JSC THE FIFTH POWER GENERATION COMPANY

ANNUAL REPORT 2007

JSC THE FIFTH POWER GENERATION COMPANY ANNUAL REPORT 2007 ООГК-5:ГК-5:

пилотный проект энергореформы! CONTENTS

ADDRESS OF BOARD CHAIRMAN ...... 4 POWER SALES ...... 59

ADDRESS OF DIRECTOR GENERAL ...... 5 FINANCIAL PERFORMANCE ...... 65 EVENTS CALENDAR ...... 7 INVESTMENT ACTIVITIES ...... 73 COMPANY BACKGROUND ...... 9 INNOVATIONS AND IT...... 77 GEOGRAPHY OF SALES ...... 15 HR AND SOCIAL POLICY STRATEGY ...... 19 SOCIAL PARTNERSHIP...... 79

CORPORATE GOVERNANCE ...... 23 ENVIRONMENTAL PROTECTION ...... 83 SHARE CAPITAL ...... 43 APPENDICES ...... 88 OPERATING PERFORMANCE...... 53

JSC The Fifth Power Generation Company 2007 Annual Report 3 Dear shareholders!

You are reading the annual report of one of the best practice, technological innovations, extensive work generation companies in Russia. It is the year 2007 experience on the free power market - these are the that brought a vivid example to this fact, as the real competitive advantages to be brought into the company again became the first in many positions Company thanks to the participation of one of the among its counterparts. world leaders in power. The Company was consistently implementing the The results achieved by the management deserve Development Strategy adopted by the Board of an ’excellent’ grade. Furthermore, the “Russia’s Top Directors of JSC OGK-5. The five-year investment Business Leaders” international research named programmeme (2007 - 2012) was adjusted and Anatoly Bushin, Director General of JSC OGK-5, the ratified to ensure reliable and effective operation of second best manager in the power sector after the production branches, as well as implementation Anatoly Chubais, Chairman of RAO UES of Russia. of new generation projects. The Company executed The management of the Company managed to show contracts with large international companies for the the investor community that the corporate construction of new capacity units, and we governance system of JSC OGK-5 is based on the managed to provide full financing of the first principles of accountability, transparency and construction stages. responsibility to shareholders and investors. The Company managed to work out effective tactics I can assure you that the Board of Directors of JSC for its operation on the market and provide its OGK-5 will persist in doing everything possible to commercial activities with relevant technological maintain the relations of maximum openness and opportunities. trust with the investor community. 2007 saw the significant enhancement of the role of independent directors and representatives of the strategic investor, Enel, in the Company’s Board of Directors. Their participation in governing the Company is a new impulse for the development of JSC OGK-5. State-of-the-art corporate governance

Chairman of Board of Directors of JSC OGK-5 Eldar Orudzhev

4 Dear shareholders, colleagues and partners!

In 2007 we witnessed the birth of the first generation companies of Russia. In 2007, OGK-5 independent power generation company in Russia, production affiliates generated 38.4 billion kW/h of this being JSC OGK-5. Not an easy thing fell to our power, while heat output totaled 6.8 million Gcal. lot, as we became the pioneers of the reform in the In general, the Company’s capitalisation increased Russian energy sector. It is a great achievement yet by more than 38%, from 115.45 billion RUB on also great responsibility, great trust and great December 31, 2006, to 152.77 billion RUB on attention to our Company. December 31, 2007 (review of share price The year results demonstrate that we worthily dynamics). accomplished the objectives set for us. The high management quality is illustrated by the All the procedures related to our spin-off from RAO fact that the Russian business elite gave OGK-5 the UES of Russia were accomplished. The Company got top spot in the “The Best IPO” and “The Best IR a strategic shareholder, Enel from Italy. Service” category, as well as an award for “The Best We successfully placed global depositary receipts, Corporate Governance Practice”. thus proving the appeal of OGK-5 shares on the All these facts indicate that OGK-5 is already a international market. Ordinary shares of OGK-5 leading company in the Russian energy sector. were included into the first-level quotation lists. It is We are facing new extensive objectives and real appreciation of the Company’s significance for ambitious aims. We are yet to grasp the first line the stock market, a guarantee of share liquidity to under new market conditions, raise the market our shareholders. capitalisation. I am sure that our team is up to it. Ensuring confidence in the future, OGK-5 started the implementation of projects for the construction of new generating capacities, concluded the contracts with general contractors and main equipment suppliers. Our production results prove a clear example of the fact that OGK-5 is one of the leading power 70% Director General of JSC OGK-5 Anatoly Bushin

JSC The Fifth Power Generation Company 2007 Annual Report 5 ННАШАШ П ПРИНЦИП:РИНЦИП: прозрачность, эффективность, ответственность! EVENTS CALENDAR

Board of Directors of the Company approves Regulation on Internal Control System of JSC OGK-5, February Regulation on Internal Audit Department of JSC OGK-5 and Rules of Interaction of Internal Audit Department of JSC OGK-5 with Audit Committee of Board of Directors of JSC OGK-5, Internal Audit Commission of JSC OGK-5, Executive Bodies of JSC OGK-5.

Company pays the first coupon yield (interest) on bonds in the amount of 187 million RUB, or 37.40 April RUB per bond. Standard & Poor’s assigns the corporate governance score (CGS) to JSC OGK-5. The international score is 5, the Russian score is 5.4.

Auction for sale of ordinary shares of JSC OGK-5 (25.0306%) held by RAO UES of Russia. ENEL June Investment Holding B.V. wins the auction.

The Federal Financial Markets Service of Russia gives permission for circulation of ordinary registered August uncertified shares of JSC OGK-5 in the amount of 7,074,537,100 pcs outside the RF. The sponsored GDR programmeme for OGK-5 shares is launched.

Reorganisation of JSC OGK-5 in the form of consolidation of JSC OGK-5 Holding takeover. The September reorganisation is implemented within the framework of the restructuring of RAO UES of Russia, as a result of which OGK-5 Holding is spun off from RAO of UES and simultaneously consolidated to JSC OGK-5.

In accordance with the requirements of legislation in force, ENEL Investment Holding B.V. makes a November mandatory buyout offer to the holders of rest ordinary shares of JSC OGK-5. The mandatory offer is effective through February 4, 2008.

December Inclusion of ordinary registered uncertified shares of JSC OGK-5 into Quotation List A1 of RTS SE.

JSC The Fifth Power Generation Company 2007 Annual Report 7 ДЕНЬДЕНЬ ЗЗАА ДНЕМДНЕМ И ШШАГАГ ЗЗАА ШШАГОМ:АГОМ:

ЭНЕРГЕТИКА ПОБЕД! COMPANY BACKGROUND

JSC The Fifth Power Konakovskaya GRES GRES for permanent operation. At Generation Company Location that moment, Konakovskaya Power (hereinafter ‘OGK-5’ or The power plant is located on the Plant was the largest power plant in ‘Company’) was established bank of the Volga River, in the Europe. by Decree No. 113r dd. south-east of Tver Oblast. The January 1993 – Konakovskaya GRES October 25, 2004, of the Konakovsky District of Tver Oblast is was transformed into an open Executive Board of RAO UES favorably located at the junction of joint-stock company and a daughter of Russia, as part of the major water-, rail- and roadways. company of RAO UES of Russia. Konakovo, with the population of Since 2000, the company has reforms in the country’s achieved a number of awards, power industry. 45,000, is one of the most developed towns in Tver Oblast. including the «European Standard» The company was registered Award, and became the winner of on October 27, 2004 by the Background various awards including the ‘Best Inspectorate for the Russian Enterprises’ Award and the Leninsky District of Konakovskaya GRES was set up as a ‘1000 Best Russian Enterprises of Yekaterinburg, Sverdlovsk power plant of a new type, and has 21st Century’ Award. During the Oblast, of the Russian been considered one of the leaders recent years, the plant has been Ministry of Taxation, with in the industry throughout its history. enjoying a Top 3 spot among power the state registry number In fact, the town of Konakovo grew suppliers in the competitive of 1046604013257. out of a small village of Kuznetsovo, wholesale power sector. thanks to the establishment of Since 1 April 2006, after the OGK-5 is one of the largest Konakovskaya GRES. completion of all the corporate and wholesale power 1961 – Survey of the construction legal procedures, Konakovskaya generation companies in site. GRES has been a production branch Russia, which aggregates 1962 – Excavation of the of JSC OGK-5. the generating capacities groundwork for the power plant. of Tver and Sverdlovsk October 1964 – Power Generation Oblasts, as well as Unit 1 was put into operation Stavropol Krai. January 1965 – a state commission signed an acceptance certificate for Unit 1. December 1971 – a state commission accepted Konakovskaya

KONAKOVSKAYA GRES

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JSC The Fifth Power Generation Company 2007 Annual Report 9 Nevinnomysskaya GRES fertilizer-producing enterprise and Reftinskaya GRES Location gained the status of a separate Location enterprise. The power plant is located in the The power plant is located in the 1962 – The power plant was north-eastern part of the town of south of Sverdlovsk Oblast, 80 renamed into Nevinnomysskaya Nevinnomyssk in Stavropol Krai. kilometers away from the city of GRES. Nevinnomyssk was founded in 1825 Yekaterinburg. April 2005 – a new 80MW as a Cossack village which was The district centre, the town of turbine-type generator, TG-3, was put transformed into a town in 1939. At Asbest, is 20 km southwest from the into operation to replace a used-up the moment, Nevinnomyssk has the plant. generator. Today the installed power population of more than 130 and heat generation capacities of thousand people. Summary Nevinnomysskaya GRES total 1,290 The capital of Stavropol Krai, MW and 729 GСal/h. Reftinskaya GRES is the biggest Stavropol, is 45 kilometers away Starting from 1 April 2006, after all thermal power plant in Russia which from Nevinnomyssk. JSC the corporate and legal procedures, uses coal. The installed generation Nevinnomyssky Azot, the largest Nevinnomysskaya GRES, earlier an capacity of the plant is 3,800 MW. producer of nitric fertilizers in Russia, open joint-stock company, has been The plant provides power for is located in close proximity to operating as a production branch of industrial regions of Sverdlovsk, Nevinnomysskaya GRES, and is the JSC OGK-5. Tyumen, Perm and Chelyabinsk plant’s key consumer of power and Oblasts. vapor. The power plant was initially a The necessity to set up Reftinskaya combined heat and power GRES was caused by the need to generation plant for the producer. eliminate power deficit in the Urals region, as well as provision of power Background to newly surveyed oil and gas 1958 – Construction of the power deposits in Tyumen Oblast. plant started. The construction site chosen was June 1960 – The first turbine-type located near a major industrial generator, with the total capacity of centre – the town of Asbest, at the 25 MW and the boiler unit capacity of confluence of two rivers – the 220 tons per hour, was put into Bolshoy Reft and the Maliy Reft, operation. which provide water to the power August 1960 – The heat and power plant and Reftinskaya village. plant was withdrawn from the Background 1963 – Construction of Reftinskaya GRES commenced. St December 1970 – Commissioning of avrop the first power generation unit with ol K ra the capacity of 300 MW. i December 1980 – Commissioning of the last power generation unit (Unit Stavropol 10) with the capacity of 500 MW.

Nevinnomysskaya GRES

10 Sredneuralskaya GRES Summary Background Location Sredneuralskaya GRES generates 1931 – Construction of the power The power plant is located in the electric power and provides thermal plant commenced. northern part of the town of power for heating and hot water 1936-39 – The first unit line of the Sredneuralsk on the bank of Lake supply of Yekaterinburg, Verknyaya power plant was built. Iset in the Urals. Pyshma, Brezovsk, and Commissioning of 5 medium Sredneuralsk. Sredneuralskaya pressure steam boilers and three GRES is located in the centre of the upgradeable turbines. region with especially high power 1963-66 – Construction of the consumption, and contributes to the second unit line. region’s power coverage. 1967-70 – Construction of the third The current installed capacity of the and fourth unit line. power plant is 1,193 GCal / h for heat and 1,182 MW for power.

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S Yekaterinburg Sredneuralskaya GRES

Reftinskaya GRES

JSC The Fifth Power Generation Company 2007 Annual Report 11 ORGANISATIONAL

DIRECTOR

FIRST DEPUTY DEPUTY DIRECTOR FIRST DEPUTY DIRECTOR GENERAL- GENERAL- DIRECTOR GENERAL FINANCIAL DIRECTOR COMMERCIAL DIRECTOR FOR PRODUCTION

DIRECTOR FOR FINANCE AND ECONOMIC SALES SECTION DEPUTY DIRECTOR GENERAL- SECTION TECHNICAL DIRECTOR NEW GENERATION

MARKETING AND ENERGY EQUIPMENT NEW GENERATION CHIEF ACCOUNTANT ANALYSIS OPERATION DEPARTMENT

ACCOUNTING SECTION FUEL SUPPLY TECHNICAL AUDIT IT DIRECTOR

INVESTMENT CORPORATE LEGAL PROGRAMMES IT DEPARTMENT SECTION AND MAINTENANCE SECTION

DEPARTMENT FOR STRATEGIC DEVELOPMENT

12 STRUCTURE

GENERAL

DEPUTY DIRECTOR GENERAL- HR DIRECTOR INTERNAL AUDIT DEPUTY DIRECTOR OPERATIONAL DIRECTOR DEPARTMENT GENERAL-DIRECTOR OF KONAKOVSKAYA GRES

ADMINISTRATIVE HR DEPARTMENT SUPPORT DEPUTY DIRECTOR GENERAL-DIRECTOR OF CORPORATE NEVINNOMYSSKAYA GRES TRAINING SECTOR SECURITY SECTION

DEPUTY DIRECTOR GENERAL-DIRECTOR OF SECURITY UNIT OF REFTINSKAYA GRES

DEPUTY DIRECTOR GENERAL-DIRECTOR OF SREDNEURALSKAYA GRES

JSC The Fifth Power Generation Company 2007 Annual Report 13 ККубань,убань, Ц Центрентр Р Россииоссии и С Среднийредний У Урал:рал:

наш труд, наша гордость, наш потенциал! GEOGRAPHY OF SALES

JSC OGK-5 is one of the Regulated Contracts Day-Ahead Market (DAM) largest thermal generation (RCs) On the «day-ahead market» excessive companies in Russia. The (deficient) volumes of power to cover main type of the Company’s In 2007, power and capacity were traded through long-term regulated RC portfolio obligations are sold at activities is production and contracts (RCs) concluded on the free (marginal) prices, which are sales of power and heat. wholesale power (capacity) market at formed as a result of the competition selection of price bids (buy/sell) from The total installed capacity of the regulated prices (tariffs), approved by wholesale market participants. NP Company’s power plants is 8,672 the Federal Tariff Service of the Administrator of Trading System MW, which is 8.7 % of the total Russian Federation in 2007. Starting organises and holds DAM auctions. installed capacity of thermal from 2008 – at an indicative price, Volume of liabilities under RCs will generation in the European part of which will be determined in accordance decrease in accordance with RF Russia and the Urals, including: with the indexation formula, approved Government Decree no. 205 dd. 1. Konakovskaya GRES (Tver Oblast, by the Federal Tariff Service of the 07.04.2007, which will accordingly the unified energy system of Central Russian Federation. The volume of RC lead to the increase of volumes of Russia) – 2,400 MW; portfolio corresponds to the size of the power sold at free market prices. 2. Nevinnomysskaya GRES power and capacity supply balance of (Stavropol Krai, the unified energy the Federal Tariff Service of the system of Southern Russia) – 1,290 Russian Federation in 2007 (base MW; volume), reduced by the liberalisation 3. Reftinskaya GRES (Sverdlovsk share approved by RF Government Oblast, the unified energy system of Decree no. 205 dd. April 7, 2007, as the Urals region) – 3,800 MW; well as with due account for the 4. Sredneuralskaya GRES peculiarities defined by RF Government (Sverdlovsk Oblast, the unified Decree no. 509 dd. August 31, 2006. energy system of the Urals region) – Starting from January 1, 2007, power 1,182 MW. supplied at regulated prices (tariffs) The company operates on the takes up the following share of power wholesale power market in the production (consumption) defined for a European and Urals price zones. participant of the wholesale market in Pursuant to Decree no. 529 dd. 31 the forecast balance for 2007, duly August 2006 of the Russian approved in 2006 taking into account Government, “On Improvement of the peculiarities of the formation of the Order of Functioning of Wholesale power share for households: from Power (Capacity) Market”, JSC OGK-5 January 1 until June 30, 2007 – from deals with trading in power in the 90 to 95%; from July 1 until December following wholesale market 31, 2007 - from 85 to 90%; from segments: January 1 until June 30, 2008 - from 80 to 85 %; from July 1 until December 31, 2008 - from 70 to 75%; from January 1 until June 30, 2009 - from 65 to 70 %; from July 1 until December 31, 2009 - from 45 to 50%; from January 1 until June 30, 2010 - from 35 to 40%; from July 1 until December 31, 2010 - from 15 to 20%; from January 1, 2011 power is fully supplied at free (non-regulated) prices.

JSC The Fifth Power Generation Company 2007 Annual Report 15 Balancing market (BM) Capacity Competition Trading in deviations of the actual Trading in deviations of the actual Since the power plants of JSC OGK-5 production schedule from the production schedule from the planned are included into the Unified Energy planned one at prices, formed on the one at prices, formed on the basis of Systems of Russia jointly with other basis of competitive selection in competitive selection in accordance power plants, it can be said that all accordance with the marginal with the marginal principle of bids of thermal generating companies are principle of bids of ВМ participants ВМ participants (suppliers and competitors of the Company. It also (suppliers and consumers with consumers with regulated load). applies to the Rosenergoatom regulated load). Constantly Constantly increasing market federal state unitary enterprise and increasing market requirements to requirements to the buyers of power HydroOGK, which also participate on the buyers of power with respect to with respect to more exact the wholesale power market. more exact consumption planning, consumption planning, requirements However, during a more detailed requirements that the suppliers that the suppliers should strictly follow analysis of competition, it is should strictly follow the orders of the orders of the System Operator necessary to take into account the the System Operator commands, as commands, as well as availability of fact that OGK-5 plants are in the first well as availability of generating generating equipment, will lead to a price zone, as well as the equipment, will lead to a possible possible decrease, rather than remoteness of a specific supplier of decrease, rather than increase, in increase, in the trading volumes of the energy from the load center, and the trading volumes of the balancing balancing market. think about the degree each market. This model of the wholesale market competitor affects the price situation This model of the wholesale market allows selling and buying lacking in a region. allows selling and buying lacking volumes of power on an hourly basis as Hydro power plants and nuclear volumes of power on an hourly basis defined in the RC portfolio. Thus, a power plants, as compared to as defined in the RC portfolio. Thus, hedging mechanism was created thermal power plants, have smallest a hedging mechanism was created which resolves the problem when it is generation costs. Moreover, due to which resolves the problem when it impossible to perform RC obligations their use peculiarities (safety, is impossible to perform RC due to the non-compliance of the environmental actions, use of obligations due to the composition of the generating natural resources, as well as work non-compliance of the composition equipment, selected by the System modes), these types of plants are of the generating equipment, Operator, or power generation using more competitive on power markets. selected by the System Operator, or the more expensive type of fuel. This At the same time, hydro power plants power generation using the more financial tool allows supplying power by (GES) and nuclear power plants (AES) expensive type of fuel. This financial generators without actually generating have greater maintenance costs tool allows supplying power by it, but buying it on the day-ahead than thermal power plants (TES), generators without actually market at the price set on the therefore thermal plants will be more generating it, but buying it on the competitive selection basis. competitive on the capacity market day-ahead market at the price set on after it is launched (launch expected the competitive selection basis. in 2008).

16 Thermal power plants using gas and Konakovskaya GRES Reftinskaya GRES and fuel oil are under equal conditions in Taking into account the growing Sredneuralskaya GRES terms of competition. Taking into power demand in the UES of Centre, The total generation of Reftinskaya account the considerable increase in competitors in the region do not GRES and Sredneuralskaya GRES in gas and fuel oil prices in 2007, which affect the operation of 2007 totaled more than 9.7% of the was more rapid than the increase in Konakovskaya GRES as they used to total power generation in the UES of coal prices, coal-fired power plants do in 2005 and 2006. Urals. The high load of Reftinskaya became more competitive. As GRES is conditioned by increased compared to competitors, the power demand in the Urals against advantage of JSC OGK-5 is the fact Nevinnomysskaya GRES high annual increase in power that fuel balance has a considerable Nevinnomysskaya GRES is located in consumption in UES of Russia (2.9% portion of coal (~ 50%), therefore, the complex power node of the UES as compared to 2006), low limitations in gas supplies and of South. For providing reliable generation costs and, as a result, gas/fuel oil price instability do not operation of the node, the dispatch high competitiveness. The high load affect the results of the Company’s control office (ODU) of South sets of Sredneuralskaya GRES, given low activities as compared to its increased loads onto generation costs, is conditioned by competitors. Nevinnomysskaya GRES except for not only the power demand of the The volume of generation and sales the following cases: UES of Urals but also heat of power generated by the • network operation in maintenance consumption by such cities as Company’s power plants are affected schemes, when load limitation of the Yekaterinburg, V.Pyshma, by the existing operating conditions power plant is necessary; Sredneuralsk. of the Unified Energy System, • high water period, when load is namely: limited by increased generation of - network maintenance the hydro power plants of the UES of (transmission lines and substations); South. - repairs, startups, outages and The advantage of Nevinnomysskaya operating conditions of plants’ GRES is its position in the network of generating equipment. South that provides good load and plant ratio of the power plant.

JSC The Fifth Power Generation Company 2007 Annual Report 17

STRATEGY

The Company’s stability the Company’s personnel, as well as the Company’s shareholder value, rests on its strategic well-elaborated business processes meet the growing demand of power advantages: for relations with clients and consumers and implement partners. responsible policies in the social and – leadership in power sales (the In accordance with the Strategy of environmental spheres. Company bears lower management OGK-5 for 2006-2012, and given the – the Company which meets the high and use costs and expenses as it existing advantages, the Company corporate governance standards, has a comparatively small number of has the ultimate goal – LEADERSHIP pays great attention to its relations power plants with high installed IN NATIONAL POWER INDUSTRY and with shareholders and investors, capacity; low production costs; the turning the strategic advantages into meets the information disclosure constant readiness of the generating strategic superiority. requirements set by law. equipment to bear the set load, LEADERSHIP IN NATIONAL POWER The self-positioning of the maneuverability of the generating INDUSTRY implies meeting the management team and the equipment; high reliability and following targets: Company’s personnel is based on guarantee of supply of power and – by January 1, 2012, the Company’s their activities aimed at supporting heat to consumers; a unique value must be on the same level with the Company’s image and meeting IT-platform which allows to take its international counterparts; the set targets. advantage of price fluctuations on – best service for our clients; The Company’s personnel is a team the free power market); – aspiring to be the most efficient of highly qualified professionals, who – favourable location of the power and competitive Company; are able to timely react to internal plants (the Company’s plants are – being constantly innovative; and external changes, forecast and located in the most economically and – having the best personnel and minimize risks, meet the highest industrially developed regions, where being the best for its self-realization. requirements and expectations of power demand will always be high); shareholders. The foundation of the – the optimal fuel balance structure Taking into account the strategic Company’s success is the (in comparison with the industry as a advantages and abovementioned combination of the experienced whole, the Company is less targets, the Company positions management team and dependent on fuel price fluctuations, oneself as: highly-qualified experts in the as it has the optimal fuel balance – a – the leader of the sector, which production branches, who honor the bit more than 50 percent of capacity provides successful attraction of traditions and welcome innovations is gas-based, while a bit less than 50 investments and is capable of that are necessary to reflect changes percent of capacity is generated managing raised funds to strengthen in the environment and the reforms using coal); its position on the market, increase in the power sector. – the good level of competence of

JSC The Fifth Power Generation Company 2007 Annual Report 19 Company achievements in 2006 the Company’s plants. OGK-5 offers favourable conditions For OGK-5, 2006 was primarily OGK-5 is the leader among other and a high level of service to its marked by the IPO, which raised $ wholesale generation companies, customers. The Company enters into 459 million: it was an event of which were established during the free bilateral contracts on the utmost importance in the light of the reforming of the power industry, and day-ahead market not only with the reforms in the power industry. it is important for us to preserve our buyers but also sellers of power. In In 2006, we proved the high credit leadership and interest for potential its relations with customers, OGK-5 quality of our Company by obtaining investors. That is why the framework follows the individuality principle, the corporate family (Ba3) and of our success is the combination of which means provision of a national scale (Aa3) credit ratings stability and constant improvement. maximum number of consulting and assigned by Moody’s. We are also To achieve this goal, we are active in: other services related to power sales continuing our work aimed at – pursuing an active investment to each counteragent, both at the obtaining the corporate governance policy aimed at a higher reliability of contract execution stage and during rating. the existing generating facilities, the implementation of such One of our priorities is stable their upgrade, reconstruction and contracts. corporate governance, and we are construction of new facilities; Active cooperation with power buyers successful on our way towards the – increasing the fuel supply and sellers strengthens the image of improvement of the corporate efficiency; OGK-5 as a reliable and competent governance system and bringing it in – constantly increasing our partner open for a constructive line with the best global practices in competence in the sphere of dialogue to reach mutually the sphere. efficient power sales management. favourable cooperation on the The Company has the following basic The success of the Company is not wholesale and retail power markets documents which we strictly follow in possible without care for the in Russia. our activities: environment, and we are aware of – Development Strategy of the our responsibility for the Image Company for 2006-2010; environment in the regions where our To preserve the existing business – Investment Programme for plants are located. partners and customers and find 2006-2010; We are sure that a stable corporate new ones, as well as create the – Environmental Policy. governance system, effective reputation of a transparent and open Our goal is to become an efficient investment and environmental Company, which helps to manage the production Company, which policy, increasing competence in the information field and positively affect demonstrates a high growth management sphere, and social capitalization growth, the Company potential for production and financial responsibility are the keystones of is constantly updating and performance indicators, provides the the Company’s leadership and the implementing the policy of growth of the shareholder value, and best proof of the success of the information transparency. is capable of efficient operation reforms and the future of the under the market liberalization Russian power industry. conditions. Customer Policy Investor Policy A major priority for the Company is We became the first energy company the best service for customers in Russia to place additional shares, reflected in the customer policy of which helps us to successfully the Company. implement the Programme for At the moment, the customer base of Technical Upgrade and the Company is mainly represented Reconstruction aimed at increased by regional (local) power suppliers reliability and efficiency of the and large industrial consumers Company’s production assets and which have direct access to the reduction of environmental impact of wholesale power market.

20 PRIORITY ACTIVITIES

Overview of Priority management: increase of efficiency and reliability of Activities • Introduction of modern equipment; JSC OGK-5 positions itself as a leader technologies in organisation of • Construction of new generation of the industry showing high power sales; facilities in regions with potential investment appeal and able to • Introduction of a professional power deficit (or regions with a high effectively manage attracted funds in training system in the area of power portion of expensive generation – the interests of strengthening market sales on the wholesale power exclusion of low-effective competitors positions, increasing the Company (capacity) market, training skilled HR from the market) and implementation value for shareholders, satisfying the reserves; of strategically important projects; growing demand of power consumers • Monitoring of environment and • Conclusion of economically sound and pursuing a responsible social and competitors including monitoring of contracts for power equipment environmental policy. The company is changes on the wholesale power maintenance; a Russian company with international (capacity) market, studying demand • Taking advantage of the Kyoto standards of corporate governance, markets and consumers’ needs; Protocol. which lays emphasis on work with • Better reliability and 3. Increasing the effectiveness of fuel shareholders and investors, and maneuverability of equipment; supplies: fulfills all requirements as to • Building effective relations with • Setting up mutually profitable information disclosure. the retail power and heat consumers long-term partnership schemes and The strategic goal set by the (by means of participation in the joint projects with gas suppliers; management of the Company is capital of regional supply companies, • Mutually profitable long-term Leadership in sales (first in sales creation of regional power partnership with coal suppliers; among wholesale generating exchanges, trilateral cooperation in • Diversification of the suppliers’ companies). To achieve this goal, the the form of the ‘generating company’ portfolio; management of the company is – ‘supply company’ – ‘user’ chain). • Optimisation of the fuel balance. 2. actively working in the following areas: Conducting an active investment • Increasing competence in the area policy aimed at better reliability, of effective power sales technical upgrade, reconstruction management; and construction of new generating • Conducting an active investment facilities: policy aimed at better reliability, • Conducting the policy of technical upgrade, reconstruction information transparency complying and construction of new generating with international requirements for a facilities; public company; • Increasing the effectiveness of fuel • Increasing competences in project supplies. management; • Studying the experience of the While following the strategic shareholder in engineering; development priorities, the • Formation of an optimal capital Company is accomplishing the structure for a long-term period; following tasks to achieve the • Economically sound set goals: reconstruction and upgrade of the 1. Increasing competence in the area existing facilities directed at the of effective power sales

JSC The Fifth Power Generation Company 2007 Annual Report 21 ЭЛЕКТРИФИКАЦИЯ ВСЕЙ СТРАНЫ! CORPORATE GOVERNANCE CORPORATE GOVERNANCE PRINCIPLES

The corporate Fairness. governance practice in the The Company undertakes to protect Company is based on the the rights of its shareholders and standards and treat all shareholders on an equal recommendations set by the basis. The Board of Directors Code of Corporate enables its shareholders to receive Governance of the Federal efficient protection if their rights are Commission for the violated. Securities Market (FCSM), as well as the provisions of Transparency. the Code of Corporate The Company shall provide timely Governance of the JSC disclosure of credible information on OGK-5 (hereinafter the all the important facts related to its ‘Code’), which was approved activities, including information on in 2006. its financial condition, social and environmental measures, results of activities, ownership and The corporate governance in the Company is founded on the management structures; the following principles: Company shall provide free access to such information for all interested parties. Accountability. The Code of Corporate Governance Responsibility. envisages accountability of the The Company acknowledges the Board of Directors of the Company rights of all interested parties before all shareholders in envisaged by the legislation in force, accordance with the legislation in and aims at cooperation with such force, and is the governing document parties in order to provide steady for the Board of Directors in issues development and ensure financial related to strategy planning, stability of the Company. administration and control over the Company’s executive bodies.

JSC The Fifth Power Generation Company 2007 Annual Report 23 Management and For the administration of the Control Bodies Company’s day-to-day activities, the The supreme management body of Executive Board was established by the Company is the General a resolution of the Board of Shareholders’ Meeting of JSC OGK-5. Directors.

General Shareholders` Meeting

The supreme management body Executive Board was established by of the Company is the General a resolution of the Board of Shareholders’ Meeting of JSC OGK-5. Directors. For the administration of the Company’s day-to-day activities, the

No. Meeting Date Resolutions Adopted

1. 1 June 2007 (Minutes 1 1. reorganisation of JSC OGK-5 by way of consolidation of JSC dd. 4 June 2007 of OGK-5 Holding to the Company; Annual General Share- 2. determination of quantity, par value, categories (types) of the holders’ Meeting of JSC OGK-5) declared shares of JSC OGK-5 and rights granted by these shares; 3. alteration of the Articles of Association of the Company; 4. increasing of the share capital of JSC OGK-5 by means of the placement of additional shares for the purpose of conversion of the shares of JSC OGK-5 Holding into them; 5. ratification of internal documents regulating the activities of the bodies of JSC OGK-5, in new edition; 6. ratification of the Annual Report, annual financial statements, including the profit and loss statement; 7. distribution of profit (including payment (declaration) of dividends) and loss of the Company upon the results of the 2006 financial year; 8. election of the new Board of Directors of the Company; 9. election of the new Internal Audit Commission of the Company; 10. ratification of the auditor of the Company; 11. payment of remunerations and compensations to the members of the Board of Directors of the Company.

24 In 2007, four General Shareholders’ Meetings of JSC OGK-5, one Annual General Shareholders’ Meeting and three Extraordinary General Shareholders’ Meetings of JSC OGK-5 were held.

No. Meeting Date Resolutions Adopted

2. 16 August 2007 (Minutes 1. Two transactions related to the construction of a ССGT unit 2. dd. 21 August 2007 of on the territory of Nevinnomysskaya GRES branch of JSC Extraordinary General OGK-5, are approved as related-party transactions; Shareholders’ Meeting of JSC OGK-5) 2. Changes and amendments are introduced into the Articles of Association of the Company

3. 31 August 2007 (Minutes 1. Resolutions are adopted about the early termination of the 3 dd. 3 September 2007 offices of the Board of Directors and election of a new Board of of Extraordinary Directors of the Company. General Shareholders’ Meeting of JSC OGK-5)

4. 31 August 2007 (Minutes 1. Resolutions are adopted about the early termination of the 4 dd. 3 September 2007 offices of the Internal Audit Commission and election of a new of Extraordinary Internal Audit Commission of the Company. General Shareholders’ Meeting of JSC OGK-5)

JSC The Fifth Power Generation Company 2007 Annual Report 25 Board of Directors of JSC OGK-5 Elected on 31 August 2007

Eldar Orudzhev Dominique Fache Dmitry Akhanov Eldar Orudzhev was born in 1975 in Dominique Fache was born in 1949. Dmitry Akhanov was born in 1975 in Sukhoy Log (Sverdlovsk Oblast). He He is Director General of Enel S.p.A Rostov-on-Don. In 1999 he graduated graduated from the Law School of for Russia and CIS countries. Since Russian People’s Friendship Omsk State University. Worked in the 2007 – Deputy Chairman of the University) in Law. He worked for the Omsk Regional Branch of the Federal Board of Directors of JSC OGK-5. following companies “Nika”, Financial Markets Service, JSC “Rosprom”, “Center Invest MK”. In “Omsktekhuglerod”. In 2001 – 2002 2000 – 2002 – in NIKoil Bank. – Leading insolvency specialist in AK From June 2002 – Deputy Head of SIBUR. the Capital Management Department From 2002 – Deputy Managing of RAO UES of Russia. From 2002 – Director of BU 1 of RAO UES of Russia. Head of the Strategy Department of Since 2005 – Chairman of the Board the Centre of Reform Management of of Directors of JSC OGK-5. RAO UES of Russia. Since 2007 – Head of the Federal Energy Agency.

26 Marcello Bruti Anatoly Bushin Sergey Vasilyev Marcello Bruti was born in 1953. He Anatoly Bushin was born in 1965 in Sergey Vasilyev was born in 1975. obtained higher education in Italy as Moscow. Graduated from Moscow Has higher legal education, graduated mechanical engineer. Since 2003 he Commercial Institute and Ryazan from Lomonosov Moscow State has been working in Enel Produzione State Pedagogical University in University in Law. From 2000 he held S.p.A. on the posts: Director of Merchandising and settlement of the post of Deputy Director General – Centralised CHP Maintenance trade, law and political science. Chairman of the Board of Service, Customer Engineer, Director Obtained additional education in the ZAO“Yurenergo-UES. From 2002 he for combined cycle electric generating Academy of Economy under the was working in RAO UES of Russia as plants maintenance. And since 2007 Government of the RF in Energy First Deputy Head of the Legal he is holding post of the Director of Management. Department of the Corporate Centre, the Integration Project JSC OGK-5 In the energy industry Anatoly Bushin and since 2003 – Head of the Legal Enel Produzione S.p.A. worked as: from 2000 – Deputy Department of the Corporate Centre. Director General of Economy, Director of economy and finances of JSC Kostromskaya GRES. From 2003 – Director General of JSC Konakovskaya GRES. Since 20 September 2004 – Director General of JSC OGK-5.

JSC The Fifth Power Generation Company 2007 Annual Report 27 Board of Directors of JSC OGK-5 Elected on 31 August 2007

Grigory Glazkov Stephane Zweguintsow Denis Kulikov Grigory Glazkov was born in 1953. In Stephane Zweguintsow born in 1968. Denis Kulikov was born in 1975. In 1979 he graduated from the He graduated from the Institute of 2006 he graduated from Moscow economics deparment of Leningrad Political Research in Paris. Since State Academy of Law (Legal Studies). State University (Economy Planning), 2002 – Head of the Representation Labour experience on the stock and in 2006 – Higher School of of ENEL Produzione S.p.A. market – 7 years. Psychology (Psychology). From 1997 From 2001 – Expert, and since 2006 to 2000 he was working as Head of – Deputy Executive Officer of the the Department of the Ministry of Investors Rights Protection Finance of Russia. From 2002 to Association. 2004 – psychologist and advisor, Director of the Psychological Consulting Center “Point of View”. In 2002-2005 – advisor of the Federal Center for project financing, and since 2004 – Independent Advisor.

28 Gerald Rohan Giorgio Cimini Gerald Rohan was born in 1942. Giorgio Cimini was born in 1947. Has From 1993 to 2007 he worked as higher education, graduated Director of Fuel and Energy University of Rome majoring in Department in industrial chemistry. From 2001 to PricewaterhouseCoopers Russia B.V. 2004 he worked in Enel (Italy) as the Since 2004 – CEO of RGС. Gerald Director for Generation Objects Rohan is Member of the Energy Planning, Director of BU for combined Institute and Independent Directors’ cycle generating plants. Since 2004 Association. he has been working in OOO ENEL ESN Energo – Advisor of EO, EO, General Director.

JSC The Fifth Power Generation Company 2007 Annual Report 29 Share of Members of Board of Directors in Company’s Share Capital as on 31 December 2007:

Full name Preferred shares, % Ordinary shares, %

Eldar Orudzhev - - Dominique Fache - - Dmitry Akhanov - - Marcello Bruti - - Anatoly Bushin - 0,029 Sergey Vasilyev - - Grigory Glazkov - - Stephane Zweguitnsow - - Denis Kulikov - - Gerald Rohan - - Giorgio Cimini - -

30 Board of Directors of JSC OGK-5 Elected on 1 June 2007*

Full nameYear of birth Place of employment and job title

Deputy Executive Officer of the Business Unit 1 of RAO 1 Eldar Orudzhev 1975 UES of Russia

Deputy Executive Officer of the Business Unit 1 of RAO 2 Ilyas Zagretdinov 1956 “UES of Russia

3 Mikhail Andronov 1969 Director General of RusEnergoSbyt LLC

Head of Strategy Department of the Center of Management of reform, Head of the Center for 4 Dmitry Akhanov 1975 AO-energos Reformation Projects Implementation of RAO UES of Russia

Director General of JSC OGK-5 5 Anatoly Bushin 1965

Deputy Director General for strategy and technical matters of the Foundation “Institute of professional 6 Evgeny Bykhanov 1968 directors”

7 Sergey Vasilyev 1975 Head of legal department of RAO UES of Russia

Deputy Executive Officer of Investors Rights Protection 8 Denis Kulikov 1975 Association

Deputy Director General for Finances of the Foundation 9 Valery Nepsha 1976 “Institute of professional directors”

Director of power supply and mining industry in 10 Gerald Rohan 1942 PricewaterhauseCoopers Russia V.V.

Head of Tariff Design Board of the Business Unit 1 of RAO 11 Vasily Filippov 1977 UES of Russia

*Job titles of the members of the Board of Directors of JSC OGK-5 are given as on the date of election.

JSC The Fifth Power Generation Company 2007 Annual Report 31 Activities of Board of programme of JSC OGK-5 for 2007; Committees of the Directors consideration of the questions Board of Directors of the In 2007 24 meetings of the Board of related to the preparation and Company Directors of JSC OGK-5 were held, 8 holding of the General Shareholders’ Audit Committee Meetings. of which were in-presentia meetings, The Audit Committee acts under the On 17 April 2007, the Board of 14 – in-absentia meetings, and 2 – Articles of Association and the Directors adopted the resolution to combined (in-absentia – Regulation for the Audit Committee recommend the Annual General in-presentia) meetings. of the Board of Directors. Shareholders’ Meeting to adopt the During 2007, the Board of Directors The Audit Committee powers include resolution about the reorganisation of JSC OGK-5, within the limits of its initial consideration, analysis and of JSC OGK-5 by consolidation of JSC competence, considered 244 development of recommendations OGK-5 Holding to it, in particular questions and adopted a number of on certain issues within the approval of the consolidation resolutions which significantly competence of the Board of contract”. influenced the activities of the Directors (approval of the Annual On 21 November 2007, the Board of Company among which the following Report of the Company, Company’s Directors of JSC OGK-5 elaborated can be marked: approval of the annual accounting statements, etc.), recommendations to the schedules for the implementation of development of recommendations to shareholders of the Company for the the following investment projects: the Board on the procedure of the mandatory offer of ENEL Investment Construction of 410-MW ССGT unit annual independent audit of the Holding B.V. for the buyout of OGK-5 at Nevinnomysskaya GRES” and Company, assessment of candidates ordinary registered uncertified “Extension of Sredneuralskaya GRES for the Company’s auditor positions, shares under the mandatory offer. through construction of 410-MW СС analysis of the Company’s GT unit”; approval of the Regulation statements and the result of external on Internal Control System of JSC audits as well as consideration of OGK-5 and the Regulation on other issues by the order of the Internal Audit Department of JSC Company’s Board of Directors. OGK-5; approval of the charity

Composition of Audit Committee:

Full name Title

Gerald Rohan CEO of RGC, Committee Chairman

Marcello Bruti Head of Combined Cycle Plants and Turbogas Department of ENEL

Grigory Glazkov Independent Consultant of the Federal Centre for Project Financing

Stephane Zweguintsow Local Representative of ENEL in Russia

Denis Kulikov Deputy Executive Director of the Investor Protection Association

Dominique Fache ENEL’s Country Manager and Chief Operations Officer for Russia and CIS

32 Committee for Strategy, Shareholders’ Meeting and the Development, Business Board of Directors to consider issues Planning and Corporate related to reorganization of the Governance Company, including agreements on merger and share capital increase. The Committee for Strategy, The Committee’s authority also Development, Business Planning comprises placement of bonds and and Corporate Governance acts other equity securities, acquisition of under the Articles of Association of shares, bonds and other convertible the Company and the Regulation on securities as well as other issues Committee for Strategy, under the instructions of the Board. Development, Business Planning and Corporate Governance of Board of Directors of JSC OGK-5”. The Committee determines priority directions for the Company’s activities; recommends the General

Composition of the Committee for Strategy, Development, Business Planning and Corporate Governance:

Full name Title

Livio Colasanto Head of Fuel Management, ENEL, Committee Chairman

Sergei Vasilyev Head of the Legal Department of the Corporate Centre of RAO UES of Russia

Denis Kulikov Deputy Executive Director of the Investor Protection Association

Mikhail Krupin First Deputy Director General – Financial Director of OGK-5

Marco Consumi Director for Business Development in Russia, ENEL

Viktoria Shamritskaya Deputy Local Representative of ENEL in Russia

JSC The Fifth Power Generation Company 2007 Annual Report 33 HR and Remuneration delegation of authority of the sole Committee executive body to the management HR and Remuneration Committee company; approval of the contractual acts under the Company’s Articles of terms in relation to the contracts Association and the Regulation on signed with the General Director, HR and Remuneration Committee of Executive Board members and the Board of Directors of JSC OGK-5. management company. The Committee deals with preliminary study, analysis and elaboration of recommendations related to election of the General Director of the Company and early termination of his powers; the number of the Executive Board members and election of the Executive Board members as well as early termination of their powers; amount of remunerations and compensations to the Executive Board members. The Committee also recommends the General Shareholders’ Meeting and the Board of Directors to consider

Composition of HR and Remuneration Committee:

Full name Title

Dominique Fache ENEL’s Country Manager and Chief Operations Officer for Russia and CIS, Committee Chairman Grigory Glazkov Independent Consultant of the Federal Centre for Project Financing

Stephane Zweguintsow Local Representative of ENEL in Russia

Denis Kulikov Deputy Executive Director of the Investor Protection Association

Gerald Rohan CEO of RGC

34 Reliability Committee operation and maintenance services; The Reliability Committee acts under it evaluates technical conditions, the Company’s Articles of degree of use and state of repair of Association and the Regulation on the power production equipment; the Reliability Committee of OGK-5. evaluates the activities of the The Committee deals with Company’s technical services and preliminary study, analysis and their management, and other related development of recommendations to issues. the Board of Directors with regard to the Company’s readiness for the autumn / winter period, labor safety and production safety management,

Composition of Reliability Committee:

Full name Title

Giorgio Cimini General Director of OOO ENEL-ESN ENERGO, Committee Chairman

Aldo Baldacci Deputy Head for Environment and Safety, Energy Management division of ENEL

Valentina Dmitrieva Head of Financial and Economic Section of OGK-5

Nikolai Grechenkov Deputy Director General – Technical Director of OGK-5

Ilyas Zagretdinov Deputy Managing Director of BU 1 of RAO UES of Russia

JSC The Fifth Power Generation Company 2007 Annual Report 35 Corporate Secretariat The Corporate Secretary performs The candidacy for the position of the In 2006 the Company approved the the functions of the secretary of the Corporate Secretary shall have Regulations on Corporate Secretariat Board of Directors of the Company, higher legal or economic education, and Secretariat of Board of Directors General Shareholders’ Meeting of have labour experience in the field of of JSC OGK-5 (Minutes 5 of the Company, and Committees of the corporate governance. 30.03.2006), developed in Board of Directors of the Company At present, the functions of the accordance with the Federal Law “On unless otherwise stipulated by the Corporate Secretary are performed Joint-Stock Companies”, Articles of resolutions of the Board of Directors by Dmitry Andreychenko – Head of Association of JSC OGK-5, internal of the Company. Corporate Relations, Corporate and documents of the Company and The Corporate Secretary of the Legal Section of JSC OGK-5 (Minutes recommendations of the Code of Company is elected by the Board of of the Board of Directors no.12 of Ethics. Directors of the Company by majority 07.07.2006). Corporate Secretary shall provide of votes of its members present at for: the meeting. The position of - Observance of the procedure for Corporate Secretary is elective. the preparation and holding of the The Corporate Secretary candidacy General Shareholders’ Meeting in is proposed by the Chairman of the the Company; Board of Directors or by members of - Efffective activities of the Board of the Board of Directors if the Directors and its committees; Chairman of the Board of Directors - Procedure of storage, disclosure has not been elected. and provision of information about the Company.

36 Executive Board and in-absentia meetings at which over Anatoly Bushin Director General 140 issues were considered. Anatoly Bushin was born in 1965 in The control over the current activities In 2007, the Board of JSC OGK-5 Moscow. He graduated from Moscow of JSC OGK-5 is exercised by the sole considered issues related to the Commercial Institute and Ryazan executive body – the Director activities of the Company, including State Pedagogical University in General and collegial executive body the reconstruction of power units at Merchandising and settlement of – the Executive Board of the Nevinnomysskaya GRES branch, as trade, law and political science. Company. well as the Rules of Procedure for Obtained additional education in the The Director General and Executive Charity Aid and the environmental Academy of Economy under the Board of the Company are audit plan of the Company. Government of the RF in Energy subordinate to the General Management. In the energy industry Shareholders’ Meeting and the Anatoly Bushin worked as: from 2000 Board of Directors of JSC OGK-5, and – Deputy Director General of act under the Articles of Association Economy, Director of economy and of the Company and the Regulation finances of JSC Kostromskaya GRES. on Executive Board of JSC OGK-5. From 2003 – Director General of JSC The formation of the Executive Board Konakovskaya GRES. Since 20 of the Company, appointment of the September 2004 – Director General Director General of the Company and of JSC OGK-5. early termination of offices of the members of the Executive Board and Director General are performed by a resolution of the Board of Directors of JSC OGK-5. In 2007, the Executive Board of the Company held 57 in-presentia and

JSC The Fifth Power Generation Company 2007 Annual Report 37 Mikhail Krupin Maxim Antipov Dmitry Vologzhanin Mikhail Krupin was born in 1972. He Maxim Antipov was born in 1973. . He Dmitry Vologzhanin was born in 1975. graduated from Yaroslavl Higher graduated from Yaroslavl Higher He graduated from two departments Military Financial College, Yaroslavl Military Financial College, Yaroslavl of Ryazan State Radiotechnical State University and Institute of State University and (in 2003) Academy for System Engineer and Professional Accountants of Russia in Institute of Professional Accountants Economist-Manager. Since 2000, he Economics, Law, Professional of Russia in Professional Accounting has been working in the energy sector Accounting – Financial Management, –Chief Accountant, Expert (JSC Kostromskaya GRES and JSC Financial Expert (Advisor). PhD in Accountant. He has been in the Konakovskaya GRES). He became Economy and Law, MBA. In energy energy sector since 2001, when he Commercial Director of OGK-5 in industry – from 2002 – Deputy Head became Deputy Chief Accountant of 2005. of the Financial Management JSC Kostromskaya GRES. He was Department of JSC Kostromskaya appointed Chief Accountant of OGK-5 GRES, Head of the Cash Flow in 2005. Department of JSC Kostromskaya GRES, Head of the Treasury of JSC Kostromskaya GRES, Head of the Financial and Legal Department of JSC Kostromskaya GRES, the First Deputy Director General – Business Director of JSC Konakovskaya GRES. Since 2005 – the Deputy Chairman of the Executive Board, First Deputy Director General – Financial Director of JSC OGK-5.

38 Nikolai Grechenkov Valery Nazarov Gennady Shepelev Nikolai Grechenkov was born in 1954. Valery Nazarov was born in 1958. He Gennady Shepelev was born in 1964 He graduated from Moscow Energy graduated from Ivanovo Energy in Norilsk, Karsnoyarsk Krai. After Institute, mastering in Power Plants. Institute for Automation of Thermal military service in the Soviet Army, in He has been in the power sector for Energy Processes. Valery Nazarov 1989 he graduated from Moscow almost 30 years, starting in 1977 in spent more than 20 years working at Automechanical Institute majoring in Mosenergo, a company dealing with Kostromskaya GRES, where he Machines and Technology of Foundry power supply of Moscow. Later Nikolai gradually rose from a foreman to the Operation. After graduation he worked Grechenkov worked as the Deputy first deputy director general – chief for 7 years as the engineer at ZIL Head of the General Inspectorate of engineer of the power plant. In automotive factory. From 1996 to Power Plant and Grid Maintenance of 2006-2007 he worked in OGK-3 as 2005 – Director General of JSC RAO UES of Russia, Director General of the deputy director general for Ryazselmash. In 2005 received MBA Gusinoozerskaya GRES, and Head of technical policy. From October 1, title in HR in the Academy of Economy Department for Technical Audit and 2007 until March 31, 2008, Valery under the Government of the RF. General Inspections of RAO UES of Nazarov worked as Deputy Director Since 2005 – HR Director of JSC Russia. Nikolai Grechenkov has been General of JSC OGK-5 for Production. OGK-5. In 2007 he was elected to the working in OGK-5 as the Technical On April 1, 2008, he was appointed Executive Board of JSC OGK-5. Director since 2005. Director General of JSC OGK-5.

JSC The Fifth Power Generation Company 2007 Annual Report 39 Share of Members of Board in Share Capital of Company as of 31 December 2007:

Full name Preferred shares, % Ordinary shares, %

Anatoly Bushin - 0,029 Mikhail Krupin - 0,00065 Maxim Antipov - 0 Dmitry Vologzhanin - 0 Nikolai Grechenkov - 0 Valery Nazarov - 0 Gennady Shepelev - 0

Internal Audit Commission

Year Full name of Birth Title

Director of the Planning and Control Department of International Division Paolo Bondi 1966 of ENEL. Since 2007 – a member of the Internal Audit Commission of JSC OGK-5.

In 1991 she graduated from Moscow Institute of Consumer Industry Oksana Burova 1969 (Engineer-Economist). She worked in the power industry for more than 15 years, started working in JSC Konakovskaya GRES (1991-2005). Since 2005 – Head of Financial Statements, Accounting Methodology and Coordination, the Accounting Section of JSC OGK-5.

From 2000 to 2005 she worked as Head of the Legal Department of the Omsk regional affiliate of CB “Siberian Society of Mutual Credit” (JSC). Lilia Osmanova 1974 From 2005 to 2006 – Head of the Legal Department of the Omsk regional affiliate of JSC JSCCB “ROSBANK”. Since 2006 – Leading lawyer, Head Lawyer, Deputy Head of the Legal department of BU 1 of RAO UES of Russia.

He graduated from All-Union Correspondence Financial and Economic Sergey Sidorov 1952 Institute majoring in Accounting and Audit. He has been working in the power industry since 1999, initially as Head of the Financial Audit Department of JSC RAO UES of Russia. Since 2004 he has been Head of the Internal Audit Department of CC of RAO UES of Russia.

Since 2001 he has been working in the Investors Rights Protection Alexander Shevchuk 1983 Association – Analyst/Assistant for Independent Directors, Analytics and Reporting Manager/Expert.

40 Share of Members of Internal Audit Commission in Share Capital of Company as of 31 December 2007:

Full name Preferred shares, % Ordinary shares, %

Paolo Bondi - 0 Oksana Burova - 0 Liana Osmanova - 0 Sergey Sidorov - 0 Alexander Shevchuk - 0

Disclosure of MICEX stock exchanges as well as OGK-5. Announcements about the information publication at the corporate website, holding of General Shareholders’ www.ogk-5.com. The Company Meetings of OGK-5, as well as In June 2005, in order to increase website offers regular news updates materials for the persons that have investment appeal, transparency and covering key company-related events. the right to attend such shareholders’ information accessibility, the Board of In order to determine major meetings, are sent in accordance with Directors of the Company approved approaches and principles of the requirements of the Federal Law and registered the prospectus of disclosure of corporate information, on «Joint Stock Companies» and the OGK-5 at the Federal Financial and meet the essential pre-listing internal documents of OGK-5. Markets Service of Russia. This fact requirements, the Board of Directors Periodicals, including the federal drew obvious interest of potential of OGK-5 approved two documents in media, which are available to the investors who are observing the autumn 2005 – the Regulation on majority of the Company’s overall progress of reforms in the Information Policy and the Regulation shareholders, are used as additional Russian power holding. on Insider Information of OGK-5. sources of timely notification of From now on, OGK-5 has begun The Company sticks to the following shareholders and other interested disclosure of information related to its major principles as for the corporate parties about the General financial and economic activities in data to be disclosed: Shareholders’ Meetings of OGK-5. the form of Quarterly Issuer’s Reports, • Fullness and reliability guarantee of Detailed information about the reports of significant facts and data the disclosed information; activities and resolutions adopted by influencing the value of securities. • Timely disclosure of information the General Shareholders’ Meeting, Financial information about the about all the significant facts that Board of Directors and Committees activities of the Company is regularly affect the financial and economic under the Board of Directors of the disclosed in news feeds of Interfax activities of the Company; Company, as well as full versions of and AK&M news agencies authorized • Public and non-selective disclosure the Company’s internal documents, by the Federal Financial Markets of information. including those regulating the Service, as well as via the periodicals One of the priority directions related activities of the Company’s available to the majority of OGK-5 to timely and full disclosure of management and control bodies, can shareholders. information on the Company’s be found on the website of the Moreover, the events of immediate activities is observation of the Company at www.ogk-5.com. interest to the business community shareholders’ right to participate at are disclosed by their submission to General Shareholders’ Meetings of the listing departments of RTS and

JSC The Fifth Power Generation Company 2007 Annual Report 41

SHARE CAPITAL

As of December 31, 2007, The Russian Federation represented privileged shares as such has not the share capital of JSC by the Federal Property Management been issued by the Company. OGK-5 amounted to Agency holds 9,350,330,680 ordinary There is no special right of the state, 35,371,898,370 roubles and is registered shares of JSC OGK-5, that its subjects or municipal bodies for divided into 35,371,898,370 amounts to 26.4343 % of the share management of JSC OGK-5 (’golden ordinary registered shares capital of the Company. share’). with the nominal value of 1 Thus the share of the state in rouble. monetary terms is 9,350,331 thousand roubles. For the whole period of its The state does not own OGK-5’s activities, from the moment of the state registration of the Company (27.10.2004.) and until December 31, 2007, JSC OGK-5 did not issue of privileged shares.

The major shareholders of JSC OGK-5, the stake of which amounts to more than 5%*

Name Number of shares Stake in share capital, %

JSC Central Moscow Depositary (nominal holder)** 13 140 797 028 37,15

The Russian Federation represented by the Federal Property Management Agency 9 350 330 680 26,4343

Nonprofit partnership National Depositary Center 4 399 157 010 12,4368 (nominal holder)

Closed Joint Stock Company Depository Clearing Company (nominal holder) 2 206 867 503 6,2390

Gazprombank (JSC) (nominal holder) 1 862 793 846 5,2663

JSC The Fifth Power Generation Company 2007 Annual Report 43 Emission history

Additional Additional Type of Share Issue Base (Added to Share (Added to Share Capital) Capital)

State Registration Number 1-01-50077-A 1-01-50077-A-001D 1-01-50077-A-002D

Date of State Registration 24.12.2004 16.03.2006 16.03.2006

Declared Number 29 407 170 459 4 105 388 231 69

Placed Number 29 407 170 459 864 514 976 69

Acquisition of shares Conversion of shares due Conversion of shares Method of Placement by the sole founder to acquisition of JSC due to acquisition of of the company Konakovskaya GRES JSC Nevinnomysskaya GRES

Date of Placement Start 27.10.2004 01.04.2006 01.04.2006

Date of Placement End 27.10.2004 01.04.2006 01.04.2006

Date of Issue Report Registration 24.12.2004 27.04.2006 27.04.2006

Code of Additional Issue 22.08.2006 17.08.2006

Registration Body Federal Financial Markets Service of Russia

44 Additional Additional Additional (Added to Share (Added to Share Capital) (Added to Share Capital) Capital)

1-01-50077-A-003D 1-01-50077-A-004D 1-01-50077-A-005D

28.09.2006 07.08.2007 07.08.2007

5 100 000 000 600 000 400 000

5 100 000 000 168 061 44 805

Conversion of shares due to Conversion of shares due to Public offering* acquisition of JSC OGK-5 acquisition of JSC OGK-5 Holding Holding

01.11.2006 03.09.2007 03.09.2007

10.11.2006 03.09.2007 03.09.2007

13.11.2006 11.10.2007 11.10.2007

20.02.2007 15.01.2008 15.01.2008

JSC The Fifth Power Generation Company 2007 Annual Report 45 Structure of share capital of JSC OGK-5, %

as of 31.12.2006 as of 31.12.2007

1,08 2,19 Individuals Individuals 23,89 Legal entities and 26,43 Russian Federation nominal holders Legal entities and RAO UES of Russia nominal holders 75,03 71,38

Circulation of Company Shares on Stock Market

The ordinary shares of the 19, 2006 – Quotation List B of RTS. 26.12.2007, by Order No. 147 of Company entered the Russian stock Starting from September 10, Chairman of the Executive Board of market in 2005: on 16.09.2005 ordinary shares were included into OAO RTS, the ordinary shares of JSC ordinary shares were included into the MSCI index; on October 15, 2007 OGK-5 were included into Quotation the Non-Listed Securities Section of – OGK-5 shares were included into List A1. Share ticker is OGKE. RTS Stock Exchange, while on the settlements base of MICEX 14.09.2005 of MICEX. On May 26, Power Industry (MICEX PWR). OGK-5 2006 trading in OGK-5 shares began securities are also included into the in Quotation List B of MICEX; on July RTSI, RTS2, MICEX indices. On

46 Share Price Dynamics from Entry into SE until 31.12.2007.

Q4 2005 Q1 2006 Q2 2006 Q3 2006 Q4 2006 Q1 2007 Q2 2007 Q3 2007 Q4 2007 USD RUB

0.16 - -3.9 0.15 - -3.6 0.14 - -3.3 0.13 - 0.12 - -3 0.11 - -2.7 0.1 - -2.4 0.09 - 0.08 - -2.1 0.07 - -1.8 0.06 -

01.10.05г. 01.12.05г. 01.02.06г. 01.04.06г. 01.06.06г. 01.08.06г. 01.10.06г. 01.12.06г. 01.02.07г. 01.04.07г. 01.06.07г. 01.08.07г. 01.10.07г. 01.12.07г. OGK-5 shares on MICEX, RUB OGK-5 shares on RTS, USD

Trading Volume on MICEX

~000 2007-12-31 900000

600000

300000

0 2006-12-01 2007-02-01 2007-03-31 2007-05-29 2007-07-26 2007-09-24

JSC The Fifth Power Generation Company 2007 Annual Report 47 Market Capitalisation As of December 31, 2007, the market capitalisation of Market capitalisation of the Company, calculated as the the Company amounted 153 billion roubles, which is 1.5 multiplication of the number of shares of the proper times more than in 2006. category (type) by the market price of one share*. Calculation of the market capitalisation of the Company is carried out on the basis of MICEX data:

As of As of December 31, 2006 As of December 31, 2007 Settlement date December 31, 2005 (December 29, 2006) (December 28, 2007)

Transaction per month more than 10 more than 10 more than 10 Number of shares, pieces 29 407 170 459 35 371 685 504 35 371 898 370 Nominal value, roubles 1 1 1 Market price*, roubles 1.6470 3.2640 4.3190 Capitalisation, roubles 48 433 609 745,90 115 453 181 485 152 771 229 060

* The market price calculated in accordance with the “Procedure for Calculation of Market Price of Equity Securities and Shares of Mutual Funds Accepted for Trading through Trade Institutors”, approved by Decree no. 03-52/ps dd. December 24, 2003 of the FFMS of Russia, on MICEX.

Dynamics of Company’s Capitalisation, from Entry into SE until 31.12.2007.

OGK-5 Capitalisation, billion RUB

160 140 120 100 80 60 40

20 0 14.09.2005 14.11.2005 14.01.2006 14.03.2006 14.05.2006 14.07.2006 14.09.2006 14.11.2006 14.01.2007 14.03.2007 14.05.2007 14.07.2007 14.09.2007 14.11.2007

48 Dynamics of Major Market Indices and Shares of JSC OGK-5 on MICEX and RTS

% 2007-12--31 170

150

130

110 SHARES INDICES MICEX: OGKE MICEX Composite RTS: OGKE MICEX Energy Sector 90 RTS Index 2006-12-01 2007-02-01 2007-03--31 2007-05-29 2007-07-26 2007-09-24

Circulation of Depositary Receipts of JSC OGK-5

After obtaining the permission of Federation in the amount of not more founded and supported in the Federal Financial Markets than 7,074,537,100 shares, the GDR accordance with Regulation «S» (Reg Service (FFMS) of Russia for the programme for ordinary shares of S). The ratio of GDR to ordinary circulation of ordinary shares of JSC JSC OGK-5 was launched in August shares of the Company is 1:50. OGK-5 outside the Russian 2007. The GDR programme is

Name of Depositary Number of Volume of Name of foreign Programme Bank deposited programme trade arranger shares (% of share capital)

Sponsored *

GDR The Bank of 993 950 344 2,81 Off-SE market (ordinary New York of securities shares) Mellon

* Information indicated as on 31.12.2007.

JSC The Fifth Power Generation Company 2007 Annual Report 49 The purposes for launching the depositary shares of RAO UES of requirements and limitations, US GDR programme of OGK-5 was to Russia obtained the rights for the residents holding UES GDRs could increase the liquidity of the securities of the Company during the only get cash from the sales of OGK-5 Company’s securities, provide the reorganisation of RAO UES of Russia shares attributable to them. growth of the Company’s stock value trough the spin-off of JSC OGK-5 as well as provide protection of rights Holding from RAO UES of Russia with and legal interests of the owners of its simulatenous consolidation to the ADRs and GDRs issued for shares of Company. RAO UES of Russia. Holders of However, in the light of US legislation

Company Bonds In 2006, the Company placed periods amounts to 7.50% per annum. of a guarantee. The liability amount of 5,000,000 documentary The coupon rates for the seventh, the Guarantor (OOO OGK-5 Finance) nonconvertible interest-bearing eighth, ninth and tenth coupon to the owners of the bonds is bearer bonds with mandatory periods will be determined by the 5,000,000,000 roubles plus the total custody with the nominal value of Company. In April 2007, the Company coupon yield in the amount 1,000 roubles per bond; with the total paid the first bond coupon at the rate determined in accordance with the nominal value of 5,000,000,000 of 37 roubles 40 kopecks per bond, placement decision and Prospectus. roubles, as per state registration with the total amount of 187,000,000 Such liability covers the cases of the number 4-01-50077-A of August 17, roubles. Company’s non-fulfillment or 2006. NP National Depositary Center (NDC), improper fulfillment of its bond The bond redemption date is the unlimited License No. obligations. 1820-th day from the placement date 177-03431-000100 dd. December (namely, September 29, 2011). The 04, 2000, issued by the Federal redemption will be done in roubles, in Commission of the Central Bank of non-cash form. No possibility for Russia, is the depositary for selection of a redemption form by mandatory centralized custody of bond holders is foreseen. bonds. The coupon rate for the first, second, OOO OGK-5 Finance provided security third, fourth, fifth and sixth coupon on the Company’s bonds in the form

50 Participation in Other Organisations

Stake in Name Location Activities share capital, %

JSC Stavropol Krai, medical care and prevention care services 99,99 Sanatory-Profilaktory Nevinnomyssk Energetik

OAO Energy North Yamal-Nenets Supply (sale) of power and heat as well as Company Autonomous Okrug, acquisition (purchase) of power and heat 40 Tarko-Sale from the wholesale power (capacity) market

OOO OGK-5 Finance Moscow Investments and financial activities 100

JSC OGK-5 is a member of the Besides that, the Board of Directors of Industry Employers (Minutes No. 19 Non-Governmental Pension Fund of JSC OGK-5 adopted the resolution dd. September 25, 2007) power industry and Noncommercial about participation in the All-Russian Partnership «Innovations in Power Industry Association of Power Industry».

JSC The Fifth Power Generation Company 2007 Annual Report 51 НАШ ДЕВИЗ –

НАДЕЖНОСТЬ И ЭФФЕКТИВНОСТЬ! OPERATING PERFORMANCE

In 2007 the total generation of power by OGK-5 branches was Power Generation Dynamics 38,379 kWh, or less by 5% than in 2006. Power generation by Konakovskaya GRES and Total Power Generation by JSC ОGК-5 Sredneuralskaya GRES increased 41 000 by 0.6% and 10.5% respectively, while generation by 40 000 Nevinnomisskaya GRES and 39 000 Reftinskaya GRES decreased by 3.2 % and 13.7% respectively. 38 000 37 000 36 000 35 000 2005 2006 2007

Unit of Plant measurement 2005 2006 2007

1. Konakovskaya GRES million kWh 6 543 8 451 8 504

2. Nevinnomysskaya GRES million kWh 6 040 6 440 6 236

3. Reftinskaya GRES million kWh 17 725 18 965 16 363

4. Sredneuralskaya GRES million kWh 6 715 6 585 7 276

Total million kWh 37 023 40 441 38 379

JSC The Fifth Power Generation Company 2007 Annual Report 53 Heat Output

Unit of Name measurement 2005 2006 2007

1. Konakovskaya GRES thousand Gcal 247 254 229

2. Nevinnomysskaya GRES thousand Gcal 1 667 1 882 1 781

3. Reftinskaya GRES thousand Gcal 449 475 481

4. Sredneuralskaya GRES thousand Gcal 4 167 4 402 4 278 Total thousand Gcal 6 530 7 013 6 769

Specific Fuel Consumption for Power Output (Coal Equivalent)

Unit of Name measurement 2005 2006 2007

1. Konakovskaya GRES g/kWh 327,8 328,3 330,4

2. Nevinnomysskaya GRES g/kWh 353,6 351,5 351,7

3. Reftinskaya GRES g/kWh 343,2 342,4 344,5

4. Sredneuralskaya GRES g/kWh 311,4 311,3 311,0

* As compared to 2006, specific fuel consumption for power output by Konakovskaya GRES and Reftinskaya GRES increased, which was caused by peculiarities of maintenance schedules and their ineffective load.

Specific Fuel Consumption for Heat Output (Coal Equivalent)

Unit of Name measurement 2005 2006 2007

1. Konakovskaya GRES kg/Gcal 178,4 176,3 177,4

2. Nevinnomysskaya GRES kg/Gcal 139,4 137,5 132,8

3. Reftinskaya GRES kg/Gcal 178,1 177,8 179,3

4. Sredneuralskaya GRES kg/Gcal 139,1 143,8 137,1

54 Structure of Power Generation, Load and Capacity Reserve

Konakovskaya GRES

Structure of Power Generation

Name Unit 2005 2006 2007

300MW units (8 units) mln. kWh 6 542,9 8 450,7 8504,6

Capacity Use in 2007

13,6 Load Capacity Reserve 33,0 Repairs 53,4

Nevinnomysskaya GRES

Structure of Power Generation

Name Unit 2005 2006 2007

TEC (combined heat and power plant) mln. kWh 586,7 655,7 663,3

150MW units mln.kWh 4858,6 5025,8 4717,6

170MW CCGT unit mln.kWh 594,5 758,6 854,8

Power generation, total mln.kWh 6039,8 6440,1 6235,7

JSC The Fifth Power Generation Company 2007 Annual Report 55 Capacity Use in 2007

13,5 Load Capacity Reserve 19,5 Repairs 67,0

Reftinskaya GRES

Structure of Power Generation

Name Unit 2005 2006 2007

300 MW-units mln.kWh 8 697,2 9 863,2 9 534,1

500 MW-units mln.kWh 9 027,4 9 101,7 6 828,6

Total mln.kWh 17 724,6 18 964,9 16 362,7

Capacity Use in 2007

1,4 Load Capacity Reserve 44,0 Repairs 54,6

56 Sredneuralskaya GRES

Structure of Power Generation

Name Unit 2005 2006 2007

Power generation, total mln.kWh 6 714,9 6 584,8 7 276,2

Including: 1st production line mln.kWh 385,3 390,6 424,1

2nd production line mln.kWh 1 450,1 1 469,9 1 400,1

Unit section mln.kWh 4 845,2 4 677,8 5 403,8

GTRS mln.kWh 34,3 46,5 48,2

Capacity Use in 2007

3,0 Load Capacity Reserve 16,5 Repairs 80,5

JSC The Fifth Power Generation Company 2007 Annual Report 57 ТЕПЛО И СВЕТ –

В КАЖДЫЙ ДОМ! POWER SALES

The main players on the Tariff Service of the Russian ‘released’ capacity volumes will be wholesale power market Federation set for 2007, which forms traded on transition auctions with the (WPM) are WPM subjects: the basis for the calculation of RC capacity supply in 2009-2011, and wholesale generating volumes and the rate of power market long-term auctions with the delivery companies established liberalization taking into account the period of 10 years, passing through during the reform in the peculiarities of power supply to competitive selection in ‘its’ zone of households. free capacity flow. It will mark the first power sector – OGKs, Starting from 2007, the capacity and time that wholesale market subjects HydroOGK; regional power volumes sold on WPM at will have the opportunity to enter into (territorial) generating regulated prices (tariffs), are gradually free contracts for capacity supply. companies, established reduced in line with liberalization It is expected that after the end of the during the reform in the rates set by Decree no. 205 dd. transition period, by 2011, a fully power sector – TGKs; FGUP 07/04/2007 of the Russian competitive wholesale power market Rosenergoatom; large power Government. The ‘released’ volumes will be formed. sales companies established of power are traded on the day-ahead After the launch of the capacity during the reform or market (DAM) at free (marginal) prices market, the system services market independent from RAO UES received upon the results of the (SSM) is planned to be launched, of Russia. competitive selection of the bids from which can be an extra source for the wholesale market participants. income of the Company in case of The adoption of new transition period Trading in the free sector of the attractive price signals. Already now WPM rules ratified by Governmental wholesale market is organized and there are several units at Decree no. 529 dd. 31/08/2006, “On held by NP ATS (Non-Commercial Konakovskaya GRES which are ready Improvement of Order of Functioning Partnership Administrator of Trading for participation in SSM, relevant of Wholesale Power (Capacity) System). preparation is underway at the other Market”, which came into force on 1 In 2007, the liberalization rate was 5% generating facilities of the Company. September 2006, marked a very and 10% for the first half and second important step towards a competitive half of the year, taking into account WPM model. the peculiarities for the formation of In accordance with the Rules, the power to be supplied to households, system of interaction between power while in 2008 the rates will be 15% for buyers and sellers in the regulated the first half and 25% for the second trading sector is transformed into the half. By 2011 the liberalization is system of regulated contracts expected to reach 100%. between power buyers and sellers. At In 2008, the Government is expected the same time, the volumes of power to adopt the Decree on the launch of sold at regulated prices (tariffs) the capacity market, at which the depend on the balance of the Federal

JSC The Fifth Power Generation Company 2007 Annual Report 59 Commercial Power Output

Power plant Unit 2005 2006 2007

Konakovskaya GRES mln.kWh 6 247 8 095 8 199

Nevinnomysskaya GRES mln.kWh 5 690 6 067 5 868

Reftinskaya GRES mln.kWh 16 814 18 072 15 611

Sredneuralskaya GRES mln.kWh 6 316 6 119 6 803

OGK-5 mln.kWh 35 066 38 352 36 481

Commercial Power Output, Revenue from Power million kwh and Capacity Sales mln RUB

30000 45 000 40 000 25000 23 762 26 898 35 000 06635 38 352 36 481 20000 30 000 25 000 15000

20 000 9 969 372 10 16 814 18 072 15 611 10000 15 000 7 857

10 000 4 305 6 102 7 103 6 247 8 095 8 199 6 316 6 119 6 803 3 552 4 344 5 063 3 347 4 360 5 690 6 067 5 868 5000 5 000 0 0 KGRES NGRES RGRES SUGRES OGK-5 KGRES NGRES RGRES SUGRES OGK-5 2005 2006 2007 2005 2006 2007

Revenue from Power and Capacity Sales

Name of power plant Unit. 2005* 2006** 2007

Konakovskaya GRES mln. rub. 4 305 6 102 7 103

Nevinnomysskaya GRES mln. rub. 3 552 4 344 5 063

Reftinskaya GRES mln. rub. - 9 969 10 372

Sredneuralskaya GRES mln. rub. - 3 347 4 359

OGK-5 mln. rub. 7 857 23 762 26 898

2005* - Reftinskaya and Sredneuralskaya GRES were parts of JSC TGK-9 2006** - in 1Q 2006, Konakovskaya GRES and Nevinnomysskaya GRES were affiliates of JSC OGK-5

60 Revenue from Power (Capacity) Sales by Power Plants: 2005-2007 Dynamics (management reporting data)

Name Period Power Mln. kW % to previous year Mln. RUB% to previous year

2005* 35 066,2 7 856,9

OGK-5 2006** 38 352,5 109,4% 23 762,0 302,4%

2007 36 480,9 95,1% 26 342,7 110,9%

2005 6 246,7 4 305,4

Konakovskaya GRES 2006** 8 094,6 129,6% 6 101,9 141,7% 2007 8 199,2 101,3% 7 264,5 119,1%

2005 5 690,3 107,8% 3 551,5 120,7% Nevinnomysskaya GRES 2006** 6 066,6 106,6% 4 343,8 122,3%

2007 5 868,5 96,7% 5 172,6 119,1%

2005* 16 813,6 - - Reftinskaya GRES 2006 18 072,1 107,5% 9 969,3 -

2007 15 610,5 86,4% 9 675,2 97,1%

2005* 6 315,5 - -

Sredneuralskaya GRES 2006 6 119,2 96,9% 3 346,9 -

2007 6 802,7 111,2% 4 283,9 128,0

2005* - Reftinskaya and Sredneuralskaya GRES were parts of JSC TGK-9 2006** - in 1Q 2006, Konakovskaya GRES and Nevinnomysskaya GRES were affiliates of JSC OGK-5

JSC The Fifth Power Generation Company 2007 Annual Report 61 Power Sales to NWPCM in 2007, by WPM Sectors (management reporting data)

Sale of electric power at wholesale market for electricity and power for 12 months of 2007 Name of Free Free bilateral bilateral power plant RC DAM DAM BM BM power contracts contracts Output sales purchases sales purchases sales purchases th.MWh th.MWh th.MWh th.MWh th.MWh MW th.MWh th.MWh th.MWh

Konakovskaya GRES 7 654,6 2 666,2 -1 167,7 561,7 -725,8 2 400 204,0 -993,8 8 199,2

Nevinnomysskaya GRES 6 296,1 768,4 -797,6 201,8 -264,5 1 290 3,4 -339,0 5 868,5

Reftinskaya GRES 16 918,0 1 722,9 -2 202,5 353,1 -696,8 3 800 255,2 -739,3 15 610,5

Sredneuralskaya GRES 5 690,5 1 523,4 -1 038,5 119,5 -370,1 1 181,5 902,0 -24,0 6 802,7

OGK-5 36 559 6 681 -5 206 1 236 -2 057 8 671,5 1 365 -2 096 36 481

Power Sales and Purchase on WPM in 2007, Cost of Power Sold (Bought) on WPM in 2007, thousand MWh million RUB

30000 40000 36559 36481 26396 35000 25000 30000 20000 25000 16589 20000 15000 15000 10000 9327 10000 6681 3917 5000 1236 1365 5000 780 736 0 0 -5000 -2057 -2096 -5206 -5000 -945 -1121 -10000 -2888 RC DAM sales DAM purch BM sales RC DAM sales DAM purch BM sales BM purch BM purch FBC sales FBC purch Output Capacity FBC sales FBC purch Output

Cost of Power Sold (Bought) on NWPCM in 2007 (management reporting data)

New Wholesale Power (Capacity) Market, 12 months of 2007 Name of Free Free bilateral bilateral power plant RC DAM DAM BM BM power contracts contracts Output sales purchases sales purchases sales purchases th.MWh th.MWh th.MWh th.MWh th.MWh MW th.MWh th.MWh th.MWh

Konakovskaya GRES 3 800,3 1 573,0 -640,7 425,1 -255,4 2 785,0 113,8 -536,5 7 264,5 Nevinnomysskaya GRES 3 547,0 529,9 -425,0 146,1 -109,5 1 674,9 2,3 -193,1 5 172,6

Reftinskaya GRES 6 690,4 959,4 -1 201,5 156,7 -455,3 3 766,2 139,8 -380,5 9 675,2

Sredneuralskaya GRES 2 551,0 855,1 -621,2 52,1 -124,6 1 101,4 480,5 -10,4 4 283,9

OGK-5 16 589 3 917 -2 888 780 -945 9 327 736 -1 121 26 396

62 Revenue from Heat Sales in 2005-2007

Heat Name Period thous. Gcal% to previous year mln. rub. % to previous year

2005* 6 554,2 551,2

OGK 2006** 7 001,8 106,8% 1 518,6 275,5%

2007 6 772,3 96,7% 1 630,6 107,4%

2005 247,2 99,8 Konakovskaya GRES 2006 253,9 102,7% 94,3 94,5%

2007 229,4 90,3% 88,2 93,6%

2005 1 666,9 451,4

Nevinnomysskaya GRES 2006 1 881,9 112,9% 472,7 104,7%

2007 1 781,1 94,6% 491,4 103,9%

2005* 448,8 - -

Reftinskaya GRES 2006 467,9 104,3% 112,0 -

2007 484,2 103,5% 129,2 115,4%

2005* 4 191,3 - - Sredneuralskaya GRES 2006 4 398,0 104,9% 839,6 -

2007 4 277,7 97,3% 921,8 109,8%

2005* - Reftinskaya and Sredneuralskaya GRES were parts of JSC TGK-9 2006** - in 1Q 2006, Konakovskaya GRES and Nevinnomysskaya GRES were affiliates of JSC OGK-5

In 2005 – 2007, a declining tendency for heat output use power-saving technologies, and install heat meters in by Konakovskaya, Nevinnomisskaya and Sredneuralskaya their households. GRES can be observed. In spite of the heat output declining trend, heat revenue was The output decline is due to the growth of tariffs, as well as growing thanks to the growth of heat and steam consumption transition to 100% benefit-free payment for utility services tariffs for these power plants. by households, as a result of which consumers started to

20,8 5,1 GES Structure of Power Generation 9,0 TES OGK in European part ofRussian Federation 26,2 AES and Urals in 2007 38,9 other TES OGK-5

GES – Hydro power plants AES – Nuclear power plants TES – Thermal power plants

JSC The Fifth Power Generation Company 2007 Annual Report 63 ЗНАЙ, ТОВАРИЩ:

устойчивое финансовое положение компании – твое достойное будущее! FINANCIAL PERFORMANCE analysis of financial performance

2007 was the year when million roubles or 3.5%). The Company’s long-term liabilities the financial structure of The most substantial change in are represented by the loans and the Company was finalised, non-current assets was the decrease credits line including 5-year bonds of which was reflected in the of the “Short-term financial JSC OGK-5 and accrued interest, as changes of the main investments” line by 45% or 5,892 well as deferred tax liabilities. In financial and economic million roubles, caused by funds 2007, these lines didn’t demonstrate performance indicators, spenditure for the construction of new any significant growth in absolute assets structure and production capacities and terms. correspondent use of the funds raised Short-term liabilities in 2007 grew by sources. by the IPO and temporarily placed in 31% (+ 771 million roubles). At the JSC OGK-5 has already gone through banks for the purpose of getting extra same time, a positive factor for 3 financial years, which helps to fully income. The corresponding flow in the Company in 2007 is the redemption estimate and analyze performance balance was reflected in the increase of short-term loans in the amount of dynamics, and also eliminates the of construction-in-progress, PP&E and 531 million rouble being the source of influence of accidental factors on the accounts receivable. The growth of additional financial burden, as well as Company’s financial performance. the latter line was primarily caused by the gradual increase of accounts During 2004-2007, JSC OGK-5 large downpayments to power payable by 59% or 1,148 million demonstrated a stable growth of all equipment producers with long roubles being an additional free kinds of assets and also sources of manufacturing timeframes. At the financial resource. enterprise funds. In general, the same time, the growth of long-term Company’s balance currency in the accounts receivable was 292% in reporting period grew by 6.45%, or 2007 (by 2,725 million roubles), 3,304 million roubles. At the same short-term – 124% (by 3,037 million time, the main source were roubles). In the reporting period, the non-current increasing by 2,672 other lines of current assets did not million roubles. This growth was demonstrate any significant growth in mainly caused by the growth of absolute terms. construction-in-progress (growth by Changes in the capital and reserves 68% as compared to the previous year section made up 1,579 million level), which was predetermined by roubles in 2007 (growth by 3.63%), the Company‘s extensive investment which was mostly predetermined by programmeme and substantial PP&E getting the net profit of 1,804 million commissioning (by more than 1 roubles at the end of the year.

JSC The Fifth Power Generation Company 2007 Annual Report 65 Company’s Financial and Economic Performance

27.10.04- 2006 2007 Indicator 31.12.05

Net asset value of issuer, thsd. RUB* 33 840 506 43 528 844 45 108 563

Debt to equity ratio, % 2.99 17,75 20,95

Current debt to equity ratio, % 2.90 5,75 7,26

Cover of payments for debt servicing, % - 46,46 216,72

Delinquency rate, % - - -

Receivables turnover ratio, times 3,29 7.67 3,66 Dividend payout ratio, % 4.51 94,85 - Depreciation/revenue, % 73.21 6.87 6,39

* The calculation of net asset value is made in accordance with Order no. 05-5/pz-n dd. March 16, 2005 of the Federal Financial Markets Service of the Russian Federation “On Procedure for Calculation of Net Asset Value of Joint-Stock Companies”. Data for calculation of the indicator is taken from the following lines of the balance sheet (Form 1): N.A.V = (110) + (120) + (130) + (135) + (140) + (148) + (150) + (210) + (220) + (230) + (240) - (244) + (250) + (260) + (270) - (415) - (510) - (515) - (520) - (610) - (620) - (630) - (650) - (660).

For the calculation of the abovementioned indicators, the Equity Securities, approved by Order no. 05-5/pz-n dd. Company used the calculation methods recommended by March 16, 2005 of the Federal Financial Markets Service the Regulation on Disclosure of Information by Issuers of of the Russian Federation.

66 Analysis of Financial Status

The dynamics of the given preceding period, the Company did 2006 made up 94.85%. Upon the indicators of the financial and not have overdue debts. results of 2007, the decision was economical perfomance of JSC The receivables turnover ratio reflects taken to direct all the gained profit to OGK-5 characterise its financial the speed, at which buyers (debtors) the development of JSC OGK-5 and sustainability pay for their liabilities to the Company, consequently not to pay dividends. Positive factors characterizing and is calculated as the relation of The depreciation/revenue ratio during financial and economical activity of revenue from sales to the average 2005 – 2006 was systematically JSC OGK-5 are the growth of net asset accounts receivable. In the reporting decreasing, which was caused by a value and absence of overdue debts. period, this indicator was increasing, considerable increase of proceeds The growth of net asset value in 2006 which speaks of acceleration of amount due to the start of operational – 2007 took place as a result of net settlements with buyers.In 2007 this activities by the Company in 2006, profit earning by the Company in the indicator slightly went down as a while the size of depreciation is amount of 571 million RUB and 1,804 result of the active making of conditionally constant and does not million RUB respectively, and the downpayments by Company, depend upon power tariffs and tariff additional share issue of 2006. predetermined by carrying out the changes. In 2007 this index went The ‘equity to debt’ and ‘current vast investment programmeme. Yet down even more, which is, first of all, equity to debt’ ratios indicate the this idicator is on the level not less predetermined by the considerable financial dependence of the than in 2005 and is not critical for the growth of revenue in the reporting the Company. The lower they are, the Company. period. lower the Company’s financial Upon the results of 2005, the The analysis of the Company’s leverage is. The analysis of these Company paid dividends in the activities during the reporting period indicators allows speaking of a amount of 200,002 thousand RUB shows high reliability and solvency of moderate financial leverage of the which made up 4.5% of the net profit OGK-5 and a low credit risk of the Company. We are observing the of JSC OGK-5. By the results of the 6 issuer. increase of financial dependence in months of 2006 the Company’s 2006 – 2007 as compared to 2005 dividends in the amount of 317,000 caused by the growth of accounts thousand RUB were accrued. Besides, payable to suppliers and contractors by the results of Company’s activity in and by the placement of the bond the the 2nd half of 2006, the Board of loan and borrowing of short-term Directors recommended 224,500 credits in 2006. thousand RUB for payment. Thus, the In the analyzed period, like in the portion of dividends in the profit of

JSC The Fifth Power Generation Company 2007 Annual Report 67 Profit and loss

27.10.04- Indicator 2006 2007 31.12.05

Revenue, thsd.RUB 1 666 824 25 898 943 33 464 949

Gross profit, thsd.RUB - 331 511 916 735 2 539 619

Net profit (retained profit (uncovered loss)), thsd.RUB 4 433 336 570 930 1 804 220

ROE, % 13,10 1,31 4,00

ROTA, % 12,72 1,11 3,31

Net profitability ratio, % 265,98 2,20 5,39

Products profitability (sales), % -19,89 1,99 6,20

Equity turnover, times 0.05 0.53 0,65

Uncovered loss amount on reporting date, thsd.RUB 0,00 0,00 0,00

Uncovered loss on reporting date – Balance currency Ratio, % - - -

For the calculation of the abovementioned indicators, the Company used the calculation methods recommended by the Regulation on Disclosure of Information by Issuers of Equity Securities, approved by Order no. 05-5/pz-n dd. March 16, 2005 of the Federal Financial Markets Service of the Russian Federation.

68 Upon the results of 2006, payment to Noncommercial profit of JSC OGK-5 made up 2,540 the Company received gross profit Partnership “ATS”, OAO SO-CDU UES million RUB (177% growth or 1,623 in the amount of 916,735 thousand and ZAO CFR for the arrangement of million RUB more as compared to RUB, while in 2005 the Company financial settlements and control, 2006), and sales income made up encountered the loss of 331,511 identification of contracting parties 2,074 million RUB (303% growth or thousand RUB. The sales income under contracts, operational 1,559 million RUB more as compared of JSC OGK-5 in 2006 made up 515 management and monitoring. to 2006). Such considerable growth is million RUB, which discriminates it Accordingly, in 2005 these determined by the growth of sales from the gross profit by commercial expenditures were absent and gross revenue (by 29%), which is more rapid expenditures amount (402 million profit coincided with sales income. than the growth of sales cost (by 24%). RUB) related to power sales. It is Upon the results of 2007, the gross

Economic Analysis of Profit/Loss of Company The growth of revenue from sales The decrease of ROE, ROTA is In 2007, profit before taxes (EBT) of products as a result of the start of the connected with the reduction of net totaled 2,032,331 thousand RUB , in operating activities of OGK-5 had a profit, despite the growth of the equity 2006 - 903,696 thousand RUB, in positive effect on the business and assets of OGK-5. The respective 2005 – 4,659,783 thousand RUB. performance of the Company. ratios in 2007 display the However, if we take into account the Already in 1Q 2006, the revenue of improvement. revaluation of financial investments, the company surpassed the revenue of The positive factor is the growth which was carried out in 2005, EBT for 2005 by 2.8 times, while the gross of return on sales, mainly due to the 2006 and especially 2007 will be profit – by 6.9 times correspondingly. increase in return on power sales. much better than that for 2005. The total revenue for 2006 was 15.54 Capital turnover in 2006-2007 times greater than that of 2005. In increased as compared to 2005, 2007, the Company displayed the which proves the financial stability of growth of this indicator by 29% the Company’s activities. At the same time, we can see the Interest receivable in 2006 made reduction of the net profit and ROE in up 102,897 thousand RUB, in 2007 it 2006 as compared to the 2005 levels, made up 770,534 thousand RUB, which results from the revaluation of gained as a result of placement of the financial investments of the temporarily free funds of the Company Company, which took place in 2005 and on the market. Interest payable in led to additional 4,958,209 thousand 2006 made up 184,704 thousand RUB. In 2007 Company again improved RUB and 380,811 thousand RUB in these indexes, which positively 2007. These values were formed out characterises its activities. of coupon yield on bonds, placed in the 4th quarter of 2006, and interest, paid in 2006 – 2007 for application of borrowed funds attracted by the Company for financing its current activities.

JSC The Fifth Power Generation Company 2007 Annual Report 69 Company’s Liquidity, Sufficiency of Equity and Turnover Assets

Indicator 27.10.2004 – 2006 2007 31.12.2005

Current assets, thousand RUB 841,587 11,617,624 10,525,825

Index of fixed assets 0.975 0.755 0.848

Current ratio 1.886 7. 3 5 4.98

Quick ratio 0.641 6.27 4.11

Autonomy ratio 0.971 0.85 0.83

For the calculation of the abovementioned indicators, the Company used the calculation methods recommended by the Regulation on Disclosure of Information by Issuers of Equity Securities, approved by Order no. 05-5/pz-n dd. March 16, 2005 of the Federal Financial Markets Service of the Russian Federation.

70 The economic analysis of OGK-5’s The value of the Company’s The quick ratio shows the capability liquidity and solvency, the current assets in 2005 and 2006 is of the Company to cover its current positive, which means that the liabilities by own cash or pending sufficiency of the Company’s capital Company is able to cover its current receipts of payments for sold products. in relation to covering current debts by own current assets. The The 2005 ratio is close to the optimal liabilities and current operating significant increase (by 12.8 times) of level (0.8 – 1.0). The 2006 quick ratio expenses, which is based on the the current assets in 2006 as increased by 8.8 times as compared to compared to 2005 was caused by the 2005, or from 0.641 to 6.27. The reason economic analysis of the dynamics of fact that the Company received net for the increase was the significant the abovementioned indicators with profit totaling 570,930 thousand RUB growth of the Company’s current assets identification of those factors that in 2006, and successfully placed the (944%) due to the current accounts led to changes in the additional share issue. The slight receivable and short-term financial decrease in 2007 is associated with investments. In 2007, this ratio went abovementioned indicators by 10 or spending IPO funds on the financing of down to 4.11 but still displays the high more percent as compared to the the investment programme of the quick ratio of the Company. preceding reporting period, speak of Company. The autonomy ratio shows the share the following: The current ratio of OGK-5 shows of own assets in the total amount of the what portion of the current liabilities enterprise’s assets. The indicator can be repaid by mobilizing all current corresponded to the recommended value assets. The current ratio is within the (0.5) in 2005 and 2006-2007. In 2005, norm. In 2006, the current ration the share of own assets in the total increased from 1.89 to 7.35 (by 2.9 amount of OGK-5’s assets was 97%, in times). The increase was caused by the 2006 – 85%, in 2007 – 83%. additional share placement, which took place in the fourth quarter of 2006. In 2007, this ratio slightly decreased but still is on the level considerably exceeding the recommended value.

JSC The Fifth Power Generation Company 2007 Annual Report 71 БОЛЬШОЙ СТРАНЕ –

БОЛЬШУЮ ЭНЕРГЕТИКУ! INVESTMENT ACTIVITIES

JSC OGK-5 pursues an active The investment programme is aimed The Company’s investment investment policy as to the reconstruction at the achievement of the following goals:programme consists of two main areas of and technical upgrade of the power plants •Construction of new generating activities: in operation. The Company is developing facilities in regions with power deficit; 1.Construction of new facilities. and implementing a number of •Equipment modernisation 2.Increase of the efficiency and strategically important investment leading to an increase in capacity and reliability of the existing facilities. projects for the construction of modern equipment efficiency; generating facilitie. •Replacement of equipment with Construction of New Facilities On 24 September 2007, according to expired life cycles; the OGK-5 Development Strategy, the The Company plans to commission Company’s Board of Directors ratified the •More reliable and efficient three new objects with the total capacity investment programme for 2007-2012. facilities; of over 2,000MW including the joint •Implementation of project with NOVATEK for the construction environmental projects; of a power plant near the town of Tarko- •IT system modernisation. Sale. It is also planned that two more units will be built within the framework of extension of Nevinnomysskaya GRES and Sredneuralskaya GRES.

Facility Planned production capacity Project cost (VAT exclusive)

Sredneuralskaya ССGT unit~410 MW12.8 billion RUB

Nevinnomysskaya ССGT unit~410 MW15.7 billion RUB

Joint project (a power plant in the Tarko-Sale area)*~1200 MW11.3 billion RUB

Total ~2020 MW34.4 billion RUB

* project implementation is possible given that OAO Energy North Company (OGK-5 stake in the share capital of OAO ENC is 40%, the stake of OAO NOVATEK – 60%) wins the tender for the IGM (Investment Guarantee Mechanism) project.

JSC The Fifth Power Generation Company 2007 Annual Report 73 Power production is a highly capital-Sredneuralskaya ССGT unit Nevinnomysskaya ССGT unit intensive industry and is characterised by At present the Company has started In order to create extra capacity long-term investment cycles and a long the implementation of the project for the replacing the existing capacities with the payback period. That is why an inevitable construction of 410-MW Sredneuralskaya expired life cycle, OGk-5 is building a 410- demand increase and propsects of power ССGT unit. This power plant is located in MW CCGT unit on the territory of sale at free prices are of great interest the Urals federal district, which is one of Nevinnomysskaya GRES with expected when estimating the investment return of the most industrially developed regions of commissioning in 2010. The new facility the projects. Russia and is expected to experience high will have new combined cycle The increase of the power power and heat deficit in the future. The technologies with efficiency of 57% and consumption and peak loads can lead to ССGT unit will be constructed by 2010 on more (at the specific fuel consumption of power deficit primarily in the regions the territory of Sredneuralskaya GRES and ~220 g of coal equivalent per 1 kW thus characterised by intensive economic will produce both power and heat. The providing high competitiveness of the new development and net profit increase. The new facility will have new combined cycle facility. The Company has a permit for Urals federal district is expected to face technologies with efficiency of 57% and Nevinnomysskaya GRES to use gas up to power deficit earlier than the other ones. more. The Company entered into a long- 2,9 billion m³/year. This allows using The construction of new objects will term contract with ITERA on gas delivery to existing gas consumption volumes for the require considerable investments. For the given facility. IBERDROLA INGENIERIA new unit, taking into account the these projects, the Company is going to Y CONSTRUCCION, S.A.U. (Spain) was decommissioning of existing facilities. use state-of-the-art technologies and selected General Contractor for the high-quality equipment supplied by Sredneuralskaya ССGT project. . Apart from the abovementioned leading world manufacturers (General investment projects, the Company is Electric, Skoda Power, Nooter/Eriksen, considering opportunities to extend the Siemens, etc.). The new ССGT units, which investment programme in part related to are planned to be put into operation, will the construction of new facilities. have very low specific fuel consumption Currently, the Company is considering the compared to the majority of existing following investment ideas*: generating facilities in Russia. It will lead to an advantageous position of power ŸA pulverized coal unit at generated by the new facility in power Reftinskaya GRES with the capacity output ranging and provide a significant of ~570MW, planned to be put into cash inflow for future investments. The operation in 2012. goals for the construction of each new ŸReconstruction of units №7-10 at object were thoroughly investigated by the Reftinskaya GRES with the increase issuer and independent experts, while the of capacity from 500MW up to volumes of power and capacity to be ~570MW in 2013-2016. supplied by these facilities have already ŸA ССGT unit at Sredneuralskaya been approved by the System Operator. GRES with the capacity of ~410MW . planned to be put into operation in 2012. *The investment ideas specified are being considered. Technical characteristics, commissioning etc. will be defined more exactly during the project development process.

74 Increase of Efficiency Within the framework of OGK-5's ŸInvestment volumes by areas are and Reliability of Existing Facilities environemntal policy, the 5-year substantiated by the following investment programme of the Company factors: The increase of the efficiency and envisages the construction of DARS and ŸIntroduction of modern reliability of the existing generating replacement of EPs at Reftinskaya GRES. technologies allow reducing specific facilities is an essential part This unique project is of great fuel consumption, at the same time of the strategic plans and the process importance for the environmental increasing unit capacity. of selling power and heat. The Company situation in the Urals region and is ŸReplacement of the life-expired signles out the following main points of potentially interesting from the the maintenance programme and equipment is planned to go in commercial point of view. The dry ash parallel with the increase of the investment policy aimed at the increase removal system will allow decreasing the of the efficiency and reliability: efficiency and capacity of the re- quantity of stored ash. In its turn, this will commissioned equipment. а) Maintenance and repairs. help to extend the life of the ash dump at ŸUse of exclusively world's best Maintenance of operating facilities is Reftinskaya GRES, decrease water technologies for new facilities considered to be an important component consumption by the hydraulic (wet) ash construction. of the Company's investment policy. The removal system and reduce negative major part of the generating assets needs environmental impact. ŸFor reliability increase, the most efficient equipment should be to constantly undergo maintenance and In February 2008, the large-scale introduced, what will result in the repairs, both scheduled and extraordinary. testing of the dry ash removal system at decrease of maintenance costs. If timely maintenance and repairs are not Unit 6 is expected to be finished. The provided, it can lead to power delivery given system has no analogues in Russia, ŸThe deterioration rate of the main disruptions, and, as a result, significant while the combination of dry and assets implies considerable losses for the Company. Timely conventional wet ash removal haven't investments into their operation, maintenance secures and prolongs the been used in the world before. The reconstruction of buildings and life cycle of the corresponding assets. introduction of this system will provide for structures b) IT introduction additional shipping of dry ash to Achievement of IT modernisation Extension of informational consumers, constructing enterprises, in targets will allow to improve the quality of technologies is considered to be an the amount of over 400 thousand tons a power supplied, which leads to its higher important component of the Company's year. Over 320 million RUB were allocated competitiveness. strategic development: by OGK-5 for the first stage of the project . - Introduction of automated control It is expected to commission the new systems; system in 2010. - Modernisation of monitoring and The total cost of the investment control systems; programme for 2007-2012 is approximately 75 billion RUB (VAT - Modernisation of frequency control exclusive), over 40 billion RUB of which blocks; will be allocated to the upgrade of the - Introduction of modeling devices existing production facilities. The rest 34.4 with a dynamic scheme and video panels.billion RUB will be allocated to the c) Environmental Projects construction of the new generating - Construction of DARS (Dry ash facilities at Sredneuralskaya GRES and removal system) at Reftinskaya GRES; Nevinnomysskaya GRES, as well as - A stage-by-stage reconstruction of construction of a new generating object in boiler EPs (electrostatic precipitators); the Tarko-Sale district within the framework of the joint project with OAO - Introduction of outgoing gas NOVATEK. sulfurisation devices; - Introduction of multistep burning systems at 300MW and 500MW units.

JSC The Fifth Power Generation Company 2007 Annual Report 75 ЭНЕРГЕТИКЕ РОССИИ –

инновации и информационные технологии! INNOVATIONS AND IT

Automated production Management Automation The 2008 prospects for IT The Company’s automated systems In 2007, information quality development are: creation of failure-proof deal with collection, processing and requirements increased. Such solutions as to corporate information transmission of various types of requirements can be met only with the systems along with the development of information, thus increasing the help of the systems with efficient data the visualisation and clusterisation observability of technological processes, delivery, processing and analysis means. architecture, provision of continuous which, in its turn, leads to higher reliability Thus, considerable changes were functioning of the Company’s applications and failure-proof operation of the introduced into the corporate information for the automation of business processes. Company’s production branches. system on the basis of «1С: Enterprise One of the priority directions of the 8.0», for which an on-line replication data User support Company’s activities was gaining access project was introduced, with the extention In 2007, the Company continued to to the balancing market (BM). Within the of its scope of functions was made for the develop IT-related processes in framework of this direction, the Company automation of activity planning and accordance with the IT-policy and was the first generating company to parallel calculation to meet the RAS standards of JSC OGK-5. Such processes receive Acts of Compliance of the (Russian Accounting Standards) and IFRS are based on the principles of control and technological information exchange at the (International Financial Reporting continuous improvement, reasonable branches with the 2nd stage requirements Standards). An automated commercial conservatism and documentation. Many for BM participants, in accordance with dispatch system with analysis and data of the processes have reached the third the Rules of Procedure for Operating forecast functions was introduced, which CobIT maturity level and continue to Supervisory Control over Power Mode of allows the company to participate more improve. Not only the quantity of IT- Control Objects of UES of Russia effectively on power sale markets. In the services increased (up to 72 services) but (Appendix 9 to the Contract on Connection previous year, within the framework of the their quality as well. Presently, each new to Trading System of Wholesale Market). creation of the Company’s unified information space, an intracorporate developed IT-service is supplemented by a In 2007, new automated control complete documentation package to systems were installed for Unit 3 of portal was successfully introduced. Thanks to the portal, electronic simplify the work of users as well as Konakovskaya GRES and Unit 7, as well specialists responsible for the operation. as a new information control system at documents circulation and remote education problems were resolved Modernisation of customer equipment is Unit 7 of Reftinskaya GRES. Within the also underway. Thus, in 2007 about 25% framework of modernisation of plant of the Company’s PCs were replaced with equipment, the full-scale automated IT-infrastructure the new ones. Office hardware and control system for the water treatment software were also updated. The company station of the chemical shop at In 2007 a reserve infrastructure of the unified information space dealing with started to use the most advanced printing, Sredneuralskaya GRES, and the copying and scanning technologies. information and control handling system the most critical issues was formed. This for fuel supply bunkers of 300MW units at allows business to reach a new level in Reftinskaya GRES were installed. continuity of the regional distributional In 2007, at Units 4, 8 of information services. The unified Konakovskaya GRES, certification tests information space includes the corporate were performed and the certificates of portal, multi-service data transmission compliance with the Standards of network, a unified phone communications participation of power units of thermal network, modern local calculation power plants in regulated primary and networks at branches and a reserved automated secondary frequency control server infrastructure. were issued. Mobile solutions were introduced, At Konakovskaya GRES, an industry which allow the staff working with “pilot” project of SO-CDU UES on documents to receive and send messages monitoring of the actual participation of from any corner of the world and also work power plants and units in regulated with the resources of the corporate primary frequency control was launched. information portal at a high security level. To provide safety of the IT systems and data transmission networks, as well as protect the parameters of the corporate networks, new data encryption and antivirus protection systems were installed, including safe internet access of the Company’s employees.

JSC The Fifth Power Generation Company 2007 Annual Report 77 СОЗДАВАЯ ЭНЕРГИЮ – ДЕЛАТЬ ЖИЗНЬ ЯРЧЕ! HR AND SOCIAL POLICY. SOCIAL PARTNERSHIP JSC OGK-5 is a socially oriented HR AND SOCIAL POLICY From the point of view of investments company that implements the policy of into human capital that means setting corporate citizenship. The Company Basic Principles and Aims of HR policy competitive salary rates for the employees participates in resolving the social problems of Company. Company’s Strategy for HR according to the economic situation on of the regions where its manufacturing Development. their regional labor markets, introduction facilities are located, including various The Company’s HR policy is based on of a flexible system of additional charity activities, rendering material aid to the combination of personnel personnel encouragement and social socially challenged population, educational technologies and investments into human payments, personnel training with the institutions and public organisations. capital. usage of advanced methods and Salary and social payments within the From the point of view of personnel technologies. period of 2004-2007 were constantly technologies that means selection of increasing. On the one hand, the collective candidates on the basis of developed agreements with a salary indexation competency models, use of modern mechanism were added, on the other hand methods of personnel assessment these agreements were brought into (assessment center), systematic approach correspondence with the situation on to training, development of material and regional labor markets. non-material stimulation systems based on the principles of internal and external compliance.

Categories of Employees, % 15,9% Branch Managers Specialists Other workers

Konakovskaya GRES15.224.460.4 50,6% 33,5% Nevinnomysskaya GRES16.824.958.3

Reftinskaya GRES11.819.668.6

Sredneuralskaya GRES15.526.558 Managers Central Office20.272.27.6 Specialists TOTAL15.933.550.6 Other workers

Age Structure , %

5,8% Branch up to 30 31-40 41-50 51- up working years years years to pension age pensioners 21,6% 17,1%

Konakovskaya GRES15.025.827.324.47.5 28,9% 26,6% Nevinnomysskaya GRES17.131.129.019.53.3

Reftinskaya GRES21.327.827.620.03.3

Sredneuralskaya GRES18.026.030.013.013.0 up to 30 years Central Office36.833.619.38.51.8 31-40 years TOTAL21.628.926.617.15.8 41-50 years 51- up to pension age working pensioners

JSC The Fifth Power Generation Company 2007 Annual Report 79 Labour Turnover JSC OGK-5, 2007 Labour Turnover 1Q 2Q 3Q 4Q year total absolute turnover3.13.246.822.2115.37 incl.: 16

- due to workforce reduction 0.0500.1400.1914 12 - due to expiry of fixed-term employment contracts0.420.050.210.160.85 10 - due to retirement1.11.50.960.544.11 8 - due to reasons beyond the control of the parties0.140.090.140.160.546

- due to transfer to affiliates and related companies0.403.530.074.04 2 - dismissal 0 - by agreement of the parties KGRES NGRES RGRES SUGRES Central OGK-5 office (employer’s initiative)0.050.090.070.140.35 2005

- resignation 2006 2007 - by agreement of the parties (employee’s initiative)

- “external transfer”0.941.51.761.135.33

Education, % Education, % Branch basic secondary secondary secondary higher higher 2 and more profess- and junior vocational vocational (not in (energy higher, MBA, sional secondary (not in (in energy energy area) area) academic energy area) area) degrees 5,1% 7,2% KGRES5.517.55.430.221.517.02.8 15,2% 15,8%

NGRES8.98.611.314.42528.33.5 28,0% 12,5%

RGRES11.525.721.916.215.78.50.5 16,2%

SUGRES1019192021.59.51

Central office08.14.90.456.112.617.9 basic profess-sional secondary TOTAL7.215.812.516.228.015.25.1 and junior secondary Average Salary, RUB secondary vocational Branch Average salary (not in energy area)

KGRES25,459 secondary vocational (in energy area) NGRES24,745 higher RGRES24,201 (not in energy area) higher (energy area) SUGRES27,983 2 and more higher, Central office* MBA, academic degrees

80 CHARITY

1.Area of Konakovskaya GRES: 3.Area of Sredneuralskaya GRES: OGK-5 plays a distinct Konakovo energy college, children-and- kindergartens no. 2, 10, 15, 39, 44, day role in providing youth center “Novaya Korcheva”, Choir care center for children no. 20, secondary school for boys and youngsters, Children-no. 5, 6, 19, 31, Urals Metrology and successful social and and-youth sport and technical carting club Quality College, Children and Youth Sports “Turn”, Gymnasium no. 5, hockey club School, Culture and rest center (city local economic development of “KonGRES”, hockey team “Titan”, history museum), Sverdlovsk region the regions, where its Kindergarten no. 2, Recreation centre basketball association, the veterans’ “Sovremennik”, chess club, sport club of council of Sredneuralskaya GRES, branches are located, KGRES, public organisation of veterans Verkhnepyshminskaya central municipal (pensioners) of Konakovskaya GRES, hospital, Verkhnepyshminskoye population welfare in Konakovskaya municipal public department of Russian association of the the Southern Federal organisation "Parents of disabled disabled persons. children”, Kindergarten № 9, 4.Area of Reftinskaya GRES: Inter- District, Central Russia, Konakovskaya central district hospital. school training center, children and youth 2.Area of Nevinnomysskaya GRES: sports school “Olympus”, Culture and arts including Moscow, Kindergartens no. 30, 47, secondary center, Social support center for families Moscow and Tver school no. 1, Nevinnomyssk Energy and children, Vocational school no. 1, College, Nevinnomysskaya GRES Village health care educational center for Oblasts and the Urals. veterans’ council, youth social children “Iskorka”, children club rehabilitation centre, special boarding “Morskaya Pekhota”, Kindergartens no. OGK-5 is a good faith taxpayer to the school no. 23, Programme of equipping 15, 20, 28, 50, Asbestovsky orphanage, budgets of all levels. The Company recreation zones for children in the places Nizhneturinsky boarding school- regards charity as an inseparable part of of mass residence of NGRES workers, orphanage for mentally challenged its socially-responsible business. municipal arts school for children, children, support of veterans of Orthodox orphanage for Children, Reftinskaya GRES, War veterans council The Programme for Social municipal children’s hospital, the of Reftinskiy urban district, Center of Partnership for 2007, approved by the veterans’ council of veterans of social service “Veterans of Reftinskiy Board of Directors of OGK-5, included Nevinnomysskaya GRES, address support urban district”, charity support for assistance to educational institutions, to disabled children who need emergency treatment of the sick children, Minova children’s and juniors’ groups, veterans’ medical care and who live in the area of Polina. organisations, medical institutions, ill and the branch. physically challenged persons, support of We believe that aid to people in need, events aimed at achieving a favourable welfare of those who need assistance and social and environmental atmosphere in support, and spiritual revival are an these regions. The most significant inseparable part of activities any large directions of the Company’s charity organisation. activities in 2007 include:

JSC The Fifth Power Generation Company 2007 Annual Report 81 РОДНЫЕ ПРОСТОРЫ ЦЕНИ И ХРАНИ

ЭНЕРГИЕЙ СВЕТА, ТЕПЛА И ЛЮБВИ! ENVIRONMENTAL PROTECTION

The resolution of environmental Konakovskaya GRES problems is one of the priority directions of In 2007, the gross air emission still nitrogen oxide; its quantity amounted OGK-5's activities. The Board of Directors increased in comparison to the preceding to 9,052 tons. In the reporting period approved the Environmental Policy year due the increase of power production. maximum emission limits were not Implementation Programme for 2006- The main emitted chemical at KGRES is exceeded. 2008, the main goal of which is mitigation of the environmental impact of power generation. To secure environmental protection at all the production branches of JSC OGK- Emissions Structure 5, the Company exercises control over air emissions, water discharge levels and Emission 2005 2006 2007 land pollution, and is active in the collection and processing of data Oil ash, tons0.21.64.3 regarding: Ÿgross air emissions; Sulphur dioxide, tons3822 4901 454 Ÿvolume and quality of wastewater discharged into water bodies; Carbon oxide, tons592761748 Ÿamount of production waste. Nitrogen oxides, tons5 946 7 9079 052

Total emissions, tons6 921 11 16011 259 KGRES Air Emissions Fuel Consumption Structure

12000 Item 2005 2006 2007 10000 Gas, thousand m3 1 830 2282 299 3162 357 718 8000 Fuel oil, tons9 64264 82736 926 6000 Share of fuel oil in fuel balance, %0.633.271.8 4000 2000 0 2005 2006 2007 From the point of view of its quality, discharge volumes depend on power wastewater at KGRES is divided into production volumes; in 2007, they Gross emission standard pure (99.8%) and standard amounted to 1,309,625 thousand m3. Nitrogen oxides purified (0.2%). Technical water supply Contamination in wastewater was within system is straight-through. Wastewater allowable standards. Sulphur dioxides Oil ash Carbon oxide

JSC The Fifth Power Generation Company 2007 Annual Report 83 Nevinnomysskaya GRES NGRES Air Emissions According to the production results of In the reporting year, within the NGRES in 2007, gross air emissions were framework of the Environmental Policy reduced due to the decrease in power Implementation Programme for 2006- 10000 production and share of fuel oil in the fuel 2008, Unit 7 was reconstructed to reduce balance. NOx emission. 8000 6000 4000 Динамика выбросов Emission 2005 2006 2007 2000 0 Oil ash, tons7.15.81.2 2005 2006 2007 Sulphur dioxide, tons1 9122 010384 Gross emission Carbon oxide, tons--- Nitrogen oxides Sulphur dioxides Nitrogen oxides, tons4 7135 3195 232.708

Oil ash Total emissions, tons7 1417 8396 122 Carbon oxide Fuel Consumption Structure of NGRES

Item 2005 2006 2007

Gas, thousand m3 1,855,0001,975,7301,961,330

Within the framework of the Fuel oil, tons52,03455,07110,015 Environmental Policy Implementation Programme of JSC OGK-5 for 2006-2008, Share of fuel oil in fuel balance, %3.33.20.6 works totaling 142.4 mln roubles were carried out at NGRES. Foremost environmental tasks at Wastewater Discharge at NGRES NGRES for the next 3 years are the following: Discharge 2005 2006 2007

1. Reconstruction of the water 3 treatment station using the reverse- Total discharge, thousand m 547,182463,344534,455 osmosis based demineralization technology; 2. Development, coordination and implementation of the sanitary zone В 2007 го ду на НГРЭС было образовано 3 104 т. отходов. Повы ш ение project; образования отходов вы звано увеличением объем ов работ по м одернизации 3. Purchase and implementation of оборудования. stationary emission control equipment for output combustion gases; Waste generation by NGRES 4. Installation of a fish protection system at Barsuchkovsky water reservoir; Item 2005 2006 2007 5. Reconstruction of the plant’s Tons of waste, total5321,4033,104 compressing station.

84 Reftinskaya GRES RGRES Air Emissions According to the production results of RGRES in 2007, gross air emissions decreased due to the decline in power production and better efficiency of electrostatic precipitators at Unit 6 after their reconstruction. 400000 350000 300000 Emissions Structure 250000 200000 Emission 2005 2006 2007 150000 Solid fuel ash, tons 120 471 155 008 141 957 100000 50000 0 Sulphur dioxide, tons113 300118 866105 692 2005 2006 2007 Carbon oxide, tons724452727

Gross emission Nitrogen oxides, tons46 42553 48049 053 Nitrogen oxides Sulphur dioxides Total emissions, tons289 694337 283306 244 Solid ash Fuel Consumption Structure of RGRES

Carbon oxide Item 2005 2006 2007

Coal, tons 10,192,34010,913,7039,552,914 Within the framework of the Environmental Policy Implementation Fuel oil, tons 29,91029,80328,530 Programme of JSC OGK-5 for 2006-2008, works totaling 142.4 mln roubles were carried out at RGRES. The most important tasks to be Wastewater Discharge at RGRES achieved by RGRES in 2008 are the Item 2005 2006 2007 following: 1.Reconstruction of the dust- Total discharge volume, thousand m34,39925,26425,424 preparation system of 300MW unit boiler with the replacement of burners with the low-emission ones. 2.Development and Wastewater is classified as not sufficiently purified. In 2007, the power plant was implementation of the dry ash removal performing the following activities to reduce wastewater discharge into surface water system. objects: the construction of drainage channels, pump stations for interception of 3.Replacement of EPs at Unit 5. filtered waters from ash dumps 3 and 4, modernisation of elements for the flowback 4.Implementation of fuel-oil-free of clarified water from the ash dumps (shaft well, water conduit). ignition systems. In the reporting year, waste generation by the plant amounted to 3,763,012 5.Implementation of the tons. The main part of them (99%) is waste belonging to the Vth hazard class: ash conditioning system for outgoing gases. generated from the burning of Ekibastuz coal. The quantity of waste generated by the 6.Reconstruction of the water plant generally depends on the volume of power production. treatment station. 7.Installation of a fish-protection system and assessment of its efficiency. Динамика образования отходов на РГРЭС 8.Development the sanitary zone project for the industrial objects at Item 2005 2006 2007 Reftinskaya GRES. Total ash, tons3,928,7204,193,5613,763,012

JSC The Fifth Power Generation Company 2007 Annual Report 85 Sredneuralskaya GRES SUGRES Air Emissions In 2007, gross air emissions at SUGRES amounted to 8,603 tons, or 12 tons more than in 2006.

10000 8000 6000 Emissions Structure 4000 Emission 2005 2006 2007 2000 0 Oil ash, tons 5.55.03.9 2005 2006 2007 Sulphur dioxide, tons1,4551,325964

Gross emission Carbon oxide, tons167 124 153 Nitrogen oxides Sulphur dioxides Nitrogen dioxides, tons6,6735,9546,425 Oil ash Total emissions, tons9,3988,3918,603 Carbon oxide Fuel Consumption Structure of SUGRES

Item 2005 2006 2007

Gas, thousand m23 ,201,2172,210,5462,358,006

Fuel oil, tons34,13233,81025,260

Share of fuel oil in fuel balance, %1.91.91.3 Within the framework of the Environmental Policy Implementation From the point of view of its quality, wastewater at KGRES is divided into standard pure and standard Programme of JSC OGK-5 for 2006-2008, purified. At 2007, the annual wastewater discharge volumes totaled: standard pure - 922 thousand m3, works totaling 64.4 mln./rub were carried standard purified – 1,640 thousand m3. out in the reporting year. The water supply system is a reverse one, with intake of water for boiler and heat network feeding, as The priority tasks to be achieved by well as for technological needs. SUGRES in 2008 and further in 2009 are the following: Wastewater Discharge at SUGRES 1.Reconstruction of the demineralization unit at the chemical Item 2005 2006 2007 water treatment station, to reduce the intake of water for own needs and Total discharge volumes, decrease of reagent consumption (end of thousand m3 2,5082,5452,562 works). 2.Purchase and installation of metering equipment to control the volume Waste Generation by SUGRES of discharge wastewater. 3.Purification of the discharge rack Item 2005 2006 2007 and adjacent trays of the fuel oil storage facilities. Total emissions, tons1,1391,2891,206

86 ЗНАЙ, ТОВАРИЩ: РОДНЫЕ ПРОСТОРЫ ЦЕНИ И ХРАНИ

ЭНЕРГИЕЙ СВЕТА, устойчивое финансовое положение компании – твое достойное будущее! ТЕПЛА И ЛЮБВИ!

Кубань, Центр России ЭНЕРГЕТИКЕ РОССИИ – и Средний Урал:

инновации наш труд, наша гордость, и информационные наш потенциал! технологии! ДЕНЬ ЗА ДНЕМ НАШ ДЕВИЗ – СОЗДАВАЯ И ШАГ ЗА ШАГОМ: ЭНЕРГИЮ – ДЕЛАТЬ ЖИЗНЬ ЯРЧЕ!

ЭНЕРГЕТИКА ПОБЕД! НАДЕЖНОСТЬ И ЭФФЕКТИВНОСТЬ! APPENDICES

Auditor Auditee ZAO PricewaterhouseCoopers Audit Audit License No. E000376 issued by JSC «The Fifth Power Generation (ZAO PwC Audit) the Ministry of Finance of the Russian Company» (OGK-5). Certificate of State Registration of Federation on May 20, 2002. The license Address: 38 Pr-t Lenina, ZAO No. 008.890 issued by the Moscow is valid until May 20, 2007. Yekaterinburg, Sverdlovskaya Oblast, Registration Chamber on February 28, Russian Federation 1992. Certificate of State Registration of Certificate of Record in the Uniform Legal Entity No. 1046604013257 issued State Register of Legal Entities about by the Inspectorate of the Ministry of Legal Entity registered prior to July 1, Taxation of Russia in Leninsky District of 2002, No. 1027700148431 dd. August Yekaterinburg on October 27, 2004. 22, 2002, issued by the Interdistrict Inspectorate No. 39 of the Ministry of Taxation of Russia in Moscow.

OGK-5 BALANCE SHEET*, in thousand RUB**

At the beginning At the end of the of the reporting year reporting period NON-CURRENT ASSETS31,911,22034,583,422 Including:Property, plant and equipment and intangible assets29,526,70630,556,052 Construction in progress2,215,0323,716,208 Long-term financial investments146,07864,758 CURRENT ASSETS19,342,50519,974,429 Including:Inventories and VAT2,719,8612,858,833 Accounts receivable3,377,7279,140,082 Short-term financial investments13,052,2107,160,272 Cash192,707815,242 TOTAL ASSETS51,253,72554,557,851 EQUITY AND RESERVES43,528,84445,108,563 Including:Share capital35,371,68635,371,898 Treasury shares-(684) Additional capital7,307,0847,307,768 Reserve capital221,667250,214 Retained earnings628,4072,179,367 LIABILITIES7,724,8819,449,288 Including:Loans and credits5,620,9975,091,445 Accounts payable1,953,2663,101,309 Other150,6181,256,534 TOTAL LIABILITIES51,253,72554,557,851

* The balance sheet and profit and loss statement provided in this section were prepared in accordance with the Russian Accounting Standards. To see the 2007 Annual Financial Statements of OGK-5 prepared in accordance with the International Financial Reporting Standards, please go to OGK-5's website: www.ogk-5.com. ** The present financial statements are abridged. The full version of the annual financial statements can be received in the Company.

88 PROFIT AND LOSS STATEMENT*, in thousand RUB

For the reporting For the similar period perio of the preceding year Revenue33,464,94925,898,943 Cost of products, goods, work and services sold(30,925,330)(24,982,208) Commercial expenses(465,621)(401,695) Profit (loss) on sales2,073,998515,040 Interest receivable770,534102,897 Interest payable(380,811)(184,704) Income from investments in other entities-250,164 Other income1,343,6431,278,368 Other expenses(1,775,033)(1,058,069) Profit before taxes2,032,331903,696 Income tax and other similar compulsory payments(228,111)(332,776) Net profit for reporting period1,804,220570,930

* The balance sheet and profit and loss statement provided in this section were prepared in accordance with the Russian Accounting Standards. To see the 2007 Annual Financial Statements of OGK-5 prepared in accordance with the International Financial Reporting Standards, please go to OGK-5’s website: www.ogk-5.com.

REPORT OF INTERNAL AUDIT COMMISSION OF JSC OGK-5 FOR 2007 In accordance with the decision of the Other expenses (including the interest to As of 01.01.08. accounts receivable Internal Audit Commission (the minutes of the be paid) surpassed other income (including the totaled 9,140 mln. RUB, including: buyers and session of the Internal Audit Commission as of interests to be received) by 42 mln. RUB and customers – 1,117 mln. RUB, given advance 14.03. 2008) the commission consisting of S.B. totaled 2,156 mln. RUB. payments – 5,733 mln. RUB, other accounts Sidorov, Chairman of the Internal Audit In 2007 the Company’s net profit was receivable – 2,290 mln. RUB including the Commission and members of Internal Audit 1,804 mln. RUB. extra tax amounts paid to the budget and non- Commission, O.V. Burova, L.E. Osmanova, A.V. The book value of the Company’s assets budgetary funds – 971 mln. RUB. Shevchuk performed auditing of OGK-5’s as of December 31, 2007 added up to 54,558 As of 01.01.08. accounts payable totaled financial and economic activities over the year mln. RUB. The net assets value as of December 3,102 mln. RUB, including: energy suppliers – of 2007. 31, 2007 amounted to 45,109 mln. RUB. 122 mln. RUB, fuel suppliers – 347 mln. RUB, The auditor of the Company, ZAO The Company’s solvency and liquidity as repair service companies – 484 mln. RUB, PricewaterhouseCoopers Audit, approved by of 01.01.08 are characterized by the following construction companies – 945 mln. RUB, other the Annual General Shareholders’ Meeting of data: suppliers and contractors – 263 mln. RUB, JSC OGK-5 (Protocol 1 dd 04.06.2007) remuneration of labour – 72 mln. RUB, tax and performed audit of the Company’s Accounting -The equity ratio numbered 0.83, dues – 416 mln. RUB. Statement for 2007 (Audit Report dd which is higher that the recommended level (0.5). This value is characteristic of the Based on the performed audit the Internal 18.03.2008). In the opinion of the auditor, the Audit Commission has sufficient grounds to Accounting Statement of the Company credibly Company’s stability, as financial liabilities can be covered at the expense of its own capital; assert the credibility of the data in the annual in every essential respect reflects the financial accounting statement of JSC OGK-5. -Cash ratio – 2.40 (2006 – 5.29); status of the Company as of December 31, We also assert the credibility of the data 2007 and the results of the financial and -Quick ratio - 4.11 (2006 – 6.27); in the annual report of the Company for 2007. economic activity for 2007 in accordance with -Current ratio – 6.40 (2006 – 7.73). the accounting requirements of Russian The decrease of the liquidity ratios in Chairman of the Internal Audi legislation. comparison with 2006 is caused by the The audit was performed from Commission of JSC OGK-5 decreased amount of short term financial S.B. Sidorov 19.03.2007 to 28.03.2007. investments and increased amount of short The audit of the presented original term liabilities regarding the start of the large documents was done on a selective basis. scale activity of the Company related to the In 2007 the revenue of the Company from investment programme implementation. In sales of products and services totaled to general the ratios are characteristic of the 33,465 mln. RUB. The cost of products, work Company’s financial stability. and services totaled 30,925 mln. RUB, earnings from sales for the period were as much as 2,074 mln. RUB.

Moscow, 31 March 2008

JSC The Fifth Power Generation Company 2007 Annual Report 89 Data on Observance of Code of Ethics

№ Provision of Code of Ethics Observance Notes or non-observance General Shareholders' Meeting 1. Notification about a General Shareholders’ Observable Articles of Association, Article 11.5 and 12.4 Meeting is issued to shareholders no less than 30 days prior to such meeting regardless of items included into its agenda except when legislation envisages an earlier notice. 2. Shareholders can study the list of persons Observable Articles of Association, Article 25.5 entitled to participate in a General Shareholders’ Meeting starting from the Regulation on the Information Policy of the respective notification date and until the Company, Article 4.4.5 closure of a formal General Shareholders’ Meeting; or, in case of a remote General Shareholders’ Meeting, until the last day for the submission of voting ballots.

3. Shareholders are entitled to study Observable Articles of Association, Article 11.7 information (materials) subject to provision during preparation for a General Shareholders’ Meeting via electronic media including Internet.

4. A shareholder is entitled to introduce an Observable The Company’s Articles of Association, as well issue to the General Shareholders’ Meeting as other internal documents of the Company do agenda or require convention of a General not specify obligations of the shareholder Shareholders’ Meeting with no provision of submitting a matter to the agenda of the the abstract from the shareholders’ register General Shareholders’ Meeting or demanding provided its share right is exercised within convening of such meeting to provide an the shareholders’ register system; should abstract from shareholders' register. such share rights be recorded at a securities account, a respective abstract from the securities account shall be sufficient for the exercise of such rights.

90 № Provision of Code of Ethics Observance Notes or non-observance

5. Requirement for obligatory presence of the Not observable According to p.6.2.2, p.6.2 of Article 6 of JSC Director General, members of the Executive OGK-5 Corporate Conduct Code, the Company Board, members of the Board of Directors, shall ensure the presence of members of the Internal Audit Commission the Company’s Board of Directors, Internal Audit Commission auditor at the General Shareholders’ and the Company’s auditor at the meeting and Meeting, stipulated in the Articles of authorise them to answer shareholders’ Association or internal documents of the questions. company.

6. Obligatory presence of candidates at General Observable Not stipulated by the Articles of Association and Shareholders’ Meetings in the event of the Company’s Internal Documents election of the Board of Directors members, the Director General, the Executive Board members, members of the Internal Audit Commission and the Company’s Auditor, as well as the consideration of the issue about the ratification of the Company’s auditor. 7. Presence of the procedure for the Observable Rules of Procedure for Preparation and Holding registration of General Shareholders’ of General Shareholders’ Meeting of OGK-5, Meeting participants in the Company’s Article 3.1 internal documents. BOARD OF DIRECTORS 8. The Article of Association contains the Not Articles of Association, Article 15.1.19: The authority of the Director General to annually observable Board of Directors annually approves the appoint the Financial and Economic Plan of business plan of the Company and the report on the Company. the results of its implementation

9. Procedure of risk management approved by Not OGK-5 risk management procedure is not the Board of Directors. observable provided by any internal documents of the Company 10. The Articles of Association contain the right According to Article 15.1.12 of the Company's of the Board of Directors to terminate the Articles of Association, the issue about the office of the Director General appointed by election and termination of office of the Director the General Shareholders’ Meeting. General, including determination of the terms and conditions of the employment contract and its termination, are within the competence of the Board of Directors of JSC OGK-5

11. The Articles of Association stipulate that the Partially According to the Article 15.1.12 of the Board of Directors is entitled to specify observable Company’s Articles of Association, resolution on requirements to qualification and the size of the terms and conditions of an employment remuneration of the Director General, contract with the Director General and its members of the Executive Board and heads termination is within the competence of the of the main structural subdivisions of the JBoard of Directors of JSC OGK-5 Company. According to Article p.15.1.13 of the Company’s Articles of Association, determination of the size of remuneration paid to the members of the Executive Board is within the competence of the Company’s Board of Directors

JSC The Fifth Power Generation Company 2007 Annual Report 91 № Provision of Code of Ethics Observance Notes or non-observance

12. The Articles of Association contain the right Observable According to Article 15.1.12 of the Company’s of the Board of Directors to approve the Articles of Association, resolution on the terms contractual terms with the Director General and conditions of an employment contract with and Executive Board members. the Director General and its termination is within the competence of the JBoard of Directors of JSC OGK-5. Articles of Association, Article 20.5.3

13. The Articles of Association or internal Partially According to the Article 5.1.2 of the Corporate documents of the Company contain a observable Governance Code of JSC OGK-5, members of requirement that in course of the approval of the Board of Directors holding the office of contractual terms with the Director General Executive Directors shall not account for over (management organisation/manager) and 25% of the total number of elected members of members of the Executive Board, the votes the Board. The Board of Directors shall include of the Board of Directors members being the not less than 3 independent directors Director General and the Executive Board members are not taken into account during the calculation of votes. 14. The Board of Directors of the Company shall Observable The Board of Directors elected pursuant to the include no less than three independent General Shareholders’ Meeting Resolution directors who meet requirements of the (Minutes No.3 of 09/03/2007) includes the Code of Corporate Behavior following directors complying with the independence requirements: Dominique Fache, Eldar Orudzhev, Dmitry Akhanov, Marcello Brutti, Sergey Vasiliev, Grigory Glazkov, Stephane Zweguintsow, Denis Kulikov, and Gerald Rohan

15. The Board of Directors shall be free of Observable There are no such persons persons previously convicted of economic crimes or crimes against public authorities, interests of federal and local governmental bodies or those punished for unlawful actions in the sphere of entrepreneurship or finance, fees and taxes collection, and the securities market.

16. The Board of Directors shall be free of Observable There are no such persons persons being a participant, the Director General (managing director), a member of managing bodies or employee of a legal entity competing with the Company.

17. The Articles of Association contain the Observable Articles of Association, Article 10.8 requirement for election of the Board of Directors by cumulative voting. 18. Internal documents of the Company contain Not observable The Articles of Association and internal the obligation of the members of the Board documents do not stipulate that of Directors to refrain from actions leading or potentially leading to conflict of interests between those of the Board members and the Company’s interests.

92 № Provision of Code of Ethics Observance Notes or non-observance

19. The Company’s internal documents contain Partially observableAccording to Article 4 of the Regulation on the obligation of the members of the Board Insider Information of JSC OGK-5, approved by of Directors to notify the Board of Directors in the Company’s Board of Directors (Minutes writing about intentions to make No.14 of 09/23/2005), the members of the transactions with the securities of the Board of Directors, Management Board and the Company, in case they are members of its General Director shall disclose all information Board of Directors, or its subsidiaries and on holding of securities to the Audit Committee. affiliates, as well as disclose information The Audit Committee shall then provide the about transactions made with such Board of Directors with Securities Transaction securities. Report of the Company and Its Subsidiaries

20. The Company’s internal documents contain Partially In accordance with p.18.2 of Article 18 of the the requirement to hold the Board meetings Company’s Articles of Association, meetings of at least once in six weeks. the Board of Directors shall be held upon necessity, but not less than once every quarter.

21. The meetings of the Board of Directors of the observable In 2007, 24 meetings of JSC OGK-5 Board of Company are held in the course of the year Observable Directors were held. reported in the Annual Report of the Company and no less than once in six weeks.

22. The Company’s internal documents include Observable JSC OGK-5 Board of Directors meetings are the order with regard to the holding of the governed by the Company’s Articles of Board meetings. Association (article 18) and Regulation on Procedure for Convention and Holding of Meetings of Board of Directors of JSC OGK-5 23. The Company’s internal documents contain Observable Article 15.1.37 of the Company’s Articles of the regulation stating the necessity for the Association Board of Directors to approve the Company’s transactions amounting to 10% of the asset value excluding transactions in the course of regular business activities.

24. The Company’s internal documents contain Observable Section 3. Regulation on the Procedure for the right of the Board members to receive Convention and Holding of Meetings of Board of information needed for due performance of Directors their functions from the Company’s executive bodies and senior division managers, as well as the responsibility for non-provision of such information.

25. Presence of the Committee for Strategic Observable JSC OGK-5 established the Committee for Planning or assignment of such Committee’s Strategy, Development, Business Planning and functions upon another Committee Corporate Governance under the Board of (excluding Audit Committee and HR and Directors (Minutes No.22 of 12/23/2005) Remuneration Committee).

26. Presence of a Board Committee (the Audit Observable JSC OGK-5 established the Audit Committee Committee) recommending to the Board of under the Board of Directors (Minutes No.22 of Directors a candidate for the Company’s 12/23/2005) auditor and interacting with such auditor and the Company’s Internal Audit Commission.

27. The Audit Committee comprises Observable Stated requirements are provided in the independent and non-executive directors Regulation on the Audit Committee of the Board only. of Directors, Article 6.5

JSC The Fifth Power Generation Company 2007 Annual Report 93 № Provision of Code of Ethics Observance Notes or non-observance

28. The Audit Committee is headed by an Observable An independent director – Gerald Rohan – is independent director. Chairman of the Audit Committee under the Board of Directors of JSC OGK-5 29. The Company’s internal documents contain Observable Regulation on the Audit Committee, Articles the provision about the right of all the Audit 11.3 and 12.1 Committee members to have access to any documentation and data of the Company provided they do not disclose confidential information. 30. Establishment of a Board Committee (HR Observable JSC OGK-5 has established Human Resources and Remuneration Committee) aimed at the and Remuneration Committee under the Board determination of criteria related to the of Directors (Minutes No.22 of 12/23/2005) selection of candidates to the Board of Directors and elaboration of the Company’s remuneration policy.

31. The HR and Remuneration Committee is Observable Independent director – Dominique Fache —is headed by an independent director. Chairman of the Human Resources and Remuneration Committee of the Board of Directors of JSC OGK-5 32. The HR and Remuneration Committee does Observable No officers of the Company are members of the not include any officials of the Company. HR and Remuneration Committee

33. Establishment of the Risk Management Partially JSC OGK-5 established Risk Management Committee of the Board of Directors or observable Council under the Company’s Executive Board. assignment of its respective functions to In addition, the functions of the Risk Committee another Committee (excluding the Audit are assigned to the Audit Committee of the Committee and HR and Remuneration Board of Directors of JSC OGK-5 Committee). 34. Establishment of a Board Committee for Not observable The Articles of Association and internal Settlement of Corporate Conflicts or documents do not stipulate such Committee assignment of the Committee’s functions to another Committee (excluding the Audit Committee and HR and Remuneration Committee). 35. The Committee for Settlement of Corporate Not applicable Conflicts is free of the Company’s officials.

36. The Committee for Settlement of Corporate Not applicable Conflicts is headed by an independent director. 37. Presence of the Company’s internal Observable The Board of Directors of JSC OGK-5 approved documents approved by the Board of (Minutes No.22 of 12/23/2005): the Regulation Directors, which envisage the order of of HR and Remuneration Committee; Regulation formation and operation of the Board of Committee for Strategy, Development, Committees. Business Planning and Corporate Governance; Regulation on Audit Committee; Regulation on Reliability Committee.

38. The Articles of Association of the Company Observable This provision is set out in Article 18.9 of the include the provision about the procedure of Company’s Articles of Association the determination of the Board of Directors’ quorum, which provides obligatory participation of independent directors at the Board meetings.

94 № Provision of Code of Ethics Observance Notes or non-observance

Executive Bodies

39. Presence of a collegial executive body (the Observable Article 20.1 of the Company’s Articles of Executive Board) of the Company. Association stipulate the establishment of a Collegiatel Executive Body – the Company’s Executive Board.

40. The Articles of Association or internal Partially observableAccording Article 21.2.4 of the Company’s documents contain a provision on the Articles of Association, the Executive Board is requirement for the Executive Board to entitled to resolve any transactions with approve real-estate and loan-related property, works or services in the amount of 1 to transactions provided such transactions are 10% of the Company's balance value not regarded as large and the making of determined at the date of the resolution on such such transactions does not fall into the transaction. regular economic activities of the Company.

41. The Company’s internal documents contain Not observable The Articles of Association and internal the procedure for agreement of operations documents do not stipulate such procedure going beyond the framework of the financial and economic plan of the Company.

42. Executive bodies are free of persons being a Observable There are no such persons participant, director general (manager), member of a management body or an employee of a legal entity competing with the Company.

43. The executive bodies of the Company do not Observable There are no such persons have persons who have been previously convicted in economic crimes or crimes against public authorities, interests of federal and local governmental bodies, or those punished for unlawful actions in entrepreneurship or finance, fees and taxes collection and securities market. If the functions of the sole executive body are performed by a managing organization or person – compliance of the director general, executive board members, managing organization or person with the requirements set for the general director and executive board members of the joint-stock company.

44. The Articles of Association or internal Not observable The Articles of Association and internal documents contain a prohibition for a documents do not stipulate such prohibition managing organisation (or manager) to perform similar functions in a competing society; neither shall such organisation/manager be within any other proprietary relations with the Company, excluding rendering of services to the managing organisation/manager.

JSC The Fifth Power Generation Company 2007 Annual Report 95 № Provision of Code of Ethics Observance Notes or non-observance

45. The internal documents of the Company Partially observableAccording to Article 20.11 of the Company’s contain the obligation for executive bodies to Articles of Association, the Director General and refrain from actions leading or potentially members of the Executive Board shall act to the leading to a conflict of interests between benefit of the Company when executing their their interests and the interests of the rights, and diligently and reasonably fulfill such Company; in case such conflict occurs, the rights and obligations to the Company This executive bodies are obliged to inform the matter is also governed by Article 4.3 of the Board of Directors of such conflict. Regulation on Executive Board of JSC OGK-5

46. The Articles of Association or internal Not observable The Articles of Association and internal documents of the Company contain criteria documents do not stipulate such criteria for selection of a managing organisation (manager). 47. The executive bodies of the Company submit Partially observable According to Article 15.1 of the Company’s monthly reports on their work to the Board of Articles of Association, the Board of Directors is Directors. entitled to review the Director General's reports on company operation, including performance of his/her official duties.

48. Agreements concluded by the Company with Observable According to Article 20.2., the Company’s the Director General (a managing Director General and Executive Board report to organisation/manager) and members of the the General Shareholders’ Meeting and the Executive Board, establish liability for Board of Directors violation of regulations with regard to confidential and corporate information.

Company Secretary

49. The Company engages a specific official (the Observable JSC OGK-5 approved the Regulation on Corporate Secretary) to monitor observation Corporate Secretary and Secretariat of Board of of the Company’s procedure requirements, Directors of JSC OGK-5 (Minutes No.5 of which ensure realisation of rights and legal 03/30/2006). interests of the Company’s shareholders, by By the Board of Directors Resolution of respective JSC departments and officials. 09/24/2007, Andreychenko D.E. was elected Corporate Secretary of JSC OGK-5.

50. The Articles of Association or internal Observable Procedure of Corporate Secretary election and documents establish the procedure for the formation of Secretariat is set out by Article 3 of appointment (election) of the Corporate the Regulation on Corporate Secretary and Secretary, and its respective functions. Secretariat of Board of Directors of JSC OGK-5

51. The Articles of Association contain Not observable The Company’s Articles of Association don’t requirements towards the candidate for the stipulate such requirements position of the Corporate Secretary.

96 № Provision of Code of Ethics Observance Notes or non-observance

Significant Corporate Actions

52. The Articles of Association or the internal Partially observableAccording to Article 15.1.24 of the Company’s documents of the Company contain the Articles of Association, the Board of Directors is requirement for approval of a large entitled to approve major transactions in cases transaction before its settlement. prescribed by the Section 10 of the Federal Law “On Joint-Stock Companies”. 53. For assessment of the market value of Partially observableAccording to Article 15.1.41 of the Company's property being the subject of a large Articles of Association, the Board of Directors is transaction, an independent appraiser is entitled to approve the candidacy of the attracted (mandatory). independent appraiser for appraisal of value of shares, property and other assets in cases, prescribed by the Federal Law "On Joint-Stock Companies”, the Company's Articles of Association and separate resolutions of the Board of Directors

54. In case of purchase of large stakes Not observable These provisions are not stipulated by the belonging to some joint-stock company Articles of Association and other internal (acquisition), the Articles of Association documents of the Company contain prohibition of any activities aimed at protection of interests of the executive bodies (and their respective members) and members of the Board of Directors of the Company, as well as prohibition of activities, which aggravate shareholders’ position as compared to the present state of affairs (in particular, prior to the end of the indicative period of shares’ acquisition, the Board of Directors is not entitled to decide upon additional share issues, issues of securities convertible into shares or securities which entitle its owners to acquire the Company’s shares even if the right to make such decision is granted to it by the Articles of Association).

55. The Articles of Association contain a Not observable This provision is not stipulated by the Articles of requirement for obligatory involvement of an Association and other internal documents of the independent appraiser for the assessment Company of the current market value of shares and possible changes of their market value as a result of acquisition. 56. The Articles of Association contain no Observable statements releasing the acquirer from its obligation to propose selling the ordinary shares of the Company in their possession (equity securities convertible into ordinary shares) in case of acquisition.

57. The Articles of Association or internal Not observable These provisions are not stipulated by the documents of the Company contain the Articles of Association and other internal requirement for obligatory engagement of an documents of the Company independent appraiser to determine correlation of share conversion in case of reorganisation. INFORMATION DISCLOSURE 58. The Board of Directors approves an internal Observable The Board of Directors has approved and document defining the rules and treatment executes the Regulation on Information Policy of of information disclosure by the Company JSC OGK-5 (Minutes No.14 of 09/23/2005) (the Regulation on Information Policy).

JSC The Fifth Power Generation Company 2007 Annual Report 97 № Provision of Code of Ethics Observance Notes or non-observance

59. The Company’s internal documents contain Not observable These provisions are not stipulated by the the requirement for disclosure of information Articles of Association and other internal dealing with the aims of placement of documents of the Company shares, persons intending to acquire the shares, including those intending to acquire large stakes, as well as the information if the Company’s senior management intends to acquire such shares.

60. The Company’s internal documents contain Observable According Article 4.4.2 of the Regulation on a list of documents and materials obligatory Information Policy of JSC OGK-5, the list of for submission to shareholders for the information, documentation and materials to be purposes of deciding upon the issues which submitted to the shareholders in preparation of are submitted to the General Shareholders’ the General Shareholders' Meeting is approved Meeting. simultaneously with the resolution to convene the General Shareholders’ Meeting. Article 4.4.3 of the stated Regulation determines approximate list of information (materials) to be provided to the Annual General Shareholders’ Meeting

61. The Company maintains a corporate website Observable JSC OGK-5 executes prompt and regular regularly updated for the purposes of disclosure of information at the corporate web- disclosure of information about the site: http://www.ogk-5.com Company. 62. The Company’s internal documents contain Observable According to Article 4.7.1 of the Regulation on the requirement to disclose information on Information Policy of JSC OGK-5, the specified the Company’s deals with persons information is disclosed by the Company in the representing the senior management of the quarterly issuer’s report Company as set in the Articles of Association, as well as deals between the Company and other entities in which the senior management members of the Company directly or indirectly own 20%+ of share capital, or which such persons may influence to a significant degree.

63. The Company’s internal documents contain Observable According to Article 4.7.1 of the Regulation on the requirement for disclosure of information Information Policy of JSC OGK-5, in its quarterly on any deals which might affect the market issuer’s report the Company shall additionally value of the Company’s shares. disclose all substantial information that may influence evaluation of the Company by the shareholders and potential investors

64. The Company has an internal document Observable The Board of Directors has approved the approved by the Board of Directors on the Regulation on Insider Information of JSC OGK-5 use of significant information about the (Minutes No.14 of 09/23/2005) Company’s activities, shares and other securities of the Company and transactions with such shares and securities, which does not represent public information and, if disclosed, might significantly influence the market value of shares and other securities of the Company.

98 № Provision of Code of Ethics Observance Notes or non-observance

Control over Financial and Economic Activities 65. The Board of Directors approves the order Observable JSC OGK-5 approved and implements a range of and procedures of internal control over internal documents governing the procedure of financial and economic activities of the internal control over the Company’s financial Company and economic activities According to Article 1.5 of the Regulation on Internal Control System of JSC OGK-5 (Minutes No.2 of 02/20/2007), such internal documents include: Regulation of Internal Control System; Regulation of Audit Committee; Regulation of Internal Audit Commission; Regulation of Internal Audit Department; Regulations on Interaction of Internal Audit Department, Audit Committee and Internal Audit Commission.

66. Presence of a special subdivision of the Observable JSC OGK-5 established and operates the Company which provides the observation of Internal Audit Department. internal control procedures (Control and Audit Service)

67. The Company’s internal documents contain Not observable According Article 1.4 and 1.5, as well as Article the requirement for the Board of Directors to 3.1 of the Regulation on Internal Audit determine the structure and composition of Department of JSC OGK-5, the Internal Audit the Company’s Control and Audit Subdivision Department is subordinate to the Director General and reports to the Audit Committee of the Board of Directors. The Head of this department is appointed and released by the Director General with due consideration for the Audit Committee recommendations. Organisational structure and staff of the Internal Audit Department are approved by the Director General with due consideration of the Audit Committee recommendations.

68. The Control and Audit Subdivision is free of Observable These requirements are specified in the Article 3 persons convicted in economic crimes or of the Regulation on Internal Audit Department crimes against public authorities, interests of JSC OGK-5 of federal and local governmental bodies or those punished for unlawful actions as related to entrepreneurship or finance, fees and taxes collection and securities market.

69. The Control and Audit Subdivision is free of Observable These requirements are specified in the Article 3 persons comprising the Company’s of the Regulation on Internal Audit Department executive bodies, the Director General of JSC OGK-5 (managing director), members of managing bodies or employees of a legal entity competing with the Company.

JSC The Fifth Power Generation Company 2007 Annual Report 99 № Provision of Code of Ethics Observance Notes or non-observance

70. The internal documents specify the Not observable The stated provisions are stipulated by the timeframe for submission of documents and Company’s internal documents materials for the assessment of the performed financial and economic action to the Control and Audit Subdivision, as well as the liability of the Company’s officials and employees for non-provision of such documentation by due date.

71. The Company’s internal documents oblige Not observable According to Article 5.2.3 of the Regulation on the Control and Audit Subdivision to inform Internal Audit Department of JSC OGK-5, the the Audit Committee about the revealed Head of Internal Audit Department shall review violations; in case of absence of such Audit materials of audits and reports on such results Committee, the Board of Directors is to be to the Director General. informed

72. The Articles of Association of the Company Not observable This provision is not stipulated by the contain the requirement for the Control and Company’s Articles of Association Audit Subdivision to preliminarily assess expediency of actions not specified in the Company’s financial and economic plan (non-standard actions)

73. The Company’s internal documents specify Not observable The stated provisions are not stipulated by the the procedure for the approval of non- Company’s internal documents standard operations by the Board of Directors 74. Presence of an internal document approved Partially observableIn 2005, the General Shareholders’ Meeting of by the Board of Directors, which determines JSC OGK-5 approved the Regulation on Internal the procedure for the holding of audits in Audit Commission of JSC OGK-5 relation to financial and economic activities of the Company by the Internal Audit Commission 75. The Audit Committee evaluates the audit Observable According to Article p.3.1.5 of the Regulation on report before it is presented to shareholders Internal Audit Commission of Board of Directors at the General Shareholders’ Meeting of JSC OGK-5, the Audit Committee performs evaluation of auditor’s reports.

Dividends 76. Presence of an internal document approved Observable JSC OGK-5 Board of Directors has approved the by the Board of Directors guiding the Board Standard of Dividend Policy (Minutes No.2 of of Directors during adoption of 02/27/2006) recommendations on the size of dividends (Regulation on Dividend Policy)

77. The Regulation on Dividend Policy specifies Observable The stated regulations are provided in the the procedure for the determination of a Dividend Calculation Procedure of JSC OGK-5 minimal share of net profit of the Company (Attachment 1 to Guidelines on Dividend aimed at payment of dividends and the Calculations). terms of non-payment or partial payment of During the period of its operation from the date dividends for preferred shares; dividend size of state registration to 12/31/2007, the for such preferred shares is specified in the Company has not issued preferred shares. Articles of Association of the Company Therefore, internal documents of the Company do not contain provisions on such shares, and the Articles of Association does not determine the size of dividends on such shares.

Data on the dividend policy of the Company Partially observableDividend policy information and historical data 78. and respective changes to be introduced are are published on the corporate website of the published in a periodical stipulated by the Company: http://www.ogk-5.com Articles of Association for the purposes of announcements about the holding of General Shareholders’ Meetings. The said data is also to be placed at the corporate Internet website. 100 INFORMATION ON TRANSACTIONS PERFORMED BY JSC OGK-5 IN 2007

Large Transactions RELATED-PARTY TRANSACTIONS: In 2007, JSC OGK-5 did not perform Related-party transactions, approved Related-party transactions, approved any transactions regarded as large by the General Shareholders’ Meeting by the Board of Directors of JSC OGK-5 pursuant to the Federal Law "On Joint- of JSC OGK-5 in 2007: in 2007*: Stock Companies". The Company’s Articles of Association do not contain any On August 16th, 2007, the 1. Supply contract between OAO ENC provisions on approval of transactions Extraordinary General Shareholders’ and JSC OGK-5 (Minutes No.1 of covered by the procedure of large Meeting of JSC OGK-5 approved two 01/26/2007). transaction approval. related-party transactions for the 2. Informational Services Agreement Company, both related to construction of between RAO UES of Russia (RE the ССGT unit on the territory of Uzhenergotekhnadzor Affiliate) and JSC Nevinnomysskaya GRES of JSC OGK-5. OGK-5 (Minutes No.1 of 01/26/2007). These transactions were to be made 3. Co-ordination Procedure between JSC OGK-5 and a Consortium Agreement between issuers and registrars established on the grounds of Consortium participating in RAO UES of Russia (Simple Partnership) Agreement of reorganisation in form of legal entity 02/21/2007. The Consortium includes: demerger and simultaneous accession of JSC Group E4, JSC "Power Machines – created JSC OGK-5. The Agreement was ZTL, LMZ, Electrosyla, concluded between RAO UES of Russia, Energomachexport”, CJSC SybKOTES, JSC CJSC Registrar Society “STATUS”, JSC Firma CENTROENERGOMONTAZH, LLC CMD and JSC OGK-5. Value of agreement Energostroysnabkomplekt-invest, JSC is RUB 101, 000, including 18 % VAT Novosybirskenergo-spetsremont. (Minutes No.2 of 02/22/2007). However, after approval, the stated 4. Information Services Agreement transactions were not made. between JSC OGK-5 and JSC UES Engineering Center. Value of agreement is RUB 23, 600, including 18% VAT (Minutes No.2 of 02/22/2007). 5. Real estate Purchase Agreement between JSC OGK-5 and JSC Stavropolpromenergoremont. Value of agreement is RUB 5, 900, 000, including 18% VAT (Minutes No.4 of 04/09/2007).

JSC The Fifth Power Generation Company 2007 Annual Report 101 6. Two Power Purchase 10. Two bilateral power purchase 16. Power Purchase Agreement (non- Agreements (non-regulated bilateral agreements (non-regulated bilateral regulated bilateral contract for power contracts for power purchase concluded contracts for power purchase) between sales) between JSC Kirovenergosbyt and by the parties in fulfillment of obligations JSC HydroOGK and JSC OGK-5. Power JSC OGK-5. Under this Agreement, the under regulated contracts) between OOO volume supplied by JSC HydroOGK to JSC Company supplies power in the amount Rusenergosbyt and JSC OGK-5. Maximum OGK-5 is determined according to the and in procedure determined by the value of each agreement cannot exceed terms and conditions of the agreements. agreement. The value of the agreement 2% of the book value of the Company’s Value of the first agreement is RUB 141, cannot exceed 2% of the book value of the assets as on the last reporting date 600, 000, value of the second agreement Company’s assets as on the last reporting determined at agreement execution – RUB 48, 427, 200. The prices are date determined at agreement execution (Minutes No.4 of 04/09/2007). specified exclusive of VAT (Minutes No.7 of (Minutes No.9 of 05/31/2007). 7. Power Purchase Agreement (non-05/03/2007). 17. Supplementary Agreement to regulated bilateral contract for power 11. Two power purchase agreements Agreement on Engineering Survey for the sales) between JSC Vladimirskaya Supply (non-regulated bilateral contracts for receipt of Technical Specifications and Company and JSC OGK-5. Value of power purchase) between JSC TOR for the “Construction of 410-MW agreement cannot exceed 2% of the book Mosenergosbyt and JSC OGK-5. Maximum CCGT at Sredneuralskaya GRES” Project. value of the Company’s assets as on the monthly volume of power purchased The Agreement is concluded between JSC last reporting date determined at (supplied) by the Company under non- OGK-5 and Urals Energy Engineering agreement execution (Minutes No.4 of regulated bilateral contract shall not Centre (ICEU) (Minutes No.11 of 04/09/2007). exceed 30% of the installed capacity of the 06/29/2007). 8. JSC OGK-5 Holding Consolidation relevant group of supply points. Value of 18. Extrastage Design Work Agreement. The Board of Directors of JSC each agreement cannot exceed 2% of the Agreement for the preparation of the OGK-5 has resolved that the value of this book value of the Company’s assets as on capacity output scheme of the 410-MW agreement cannot be determined the last reporting date determined at CCGT unit of Sredneuralskaya GRES. This (Minutes No.5 of 04/20/2007). agreement execution (Minutes No.4 of agreement is concluded between JSC 9. Four Supplemenatary Agreements 05/03/2007). OGK-5 and Urals Energy Engineering to the Power Purchase Contract (non- 12. Power purchase contract (non- Centre (ICEU) (Minutes No.11 of regulated bilateral contract for power regulated bilateral contract for power 06/29/2007). purchase) between ZAO INTER RAO and purchase) between JSC TGK-5 and JSC 19. Supplementary Agreement to JSC OGK-5. Maximum hourly power OGK-5. Maximum monthly capacity of Agency Contract between JSC OGK-5 and volume purchased (supplied) by the power purchased by the Company under NP INVEL for the creation of a regulatory Company under each non-regulated the non-regulated bilateral contract shall framework (RAO UES of Russia bilateral contract cannot exceed 30% of not exceed the cumulative power volume Standards). This agreement is concluded the installed capacity of relevant group of supplied by the relevant Company branch under the essential terms and conditions supply points (it shall not exceed the under regulated agreements. The value of specified by the Agency Contract (Minutes cumulative power volume supplied under the agreement cannot exceed 2% of the No.12 of 07/06/2007). regulated agreements by the appropriate book value of the Company’s assets as on branch of the Company). Value of each the last reporting date determined at agreement cannot exceed 2% of the book agreement execution (Minutes No.7 of value of the Company’s assets as on the 05/03/2007). last reporting date determined at 13. Railway Service Agreement agreement execution (Minutes No.7 of between JSC OGK-5 and JSC Sverdlovsk 05/03/2007). Energy Service Company. (Minutes No.8 of 05/21/2007). 14. Power Purchase Agreement (non- regulated bilateral contract for power sales) between JSC Sverdlovenergosbyt and JSC OGK-5. (Minutes No.8 of 05/21/2007).

102 20. Surety Agreement between JSC 27. Surety Agreement between JSC 35. Service Agreement for Guideline OGK-5 and JSC TGK-2 for the fulfillment by OGK and JSC Omsk Power Generation Cost Evaluation of Nontypical Repair JSC Arkhangelsk Supply Company of its Company (Minutes No.16 of Works of Konakovskaya GRES, obligations under the Regulated Power 08/06/2007). Nevinnomysskaya GRES, Reftinskaya Purchase Agreement No. RDM- 28. Surety Agreement between JSC GRES, And Sredneuralskaya GRES PARTHENER-SKONAGRE-01-KP-07-E of OGK-5 and JSC Tomskenergo (Minutes Permanent Assets. This Agreement is 02/16/2007 (Minutes No.14 of No.16 of 08/06/2007). concluded between JSC OGK-5 and JSC 07/20/2007). 29. Measuring Devices Calibration CDO Energoremont (Minutes No.18 of 21. Surety Agreement between JSC Services Agreement between JSC OGK-5 08/28/2007). OGK-5 and JSC TGK-2 for the fulfillment by and JSC Sverdlovsk Energy Service 36. Agency Agreement between JSC JSC Tver Supply Company of its obligations Company (Minutes No.16 of OGK-5 and NP INVEL (Minutes No.16 under the Regulated Power Purchase 08/06/2007). 08/28/2007). Agreement No. RDM-PTVERENE- 30. Reftinskaya GRES and 37. Supplementary Agreement No.1 SKONAGRE-02-KP-07-E of 02/16/2007 Sredneuralskaya GRES Property Purchase and No.2 to Non-government Pension (Minutes No.14 of 07/20/2007). Agreement between JSC OGK-5 and JSC Insurance Agreement No. 329/ДУП-270 22. Four bilateral power purchase TGK-9 (Minutes No.17 of 08/15/2007). of July 25th, 2006 between NPF of Energy agreements (non-regulated bilateral 31. Services Agreement for the Industry and JSC OGK-5 (Minutes No.20 of contracts for power purchase) between examination of the metal diagnostic surve 10/29/2007). JSC HydroOGK and the Company (Minutes results on Reftinskaya GRES equipment 38. Supplementary Agreement to the No.14 of 07/20/2007). between JSC OGK-5 and JSC TGK-9 Contract on Maintaining and Storage of 23. Power Purchase Agreement (non-(Minutes No.17 08/15/2007). Register of Registered Equity Securities regulated bilateral contract for power 32. Services Agreement on Holders between JSC OGK-5 and OAO sales) between Ulyanovsk Region Energy Examination Services for Refinskaya CMD (Minutes No.20 of 10/29/2007). and Electrification JSC Ulyanovskenergo GRES Stations No.1, 2, 3, 4, 5, 6, 7 К- 39. Material Production and and JSC OGK-5 (Minutes No.14 of 300-240, К-500-240 turbines aimed at Distribution Services Agreement between 07/20/2007). extension of their life. This agreement is JSC OGK-5 and OAO CMD (Minutes No.21 24. Agreements related to the concluded between JSC OGK-5 and JSC of 11/13/2007). preparation and holding of extraordinary TGK-9 (Minutes No.17 of 08/15/2007). * Information is specified in General Shareholders’ Meetings of the 33. Agreement on Termination of accordance with the requirements of the Company. These agreements were Surety Contract between JSC OGK-5 and Regulation on Insider Information and concluded between JSC OGK-5 and OAO JSC TGK-9 (Minutes No.18 of Regulation on Confidental Information of Central Moscow Depositary (Minutes 08/28/2007). JSC OGK-5. No.16 of 08/06/2007). 34. Service Agreement for Cost 25. Reftinskaya GRES Ash Dump Evaluation of Nontypical Repair Works of No.2 Water Drain Cleaning Services Konakovskaya GRES, Nevinnomysskaya Agreement between JSC OGK-5 and JSC GRES, Reftinskaya GRES and Sverdlovsk Energy Service Company Sredneuralskaya GRES Permanent Assets. (Minutes No.16 of 08/06/2007). This Agreement is concluded between JSC 26. Reftinskaya GRES Ash Dump OGK-5 and JSC CDO Energoremont No.2 Intradam Space and Sluice (Minutes N0.18 of 08/28/2007). Discharge Pipeline Cleaning Services Agreement between JSC OGK-5 and JSC Sverdlovsk Energy Service Company (Minutes No.16 of 08/06/2007).

JSC The Fifth Power Generation Company 2007 Annual Report 103 GENERATING CAPACITIES OF JSC OGK-5

Konakovskaya GRES There are eight 300 MW generating units at the Konakovskaya GRES. Each generating unit is equipped with K- 300-240 turbine sets. The installed capacity of Konakovskaya GRES is 2,400 MW.

Unit no. Capacity, Turbine set Boiler unit Power generator Commissioning MW year

1300K-300-240PP-950-255-GM (PK-41)TWW-320-21964

2300K-300-240PP-950-255-GM (PK-41)TWW-350-21965

3300K-300-240PP-950-255-GM (PK-41)TWW-350-21965

4300K-300-240PP-950-255-GM (PK-41)TWW-320-21966

5300K-300-240PP-950-255-GM (PK-41)TWW-320-21967

6300K-300-240PP-950-255-GM (PK-41)TWW-320-21968

7300K-300-240PP-950-255-GM (PK-41)TWW-320-21968

8300K-300-240PP-950-255-GM (PK-41)TWW-320-21969

Reftinskaya GRES There are ten generating units at the GRES, six with the capacity of 300 MW and К-300-240 turbogenerators and 4 generating units with the capacity of 500 MW and K-500-240 turbogenerators. The installed capacity of the plant is 3800 MW.

nit no. Capacity, Turbine set Boiler unit Power generator Commissioning MW year

1300K-300-240PK 39-IITGW-3001970

2300K-300-240PK 39-IITGW-3001971

3300K-300-240PK 39-IITGW-3001971

4300K-300-240-2PK 39-IITGW-3001972

5300K-300-240-2PK 39-IITGW-3001974

6300K-300-240-2PK 39-IITGW-3001975

7500K-500-240-2PK-57-2TGW-5001977

8500K-500-240-2PK-57-2TWM-5001978

9500K-500-240-2PK-57-3TWM-5001979

10500K-500-240-2PK-57-3TWM-5001980

104 Nevinnomysskaya GRES There are 13 turbines and 14 boilers at the power plant, including 6 generating units with К-150-130 turbines and CCGT-170. Installed power and heat capacity of Nevinnomysskaya GRES is 1290 MW and 729 Gcal/h accordingly.

Unit no. Capacity, Turbine set Boiler unit Power generator Commissioning MW year.

Turbines

125PT-25/30-90/10- TWC-301960

225PT-25/30-90/10- TWC-301960

380PT-80/110-130/13- TZFP-110-2UZn2006

450P-50-130-1- TWF-60-21968

530P-30(100)-130/15- TWF-100-21973

Boilers

1- - ТP-15-1960

2- - ТP-15 -1960

3- - ТP-15 -1962

3А- - ТP-15 -1965

4- - ТGM-96 -1968

5- - ТGM-96 -1972

5А- - ТGM-96-1974

Units

6150K-150-130TGM-94TWW-165-21964

7150K-150-130TGM-94TWW-165-21964

8150K-150-130TGM-94TWW-165-21965

9150K-150-130TGM-94TWW-165-21966

10150K-150-130TGM-94TWW-165-21967

11160K-150-130TGM-94TWW-165-21970

ССGT unit

12145K-145-130WPG450-140TWW-165-21972

1325GT-25-710TWF-60-2

JSC The Fifth Power Generation Company 2007 Annual Report 105 Sredneuralskaya GRES There are 9 turbines and 11 boilers at the power plant, including 3 generating units with К-300-240 turbines. Installed power and heat capacity of Nevinnomysskaya GRES is 1181.5 MW and 1193 Gcal/h accordingly.

Unit no. Capacity, Turbine set Boiler unit Power generator Commissioning MW year.

Turbines

116P-16-29/8.5-T-4376/1421933

246PR-46-29/8.5/0.25- T-4376/1421937

516P-16-29/1.2- TWC-301949

6100T-100-130-TWF-100-21965

7100T-100-130-TWF-100-21966

838P-38-130/34- TWF-60-21966

Boilers

2- - TWW- 1936

3- - OGWC- 1937

4- - OGWC- 1937

5- - OGWC- 1939

6- - TWW- 1943

9- - TGM-96- 1964

10- - TGM-96- 1965

11- - TWW1966

Units

9300K-300-240-1TGMP-114TWW-320-21969

10277T-277-240TGMP-114TWW-320-22004

11277T-277-240TGMP-114TWW-320-21993

106 GLOSSARY JSC TSO–CDU of UES (Transmission System Operator – Central Dispatching Office of UES) – operational dispatch management organisation implementing a range of measures to 1.Company (JSC OGK-5) – Open Joint-Stock Company The ensure centralised management of technological modes of Fifth Power Generation Company customers’ power facilities and power receivers within the range 2.Annual Report – Annual Report of Open Joint-Stock of Unified Russian Power Grid and technologically isolated Company The Fifth Power Generation Company for 2006. regional power systems. 3.Central Office (CO) – JSC OGK-5 Central Office Branch NP ATS (Non-profit Partnership Administrator of Trade Konakovskaya GRES (KGRES) – JSC OGK-5 Konakovskaya System) - infrastructural organisation of the Wholesale Energy GRES Branch. Market, its primary tasks include: arrangement of wholesale Nevinnomysskaya GRES (KGRES) – JSC OGK-5 energy trading, performance of verification and set-offs of Nevinnomysskaya GRES Branch. traders’ mutual cross-obligations; organisation of warranty and Reftinskaya GRES (KGRES) – JSC OGK-5 Reftinskaya GRES settlement system at the wholesale market, market regulations Branch. compliance control. Sredneuralskaya GRES (SUGRES) – JSC OGK-5 5.WPCM – wholesale power and capacity market. Sredneuralskaya GRES Branch. 6.UES of Russia– unified energy system of Russia. 4.FTS (Federal Tariff Service of Russian Federation) – an GRES – state district power plant. authority controlling operation of power industry entities on the TEC – combined heat and power plant. wholesale and retail markets with regard to approval of rates and 7.Code of Ethics - Code of Corporate Conduct volumes of power purchase/sales taking into consideration recommended by FCSM Resolution No. 421/p of 04/04/02. maximum allowed growth level of end-users' rates, determined 8.Measurement units: by the Government of Russian Federation for the forthcoming control period. kW/h (Kilowatt/hour) – power output measurement unit. JSC FGC UES - unified national (all-Russia) power grid kW (kilowatt) –power measurement unit. controlling organisation, it provides paid power transmission MW (megawatt) –power measurement unit. services to Wholesale Energy Market participants and other Gcal (gigacalorie) – heat measurement unit. entities owning power facilities technologically connected to the Gcal/ h (gigacalorie/hour) – heat energy measurement unified national (all-Russia) power grid (under proprietary right or unit. on the other grounds prescribed by the federal laws).

JSC The Fifth Power Generation Company 2007 Annual Report 107 CONTACT INFORMATION

Joint-Stock Company The Fifth Power Generation Company (JSC OGK-5)

Registered Address: 38 Pr. Lenina, Yekaterinburg Sverdlovsk Oblast, 620219, Russian Federation Mailing address: 10A/2, 4-th Setunsky Proezd, Moscow, 119136, Russian Federation www.ogk-5.com

Reception Tel/fax: +7 (495) 380-02-32 e-mail: [email protected]

Public Relations Sergey Karaulov Tel: +7 (495) 380-02-30 ext 5526 Fax: +7 (495) 380-02-39 E-mail: [email protected]

Corporate Relations Department Dmitry Andreychenko Tel: +7 (495) 380-02-30 ext 5395 Fax: +7 (495) 380-02-39 E-mail: [email protected]

Auditor Name: ZAO PricewaterhauseCoopers Audit Address: 52/5, Kosmodamianskaya Nab., 115054, Moscow Tel: +7(495) 967-60-00 Fax: +7(495) 967-60-01 www.pwc.com

Depositary Bank Name: The Bank of New York Mellon Address: One Wall Street, New York, New York 10286, USA www.bankofny.com

Registrar – OAO Central Moscow Depositary (OAO CMD) Address: 3/B, Orlikov Per., Moscow, 107078 Mailing address: 34, build.8, Bolshaya Pochtovaya Str., 105082, Moscow Tel: 221-13-33 Fax: 221-13-83 http://www.mcd.ru/

108