frame," said Mr Chikunov.

____________________________________

WGC-5 shares were admitted to trading on ZAO "MICEX Stock Exchange", OAO "RTS Stock Exchange", and NP "RTS Stock Exchange" in September 2005. At the same time, an unsponsored GDR programme for WGC-5 shares was established.

Note for Editors

RAO "UES of Russia" is Russia's largest group of companies. The capacity of RAO UES power plants is 157,700 MW, or 72.2% of the total installed capacity of Russia's power plants and over 70% of the electricity generated in the country. RAO UES owns 2,482,900 km of transmission lines, including 144,500 km of backbone lines. The 2005 revenue of RAO UES Group under the IFRS amounted to RUB764.6 billion, with the net income of RUB23.9 billion.

2003 saw the launch of a large-scale reform of the Russian electricity sector. The key objectives of the sector reform are to improve efficiency and ensure reliable and uninterrupted power supply to consumers. This is to be achieved by creating favourable conditions for investments in the construction of new generation capacity.

The reform of RAO UES Group is being implemented in accordance with the Strategy Concept of RAO "UES of Russia" for Years 2003-2008 ("5+5").

The electricity reform is primarily intended to create a new sector structure, with the competitive segments developing based on private investments. The state will keep its control over the monopoly segments.

The monopoly segment of the electricity industry includes the Federal Grid Company (OAO "UES FGC"), the entity in charge of the Unified National Energy Grid (UNEG), distribution companies (DCs) which are run by Interregional Distribution Companies (IDCs), and the System Operator (OAO "UES SO-CDA"), the entity responsible for dispatching of the Unified Energy System (UES). After the reform, the government will retain control over OAO "HydroWGC", the company consolidating all the hydropower stations of RAO "UES of Russia".

The competitive segment comprises the interregional generation companies—six WGCs and fourteen TGCs—created on the basis of thermal power plants, and retail and services companies.

The electricity reform and demonopolization of the sector structure will end in the reorganization of RAO "UES of Russia". As resolved by the Board of Directors on 30 September 2006, RAO "UES of Russia" will be reorganized in two phases. During the first phase of the process, two generation companies, OAO "WGC-5" and OAO "TGC-5", will be spun off from RAO "UES of Russia". During the second phase, RAO "UES of Russia" will be separated. RAO UES shareholders will receive shares held by RAO "UES of Russia" in the new companies (WGCs, TGCs, FGC, etc.) in proportion to their holdings in RAO UES.