mrsk-cp.ru

1. http://www.mrsk-cp.ru

2. MRSK of the Centre and Privolzhye OJSC geographical location Currently, the ‘Interregional Distribution Grid Company of the Centre and Privolzhye’ Open Joint Stock Company is the main provider of services for supplying electricity and technical connection to electricity grids in the regions of Vladimirskaya, Ivanovskaya, Kaluzhskaya, Kirovskaya, Nizhegorodskaya, Ryazanskaya and Tulskaya, and the republics of Mariy El and Udmurtskaya. The region being serviced extends for 1,315 km west and east and 315 km north and south, the region’s area – 414 thousand km2, resident population – 14.4 million. The company is a natural monopoly and actually all distributing power grids with voltage of 110 kV and lower in these 9 regions are owned by MRSK Center and Privolzhie OJSC. 1

3. MRSK of the Centre and Privolzhye OJSC generating capacity Number of staff … 19,600 Company assets as at 29 Feb 08… RUB49.1 billion 2

4. Sale of services MRSK earnings for 2007–10 * –planned Growth in revenue will derive from growth in the volumes of electricity transmitted, tariff changes and expansion of the technical connection of customers to the distribution network. MRSK revenue make-up for 2007 3

5. MRSK investment activities for 2006–10 Invested capital values * –planned Investment and funding sources structure for 2007 4

6. Technical connection fee Its introduction was prompted by the fact that the existing tariff regulation system prevents distribution grid companies from meeting the growing demand for connection to the energy grid because of material restrictions on tariff increases. The basis of the scheme is as follows: anybody who wants to be connected to the grid shall bear all the costs required for the increase in the Energo-JSC’s grid capacity. The amount of the connection fee is calculated on the basis of the region’s mid-term demand for grid capacity increase. Currently, such a fee is levied in the regions which suffer a serious deficit of grid assets. Technological connection services (billion RUB net of VAT) * –planned 5

7. Tariff calculation using Return on Regulatory Asset Base (RAB) method It is expected that during 2010–12 there will be a gradual transition from the ‘Costs + ’ method of regulating tariffs for electricity transmission via the distribution grid, to the ‘Return on Regulatory Asset Base’ (RAB) method. The RAB method is aimed at providing full return of funds invested into company assets during the period determined to correspond to asset service-life, and at normalised revenue earning, the level of which is set by the Government, and which shall correspond to the RSK’s risk profile and its sector prominence to investors. Operational costs include all productions costs, excluding depreciation of a company’s tangible and intangible assets. Return on Asset Base shall provide for replacement of the assets used intensively for electricity transmission via the MRSK grid. Yield on Asset Base is calculated on the basis of regulated rate of return (regulatory WACC) established by the regulator, the rate of which will be established for the long-term regulatory period and will be the same for all MRSK. 6

8. Equity 28 June 2007, RAO UES of Russia established the MRSK of the Centre and Privolzhye OJSC 29 February 2008, the MRSK merged with nine regional grid companies, and additional share issues were carried out for this purpose. Currently, MRSK of the Centre and Privolzhye OJSC’s statutory capital totals 11.27 billion RUB, and comprises 112.7 billion ordinary shares. April 2008– shares will be traded at MICEX and RTS July 2008– listing for adoption to ‘B’ Quoted List June 2010– publishing of ISA-based or US GAAP-based financial statements July 2010– listing for adoption on ‘A’ Quoted List After restructuring of the electricity sector and the liquidation of RAO UES, its equity will be transferred to the MRSK Holding, which will have the following structure: 52% will be owned by the Government and 48% by minority shareholders. The nonresident shareholders account for over 20%. 7

9. Comparison with Foreign Analogs In the long-term perspective, Russia’s and foreign distributing companies may be compared using the following indicators: • capitalization/amount of power transmitted: EV/El.sales • capitalization/population of serviced territory: EV/Resident These ratios are not dependent on the existing tariff-formation system, specifics of Russian accounting, degree of capacities loading, but they take into account a potential growth in the amount of electric power transmitted and change in tariff regulation. • Main reasons of growth: • improved corporate management • changed tariff regulation, changing-over to RAB • implementation of investment program • positive effect of joining RSK and MRSK 8

10. MRSK Center and Privolzhie: Investment-Attractive Company • One of the largest distributing grid companies of Russia having high investment attractiveness has been established; • This has created opportunity for prompt, efficient and operational management due to economy of scale and synergy; • Investment resources are being consolidated and potentialities of their efficient use increase; • Increased credit rating will allow the company to make less expensive borrowing; • Reduced transaction costs; • Increased efficiency of financial flow management. By 2012, MRSK capitalization may reach capitalization of foreign analogs and make up RUB 112 billion 01.янв.09 01.янв.12 01.окт.07 9

11. Comparison with Other Distributing Grid Companies of Russia 13 interregionaldistributing grid companies operate in Russia. At the end of six-month period of 2007, FSK UES OJSC conducted a comparison in terms of the following indicators: • Financial and economic status • Equipment operation and grid reliability • Sale of services and interaction with customers • Capital construction • IT-support • Personnel quality MRSK Center and Privolzhie scored the most. Strengths of MRSK Center and Privolzhie: • Personnel quality • Equipment operation and grid reliability • Financial and economic status • Development prospects 10

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