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INTER RAO UES Generating Assets: Target Shareholding Structure

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INTER RAO UES Generating Assets: Target Shareholding Structure INTER RAO UES Generating Assets: Target Shareholding Structure March,16 2012 1. Strategy recap and update INTER RAO at a Glance A Leading Russian Power Company Diversified Group Structure . Diversified power holding involved in electricity/heat generation and supply, export/import of electricity and engineering . Operates and manages 27 thermal, 2 hydro power plants and 1 wind power farm Domestic Engineering . Total installed electricity capacity of 29GW and electricity output of Generation Trading Supply International 117 TWh⁽¹⁾ in 2011 . INTER RAO – . RAO Nordic Oy . 9 supply companies . Generation: . Quartz Group . 2 Hydro PP - 0.2 GW Electrogeneration (Finland) . Customer base: . 4 Thermal PP - 5.2 GW . JV with Worley Leading Russian export-import operator accounting for 97% of Russian (100%) . Kazenergoresurs . 1 wind power farm - Parsons electricity export in 2011 . 314 thousand 0.03 GW . OGK-1 (75%) (Kazakhstan) legal entities and . Distribution . JV with Rosatom . OGK-3 (82%) . TGR Enerji (Turkey) . c. 34 ths. km of power . Operations in over 14 countries, including Russia, Belarus, Lithuania, 9.8 million . JV with GE lines (Georgia, residential . TGK-11 (68%) . INTER RAO Lietuva Armenia) Georgia, Armenia, Kazakhstan, Tajikistan, Moldova, and Finland . EMAlliance (the Baltics) customers Engineering (2) . Listed on RTS and MICEX (List A1), MCAP of $10.2bn. Shares are (2) included into MSCI Large Caps Index (0,54%) . GDRs admitted to LSE trading Ownership Structure Broad Geographical Coverage INTER RAO UES Finland Generation Assets Russia Russia Supply Assets Distribution Assets Latvia Countries with trading presence Lithuania Kaliningrad Belarus (3) Ukraine Kazakhstan Moldovia Mongolia South Ossetia Georgia Armenia Azerbaijan China Tajikistan __________________________________________________________________________ (1) Not included Armenian NPP electricity output; (2) As of March,22 2012; (3) Russian State is represented by Russian Federal State Property Management Agency; 3 Strategic Development Strategic Objectives Strategic Steps and Priorities Key Targets . Organic growth through construction of new 2011E 2015E Installed electricity capacity, . Shareholder value creation electricity generation capacity in Russia GW 29 40 . Selective expansion into target foreign Share of installed electricity 22% 25% . Leadership in Russian power sector markets capacity abroad . Improvement of efficiency and . Expansion of presence and operations Consolidated revenue, $ bn 18 32 abroad modernization of existing assets . Integration of core assets in electricity Consolidated EBITDA, $ bn 1.4 3.9 . Leadership in innovations and energy generation and supply efficiency Trading volume, TWh 24 45 . Efficient management of minority stakes . Ensuring safety of Russian power supply Supply market share in in the asset portfolio Russia 13% 25% . Ensuring visibility into shareholder Electricity supplied, TWh 142 250 structure and stock performance Key milestones 2012 - 2013 2015 - 2017 Potential privatization of state-owned stake in INTER RAO as Reorganization of INTER RAO to convert minorities of OGK-1 and OGK-3 into INTER RAO shares envisaged by Russian government privatization programme (until 2017) International Credit Rating assessment (Global rating agency «Fitch» assigned credit rating of BB+ to INTER RAO in March 2012) Potential international SPO with full London listing envisaged 4 Minority Stakes Disposal Portfolio of Minority Stakes(1) Value-Creative Management INTER RAO's Stake . Minority participations are split into two categories with respective agreed MCap, As of Current Current Asset Sold/Swapped strategies for each: $m. 30 Jun 2011 Stake Value, $m. RusHydro 11 037 1.63% 1.83% 202 . Significant minority stakes (5-50%): Federal Grid Company 13 715 0.37% 0.37% (sold) 0.00% 0 1. Obtaining control E.ON Russia 5 749 3.26% 3.26% (sold) 0.00% 0 Irkutskenergo 3 116 40.01% 40.01% 1 247 2. Swap transactions to acquire core assets Mosenergo 2 500 5.05% 5.05% 126 3. Creation of JVs Enel OGK‐55 749 26.43% 26.43% (sold) 0.00% 0 TGK‐7 (Volzhskaya TGK) 1 886 39.39% 39.39% 743 . Small minority stakes (<5%): Bashkirenergo 1 485 26.65% 26.65% 396 1. Monetization to raise financing for the Group TGK‐11 303 1.97% 1.97% 26 2. Swap transactions to acquire core assets OGK‐21 566 3.05% 0.62% (sold) 5.70% 93 Fortum 788 3.04% 3.04% (swapped) 0.00% 0 3.47% (sold), OGK‐6 ‐ 13.20% 0.00% ‐ Progress to Date 9.73% (swapped) TGK‐9 562 1.71% 1.71% 10 Kuzbassenergo 451 1.97% 1.97% 9 . Irkutskenergo: BoD resolution to swap for RusHydro Quadra 506 2.25% 2.25% 11 . RAO ES of Far East: Swapped for RusHydro (0,2%) TGK‐6 400 26.09% 26.09% 104 Eniseyskaya TGK 330 2.16% 2.16% 7 . OGK-6: Sold 3.47% in September 2011 (RUB1,571m raised under a buy- RAO Energy System of Far East 513 4.29% 4.29% (swapped) 0.00% 0 out). Remaining OGK-6 shares converted into OGK-2 shares TGK‐2 147 1.19% 1.19% 2 . OGK-2: Sold 0.62% in September 2011 (RUB347m raised under a buy-out) TGK‐14 71 0.60% 0.60% 0.4 Tomsk Energy Retail Company n/a 31.27% 31.27% n/a . Kuban Supply Company: Sold 26.26% in September 2011 (RUB 850m) Kuban Generation Company n/a 26.26% 26.26% (sold) 0.00% n/a . Kuban Generation Company: Sold 26.26% in December 2011 (RUB 450m) Kuban Supply Company 110 26.26% 26.26% (sold) 0.00% 0 Tomskenergoremont n/a 25.88% 25.88% (sold) 0.00% n/a . Tomskenergoremont: Sold 25.88% in December 2011 (RUB 150m) Novosibirskenergo n/a 0.16% 0.16% n/a . E.ON Russia: Sold 3.26% in January 2012 (RUB 4,830m) Minority stakes (Total), $m. 2 976 INTER RAO Market Cap, Sm. 10 193 . FSK EES: Sold to IRAO Capital for further swap with FSK EES . Fortum: Swapped for shares in PSK (31,01%) . Enel OGK-5: Signed agreement for sale 26.43% Stakes being disposed / disposed ______________________ (1) As of March, 22 2012; 5 Consolidation of Generating Assets by InterRAO 75% 82% 27% JSC «OGK-1» JSC «OGK-3» JSC «Bashkirenergo» (generating assets) • OGK-1 comprises of 6 thermal power plants with • OGK-3 owns 6 thermal power plants with total • Bashkirenergo assets include 1 TPP total installed capacity of 9,861 MW and 2,398 installed capacity of 8,357 MW and 1,768 Gcal (Karmanovskaya TPP), 10 CHPPs (including Gcal per hour per hour Zauralskaya gas-piston plant), 5 gas-turbine units • 100% of the Company’s generating capacities are • 69% of the Company’s generating assets are and 9 HPPs (including 7 small-size plants) located in the First price zone (Europe and Urals located in the First price zone (Europe and Urals • The total installed electric and heat capacity region) - in Russia’s most power-deficient regions region), 18% - in the Second price zone (Siberia) amounts to 4,926 MW and 13,035 Gcal per hour with high electricity consumption growth outlook with the remaining 13% located in non-price • The Company owns modern and efficient zones • 100% of the Company’s generating assets are located in the First price zone (Europe and Urals generating capacities. Average fuel consumption Average fuel consumption rate in 2011 equaled • region) rate amounted to 328.6 g/kWh in 2011 345.1 g/kWh • Bashkirenergo sells its capacity in the Urals free • Gas constitutes up to 93% share of the OGK-3 has a diversified fuel balance split into • flow capacity zone (does not fall under any Company’s fuel balance, coal – 7% gas (56%) and coal (33%), which makes the capacity price caps) • The Company’s key gas suppliers are Novatek Company less vulnerable to gas price growth and ТНК-ВР rates • Average fuel consumption rate amounted to 320 g/kWh in 2011 • Current Company’s investment program implies • The Company’s gas suppliers: Novatek and launching 1,680 MW of installed capacity in 2011- Gazprom • Gas constitutes up to 97% share of the Company’s fuel balance 2015 • According to the Company's current investment program 2,265 MW of installed capacity is planned for launch in 2011-2015 #% - Inter RAO ownership 6 2. Transaction Details Transaction Overview Short overview Consolidation of certain generating assets by JSC “INTER RAO UES” implies obtaining 100% ownership in JSC "OGK-1”, JSC “OGK-3” and JSC “Bashenergoaktiv”⁽¹⁾ All minority shareholders of JSC “OGK-1”, JSC “OGK-3”, JSC “Bashenergoaktiv” will be granted an opportunity to convert their shares into JSC “INTER RAO UES” stakes (INTER RAO share capital will increase by 9,56%⁽²⁾) The Transaction is expected to be closed in 4Q 2012 Share swap coefficients of JSC “OGK-1”, JSC “OGK-3” and JSC “Bashenergoaktiv” into the shares of JSC “INTER RAO UES” has been approved by INTER RAO’s Board of Directors. Consortium of investment banks (comprised of Troika Dialog and Morgan Stanley) has provided an opinion that share swap coefficients for each of the companies fall within the range of fair conversion ratios from a financial point of view Benefits for minority shareholders from transaction : . Optimized shareholder structure and wider free float will increase the level of investors’ interest in JSC “INTER RAO UES” shares supporting company’s market capitalization . Obtaining transparent shareholding structure of the generating assets . Liquidation of uncertainty in respect to company’s shareholder structure as well as management decisions of the controlling shareholder . Unique opportunity to convert minority interest in the assets with limited liquidity into one of the blue-chips in the Russian energy sector (1) Hera and hereafter, considering preliminary conception of reorganization scheme and that it will be approved by authorized bodies of JSC «Bashkirenrgo» and JSC «AFK Sistema»
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