OREANDA-NEWS. The Board of Directors noted the progress report on the electricity reform in Russia and reviewed its results since the Board last considered the issue on 25 November 2005.

As resolved by the Board of Directors of RAO "UES of Russia" at its meetings held 28 July, 30 August, 22 September, and 27 October 2006, the Company will be reorganized in two phases.

During the first phase scheduled to take place in 2007, two generation companies, OAO "WGC-5" and OAO "TGC-5", will be spun off from RAO "UES of Russia". These companies have been chosen primarily because they have completed their restructuring, they have highly professional teams of managers and are fully prepared to operate independently and implement promising investment projects. After OAO "WGC-5' and OAO "TGC-5" are spun off from RAO "UES of Russia" and issue additional shares, the Government will hold at least 25 percent plus one share (i.e. a blocking stake) in these companies.

During the second phase, which is scheduled for 2007-2008, RAO "UES of Russia" will cease its activity, and the sector's target companies–OAO "UES FGC", OAO "UES SO-CDA", WGCs, TGCs, IDCs, etc.–will be spun off from RAO "UES of Russia".

At today's meeting, the Board of Directors gave the Management Board of RAO "UES of Russia" the task to submit the plan to complete the Company's reorganization. Under the plan, the proceeds from the sale of shares in the thermal generation companies will be invested in Federal Grid Company, System Operator, and HydroWGC.