OREANDA-NEWS. July 19, 2007.  OGK-4, the Fourth Wholesale Power Generating Company (“The Group“), today announces its audited consolidated IFRS financial results for the year ended 31 December 2006.

According to IFRS standards, allowing the use of the “predecessor accounting method”, the consolidated results of OJSC OGK-4 include the activities of all five power plants incorporated in OJSC OGK-4 beginning from January 1, 2005. Before July 1, 2006, each power plant was a separate joint stock company, managed by OJSC OGK-4 and the Group included only OJSC OGK-4 and OJSC BGRES-1 along with its subsidiaries: OJSC Transavto, SMU Ltd. and KATEKenergoremont Ltd. Since July 1, 2006, OJSC OGK-4 has operated as a unified company, including five power plants as divisions of the Company: Berezovskaya GRES, Surgutskaya GRES-2, Smolenskaya GRES, Shaturskaya GRES and Yayvinskaya GRES.

 Financial Highlights:

•          Revenues increased by 20.5% to 26,110.5 million Rubles compared to 21,669.1 million Rubles in 2005

•          Operating profit amounted to 7,375.1 million Rubles compared to 391.2 million Rubles in 2005

•          EBITDA increased by 20.3% to 2,170.9 million Rubles compared to 1, 805.3 million Rubles in 2005

•          Net profit in 2006 amounted to 5,330.6 million Rubles compared to 162.9 million Rubles in 2005

•          Earnings per share increased to 0.185 Rubles compared to 0.002 Rubles in 2005

Commenting on today’s announcement, Andrey Kitashev, General Director of OGK-4 said “In 2006 OGK-4 finished its asset consolidation, becoming a unified generating company. During the year the company had managed to achieve high production and strong financial performance, which is reflected in the IFRS results. Even without taking into account profit from non-cash items, OGK-4 demonstrated significant financial growth compared to the previous year. This was possible, among other things, due to increased operating efficiency at the company's power plants, located in the regions with growing demand for electricity, as well as successful activity on the wholesale energy market”.

Consolidated Balance as of December 31, 2006

Property, plant and equipment of the Group as of December 31, 2006, amounted to 24,186.6 million Rubles compared to 18,403.3 million Rubles as of December 31,2005 (31.4% increase). This figure increased as a result of a reversal of impairment of plant, property and equipment recognized during previous periods.

Total assets as of December 31, 2006, increased by 26.1% compared to total assets as of December 31, 2005 and amounted to 29,175 million Rubles.

Accounts receivable as of December 31, 2006 amounted to 1,262.1 million Rubles compared to 1,621.3 million Rubles in the previous year (a reduction of 22.2%).

Short-term accounts payable decreased by 2.6% in 2006, from 2,739.7 million Rubles as of December 31, 2006 to 2,641.7 million Rubles as of December 31, 2006.

Total liabilities stood at RUB 6,739,392 thousand as of December 31, 2006 compared to RUB 5,423,281 thousand in 2005, an increase of 24.3%.

Consolidated Profit and Loss Account on December 31, 2006

 Revenues in the year 2006 amounted to 26,110.5 million Rubles, up 20.5% compared to the corresponding period in 2005. Revenue growth was achieved as a result of the increase in energy sales, as well as growth in average tariffs.

Operating expenses increased by 19% reaching 25,445.3 million Rubles over 2006 with fuel representing almost 60% of the total operating expenses, in line with 2005 charges.

Operating profit amounted to 7,375.1 million Rubles compared to 391.2 million Rubles in 2005. The significant growth was caused by non-cash items of reversal of impairment of plant, property and equipment of 6,613.3 million Rubles. The reverse of the previously recognized impairment loss was a result of an impairment test conducted regularly according to IFRS requirements. The test had shown significant reduction of impairment recognized in the previous year. Key changes with a favorable effect on the Company were upward revisions, based on recurrent trends, in the expected growth of demand for electricity and heat in the regions where the Company operates, and a higher degree of certainty about the free trading sector for electricity resulting from the government decision, legally confirmed in August 2006.

Not taking the impairment into account, operating profit in 2006 amounted to 761.7 million Rubles, over twice that achieved in 2005. This growth was caused by higher revenue growth compared to increase in current expenses.

Profit before tax in 2006 amounted to 7,270.4 million Rubles compared to 331.4 million Rubles in 2005.

Net profit in 2006 rose to 5,330.6 million Rubles compared to 162.9 million Rubles in 2005. This significant increase was also mainly caused by reversal of impairment of property, plant and equipment.

1,495.1 million Rubles was allocated for investment purposes in 2006, twice that of 2005. This increase was caused by the start of a large-scale investment program, which aims to build 2 400MW of generation capacity by 2011.