Dear Shareholder,

We highly value your views on corporate strategy and developments, as well as your support of key management decisions. Therefore, in light of the upcoming Annual General Meeting of Shareholders (June 30th, 2011), we would like to explain the logic behind important items on the AGM agenda and draw your attention to several topics.

Increasing equity: key objectives and terms (Items 7-9 of the AGM agenda)

A 89 bln share issue increase was initiated by the Company’s Management Board and approved by the Board of Directors, with the objective of acquiring numerous energy assets at very attractive valuations. These acquisitions will give RusHydro and its shareholders a stronger foothold in Siberia and the Russian Far East, create synergies and sources for the stronger performance of existing assets and generate new opportunities for strategic development. In our view, the proposed transactions are entirely consistent with our growth strategy aimed at consolidating hydro-generating assets and hydro engineering assets in Russia, as well as the development of value-accretive projects.

RusHydro seeks to acquire the following assets via the planned equity issue (for the full list of assets please refer to the presentation at: http://www.eng.rushydro.ru/company/governance/general-meeting/forthcoming/14820.html)

1) 40% stake in JSC Irkutskenergo – to be acquired from Inter RAO UES (previously held by the Russian State) for a total consideration of 29,998,136,646 shares of RusHydro. The proposed swap ratio of 15.7328229571753 RusHydro shares per 1 share of Irkutskenergo is also subject to shareholder approval. 2) Five concrete dams of the hydro-power plants of the Cascade in the Region – to be acquired from the Government of the Russian Federation. The valuation of these assets is to be approved by the Board of Directors in July 2011. However, management estimates that the aggregate value of all dams will not exceed RUB 10 bln, which is significantly lower than the preliminary assumptions of most analysts and investors. 3) 52.68% of JSC RAO Energy Systems of the East and a number of minority shareholdings in some of its subsidiaries – to be acquired from the Russian State. This is being done to significantly upgrade the efficiency of existing RusHydro hydro-power plants in the Far East (4.2 GW in total), as well as investment projects for the construction of new hydro-power plants in the region. 4) Shareholdings in different medium-sized energy companies – to be acquired from the Russian State. Most of these companies are already subsidiaries or jointly controlled companies of RusHydro (like JSC Geotherm, JSC Kolymaenergo, JSC Boguchanskaya HPP). Therefore, the acquisitions are aimed at further consolidating these assets.

Valuations of all above-mentioned assets are being made by independent appraisers and will be confirmed by leading investment banks and are to be approved by the Company’s Board of Directors in July 2011.

The Russian State will also contribute RUB 3.1 bln of budget funds (cash) earmarked for the construction of the Gotsatlinskaya hydro-power plant via this equity offering.

40% of Irkutskenergo and the 5 hydro dams Irkutskenergo is a large vertically-integrated power company in Siberia, with low-cost hydro representing 70% of its generation mix, significant coal-fired thermal generation, coal mines and electricity transmission and distribution assets under operation.

RusHydro’s management strongly believes that acquiring 40% in Irkutskenergo and the 5 dams of the Bratskaya, Ust’-Ilimskaya and Irkutskaya hydro-power plants of Irkutskenergo coupled with a blocking stake in the Krasnoyarskaya HPP (acquired in 2010) creates synergies with RusHydro’s existing businesses (project design, engineering and R&D) and brings additional value through exposure to aluminum prices, as well as creates new opportunities for closer cooperation between power-generating businesses of RusHydro and one of the largest industrial consumers of electricity – RUSAL.

After thorough analysis, we also see the following operating and financial synergies that could be gained from the ownership and management of holdings in Irkutskenergo, the Krasnoyarskaya HPP and dams: – Implementing co-ordinated modernization and rehabilitation programs for the Angara and Enisey Cascade facilities, as well as maintenance programs leading to improvement in the safety of their operations; – Introducing up-to-date technologies to Irkutskenergo and the Krasnoyarsk HPP, with greater involvement of R&D and engineering capabilities of the RusHydro Group; – Jointly developing energy services businesses by RusHydro’s electricity retail subsidiary and the retail units of Irkutskenergo.

RusHydro is starting to negotiate with EN+, a majority shareholder of Eurosibenergo, a potential swap deal of its shareholdings in Irkutskenergo, the Krasnoyarskaya HPP and ownership of 5 dams for at least a blocking stake in Eurosibenergo (with corresponding representation on the Board of Directors and shareholders’ rights), a holding company for these assets, that will become a more well-managed and transparent asset after consolidation and the potential IPO in Hong Kong (which is planned for 2012).

Irrespective of the outcome of these negotiations, RusHydro will seek to maximize the value of its holdings via all available means, acting as a responsible and proactive shareholder, which should benefit RusHydro stakeholders, as well as those of Eurosibenergo and its subsidiaries.

RAO Energy Systems of East JSC RAO Energy Systems of East (RAO ES of East) and its subsidiaries form a vertically-integrated holding, operating co-generation thermal plants and electricity transmission and distribution assets in the Russian Far East. Operating 8.8 GW of electric capacity, 16.7 thousand GCal/h of heat capacity and 35 thousand kilometers of electricity lines, RAO ES of East covers the territory of more than 1/3 of Russia. Currently, RusHydro operates a number of large hydro-power plants in the region of the Far East – Bureyskaya, Zeiskaya, Kolymskaya – and already started constructing the Ust’-Sdednekanaskaya plant. However, these capacities are not being utilized in full compared to thermal power plants of RAO ES of East which are loaded on a first priority basis. This results in lost revenue by RusHydro, a high reserve margin of the power system (which is paid by consumers due to feeble interconnections within the region) and excessively high end-consumer power prices due to high fuel cost. All these factors curb the region’s economic development and put constraints on a larger industrial presence, and, therefore, electricity consumption dynamic in the Far East.

The acquisition of RAO ES of East by RusHydro will lead to:  Re-balancing load with inefficient thermal power plants giving way to more efficient low-cost hydro-power plants, which should result in additional revenue and attract a larger industrial customer base;  Gradual de-commissioning of the most inefficient and expensive thermal plants on the back of the higher load for existing hydro-plants and commissioning new hydro-capacities;  Exporting electricity surplus to China, which currently seeks a greater exposure to clean energy and is facing increasing demand.

Pricing parameters of assets and terms of the share issue The subscription to new shares will be open to all existing shareholders that have pre-emptive rights for a pro- rata buy-out. Pricing parameters for the equity offering are yet to be determined and approved by the Company’s Board. However, management believes that the price of additional shares will be in the range of RUB 1.55-1.65 per share – which is significantly above the current market level (ca. 1.36 – as of early June 2011).

Increase in the number of shares authorized for issuance The Board of Directors also proposes to shareholders to increase the number of shares authorized for issuance by 100 bln shares and to amend the Company’s Articles of Association accordingly. This is done to accommodate the 89 bln shares offering described above and also to create a reserve, in case the final valuation of assets exceeds preliminary estimates (which management sees as highly unlikely).

Transactions with VTB Bank (Items 11.3-11.10 of the AGM agenda)

The Board of Directors also submits for shareholders’ approval a number of transactions with VTB Bank to provide the following banking services:  Deposit of cash assets;  Loan and credit line facility(-ies);  Bank guarantee(s) and letter(s) of credit;  Remote banking services.

Since the Government of the Russian Federation is the majority shareholder in both RusHydro and VTB Bank, any sizable transactions between these two parties are qualified as “related party transactions” (or “interested party transactions”), by regulations of the Russian Federation, and are subject to approval by a simplе majority (> 50%+1) of votes of all non-related shareholders. Therefore, since the Russian State cannot vote on these items, the outcome of voting would depend on the votes of the remainder of shareholders.

VTB Bank is the second largest Russian bank with Ваа1/ВВВ ratings from S&P, Moody’s and Fitch rating agencies. RusHydro selected it from among other leading banking institutions based on the quality and safety of its services, reliability and a successful track-record of cooperation. If agreements between RusHydro and VTB Bank are approved by shareholders, they do not pose any risk of “exclusivity” or non-market pricing, as RusHydro will continue working with a wide range of leading financial institutions which can provide competitive and reliable services.

Details of the transactions to be voted on are described in the appendix to your proxy cards. The Board of Directors and the Management Board would appreciate your support of these important strategic developments and a vote in favor of the motions. If you have any questions on the AGM agenda items, do not hesitate to contact our managers (see the contact information below).

On behalf of the Management Board,

Deputy Chairman of the Management Board George Rizhinashvili

Member of the Management Board Evgeny Gorev

For more information, please contact: IR Department Tel: +7 (495) 225-3232, ext. 1319, 1394, 1607 ir@.ru Corporate Governance Department Tel.: +7 (495) 225-3232 ext.1025 [email protected]