OREANDA-NEWS. On August 31, 2007 the Board of Directors of RAO "UES of Russia" approved the Company's participation in the establishment of Not-for-profit Partnership "All-Russia Combustion Engineering Research Institute" (NP "VTI"), reported the press-centre of RAO "UES of Russia".

The partnership is to be established on the basis of OAO "All-Russia Combustion Engineering Research Institute". The Institute is a national centre for knowledge generated in the 85 years of electricity engineering research in Russia. The scope of research work carried out by the Institute is expanding every year; the Institute has identified priority research areas to be investigated for decades to come. However, due the Centre's low profitability, potential owners are not likely to be interested in continuing the research business of OAO "VTI" for commercial reasons.

As a result, the most stable and appropriate form of organization for a national knowledge centre for the electricity industry, i.e. OAO "VTI", is that of a not-for-profit partnership.

RAO "UES of Russia", as the founder of NP "VTI", will contribute its 100 percent stake in OAO "VTI" as the initial contribution to the partnership's capital. The other founders, RAO UES subsidiaries, will contribute cash which will serve as a basis for the partnership's development and implementation of new tasks, primarily those related to the implementation of the RAO UES five-year investment Programme.

To further implement this resolution, the Board of Directors of RAO "UES of Russia" instructed the Company's representatives on the management bodies of the RAO UES subsidiaries and dependent companies to FOR their participation in the establishment of NP "VTI". These SDCs will include all thermal WGCs and TGCs, as well as the leading engineering centers and design bureaus.

The Board of Directors approved the sale of the shares in OAO "Engineering Centre" held by RAO "UES of Russia".

Currently, the Company holds a 14.1798 percent stake in OAO "Engineering Centre", an engineering company spun off from OAO "Novosibirskenergo". Engineering Center's core business is providing integrated repair and maintenance services.

This asset is not related to the Company's core business and should be divested in accordance with the RAO UES Strategy Concept. The fair market value of this stake determined by an independent appraiser and approved by the Appraisal Committee of the RAO UES Board is RUB257,3 million.

At today's meeting, the Board of Directors noted the report of its HR and Remunerations Committee and the Strategy and Reform Committee.

Also, some changes were made to the composition of the HR and Remunerations Committee. "KES-Holding" Director General Mikhail Slobodin was replaced with Alexey Glushchenko, Senior Vice President for Asset Management of ZAO "Complex Energy Systems" (KES), and Head of the Russian Government's Energy Department Anatoly Romanovsky was replaced with Sergey Bubnov, Director of the Alternative Investment Department with Renaissance Capital Management. August 2007 saw the sixth anniversary of the Strategy and Reform Committee. Since its creation, the Committee has become a reputable management body whose suggestions and recommendations are often taken into account by the Board of Directors in the decision-making process.

The Board of Directors of RAO "UES of Russia" approved some changes to the rules of procedure for the RAO UES Investment and Fuel Supply Commission.

These changes were due to the fact that the Commission has 24 members, and it is sometimes impossible to secure a quorum when it is necessary for most of its members to physically attend the Commission's meetings.

Practice suggests that because of their heavy workload, the Commission's experts are sometimes unable to attend two or more consecutive meetings. However, these experts possess a wealth of knowledge and it would not be prudent to remove them from the Commission.

The amended Commission's Regulations provide that a physical meeting of the Commission will have a quorum if at least half of the Commission members are present in person at the meeting or provide their written comments, without taking into account the members absent from the two previous meetings.

The Board of Directors of RAO "UES of Russia" gave instructions to RAO UES representatives for voting at the general shareholders' meetings and Board meetings of some SDCs of OAO RAO "UES of Russia".

The Board instructed the RAO UES representatives on the Board of Directors of WGC-4 -8 to vote FOR the establishment of OOO "WGC-4 Finance", an entity to implement the WGC-4's stock option programme.

The Board of Directors also instructed the Company's representatives on the Board of Directors of OAO "UES Engineering Center" to vote for the sale of a property not related to the company's core business, namely, a non-residential building in Spartakovskaya street, Moscow. This decision was taken in line with the RAO UES non-core assets divestment strategy.

The building will be sold through a public auction in Q4 2007. The property slated for sale is a non-residential building having a floor area of 3,300 square meters and a one-storey extension of 1,000 square meters.

The start price should be not lower than the fair market value determined by an independent appraiser and approved by the RAO UES Board's Appraisal Committee. The property is expected to be sold through a public auction.

The Board of Directors instructed the RAO UES representatives on the Board of Directors of OAO "WGC-1" to vote for WGC-1 joining Not-for-profit Partnership "Interregional Exchange of Oil-and-Gas Complex" (NP "MBNK").

WGC-1's membership in NP "MBNK" will enable the company to take part in the drafting of the rules for natural gas trading on the exchange so that the rules are most convenient for energy companies.

The Board of Directors of RAO "UES of Russia" approved amendments to the Charters of the WGCs and TGCs. The Board removed from the companies charters certain provisions which require a special resolution by the Board members.

These include matters submitted to generation companies' general shareholder meetings, such as approval of the annual report, annual financial statements, profit distributions, recommendations on the dividend amount and procedure for dividend payments, etc.

Other items of business include determining priority investment projects; procedure for the use of proceeds from the additional share offerings; approval, amendment or cancellation of an investment programme or investment project; determining the terms for the selection and approval of the general contractor to implement the investment programme; approval of the appointment of an independent engineering expert (technical agent) for control the performance of the investment programme and preparation of quarterly progress reports on the investment programme; deciding on the entry into, amendment or termination of an agreement with the independent engineering expert (technical agent); approval of the director general's reports on the implementation of the Company's investment programme, and approval of the format for presentation of reports by the generation company's director general.

The fact that approval by a qualified majority of votes is required on certain matters does not allow the strategic shareholders in the WGCs/TGCs to prepare consolidated financial statements of the companies which comprise their group of persons. Furthermore, the amendments to the charter relating to removal of some provisions which require that resolutions on certain matters are to be approved by three-fourths of votes do not prejudice the rights of RAO "UES of Russia" as a minority shareholder, as the shareholder agreements entered into with the new shareholders provide that resolutions on those matters may only be taken subject to approval of RAO "UES of Russia".

The Board of Directors of RAO "UES of Russia" resolved to terminate the agreement between RAO "UES of Russia" and OAO "TGC-1" on the fiduciary management of shares of OAO "Karelia Energy Retail Company".

This resolution was taken in connection with the auction to sell the shareholding in OAO "Karelia Energy Retail Company" owned by RAO "UES of Russia" scheduled for 19 September 2007.

By way of reminder, the 'second-tier' public auctions to sell the RAO UES stakes in energy retail companies will be held on 18-19 September 2007.