SUPERSONIC ENERGY Business Report

2009

INTERREGIONAL DISTRIBUTIVE G RID C OMPANY IDG C OF URALS

SUPERSONIC ENERGY business report

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Key financial indicators1

2009 2009 20082 (US$, thous.) (RUR, thous.) (RUR, thous.) Revenues, including 1 299 894.1 41 297 636 35 964 707 transmission revenues 1 259 086.4 40 001 176 34 437 161 connection revenues 30 657.4 973 985 895 581 Expenses 1 152 773.4 36 623 611 33 947 171 Operating profit 147 120.7 4 674 025 2 017 536 Operating margin, % 11.3% 11.3% 5.6% EBITDA3 131 941.8 4 191 790 3 576 138 EBITDA margin, % 10.2% 10.2% 9.9% Pre-tax income 43 845.5 1 392 972 1 288 425 Net profit 33 152.9 1 053 267 862 085 Net margin, % 2.6% 2.6% 2.4% Earnings per share US$ 0.0003 RUR 0.01 RUR 0.02 Short-term loans and borrowings 0 0 1 200 000 Long-term loans and borrowings 175 749.5 5 583 562 5 161 534 bonds 51.6 1 638 1 000 000 Debt/ Equity, % 20% 20% 23% Equity/ Assets, % 66% 66% 66%

Energy sales 2009 2008 Change, % Energy supply, mln kW/h 75 795.9 86 365.8 - 12.24 Productive supply, mln kW/h 69 339.2 79 902 - 13.22

1 Key financial indicators of the Company are represented on the basis of 2008-2009 Operating figures 2009 audited financial statements under Russian Accounting Aerial lines (in chains), km 122 054 Standards (RAS). 2009 indicators were shown in US dollars Aerial lines (in lines), km 113 210 just for information (average rate as of 2009 is 1US$= RUR Cable lines, km 4 691 31.77). Transformer substations (35/110-220 kV) 1 006 2 Here and henceforth 2008 indicators are shown Capacity of transformer substations (35/110-220 kV), MVA 20 453 as the sum of the operating results of managing Transformer substations (6-20/0.4 kV) 27 390 company ОАО “IDGC of Urals” and ОАО “Permenergo”, Capacity of transformer substations (6-20/0.4 kV), MVA 7 407 ОАО “Sverdlovenergo”, ОАО “Chelyabenergo” in January- April 2008 (prior to the merger) and operating results of united operating company as of May-December 2008 (following the merger). Key performance indicators, 2009 actual plan

3 EBITDA is calculated ac- ROE, % 2.80 2.79 cording to the formula: net profit + income tax and other Weight of overall energy losses in overall energy supply, % 8.52 8.76 obligatory payments + interest payable + depreciation. Current investment program efficiency (in terms and cost), % 130 > 95

4 Our 2009 IAS and RAS Prevention of incidents over ultimate numbers 0 0 financial statements can be found at Section "Economics Supply interruption system indicator <1 <1 and Finance" of our corporate web-site. System indicator of average supply interruption <1 <1

Company's 2009 Back to Contents >> business report 1 Contents

Shareholder letter 5 The Company’s profile 9 The Company’s business card 10 Development History 12 The Company’s regional market share 13 2009 Key events 15 2009 Key events 16 Events after the reported period 16 Financial and economic highlights (under RAS) 19 Year results 20 Revenue and expense structure 21 Efficiency indicators 23 The structure of accounts payable and receivable 24 Credit portfolio 25 2009 Operating results 27 Energy transmission 28 Overall energy supply, productive supply and losses 28 Measures taken to reduce energy losses 29 Debts for transmission services and for purchased energy acquired for loss compensation 30 Global crisis and energy transmission 31 Technological connection 32 Connection tariffs 32 Connection demand analysis 35 Global recession and technological connection 38 Connection Revenues 39 Repair activities 40 Investments 42 Investment program parameters 42 Investment structure and directions 44 Investment policy of OAO “IDGC of Urals” in 2010-2012 48 Grids development and exploitation 50 Further grid development plans 52 Pacts concluded with regional authorities. Federal target programs 54 Client Relationship 57 Information technologies 59 Tariffs 61 Energy transmission tariffs 62 RAB methodology 64 Internal control and risk management 67 Internal control system 68 Risk management 69 Industry risks 70 Federal and regional risks 71 Financial risks 72 Legal risks 73

INTERREGIONAL DISTRIBUTIVE G RID C OMPANY IDG C Back to Contents >> 2 OF URALS Shareholder equity and securities 75 Shareholder equity 76 The company and stock market 77 Bonds 78 Dividend history 79 Corporate governance 81 The structure and principles of corporate governance 82 Management and Control Bodies 83 The General Shareholder Meeting 83 The Board of Directors 84 The BoD remuneration 87 The BoD activity in 2009 87 The BoD Committees 88 The General Director 90 The Management Board 91 The Audit Commission 92 Subsidiaries and Associated Companies. Participation in non-profit companies 92 Participation in non-profit organizations 93 Personnel policy and social responsibility 95 The Company’s personnel structure 96 Personnel training and development 97 Training and development of technical staff 97 Development of non-core staff 97 Candidate pool development 97 Social responsibility 98 Social policy in 2009 98 Average salary 98 Welfare and Charity 99 Ecological policy 101 Contact information 105 Abbreviations 109 Appendices 113 2009 Interested-party transactions 114 Information on observing the requirements of the Corporate Behavior Code developed by the Russian Federal Securities Commission 117

Company's 2009 Back to Contents >> business report 3 Содержание

INTERREGIONAL DISTRIBUTIVE G RID C OMPANY IDG C Back to Contents >> 4 OF URALS Shareholder letter

Company's 2009 Back to Contents >> business report 5 Shareholder letter

The BoD Chairperson The CEO N.N. Shvets V.N. Rodin

Dear shareholders! program completion. Thus, energy supply in 2009 totaled 75.8 bln. kWh (-10.5 bln. kWh or 2009 was a check-out period 12% on 2008) and is due to a significant impact made by the economic recession and energy in terms of our operating consumption decrease (by large industrial efficiency under severe economic consumers - metallurgy and machine-building). environment. The Urals region, Despite it, overall 2009 revenues totaled RUR 41.3 bln., net profit – RUR 1.053 bln. exceed- more than any other regions, was ing 2008 results. These positive results were affected by the economic recession achieved due to a range of measures aimed at increasing our efficiency, including transition ended in a significant consumption of repair, metering and IT services onto non- decrease. Nevertheless, ОАО contracted forms. “IDGC of Urals” successfully In 2009, according to our plans, we completed fulfilled its production goals and construction of new objects as well as reconstruction and upgrade of the current objects. secured its profit. These measures were taken to prevent equip- In 2009 our Board of Directors focused on ment aging and lift connection restrictions in increasing the Company’s governing quality places experiencing electricity deficit, to create following the 2008 merger. ОАО “IDGC of Urals” new main substations and increase energy is a part of OAO “Holding IDGC”, a group of inter- volume by connecting new consumers as well regional distributive grid companies, that is one as to provide network reliability. In 2009 our of the largest infrastructure Russian companies personnel launched 491 MVA of transformer possessing 80% of the Russian grid complex. capacity and 951 km of lines, investments into In 2009 we elected Valery Rodin as a new CEO, the Urals grids reaching RUR 3 466 mln. extended the membership of the Management The launch of 220/10 kV substation “Anna”, Board up to 10 members and elected its new ensuring reliable energy supply to con- members as well as approved our Corporate structed mortar technological line (OAO Governance Code in a new version. The “Sukholozhsktsement”), is among the most im- Company’s BoD held 14 sessions during which portant 2009 investment projects. Construction it reviewed key governing issues. To ensure high expenses exceeded RUR 1.2 bln. and were operating efficiency under a negative economic financed by connection fees and our own environment the Board of Directors approved resources. In Chelyabinsk we launched a new several fundamental documents, including 110/10 kV substation “Massivnaya” (over- 2009 business plan and investment program. all capacity – 80 MVA). The launch enabled Under these drastically changed economic us to solve the problem of energy supply to circumstances the Company’s management Chelyabinsk residential districts experiencing focused its efforts on internal resource gen- energy shortages as well as to satisfy grow- eration and cost saving, meanwhile ensuring ing demand of new residential and communal required supply reliability and investment objects under construction. In Perm region we

INTERREGIONAL DISTRIBUTIVE G RID C OMPANY IDG C Back to Contents >> 6 OF URALS completed construction of overhangs of 110 of labor protection in 2009 we approved our kV line to 220 kV substation “Soboli”. This line Traumatism Risk-decreasing Program. In all was designed for energy transmission from new subsidiaries we concluded collective agree- 220 kV substation “Soboli” (MES of the Urals ments adopted by the BoD. branch of ОАО “FSK UES”) to transit networks. Social policy in 2009 was focused on pres- Our technical staff in Permenergo reconstructed ervation, strengthening and development of and built overhangs to new substation (16 personnel potential, creation of highly-pro- 110 kV lines in total). Overall expenses reached ductive team-oriented staff that is capable of approx. RUR 128 mln. All in all, the launch of timely reaction on constantly changing market fixed assets in 2009 increased by 1.4 times on requirements. Our overall expenses on 2009 2008. This was due to completion and launch social programs amounted to RUR 232 015 of objects that were started in previous years. thous., meanwhile we increased expenses on We plan that in 2010 overall funds for recon- voluntary medical insurance, arrangement of struction and update of the Urals grids will health-stimulating campaign, cost-sharing in increase on 2009 and will total RUR 4 795 children care, payments to veterans. On labor mln. These funds will be spent to launch 478 market ОАО “IDGC of Urals” retains its competi- MVA of transformer capacity and 1 113 km of tiveness among large productive companies lines. In our 2010-2012 investment program and is attractive for personnel. we shall focus on the increase of investments Summarizing the year of 2009, we should note into reconstruction and update of grid objects that the BoD, management and personnel suc- to provide reliable energy supply and required cessfully coped with the tasks. This is proved quality of energy parameters for our consum- by the Company’s high financial and economic ers. In our 2010-2012 investment program we results. Under heavy conditions the Company suppose that capex will increase annually. This demonstrated its efficiency. We are sure that increase will be possible due to transition to a the BoD, alongside with the top management, new RAB tariff model and spending more profit will further ensure safeguarding of shareholder on investments. interest and implementation of all plans aimed In 2009 we proceeded repairing our main at increasing the Company’s capitalization. power equipment basing on the evaluation of its real technical status and depreciation. Our 2009 repair priority focused on the restoration of equipment life. Our 2009 repair program, in fact, exceeded the target one by 105%. Repair expenses totaled RUR 787 389 thous., including non-contracted services – RUR 455 801 thous. To implement the strategy of non-core asset management the BoD approved the Regulations on residential and communal object management. To improve the quality

Company's 2009 Back to Contents >> business report 7 Содержание

INTERREGIONAL DISTRIBUTIVE G RID C OMPANY IDG C Back to Contents >> 8 OF URALS The Company’s profile

Company's 2009 Back to Contents >> business report 9 The Company’s profile

Mission: Strategic aims: Efficient usage and maintenance >>Provision of system reli- >>Sustainable increase of the of the assets’ reliability as well as ability and security to retain Company’s value, implicating raising investments to the benefit of sustainable functioning of the sustainable revenue, profitability each shareholder and the Company regional grid complex, to secure and efficiency growth, that should on the whole. safe exploitation of main and ensure satisfaction of shareholder auxiliary equipment and buildings interests, make the Company and as well as to prevent threats for its projects attractive for invest- population; ing as well as enable evaluation >>Increase in transmission services of resource usage efficiency and quality, extension and update quality of the top management. of the Company’s assets by an innovative large-scale technological update as well as provision of ecology safety that should enable the growth of the Company’s value, simultaneously creating infrastructure basis for local economic development;

The Company’s business card

ОАО “IDGC of Urals” is an electric grid company providing energy transmission, using 0.4-220 kV networks, and connection to grids in the Sverdlovsk and Chelyabinsk regions (the Urals Federal District) as well as the Perm region (a part of the Volga Federal District).

Key Facts on ОАО “IDGC of Urals” (as of 31.12.2009):

Operating results: Total length of aerial lines (in lines) 113.2 thous. km Total length of aerial lines (in chains) 122.1 thous. km Total length of cable lines 4.7 thous. km Quantity and capacity of PS-35/110-220 kV substations 1 006 and 20.5 GVA Quantity and capacity of TP-6-20/0.4 кВ substations 27 390 and 7.4 GVA Energy supply 75 795.9 mln. kWh. Productive energy supply 69 339.2 mln. kWh. Energy losses 6 456.7 mln. kWh. Финансовые показатели: Выручка от реализации RUR 41 297.6 mln. Затраты RUR 36 623.6 mln. Чистая прибыль RUR 1 053.3 mln.

INTERREGIONAL DISTRIBUTIVE G RID C OMPANY IDG C Back to Contents >> 10 OF URALS Regions in our service area are abundant in covered by all-Russian railroads, motor ways mineral resources and characterized by one and air lines, including Transsibirian line. The of the highest level of industry development density of railroads and motorways exceeds and investment attractiveness. They also pos- the Russian average. Airport “Koltsovo” sess a significant scientific and technological (Ekaterinburg) is one of the important transfer potential, developed market infrastructure as hubs for domestic and international passen- well as highly-skilled workers. The Urals region ger and cargo air routes linking European and produces approx. 40% of all-Russia steel and Asian parts of Russia. ferrous metals, 45% of refined copper and 40% ОАО “IDGC of Urals” provides the following of aluminum, almost 10% of overall machine- services: building produce. There are plenty of plants, >>Energy transmission and distribution; factories, electric and power stations. Regional >>Connection to networks; development is determined by ferrous and >>Energy equipment testing and safe usage non-ferrous metallurgy, machine-building, control; agricultural, chemical and petrochemical >>Collection, transmission and processing of industries. Concentration of industrial manu- technological information, including meter- facturing in the Urals is 4 times higher than the ing data; Russian average. >>Operating technical management and Convenient location of the regions (between control over energy saving and consuming Europe and Asia) creates favorable condi- regimes; tions for economic and cultural development. >>Technical maintenance, diagnostics and In June 2009 Ekaterinburg hosted 2 large repair of electric networks and equipment; international events: the SCO and BRIC sum- >>Development of grids and other electric mits. During the summits the country leaders objects, including engineering, construction discussed security issues and expansion of and reconstruction as well as installation economic cooperation between the countries. and mounting. Regions occupy dominant positions in the Find more about us at our corporate web-site: Russian transport system. Their territory is www.mrsk-ural.ru.

Total area — 443.7 thous. sq.km.

Population — 11 mln.

Отчет компании Back to Contents >> за 2009 год 11 The Company’s profile

Development History

Open joint-stock company "Interregional In January 2008 the EGMs of ОАО Distributive Grid Company of Urals" was incor- "Sverdlovenergo", ОАО "Chelyabenergo", porated on February 28, 2005 in Ekaterinburg ОАО «Permenergo» made decisions to (the Urals) during the reforms in the Russian be reorganized in the form of the merger energy sector following differentiation of and also approved the merger agreement companies which produce, transfer, distrib- as well as the transfer act. In relation to ute and sale electric and heat energy as well ОАО "Kurganenergo", which is also in the as operating dispatcher management into Company's service area, by virtue of the fact separate business units. Main variant of the that Kurganenergo shareholders did not ap- reform implied the creation of interregional prove the merger, OAO "IDGC of Urals" was distributive grid companies (IDGCs) as well as formed as a holding company. interregional integration of regional distributive The reform process ended on April 30, 2008 companies in IDGCs within the united energy by introducing to United State Register of systems. Legal Entities information on discontinua- According to the first IDGCs configuration, with tion of activities of OAO "Sverdlovenergo", a view to effective operation, development ОАО "Chelyabenergo", ОАО «Permenergo» and reliability of the grid complexes within as a result of the merger into OAO "IDGC of the united energy systems of the Urals and Urals". These merged companies became Middle Volga, the company (till August 2007 our Company name was ОАО "IDGC of Urals branches of OAO "IDGC of Urals". Therefore, and Volga") covered 15 DGCs - regional discos: as a result of the Company's ОАО "Kirovenergo", ОАО "Kurganenergo", ОАО "Marienergo", ОАО "Mordovenergo", ОАО reorganization we are the largest "Orenburgenergo", ОАО "Permenergo", ОАО grid company in the Urals region "Penzaenergo", ОАО "Samara distributive company", ОАО "Saratov distributive company", which provides energy transmission ОАО "Sverdlovenergo", ОАО "Tyumenenergo", ОАО "Udmurtenergo", ОАО "Ulyanovsk and connection to grids in the distributive company", ОАО "Chelyabenergo" Sverdlovsk, Chelyabinsk and Perm and ОАО "Chuvashenergo". The second IDGC configuration was formed in compliance with regions. the territorial contingency and corresponding balance cost of DGC's assets which comprised the corresponding IDGCs. According to the configuration OАО "IDGC of Urals" covered ОАО "Sverdlovenergo", ОАО "Chelyabenergo", ОАО «Permenergo» and ОАО "Kurganenergo". In August 2007 due to the changes in the configuration amendments were made into our foundation documents, and the company received its new name - Open joint-stock company "Interregional Distributive Grid Company of Urals" (OAO "IDGC of Urals" for short). In December, 2007 the Federal Antimonopoly Service of Russia approved our reorganization in the form of the merger of ОАО "Sverdlovenergo", ОАО "Chelyabenergo", ОАО «Permenergo» and ОАО "Kurganenergo". Also in December 2007, to convert the shares of the merged companies, the EGM of OAO "IDGC of Urals" made a decision to increase the Company's charter capital by issuing common shares. These shares were placed by converting the shares of the merged companies.

INTERREGIONAL DISTRIBUTIVE G RID C OMPANY IDG C Back to Contents >> 12 OF URALS The Company’s regional market share

ОАО “IDGC of Urals” occupies a dominant occupied by our Chelyabenergo branch and position on the energy transmission market 47% of overall productive supply is transmit- on its service area. The consumers are retail ted through IDGCU’s grids. The overall market suppliers, being participants of wholesale share of OAO “IDGC of Urals” within its service and retail energy markets, and local grids. area is 46% (CU) and 66% (productive supply). The competition in energy transmission using High and Medium 1 (HV and MV1) voltage almost does not exist due to technological features and is possible only in Medium 2 and Low (MV2 and LV) voltage. In terms of energy transmission, our competitors are allied municipal and private grids possessing low voltage networks. In our service area there are approx. 280 allied grids (including industrial plants providing transmission services to subconsumers), 30 of them being large ones. Smaller competitors depend directly on OAO “IDGC of Urals” that adheres to the policy of consolidating all grid assets on its services area. Since each region in our services area possesses its own features (consumer structure, retail energy market model, etc.), the communal market shares of our subsidiaries differ. Thus, in the Sverdlovsk region the Company occupies 35% of the communal market in conventional units (CU1) and 67% in productive supply to end users. Our Permenergo 1 Conventional equipment branch occupies 71% of the market in CU and unit (or CU) that characterizes property complex used for 78% in productive supply. In the Chelyabinsk energy transmission. region 43% of the communal market in CU is

The Company’s market share in energy transmission in the Sverdlovsk, Chelyabinsk and Perm region

in terms of CU in terms of productive supply

IDGC of Urals

Other regional grids

Company's 2009 Back to Contents >> business report 13 Содержание

INTERREGIONAL DISTRIBUTIVE G RID C OMPANY IDG C Back to Contents >> 14 OF URALS 2009 Key events

Company's 2009 Back to Contents >> business report 15 2009 Key events

2009 Key events

> The Company's common > The Company present- shares were listed into ed its 1Q 2009 RAS Quotation list B on MICEX. > Valery results. > Permenergo branch of ОАО Nikolayevich > ОАО “IDGC of Urals” “IDGC of Urals” started Rodin was elected redeemed 99.8% of technical maintenance of the Company’s 01-series bond issue the grids in Solikamsk. CEO. according to the offer.

January March May

February April June

> ОАО "IDGC of Urals" > The Company presented its > ОАО “IDGC of participated in 2008 RAS results. Urals” held its investment forum > ОАО “IDGC of Urals” ap- annual gen- "Forum: Russia proved the compliance of eral shareholder 2009" (organized the Company’s manage- meeting that by Troika Dialog, ment system with the approved its Moscow). requirements set forth by annual report, the quality management annual financials system (ISO 9001:2000). (including profit > ОАО “IDGC of Urals” and and loss state- MES of Urals branch of ОАО ment) as well “FSK UES” signed an agree- as 2008 profit ment on cooperation during distribution. new construction, technical update and reconstruction on energy objects of the region.

Events January 2010 after > Permenergo completed reconstruction of its 35 kV line ("Tyagovaya - Borovsk") which plays the reported an important role in energy supply of the period Solikamsk industry cluster. > Permenergo completed reconstruction of its 35 kV lines ("Chusovaya - CHMZ" and "Chusovaya - Levoberezhnaya" which enable to increase reliability of energy supply to Chusovskoy Metallurgy Plant and left-side part of a city. > ОАО "IDGC of Urals" received a letter of thanks from the Governor and Government of the Sverdlovsk region for social and charity activities in 2009.

INTERREGIONAL DISTRIBUTIVE G RID C OMPANY IDG C Back to Contents >> 16 OF URALS > New members were elected into the Company’s Management Board. > ОАО “IDGC of Urals” participated in the 5th Perm economic forum. > The launch of a new > The Company’s manage- 220/10 kV substation ment discussed the issues "Anna". of effective functioning of > ОАО "IDGC of Urals" > ОАО “IDGC of Urals” the South Urals grids dur- introduced its 2008 IAS announced a contest ing the meeting with the results. in energy-saving in- Governor of the Chelyabinsk > The Company introduced novative projects. region. its 9M 2009 RAS results.

July September November

August October December

> The election of a > The Management > The Company's new membership of Board of ОАО energy effective- the BoD. "IDGC of Urals" to- ness program > ОАО “IDGC of Urals” taled 10 persons. was introduced presented its 1H to the President 2009 RAS results. Plenipotentiary Envoy in the Urals. > Corporate Governance rating increased to NRKU 6+. > ОАО "IDGC of Urals" participated in a Moscow specialized exhibition “Russian Grids-2009”.

February 2010 March 2010 > Permenergo branch of OAO "IDGC of Urals" > A new mimic diagram board was launched acquired a portable substation with the over- in our Sverdlovenergo branch. all capacity of 10 MVA that will enable the > The construction of a new 220/110 kV sub- Company to temporary provide energy to new station "Ryabina" began in Ekaterinburg. objects as well as to fulfill required maintenance and repair activities with no breaks in energy supply. > Chelyabenergo branch of OAO "IDGC of Urals" began a complete overhaul of aerial line "Yuryuzan-Bakal" that will enable to increase reliability of energy supply in the Kropachevo- Privalovskyi industry cluster.

Company's 2009 Back to Contents >> business report 17 Содержание

INTERREGIONAL DISTRIBUTIVE G RID C OMPANY IDG C Back to Contents >> 18 OF URALS Financial and economic highlights (under RAS)

Company's 2009 Back to Contents >> business report 19 Financial and economic highlights (under RAS)

Year results 2009 net profit totaled RUR by RUR 191 182 thous. The profit increase, primarily, is due to revenue growth in energy 1 053 267 thous. transmission and connection as well as (including connection revenues - RUR measures taken to decrease the Company’s 661 734 thous.) exceeding 2008 net profit expenses.

2009 2008 2007 Revenues, including 41 297 636 35 964 707 32 675 965 Energy transmission 40 001 176 34 437 161 31 611 321 Connection 973 985 895 581 305 444 Other services 322 475 631 965 759 200 Expenses 36 623 611 33 947 171 29 915 511 Gross profit 4 674 025 2 017 536 2 760 454 Commercial expenses 0 0 0 Operating profit 4 674 025 2 017 536 2 760 454 Interest receivable 14 598 14 953 22 154 Interest payable 728 621 435 820 193 570 Revenues from participation in other companies 13 242 13 324 18 550 Other revenues 3 845 823 1 928 401 1 510 485 Other expenses 6 426 100 2 249 970 3 007 350 Pre-tax profit 1 392 972 1 288 425 1 110 723 Income tax and other payments 339 705 426 339 169 237 Net profit, including 1 053 267 862 085 941 486 Operating activities 391 533 310 754 718 893 Connection 661 734 550 598 222 593

2009 plan profit distribution In accordance with the Charter a resolution on profit distribution is adopted by the AGM. According to 2009 financials ОАО “IDGC of Urals” had a net profit equaling RUR 1 053 267 thous. The 2009 profit distribution is planned as follows: Net profit distribution (RUR thous.)

As of 2007 As of 2008 As of 2009 Net profit 941 486 862 085 1 053 267 Reserve fund 14 784 43 068 52 553 Dividends 0 0 0 Enterprise development 676 592 819 017 300 577 Savings 250 110 — 700 137

In accordance with the Charter and Federal Law “On Joint-Stock Companies”, the Company creates a reserve fund containing 5% of the charter capital. Compliant with the Charter, the amount of obligatory annual charges to the Company’s reserve fund equals 5% of net profit till the fund reaches the stipulated amount. Therefore, as of 2009 the reserve fund receives RUR 52 553 thous. We plan to invest RUR 300 577 thous. Savings will total RUR 700 137 thous.

INTERREGIONAL DISTRIBUTIVE G RID C OMPANY IDG C Back to Contents >> 20 OF URALS Revenue and expense structure

The overall revenues mainly transmission tariff. Connection revenues in 2009 totaled RUR 974 mln. (2.4% of overall contain revenues from energy revenues) giving +8.8% on 2008. In absolute transmission. terms, the increase amounted to RUR 78 mln Overall 2009 revenues totaled RUR 41 298 and was due to completion of the connection mln., (+RUR 5 333 mln. or 15% on 2008). applications as well as due to connection tariff Revenues from energy transmission, as of increase in comparison to 2008. Other rev- 2009, totaled RUR 40 001 mln. (97% of total enues totaled RUR 322 mln. (0.78% revenues) revenues) giving +15% on 2008. In abso- giving -50% on 2008. lute terms, the increase reached RUR 5 564 2009 expenses amounted to RUR 36 623.6 mln. and was due to the increase in average mln. (+7.9% on 2008).

2009 2008 2007 RUR, thous. % RUR, thous. % RUR, thous. % Total revenues: 41 297 636 100 35 964 707 100 32 675 965 100 Energy transmission 40 001 176 96.86 34 437 161 95.75 31 611 321 96.74 Connection 973 985 2.36 895 581 2.49 305 444 0.93 Other services 315 290 0.76 621 635 1.73 734 191 2.25 Non-core services 7 184 0.02 10 329 0.03 25 009 0.08

Overall 2009 revenues totaled RUR 41 298 mln.

2009 2008 2007 RUR, thous. % RUR, thous. % RUR, thous. % Total expenses: 36 623 611 100 33 947 172 100 29 915 511 100 Purchased energy for loss compensation 8 237 656 22.5 7 498 977 22.1 9 806 367 32.8 Payments to ОАО “FSK UES” 8 374 947 22.9 6 765 843 19.9 5 778 536 19.3 Payments to other gridcos 9 204 054 25.1 8 051 499 23.7 4 769 376 15.9 Wages and other social benefits 4 144 530 11.3 3 874 825 11.4 3 489 050 11.7 Depreciation 2 070 197 5.7 1 855 161 5.5 1 434 543 4.8 Taxes and levies 124 026 0.3 117 467 0.3 178 586 0.6 Other expenses 4 468 201 12.2 5 783 400 17.0 4 459 053 14.9 For information: Repair expenses 787 392 2.1 993 845 2.9 1 126 626 3.8

2009 expenses amounted to RUR 36 623.6 mln.

Company's 2009 Back to Contents >> business report 21 Financial and economic highlights (under RAS)

Expenses on purchased energy for loss com- Other revenues in 2009 totaled RUR 3 874 pensation in 2009 totaled RUR 8 238 mln. mln. Main revenues gains are revenues from (23% of overall expense). In absolute terms, securities and financial instruments (RUR the increase on 2008 totaled RUR 739 mln. 412 mln.), revenues from selling fixed assets, and was due to the increase in the share of apartments, materials, intangible assets, losses purchased at free market prices as well other non-current assets (RUR 173 mln.), as excess of free market prices over regulated revenues of the previous years revealed in ones. Payments to ОАО “FSK UES” totaled the reported period (RUR 318 mln.), revenues RUR 8 375 mln. (23% of overall expenses). In from restoration of bad debts reserves (RUR absolute terms, the increase on 2008 totaled 2 524 mln.). RUR 1 609 mln. and was caused by increase Other expenses in 2009 totaled RUR 7 155 in FSK maintenance tariff. Payments to other mln. and include the following expenses: gridcos as of 2009 totaled RUR 9 204 mln. interest payable (RUR 728 mln.), expenses (25% of overall expenses). In comparison to from selling main and intangible assets and the previous yea, the increase totaled RUR materials (RUR 146 mln.), expenses from sell- 1 153 mln. The increase on 2008 is affected ing securities and financial instruments (RUR by the appearance of new grid companies as 412 mln.), creation of bad debt reserve (RUR well as tariff growth. Wages and other social 4 493 mln.), losses of the previous years re- benefits in 2009 reached RUR 4 145 mln. vealed in the reported period (RUR 844 mln.), (11% of overall expenses) giving +7% on 2008. social expenses (RUR 65 mln.). The increase was caused by the personnel growth due to transition of repair and metering services to non-contracted ones since July 01, 2009. Other expenses totaled RUR 4 468 mln (12%) and comprise transportation services, leasing expenses, maintenance services. Decrease of the expenses, in comparison to the corresponding period of 2008, in absolute terms, totaled RUR 1 315 mln. and was caused by rejection of contracted services (repair and maintenance services, IT and metering services.

Other revenues in 2009 totaled RUR 3 874 mln.

Other expenses and revenues, RUR thous. 2009 2008 2007 Interest receivables 14 598 14 953 22 154 Interest payable 728 621 435 820 193 570 Revenues from participation in other companies 13 242 13 324 18 550 Other revenues 3 845 829 1 928 401 1 510 485 Other expenses 6 426 100 2 249 970 3 007 350

Other expenses in 2009 totaled RUR 7 155 mln.

INTERREGIONAL DISTRIBUTIVE G RID C OMPANY IDG C Back to Contents >> 22 OF URALS Efficiency indicators

As of 2009 Debt/Capital and liabilities – connection advances and accounts reserves ratio demonstrates a payable to suppliers and contractors. The Company is able to pay its credit and debt positive dynamics related to liabilities in full without unbalancing its financial insignificant increase in the stability. The Company has a low risk of losing its creditworthiness in case of increase in debt in Company’s liabilities and equity. comparison to the present liabilities. Financial The Company’s dependency on debt capital indicators correspond with the normative values in 2009 is on the same level, alongside with a of key financial ratios. sufficient level of financial stability. Meanwhile, short-term debt capital decreased. This is shown by the main financial indicators of the Company. The debt consists mainly of the long-term liabilities (99.5%). Other long-term liabilities are formed by connection advances (terms of contracts exceeding 12 months). The share of the short-term credits is insignificant and totals 0.47%. Coverage of debt payments demonstrates the Company’s ability to pay its debts by profit and its equivalents. Increase in accounts receivables turnover caused by the revenue growth and decrease in accounts receivables is characterized positively. Due to the growth of depreciation, income tax and interest payable EBITDA (operating cash flow) increased by 15% on 2008. Debt/ EBITDA in 2009 is 1.3. This is within the generally accepted ratio (no more than 4). Liquidity indicators are within the normative level and characterize the ability of an enterprise to pay its short-term liabilities. Liquidity decrease as of 12 months is caused by the increase in short-term

Indicators 31.12.081 31.12.09 (2009/2008) Net assets cost, RUR thous. 27 260 302 28 289 720 +1 029 418 Debt/ Capital and reserves, % 50.20 49.44 -0.76 Coverage of debt payments, % 93.56 127.81 +34.25 Turnover of accounts receivables, times 5.40 6.63 +1.23 Profitability indicators Return on assets (ROA), % 2.11 2.5 +0.39 Return on Equity (ROE), % 3.19 3.74 +0.55 Financial stability indicators Solvency ratio 0.67 0.67 0.00 Equity/Debt 2.00 2.04 +0.04 Accounts receivable/ Accounts payable 1.1 0.87 - 0.23 Liquidity indicators 1 On 30.04.2008 the Current liquidity ratio 1.71 1.30 - 0.41 Company was reorganized in the form of the merger Quick liquidity ratio 1.48 1.13 - 0.35 when OAO “Sverdlovenergo”, OAO “Permenergo”, OAO Debt “Chelyabenergo” merged into OAO “IDGC of Urals”. For Debt 6 361 534 5 583 562 -777 972 correct comparison of 2008 financials main indicators Net debt 5 762 942 4 542 354 -1 220 588 are given on the basis of Debt/EBITDA 1.8 1.3 - 0.5 the consolidated reporting (ОАО “IDGC of Urals”, Debt/Equity 0.23 0.20 - 0.03 Permenergo, Sverdlovenergo, Chelyabenergo). For information: EBITDA 3 576 138 4 191 790 + 615 652

Company's 2009 Back to Contents >> business report 23 Financial and economic highlights (under RAS)

The structure of accounts payable and receivable

The overall accounts receivable >>item “Suppliers and Contractors”: debt totaled RUR 747.7 mln. and was due to as of the beginning of the reported increase in energy transmission debt by RUR period totaled RUR 6 702.3 mln., 1 266.5 mln. as well as due to decrease in as of 31.12.2009 receivables debts to building companies (by RUR 453.7 mln.), repair companies (by RUR 26.4 mln.) reached RUR 6 226.5 mln. Therefore, and other creditors (by RUR 38.7 mln.). as of 12M 2009 receivables decreased by >>item “Advances received”: debt increased by RUR 475.8 mln., including RUR 1 252.0 RUR 1 575.4 mln. (99% of debt is connec- mln. (advances paid) and by RUR 252.7 tion advances). mln. (other debtors). At the meantime, debt >>item “Wages”: debt increased by RUR 20.8 by suppliers and clients increased by RUR mln. 823.2 mln. and debts of SACs by RUR 205.9 >>taxes and levies: debt increase by RUR mln. Besides, we created a bad debt reserve 408.2 mln. (RUR 2 013.0 mln.). >>other creditors: debt increased by RUR 24.4 Payables as of 2009 increased by RUR mln. 2 709.3 mln. in comparison to 2008, and, as >>debt to SACs decreased by RUR 74.9 mln. of 31.12.2009, it totaled RUR 6 340.8 mln. There are no overdue payables as of 2009. There were also the following changes:

Item, RUR thous. As of As of Change 31.12.2008 31.12.2009 Accounts receivable including: 6 702 273 6 226 469 -475 804 Accounts receivable (exceeding 12 months), including: 128 131 99 509 -28 622 Buyers and clients 3 805 8 187 4 382 Accounts receivable (less than 12 months), including: 6 574 142 6 126 960 -447 182 Buyers and clients 3 857 266 4 676 087 818 821 Accounts payable, including: 3 631 480 6 340 816 2 709 336 Suppliers and contractors 2 379 927 3 127 653 747 726

ACCOUNTS RECEIVABLE (RUR THOUS.) AS OF 31.12.2008 6 702 273 AS OF 31.12.2009 6 226 469

CHANGE −475 804

ACCOUNTS PAYABLE (RUR THOUS.) AS OF 31.12.2008 3 631 480 AS OF 31.12.2009 6 340 816

CHANGE 2 709 336

INTERREGIONAL DISTRIBUTIVE G RID C OMPANY IDG C Back to Contents >> 24 OF URALS Credit portfolio

As of the reported period, our calculated by the Company’s credit policy. Therefore, as of 31.12.2009, interest rates loans and borrowings decreased on long-term credits were between 11.01- by 12% (RUR 794.2 mln.) and, as 12.8% per annum. As of 2009, the Company of 31.12.2009, totaled RUR 5 583.6 ensured compliance of debt parameters to the stipulated limits and retained the mln. These loans and borrowings are long- creditworthiness rating at level “A”. The debt, term ones. At the end of 2008 and beginning as of the end of 2010, is planned at RUR of 2009, due to crisis situation on capital 6 837.4 mln. markets, banks unilaterally increased our In 2009 the accrued interest on loans and credit interest rates. As a result, debt was borrowings totaled RUR 831 558 thous. It financed with excess of standard debt cost formed other expenses (item 070 “Interest limits. This was approved by the Board of payable” of the profit and loss statement) Directors. Due to the refinance rate decrease and amounted to RUR 728 621 thous. The and improvement of situation on capital rest was classified as the increase of the markets during 2H 2009 the Company investment asset value and it totaled RUR took measures to decrease cost of debt 102 937 thous. down to the limits approved by the BoD and

Change Change Credit portfolio structure, RUR thous. 31.12.2008 31.12.2009 (2009/2008) (2009/2008), % Short-term loans and borrowings 1 200 000 — -1 200 000 -100% Long-term loans and borrowings, including 5 161 534 5 583 562 422 028 8% bonds 1 000 000 1 638 -998 362 -99.8% Debts on accrued interest 42 770 26 503 -16 267 -38% Total 6 404 304 5 610 065 -794 239 -12%

Credit portfolio structure (RUR mln)

Short-term loans Long-term bonds Long-term loans

as of 31.12.2008 5161.5 as of 31.12.2009 1.6 5583.6 change -99.8% +8%

Company's 2009 Back to Contents >> business report 25 Содержание

INTERREGIONAL DISTRIBUTIVE G RID C OMPANY IDG C Back to Contents >> 26 OF URALS 2009 Operating results

Company's 2009 Back to Contents >> business report 27 2009 Operating results

Energy transmission

Overall energy supply, productive supply and losses

Our overall energy supply in 2009 supply totaled 69 339 mln. kWh. (-13% or -10 563 mln. kWh. on 2008). 2009 losses totaled 75 796 mln. kWh (-12% amounted to 6 457 mln. kWh. (8.52%) and or - 10 570 mln. kWh on 2008). Such were lower than 2008 losses by 7 mln. kWh., decrease was due to the reduction of energy real losses were also lower by 51 mln. kWh consumption by large industrial enterprises (or 0.24%) than losses set forth in 2009 (machine-building and metallurgy), influenced business plan. by the economic recession. Productive energy

Permenergo Sverdlovenergo Chelyabenergo ОАО "IDGC of Urals" Overall Thous. 2008 20 875 189 40 147 542 25 343 066 86 365 797 energy kWh 2009 18 991 809 34 511 475 22 292 612 75 795 896 supply Change Abs. -1 883 380 -5 636 066 -3 050 454 -10 569 901 % -9.02% -14.04% -12.04% -12.24% Productive Thous. 2008 18 670 184 37 753 791 23 478 000 79 901 975 supply kWh 2009 16 737 643 32 205 849 20 395 740 69 339 232 Change Abs. -1 932 541 -5 547 941 -3 082 261 -10 562 743 % -10.35% -14.70% -13.13% -13.22% Losses Thous. 2008 2 205 004 2 393 751 1 865 066 6 463 821 kWh 2009 2 254 166 2 305 626 1 896 872 6 456 664 Change Abs. 49 161 -88 125 31 806 -7 157 % 2.23% -3.68% 1.71% -0.11% % 2008 10.56% 5.96% 7.36% 7.48% 2009 11.87% 6.68% 8.51% 8.52% Change Abs. 1.31% 0.72% 1.15% 1.03% % 12.37% 12.05% 15.62% 13.82%

Revenues from energy transmission

Approved by the business plan Actual Productive supply, Revenues, includ- Average tariff, no VAT, Productive supply, Revenues, includ- Average tariff, no mln. kWh ing VAT, RUR mln. RUR/kWh mln. kWh ing VAT, RUR mln. VAT, RUR/kWh Permenergo 16 087 12 610 0.66 16 222 12 086 0.63 Sverdlovenergo 31 021 22 865 0.62 31 024 22 540 0.62 Chelyabenergo 18 972 12 031 0.54 20 450 12 570 0.52 ОАО "IDGC of Urals" 66 080 47 507 0,61 67 696 47 196 0,59

Decrease in revenues from energy transmission by RUR 311 mln. (0.7%), alongside with the increase of productive supply from the ones stipulated by the business plan, was caused by the reduction of the average tariff.

INTERREGIONAL DISTRIBUTIVE G RID C OMPANY IDG C Back to Contents >> 28 OF URALS Business plan execution in terms of non-excess of 2009 loss level

Energy losses 2009 (plan) 2009 (actual) Change Mln. kWh % Mln. kWh % Mln. kWh % Permenergo 2 240 11.94% 2 254 11.87% 14 -0.07% Sverdlovenergo 2 400 6.92% 2 306 6.68% -94 -0.24% Chelyabenergo 1 868 8.96% 1 897 8.51% 29 -0.45% ОАО "IDGC of Urals" 6 508 8.76% 6 457 8.52% -51 -0.24%

Measures taken to reduce energy losses

Main measures enabling to decrease energy As of 2009 technical losses were decreased losses during technological distribution by 5.515 mln. kWh, that, in comparison to process: 2008, produced effect of 7.157 mln. kWh on >>Disconnection of transformers on 2 (and loss decrease. more) (220)110/35/10, 110(35)/10 kV transformer substations during low loads; >>Disconnection of KTP 10/0.4 kV transformers during seasonal loads; >>Load balancing of 0.4 kV phases by redistribution of connected consumers and profile increase of overloaded 10 and 0.4 kV lines; >>Replacement of over- and underloaded power transformers as well as load optimization and grids operation modes.

Main Measures Loss decrease, mln. kWh. measures on Replacement of line wires 4.98 decreasing Replacement of overloaded/ underloaded transformers 0.87 2009 Disconnection of transformers on 2 transformer substations and substations during 1.259 technical seasonal load losses Load balancing of 0.4 kV phases 0.516 Regulation of reactive power in grids 0.53 Load optimization by constructing substations and lines, including shift to a higher 0.1 voltage

Company's 2009 Back to Contents >> business report 29 2009 Operating results

Debts for transmission services and for purchased energy acquired for loss compensation

The increase in consumer debts for transmis- Payments to ОАО “FSK UES” in 2009 totaled sion services was caused by deterioration RUR 8 375 mln., no VAT. There are no debts of payment discipline influenced by the to OAO “FSK UES” for 2009 services, all pay- economic recession. Consumers also litigate ments were done according to the terms of the amount of contract demand used during agreements. 2009 tariff setting. Debt under litigation, as of 31.12.2009, totaled RUR 916 mln., including VAT. To reduce receivables we initiated lawsuits on collection of debts and forfeits for overdue payments. Lawsuits on debts under litigation are in courts. Measures taken to cancel consumer debts under litigation: >>Arrangement of claim administration; >>Signing of restructuring agreement; >>Submission of notification on energy limitation; >>Energy limitation; >>Consultations with regional authorities.

Receivables Payables Consumer debt at the Consumer debt at the end of Debts of the gridco at the Debts of the gridco at the beginning of the year, RUR the year, RUR mln., incl. VAT beginning of the year, RUR end of the year, RUR mln. mln., incl. VAT mln. incl. VAT incl. VAT Permenergo 211.84 476.37 -5.51 85.92 Sverdlovenergo 2 291.44 3 584.18 -22.24 405.59 Chelyabenergo 197.19 2 409.03 9.41 601.52 ОАО “IDGC of Urals” 2 700.47 6 469.58 -18.34 1 093.03

ОАО "IDGC of Urals" Permenergo Sverdlovenergo Chelyabenergo Capacity (MW) 10 961.78 2 300.69 5 440.00 3 221.09 Energy (mln. kWh) 1 718.45 470.29 805.92 442.24 Overall value: 8 374.95 1 841.85 4 139.98 2 393.12 Loss payment (RUR mln.) 1 755.88 459.12 831.21 465.55 Grids maintenance (RUR mln.) 7 650.32 1 605.67 3 796.62 2 248.02 Load loss cost (RUR mln.) 1 031.25 222.94 487.84 320.46

Subsidiary consumer breakdown as of 01.01.2009 and 01.01.2010

Period Group ОАО "IDGC of Urals" Permenergo Sverdlovenergo Chelyabenergo 01.01.09 Legal entities 45 906 19 361 9 564 16 981 Natural persons 1 826 077 772 486 378 456 675 135 TOTAL 1 871 983 791 847 388 020 692 116 01.01.10 Legal entities 46 425 19 546 9 694 17 185 Natural persons 1 829 290 773 870 379 706 675 714 TOTAL 1 875 715 793 416 389 400 692 899

30 Back to Contents >> Global crisis and energy transmission

Due to the global crisis, ОАО “IDGC restructuring till July 2010 (overall amount of RUR 412 mln.). of Urals” encountered transmission Additional information on the procedures decrease (-10.3 bln. kWh or -13% on 2008). and prices for energy transmission as well as This decrease was influenced by the drop normative documents stipulating this service of energy consumption by industrial users can be found on our corporate web-site due to production fall. Besides, decrease in (www.mrsk-ural.ru) at Section ”For Clients”. volume resulted in contractor’s litigation of the contract demand used during the 2009 tariff setting. As of 31.12.2009, debt under litigation totaled RUR 916 mln., including VAT. Lawsuits on debts under litigation are in courts. Particularly, in December 2009, arbitration court adopted a resolution in favor of ОАО "IDGC of Urals" concluding that energy transmission should be paid according to the contract demand used during the tariff setting. As a result, we signed an agreement on debt

DEBT UNDER LITIGATION RUR 916 MLN AGREEMENT ON DEBT RESTRUCTURING RUR 412 MLN

Отчет компании Back to Contents >> за 2009 год 31 2009 Operating results

Technological connection

Connection tariffs

Sverdlovenergo In accordance with items 16 and 17 of the approved connection fees graded by voltage Guidelines on connection fee determina- levels (0.4 kV and 6-10 kV) and municipali- tion (approved by FTS decree #201-e/1 ties of the Sverdlovsk region conventionally dd. 21.08.2009), decree #16-PK dd. divided into three zones1. 11.02.2009, issued by the regional regulator,

Power range, kW Voltage at Capacity at Declared connection Fixed connection fee, connection point, kV calculation of fee, RUR./kW, no VAT RUR/kW, no VAT connection fees, kW

Up to 15 kW, total 0.4 18 602.00 466.1 466.1

6-20 816.32 466.1 466.1

35-110 — — —

including natural 16 069.56 466.1 466.1 persons

from 15 to 100 kW, 0.4 5 783.38 4 145.29 8 933 - Zone 1 total 2 792 - Zone 2 1 685 - Zone 3

6-20 4 331.57 12 080.22 12 847 - Zone 1 8 868 - Zone 2 6 143 - Zone 3

35-110 — — —

including privi- — — — leged categories

from 100 to 750 kW 0.4 11 761.91 4 145.29 8 933 - Zone 1 2 792 - Zone 2 1 685 - Zone 3

6-20 34 036.75 12 080.22 12 847 - Zone 1 1 Distribution of municipali- 8 868 - Zone 2 ties in the Sverdlovsk region: 6 143 - Zone 3 Tariff zone 1 – Aramil urban district, Berezovsky urban 35-110 — — — district, municipality “city of Ekaterinburg”, Kamensk- Uralsky, Nizhnyi Tagil, exceeding 750 kW 0.4 7 200.00 4 145.29 8 933 - Zone 1 Pervouralsk urban district. 2 792 - Zone 2 Tariff zone 2 – municipal- 1 685 - Zone 3 ity “town of Alapaevsk”, Beloyarsky urban district, Verkhnyaya Pyshma urban 6-20 79 620.00 12 080.22 12 847 - Zone 1 district, Sredneuralsk urban 8 868 - Zone 2 district, Serov and Sysert 6 143 - Zone 3 urban districts. Tariff zone 3 – municipalities not included into zones 35-110 — — — 1 and 2.

Decree #16-PK dd.11.02.2009 approved connection fees

INTERREGIONAL DISTRIBUTIVE G RID C OMPANY IDG C Back to Contents >> 32 OF URALS Permenergo 2009 connection tariff was approved by Perm regulator’s decree #11-e dd. 28.04.20091.

Power range, kW Voltage at Capacity at Declared connection fee, Fixed connection fee, RUR/ connection calculation of RUR./kW, no VAT kW, no VAT point, kV connection fees, kW 3 2 1 3 2 1 category category category category category category

Up to 15 kW, 0.4 3 497 RUR 550, including VAT, per 1 connection total

including natural 2 799 persons

From 15 to 30 kW, 433 11 257 14 633 16 322 11 257 14 633 16 322 total

1 а) Differentiation ratio at From 30 to 2 797 9 812 12 755 14 226 9 812 12 755 14 226 energy supply zones: 1.31, 100 kW 1.25 and 0.3. b) A consumer is connected at voltage 0.4 and 6 kV From 100 to 10 848 10 338 13 438 14 990 10 338 13 438 14 990 with provision of contracted 750 kW demand range and reliability categories. c) No tariff for applicants with Up to 15 kW 6-10 485 RUR 550, including VAT, per 1 connection demand exceeding 750 kW at voltage of 0.4 kV. including natural 350 d) Tariff is differentiated on supply zones (8 zones, two of persons which have a multiplying ratio 1.31 and 1.25 and 6 zones From 15 to 100 607 9 606 12 487 13 928 9 606 12 487 13 928 have reduction factor 0.6). kW e) A list of open main substations (6-10 kV) connections to which are done at a privileged From 100 to 2 603 9 000 11 700 13 050 9 000 11 700 13 050 price (RUR 3 115 per 1 kW, no 750 kW VAT) is determined. f) Payment for applicants with Exceeding 750 3 850 8 032 10 441 11 646 8 032 10 441 11 646 contract demand up to 15 kW is set at RUR 550 (including kW VAT) per 1 connection.

Connection fee is approved by Decree #11-e dd. 28.04.2009 (issued by the Perm regulator)

Company's 2009 Back to Contents >> business report 33 2009 Operating results

Chelyabenergo In 2009 connection tariffs are set individually in accordance with decree #43/21 dd. 25.12.2008, issued by the United Tariff Body of the Chelyabinsk region.

Power range, kW Voltage at connection Capacity at calculation of Declared connection Fixed connection payment, point, kV connection payments, kW payment, RUR./kW, no VAT RUR/kW, no VAT Up to 15 kW total 0.4 RUR 550, including VAT, per 1 connection 6-20 35-110 Individual payments including natural persons RUR 550, including VAT, per 1 connection From 15 to 100 kW total 0.4 Decree #43/21 dd. 25.12.2008 г. № 43/21s 6-20 35-110 Including privileged categories From 100 to 750 kW 0.4 6-20 35-110 Exceeding 750 kW 0.4 6-20 35-110

For additional information on connection for main substations on our service area, please, natural persons and legal entities, including visit Section ”For Clients” at our corporate estimation of connection price and procedure web-site (www.mrsk-ural.ru). Here you can (including standard applications and connec- also ask your question or submit your application agreements), normative base, list of open tion for connection on-line.

Connection tariffs are set individually in accordance with decree #43/21 dd. 25.12.2008, issued by the United Tariff Body of the Chelyabinsk region

INTERREGIONAL DISTRIBUTIVE G RID C OMPANY IDG C Back to Contents >> 34 OF URALS Connection demand analysis

Volume and In 2009 we received 16 441 applications for Chelyabenergo connection (+16.3% on 2008), the overall >>Applications received - 3 842 (-8% on dynamics of capacity totaling 702.4 МW (-65.7%). 2008). applications Permenergo >>Overall capacity – 198.8 МW (-41%). for connection >>Applications received - 8 226 (+24% on Recessionary trends in economy resulted in 2008) drop of both number and capacity of applica- >>Overall capacity – 257.2 MW (-67%). tions. However, one should mention that in Increase in number of applications, alongside 2009 the number of applications from natural with decrease in capacity (+45% on 2008), is persons and legal entities with connected caused by increase in number of applications capacity up to 15 kW almost did not change from natural persons and legal entities with - 3 296 applications against 3 308 ones in connected capacity up to 15 kW, including 2008. Meanwhile, requested capacity grew increase in number of applications from ap- by 12% on 2008 (22.9 MW against 20.5 MW). plicants representing garage and gardening This was caused by changes in legislation on cooperatives. Overall decrease in capacity connection: in accordance with decree of the is due to recessionary trends in economy, Russian Government #334 dd. 21.04.2009 including residential building. the amount of connection payment for legal persons and private entrepreneurs requesting Sverdlovenergo capacity up to 15 kW inclusively was reduced >>Applications received – 4 373 (+32% on to RUR 550, including VAT. Therefore, if in 2008) 2008 such applicants tried to reduce con- >>Overall capacity – 246.35 MW (-76.7%). nected capacity for cutting their expenses on A considerable increase in number of applica- connection, in 2009 they requested a larger tions is due to increase in applications from capacity in their applications. Average value applicants with connected capacity up to 15 of requested capacity grew by 31% (6.12 kW kW (+49.8%). At the same time, number of against 4.68 kW). applications from other consumer categories decreased by 62.4%.

In 2009 we received 16 441 applications for connection (+16.3% on 2008), the overall capacity totaling 702.4 МW (-65.7%)

Company's 2009 Back to Contents >> business report 35 2009 Operating results

Volume and In 2009 we concluded 13 665 agreements Chelyabenergo (+28% on 2008), the overall capacity totaling >>Agreements concluded - 3 274 (-3% on dynamics 509.1 MW (-33.8%). The price for the agree- 2008) of satisfied ments decreased on 2008 by 78.8% (RUR >>Overall capacity – 121.6 MW (-55%). connection 1 212.1 mln. against RUR 5 718.4 mln.). >>Overall price of the agreements – RUR 137.6 mln. (RUR 1 063.2 mln. in 2008). demand Permenergo >>Agreements concluded - 6 824 (+3% on A considerable decrease in agreement prices 2008). was due to tariff policy in Chelyabinsk region. >>Overall capacity – 223.7 MW (-38.9%). Recessionary trends had a great influence This multidirectional dynamics in number of on decrease in number of concluded agree- agreements and total capacity was a result of ments and overall capacity. increase in number of agreements concluded >>Capacity range from 100 to 750 kW with natural persons (+29% on 2008) and de- (building companies mainly): number of crease in number of agreements concluded in concluded agreements - 106 (-74% on a capacity range from 100 kW (-32%), mean- 2008), capacity – 31.4 MW (-77%). while, the overall capacity on agreements >>Capacity range up to 15 kW (legal enti- with a capacity range from 100 kW decreased ties): number of concluded agreements by 54% on 2008. - 913 (+16% on 2008), capacity – 5.4 MW (+53%). Sverdlovenergo >>Capacity range up to 15 kW (natural >>Agreements concluded - 3 567 (+95.5% on persons): number of concluded agree- 2008). ments - 2 014 (2 003 agreements in 2008), >>Overall capacity – 163.81 МВт (+20.7%). capacity – 14.5 MW (+7%). >>Overall price of the agreements – RUR >>Capacity range exceeding 750 kW: number 219.02 mln. (-89.7%). of concluded agreements – 20 (19 on Increase in number of concluded agreements 2008), capacity – 59.2 MW (-48%). and simultaneous decrease in agreement prices was due to the growth of applications from legal entities and natural persons with capacity up to 15 kW (the connection agreement price is RUR 550, including VAT). Thus, in 2009 we concluded 3 346 agreements with such applicants (overall agreement price is RUR 3.09 mln.).

Volume and In 2009 we connected 9 496 applicants Chelyabenergo (+19.7% on 2008), the overall capacity total- >>Number of connected applicants - 1 742 dynamics in ing 212.23 MW (+39.2%). (-5.1% on 2008) connected Permenergo >>Overall capacity – 37.63 MW (-17.8%). capacity >>Number of connected applicants - 5 780 Decrease was caused by connection drop in (+20.6 % on 2008) all applicant categories, except for legal enti- >>Overall capacity – 144.26 MW (+83.8%). ties with connected capacity of up to 15 kW This increase was due to a large number of (agreements executed - 457, +10% on 2008, connections (we exceeded 2008 figures by capacity - 2 756 kW, +65%). On the whole, in 981 connected applicants) and execution of 2009 we executed 94 agreements less than the agreement with ОАО “RZHD” (connected in 2008. capacity of 64 MW). Sverdlovenergo >>Number of connected applicants - 1 974 (+51.3% on 2008) >>Overall capacity – 30.34 MW (+9.9%). Executed/non-executed agreements ratio is 43%, since the term of agreement execution, according to an application, exceeds one year, i.e. such agreements are “transient”.

INTERREGIONAL DISTRIBUTIVE G RID C OMPANY IDG C Back to Contents >> 36 OF URALS Industry Industry analysis of submitted applications +69%, capacity -82.4%) as well as for trad- in 2009 shows that there are the following ing, public catering, storage facilities and analysis of changes in comparison to 2008: logistics (number of applications +27.6%, submitted >>Small business segment (up to 100 kW): capacity -89.3%), construction (number of applications 336% increase in number of applications applications +130.8%, capacity -92.4%). This and 165% increase in capacity; demonstrates that there was an increase in >>Natural person segment: 34.6% increase in applications from small and medium busi- number of applications and 38% increase ness and decrease in applications submitted in capacity; by large business. Thus, during 2009 com- >>Agricultural segment (from 100 to 750 kW): panies dealing with ferrous and non-ferrous 60% increase in number of applications metallurgy, machine-building and metal and 152.5% increase in capacity; working as well as large business dealing with >>Residential construction segment: 75% de- trading, public catering, logistics, transport, crease in number of applications and 70% construction and agriculture did not forward decrease in capacity; their applications to us. Agricultural segment >>Ferrous and non-ferrous metallurgy demonstrated a simultaneous decrease in segment: 50% decrease in number of ap- number of applications (-60.9%) and capac- plications and 60.5% decrease in capacity; ity (-20.4%). Positive trends in application >>Machine-building and metalworking and capacity increase were demonstrated segment: 66.7% decrease in number of ap- by natural persons (number of applications plications and 90.5% decrease in capacity. +51.2%, capacity +60.1%), budget organi- Permenergo zations (number of applications +207.4%, capacity +2 011.9%) as well as by transport Number of submitted applications increased and communication companies (number of by 24% on 2008 (applications from natural applications +49.0%, capacity +415.8%). persons +45%). However, there was a decrease in submitted applications from main Chelyabenergo economy sectors: residential construction In comparison to 2008 there was a decrease (-71%), budget organizations (-30%), trading, in applications submitted by the following public catering, storage facilities and logistics sectors: (-77%), IT and communications (-90%), other >>Residential construction (-59%); sectors (-67%). >>Housing and utilities infrastructure (-57%); Sverdlovenergo >>IT and communications (-30%); >>Transport (-24%); Industry analysis of submitted applications >>Other sectors (-20%). shows that, while the number of applications increased (+32.2%), there was a considerable capacity decrease (-76.7%). Such tendencies are evident for all industry sectors, on the whole (number of applications

Company's 2009 Back to Contents >> business report 37 2009 Operating results

Global recession and technological connection

Increase in the number of concluded measures for signing additional agreements agreements and simultaneous decrease to adjust payment terms. We also submitted of agreement prices in 2009 were due to claims to the court and distributed collection increase in applications submitted by legal reminders. Adhering to our client-friendly entities and natural persons for connec- policy, we have regulated the debt by pre- tion up to 15 kW. Companies dealing with trial procedure. Having raised consumer ferrous and non-ferrous metallurgy, machine- awareness, we successfully prevented mass building, trading, logistics and residential capital outflow on such applications as well construction considerably reduced the num- as prolonged the payment terms and liability ber of their submitted applications. execution, alongside with capacity reserva- Taking into account decrease in business tion for future investment projects. activity of companies and organizations in the With a view to decrease the impact produced Chelyabinsk region, there was an increase of by the global crisis and to lower the load applications submitted to dissolve contracts on small and medium business as well as and to return the payments. With a view to a residential developers, the Government of difficult material situation of applicants, we the Chelyabinsk region adopted a resolution diagnosed an increase in scheduled payment on transition to individual connection fees debt, according to the agreements, as well (decree #02/2321 dd. 24.11.2008). This in receivables on the executed agreements. resulted in 36% revenue drop demonstrated To reduce the debt OAO “IDGC of Urals” took by our Chelyabenergo branch.

Consumer Cash inflow dropped down by 282.4% on 2008: Outstanding payments grew by RUR 55 in 2008 we gained RUR 2 354.2 mln., in 2009 mln. (+32.9%), including current arrears connection we had only RUR 900.3 mln. Outstanding pay- that increased by RUR 136.7 mln. (+823%). refusals ments, according to the previously concluded Receivables on the executed contracts in- contracts, in 2009 increased by RUR 275.5 mln. creased by RUR 5.4 mln. (+52.4%). (+12% on 2008), including current arrears that Chelyabenergo grew by RUR 309.2 mln. (+26.5%). Receivables on the executed contracts increased by RUR Agreements cancelled on applicant’s initiative 17.1 mln. (+45.5%) in 2009. - 168 (48 agreements in 2008), the capacity totaling 16.5 MW (+129.1%) as well as the Permenergo contract price totaling RUR 8 498 thous. (RUR >>Agreements cancelled on applicant’s initia- 147.7 thous. in 2008). tive - 165 (+23.1%), the capacity totaling 25 MW (-19.4%) The received payments dropped down by RUR >>Money refunded – RUR 63 436 thous. 377.1 mln. due to: (RUR 7 122 thous. in 2008). >>changes in applicant structure (increase >>Money received – RUR 602.1 mln. (-48.1% in legal entities and private entrepreneurs on 2008). connecting up to 15 kW, the contract price totaling RUR 550, including VAT), Outstanding payments in 2009 grew by RUR >>fixing of connection fees according to indi- 253.3 mln. (+15.3%), including current ar- vidual project (RUR 133 mln., including VAT, rears that grew by RUR 181.8 mln. (+15.5%). against RUR 510.1 mln., VAT incl. in 2008). Receivables on the executed contracts decreased by RUR 0.7 mln. (-3.4%). Outstanding payments decreased by RUR 32.7 mln. (-6.8%), including current ar- Sverdlovenergo rears that grew by RUR 0.7 mln. (+3,8%). >>Agreements cancelled on applicant’s Receivables on the executed contracts grew initiative - 68 (2 agreements in 2008), the by RUR 12.5 mln. (+130.2%). capacity totaling 2.28 MW (-48.2%) as well as the contract price totaling RUR 22 070 thous. (+19.1%) >>Money received – RUR 165.2 mln. (- RUR 517.7 mln.).

INTERREGIONAL DISTRIBUTIVE G RID C OMPANY IDG C Back to Contents >> 38 OF URALS Connection Revenues

In 2009 we gained RUR 974 mln. (+76% on Chelyabenergo 2008). Connection revenues – RUR 227.2 mln. (RUR Permenergo 402 mln. in 2008). The decrease was due Connection revenues – RUR 684.4 mln. (RUR to the execution of connection contracts in 138.7 mln. in 2008). The increase was due 2008, 2008 contract prices being determined to the execution of macrocontracts (“Russian by the tariff (in Chelyabinsk, for instance, Railroads” – RUR 362 mln., “Lukoil-Perm” – the tariff was RUR 14 417 per 1 kW). This RUR 43 mln. and “Lukoil-Energoseti” – RUR ensured more revenue gains. In 2009 pay- 21 mln.). ments for the contracts, executed by us, were determined by an individual project and were Sverdlovenergo lower than payments determined by the tariff. Connection revenues – RUR 62.34 mln. (RUR 11.8 mln. in 2008). The increase covered the following categories: natural persons, privileged applicants and applicants with 100-750 kW capacity. A significant revenue decrease covered categories with applicants requesting capacity up to 100 kW and more 750 kW.

Connection revenues in 2010 (forecasts)

Produce Measurement 2010 Plan Including quarter results units 1Q 2Q 6M 3Q 9M 4Q

2 3 6 7 8 9 10 11 12

Connection services RUR, thous. 1 429 930.4 88 873.9 839 956.5 928 830.4 194 546.7 1 123 377.1 306 553.3 Types of applicants RUR, thous. 920 843.1 611.7 676 147.4 676 759.1 73 892.8 750 651.9 170 191.2 Natural persons (15 kV) RUR, thous. 2 978.4 611.7 810.6 1 422.4 856.8 2 279.2 699.2 Exceeding 10 000 kVa (exceeding 35 kV) RUR, thous. 917 864.7 0.0 675 336.7 675 336.7 73 036.0 748 372.7 169 492.0 Connected capacity RUR, thous. 509 087.3 88 262.1 163 809.2 252 071.3 120 654.0 372 725.2 136 362.1 Up to30 kW (0.4 kV) RUR, thous. 8 553.8 2 296.5 2 082.1 4 378.6 2 391.1 6 769.6 1 784.2 30-100 kW (0.4 kV) RUR, thous. 255 369.1 47 245.4 67 359.4 114 604.8 89 690.0 204 294.8 51 074.3 Up to 100 kW(6-35 kV) RUR, thous. 24 873.3 6 492.6 5 233.7 11 726.3 4 712.5 16 438.8 8 434.5 100-750 kW (6-35 kV) RUR, thous. 59 343.2 11 050.3 21 306.5 32 356.8 11 792.5 44 149.3 15 193.9 Exceeding 750 kW (6-35 kV) RUR, thous. 160 948.0 21 177.4 67 827.4 89 004.8 12 068.0 101 072.8 59 875.2

Company's 2009 Back to Contents >> business report 39 2009 Operating results

Repair activities

In 2009 we proceeded repairing our main control and technical diagnostics. Our 2009 power equipment basing on the evaluation of repair program exceeded the target one by its real engineering status and depreciation. 105%. Our 2009 repair priority focused on the resto- In 2009 we spent RUR 787 389 thous. on ration of equipment life. The repair is planned repair activities (Permenergo – RUR 288 217 and performed according to long-term thous., Sverdlovenergo – RUR 283 627 thous., schedules following preliminary multipurpose Chelyabenergo – RUR 214 737 thous.). equipment survey, expert valuations of status

Repair 2008 2009 2009 Plan Plan completion, % 35-110 kV substations Integrated substation repair, pieces 92 95 95 100 35-110 kV transformer repair, pieces 52 71 54 131 35-110 kV switch repair, pieces 279 285 236 121 6-10 kV switch repair, pieces 787 837 829 101 0.4-110 kV aerial lines 110 kV aerial line repair, km 5 202 2 976 2 908 102 35 kV aerial line repair, km 1 959 1 216 1 157 105 6-10 kV aerial line repair, km 2 685 2 851 2 623 109 0.4 kV aerial line repair, km 1 673 1 946 1 598 122 Line clearing, ha 4 860 5 139 4 858 106 6-10/0.4 kV transformer substations Transformer substation repair, pieces 2 364 2 239 1 999 112 6-10 kV transformer repair, pieces 493 388 333 117

Repair program objects (equipment groups), RUR thous.

Types of repair activities 35-220 kV 35-220 kV sub- 0.4-20 kV sub- Other repair TOTAL aerial line station repair station repair repair Permenergo 50 533 52 656 133 317 51 711 288 217 Sverdlovenergo 48 686 63 261 101 942 69 738 283 627 Chelyabenergo 23 097 49 809 89 035 52 796 214 737 ОАО “IDGC of Urals” 122 316 165 726 324 294 175 053 787 389

Repair program objects (equipment groups)

0.4-20 kV substation Other repair

35-110 kV substation repair

35-110 kV aerial line repair

INTERREGIONAL DISTRIBUTIVE G RID C OMPANY IDG C Back to Contents >> 40 OF URALS Due to 15% decrease in 4M 2009 energy and facility repair, landscape renovation consumption, as compared to 4Q 2008, following cable line repair. Other activities the Company transited maintenance and are performed on non-contracted form. As of repair functions onto non-contracted forms. the year-end we saved approx. 20% from the According to our maintenance and repair initial expenses. policy, since mid-2009 we resort to con- The overall repair expenses totaled tracted forms only when performing complete RUR 331 588 thous. (contracted form) and overhaul of power and metering transform- RUR 455 801 thous. (non-contracted form). ers, 0.4-110 kV aerial line clearing, building

Contracted form Non-contracted form TOTAL Permenergo 143 184 145 033 288 217 Sverdlovenergo 122 364 161 263 283 627 Chelyabenergo 65 232 149 505 214 737 ОАО “IDGC of Urals” 331 588 455 801 787 389

Repair expenses (RUR thous.)

OAO “IDGC of Urals” Permenergo

Sverdlovenergo

Contracted form Non-contracted form Chelyabenergo

As of the year-end we saved approx. 20% from the initial expenses

Company's 2009 Back to Contents >> business report 41 2009 Operating results

Investments

Investment program parameters

Our fixed assets are formed by the capital The overall 2009 investments totaled RUR investments that comprise expenses on new 3 466.3 mln., including reconstruction and construction, extension, reconstruction and technological update (RUR 1 137.9 mln. or technical update of the operating objects, 33% of overall investments), new construc- equipment acquisition and other capital tion and extension of operating objects (RUR expenditures. 2 026.2 mln. or 58%) and acquisition of core assets (RUR 302.3 mln. or 9%).

Financial structure of 2009 investment program

Total 3 466.3 Internal Depreciation of the reported year 1 900.1 resources Unused depreciation of the previous years 0.0 Unused profit of the previous years 0.0 Profit of the reported period used in investment program of the reported year, including: 300.5 Connection fees 288.3 Additional security issue 0.0 Other internal resources 16.7

External Budgetary funds (federal, municipal) 0.0 resources Borrowed funds 92.1 Connection fees (advances) 1 157.0 Other external resources, including share construction at the expense of other resources 0.0

Cost and physical parameters of 2009 investment program

Investment Fixed asset launch Financial Capacity launch Capacity increase program resources implementation RUR, mln., no VAT RUR, mln., no VAT RUR, mln., no VAT MVA km MVA km Permenergo 1 524.9 2 208.5 1 435.1 133.9 569.6 127.6 507.4 Sverdlovenergo 1 378.2 1 555.8 1 272.6 65.1 243.2 45.1 140.5 Chelyabenergo 563.3 1 395.9 514.6 291.8 138.2 188.3 135.2 ОАО “IDGC of Urals” 3 466.3 5 160.2 3 222.2 490.8 951.0 361.0 783.2

Execution of 2009 plan investments

Capital investments, 2009, RUR mln., no VAT plan actual % completed Permenergo 1 348.6 1 524.9 113% Sverdlovenergo 1 017.3 1 378.2 135% Chelyabenergo 538.7 563.3 105% ОАО “IDGC of Urals” 2 904.7 3 466.3 119%

INTERREGIONAL DISTRIBUTIVE G RID C OMPANY IDG C Back to Contents >> 42 OF URALS Reasons for exceedance over the plan figures >>Construction of 35-0.4 kV cable lines: are mainly the following: overfulfilled by RUR 113.4 mln. (plan fig- Sverdlovenergo ures – RUR 0.3 mln., actual figures – RUR 113.4 mln). Such exceedence was caused 2009 investment plan totaled RUR 1 348.6 by increase in consumer activities and ap- mln., real investments totaled RUR 1 524.9 plications. In accordance with the current mln. (113%). Reasons for overfulfilment: legislation, ОАО “IDGC of Urals” has no >>Acquisition of grids to consolidate the right to reject connection of consumers. Company’s grid’s assets: overfulfilled by RUR 165 mln. (plan figures - RUR 46.1 Chelyabenergo mln, actual figures - RUR 211 mln.). 2009 investment plan totaled RUR 538.7 Objects unrecorded in 2009 plan: grids of mln., real 2009 investments totaled RUR Verkhnyaya Tura (RUR 15.9 mln.), 35 kV 563.3 mln. (105%). line “Maslovo-Chernaya” (RUR 15.8 mln.), a Reasons for overfulfilment: building of a production base in Revda, in- >>Acquisition of grids to consolidate the cluding land plot (RUR 37.4 mln.), property Company’s grid assets: overfulfilled by RUR complex “Karpushikha-Levikha” (RUR 16.9 22 mln. (plan figures – RUR 36.4 mln., mln.), acquisition of property complexes in actual figures – RUR 58.5 mln.). Objects Ekaterinburg under agreement #657/2009 unrecorded in 2009 plan: 110 kV aerial (RUR 78.3 mln.), other single-piece grid as- line “Satka-Zapadnaya, Zapadnaya-Bakal” sets (RUR 0.5 mln.). (RUR 4.8 mln.), grid complex of OOO “SHK >>Construction of PS 220/10 kV “Anna”: Rodnichok (RUR 8.8 mln.), acquisition of overfulfilled by RUR 132 mln. (plan figures transformer substation of ZAO “Energy” – RUR 964.9 mln., actual figures – RUR (RUR 7 mln.) and other single-piece grid 1 096 mln.). The exceedence was due to assets (RUR 1.49 mln.). the tight-scheduled object construction, alongside with the design engineering. The investment figures, recorded in 2009 investment program, were preliminary and were revised hereinafter. Permenergo 2009 investment plan totaled RUR 1 017.3 mln., real investments totaled RUR 1 378.2 mln. (135 %). Reasons for overfulfilment: >>Connection objects: overfulfilled by RUR 38 mln. (plan figures – RUR 580 mln., actual figures – RUR 618 mln.). Such exceedence was caused by increase in consumer activities and applications. In accordance with the current legislation, ОАО “IDGC of Urals” has no right to reject connection of consumers. >>Objects that will be completed in 2010 and that we decided to complete in 2009 due to their social importance and for accidents prevention: overfulfilled by RUR 160 mln. (plan figures – RUR 82.8 mln., actual figures – RUR 243 mln.), namely: reconstruction of 110 kV aerial line “Chusovaya-Lysva”, (plan figures – RUR 23.2 mln., actual figures – RUR 147.7 mln.), reconstruction of 35 kV aerial line “Solikamsk-Borovsk” (plan figures – RUR 59.6 mln., actual figures – RUR 95.3 mln.).

Company's 2009 Back to Contents >> business report 43 2009 Operating results

Our capex dynamics in 2007-2009, RUR mln.

2007 2008 2009 Sverdlovenergo 2 244.6 1 680.6 1 524.9 Permenergo 2 566.9 2 331.7 1 378.2 Chelyabenergo 1 159.9 1 294.2 563.3 Executive office 0.0 15.5 0.0 ОАО “IDGC of Urals” 5 971.3 5 321.9 3 466.3

The Company’s capex dynamics in 2007- The capex dynamics 2009 is downgrading. Thus, in 2009, in comparison to 2007-2008, we observe capex of OAO “IDGC of Urals” decrease caused by tangled domestic eco- (RUR bln) nomic situation, decrease in production and, as a consequence, consumption decrease (of Sverdlovenergo productive supply) and reduction of investment financing. Permenergo Chelyabenergo IDGC of Urals

Investment structure and directions

In 2009 we completed a considerable scope >>Development of grid business – increase of work on new objects construction, re- in energy transmission by connecting new construction and technical update of the consumers; operating electric equipment. 2009 capex >>Provision of system network reliability – no- was mainly aimed at: break energy supply in demanded volumes. >>Prevention of equipment aging – maintenance of grid engineering features within permissible values; >>New construction – lifting connection limitations at stations experiencing energy shortages and creation of new main substations;

Our 2009 capex directions, RUR mln.

Capex Including: Reconstruction and update New construction Other (acquisition of fixed assets) plan actual % plan actual % plan actual % plan actual % Permenergo 1 348.6 1 524.9 113 242.3 202.3 83 1 060.2 1 111.6 105 46.1 211.0 458 Sverdlovenergo 1 017.3 1 378.2 135 368.8 654.1 177 622.8 697.6 112 25.6 26.5 103 Chelyabenergo 538.7 563.3 105 287.7 281.5 98 214.7 216.9 101 36.4 64.9 178 ОАО “IDGC of Urals” 2 904.7 3 466.3 119 898.8 1 137.9 127 1 897.8 2 026.2 107 108.1 302.3 280

INTERREGIONAL DISTRIBUTIVE G RID C OMPANY IDG C Back to Contents >> 44 OF URALS Our capex structure, RUR mln.

Investment structure 2007 2008 2009 Total: 5 971.3 5 321.9 3 466.3 Grid objects, including 4 419.2 4 262.8 2 981.4 Reconstruction and update 1 868.4 1 795.6 976.7 New construction and extension of the operating objects 1 937.2 2 069.6 2 004.1 Other grid objects (automation, communications) 145.2 140.7 0.6 Metering and energy control equipment, including 115.8 59.5 0.0 Electric power fiscal metering system of wholesale market as a part of investment program 102.2 21.3 0.0 Other metering and energy control equipment 13.6 38.2 0.0 Engineering and design of future construction 352.6 197.3 82.0 Other production and economic entities 269.3 133.3 6.5 Equipment, non-included into construction budget 142.3 186.4 94.0 Non-production objects 0.1 0.0 0.1 Capex in intangible assets 0.0 0.0 0.0 Long-term investments 0.0 0.0 0.0 Acquisition of fixed assets 1 138.3 739.4 302.3

Our fixed assets launch dynamics in 2006-2009, RUR mln.

2006 2007 2008 2009 Sverdlovenergo 358.4 1 477.4 1 290.3 2 208.5 Permenergo 1 330.4 2 092.4 1 822.8 1 555.8 Chelyabenergo 175.4 733.2 474.0 1 395.9 Executive office 0 0 15.5 0 ОАО “IDGC of Urals” 1 864.4 4 303.1 3 602.6 5 160.2

2009 fixed assets launch increased almost Our 2009 capex structure thrice on 2006 and 1.4 times on 2008. This considerable increase was due to the completion of construction and launching of objects started during the previous years.

Reconstruction Other New construction and update

Company's 2009 Back to Contents >> business report 45 2009 Operating results

The Company’s capex structure analysis dem- As of 31.12.2009 the object was put into onstrates that despite 2009 capex decrease operation. there is a healthy investment increase in Chelyabenergo new construction, as compared to 2008 (the share of new construction in 2008 is 41%) >>Construction of PS-110 kV substation as well as sustainable growth in connection “Massivnaya”. capex. ОАО “IDGC of Urals” fulfilled its plans Aims: to provide energy to consumers in on financing, capex development and facili- Chelyabinsk, redistribution of load on the ties commissioning in the company and its operating substations, provision of additional subsidiaries. In 2009 we have constructed energy supply and further residential con- and commissioned the following important struction and industry development. facilities: Spent in 2009: capex – RUR 133.1 mln. (plan Permenergo – RUR 120.5 mln.). Launched: 2х40 MVA >>Construction of 110 kV aerial line: over- (plan - 2х40 MVA). hangs to transformer substation PS-220 kV As of 31.12.2009 the object was put into “Soboli” operation (in December 2009). Aim: energy transmission from newly con- >>Reconstruction of PS-110kV substation structed PS-220 kV substation “Soboli” to “Taganai”. transient networks, energy supply of Perm Aims: provision of reliable energy supply due and lifting of network restictions in Perm- to existing standardized reserve capacity Zakamsk energy center. required for repair mode creation. Spent in 2009: capex – RUR 70.1 mln. (plan - Object from 2007. RUR 65 mln. in plan). Launched: 17 km (plan Spent in 2009: capex -RUR 6.6 mln. (plan – - 12 km). RUR 6.4 mln.). Launched: 2х40 MVA (plan As of 31.12.2009 the object was put into - 2х40 MVA). operation. As of 31.12.2009 the object was put into >>Construction of 110 kV aerial line (detour operation. of technogenic accident): spur line on >>Reconstruction of PS-110 kV 4 railway substations from aerial lines “Shershnevskaya”. “Yayva-TES-10” and “Yayva-Lyuzen”. Aims: provision of reliable energy supply Aim: energy supply to 4 railway substations to consumers and satisfaction of growing of a new railway section detouring Berezniki demand in newly constructed residential and technogenic accident (sinkhole). social facilities in Chelyabinsk, creation of Spent in 2009: capex – RUR 223.9 mln. (plan required reserve of energy capacity during – RUR 204 mln.). Launched: 52.1 km (plan – connection of new consumers. 17.0 km). Spent in 2009: capex- RUR 7.2 mln. (plan – As of 31.12.2009 the object was put into RUR 7.1 mln.). Launched: 2х25 MVA (plan operation. - 2х25 MVA). >>Rise of 2 chained 110 kV aerial line As of 31.12.2009 the object was put into “Lyuzen-TES-4” and 110 kV aerial line operation. “TES-10-TES-4” and repair on 110 kV aerial >>Reconstruction of PS-35/10 kV line “TES-10-TES-4” and 110 kV aerial line “Nugumanovo”. “Yayva-TES-10”. Aims: provision of reliable energy supply to Aims: rise of 110 kV aerial line segments from current consumers. high-probability subsidence zone (Berezniki technogenic accident). Spent in 2009: capex – RUR 27.193 mln. (plan – RUR 20.4 mln.). Launched: 4 MVA Spent: capex – RUR 35.4 mln. (plan – RUR (plan - 4 MVA) and 0.5 km (plan – 0.5 km). 32 mln.). Launched: 8.5 km (plan – 2.8 km). As of 31.12.2009 the object was put into As of 31.12.2009 the object was put into operation. operation. Sverdlovenergo >>Reconstruction of 110 kV aerial line “Gornaya-Ugleuralskaya”. >>Reconstruction of PS-110/35/10 “Cherdantsy”. Aims: reliability increase of energy supply to railway substations of the railways between Aims: energy supply to the pig complex Solikamsk and Perm and development of “Uralsky”. energy supply to communal and industrial Spent: capex – RUR 11.5 mln. (plan – RUR 16.8 consumers. mln.). Launched: 6.3 MVA (plan – 6.3 MVA). Object from 2008. As of 31.12.2009 the object was put into Spent in 2009: capex – RUR 9 mln. (plan – RUR operation. 6.4 mln.). Launched: 6.7 km (plan - 11 km). >>Construction of PS 220/10 kV “Anna”.

INTERREGIONAL DISTRIBUTIVE G RID C OMPANY IDG C Back to Contents >> 46 OF URALS Aims: connection of the 5th productive line of In 2009 the Company commenced and will “Sukholozhsktsement”, energy transmission further continue reconstructing such impor- from Reft GRES to Kamensk energy center. tant objects: Spent: capex – RUR 1 096.1 mln. (plan – Permenergo RUR 964.9 mln.). Launched: 80 MVA and >>Reconstruction of 110 kV aerial line 22.1 km (plan 80 MVA and 23 km). “Chusovaya-Lysva c.1,2 up to spur line to As of 31.12.2009 the object was put into ChMZ”. operation. Aims: increase in reliable energy supply to >>Reconstruction 110 kV aerial line Chusovskoy Metallurgy Plant and left-side “Tura-Kvarts”. part of Chusovoy, Perm region. Aims: increase in energy supply reliability, The facility is planned to be commisssioned in provision of high-quality energy supply, cre- 2010. Capacity launch will total 18.8 km. ation of safe exploitation of the aerial line by Sverdlovenergo personnel. >>Reconstruction PS-110/35/6 kV Spent: capex – RUR 52.9 mln. (plan – RUR “Krasnouralsk”. 51.5 mln.). Launched: 23.2 km (plan - 20 km). Aims: provision of reliable energy supply As of 31.12.2009 the object was put into to consumers, including copper plant ОАО operation. “Svyatogor”. The facility is planned to be commissioned in 2010. Capacity launch will total 103 MVA.

Company's 2009 Back to Contents >> business report 47 2009 Operating results

Investment policy of OAO “IDGC of Urals” in 2010-2012

The Company’s investment policy as of 2010- quality parameters to current consum- 2012 will be redirected to capex increase in ers. This is due to decrease in demand for reconstruction and update of energy objects connection of new facilities caused by 2008- to provide reliable energy supply and required 2009 recession.

Planned capex in 2009-2012

RUR, mln 2009 2010 2011 2012 Sverdlovenergo 1 524.9 1 261.6 2 218.2 3000.3 Reconstruction and update 202.3 728.2 1 531.6 2 430.4 New construction 1 111.6 453.1 529.7 388.5 Other 211.0 80.3 156.8 181.4 Permenergo 1 378.2 2 684.9 2 722.6 3 377.3 Reconstruction and update 654.1 1 506.0 928.5 1 537.6 New construction 697.6 1 128.5 1 682.4 1 719.2 Other 26.5 50.4 111.7 120.6 Chelyabenergo 563.3 834.3 1 543.4 1 661.4 Reconstruction and update 281.5 344.3 1 080.2 1 195.2 New construction 216.9 403.5 426.8 426.1 Other 64.9 86.6 36.5 40.2 Executive office 0.0 14.0 15.0 16.1 Reconstruction and update 0.0 10.8 15.0 16.1 New construction 0.0 3.2 0.0 0.0 Other 0.0 0.0 0.0 0.0 ОАО “IDGC of Urals” 3 466.3 4 794.8 6 499.2 8 055.1 Reconstruction and update 1 137.9 2 589.3 3 555.3 5 179.2 New construction 2 026.2 1 988.2 2 638.9 2 533.7 Other 302.3 217.3 305.0 342.1

Planned capex in 2009-2012 The Company’s investment program in 2010- (RUR mln) 2012 supposes annual capex increase, as compared to 2009. This could be possible Chelyabenergo Executive office by transitioning to a new tariff model (RAB) and allocation of more profit share into investments.

Sverdlovenergo Permenergo

OAO “IDGC of Urals”

INTERREGIONAL DISTRIBUTIVE G RID C OMPANY IDG C Back to Contents >> 48 OF URALS Planned financing resources of the Company’s investment program in 2010-2012

Investment resources, RUR mln 2010 20111 20121 ИТОГО Total 4 794.8 6 499.2 8 055.1 19 349.1 Depreciation of the reported period 2 207.7 2 420.5 2 630.5 7 258.7 Unused depreciation of the previous years 170.1 0.0 0.0 170.1 Unused profit of the previous years 319.5 0.0 0.0 319.5 Profit of the reporting year for use in the investment program of the 732.5 3 353.0 4 870.5 8 956.0 reported period, including Renewal included into tariff 71.4 3 353.0 4 870.5 8 294.9 Sale of core non-current assets 0.0 0.0 0.0 0.0

Sale of non-core non-current assets 0.0 0.0 0.0 0.0 Connection payment 661.1 0.0 0.0 661.1

Internal resources Internal Other internal resources 136.1 0.0 0.0 136.1 Budgetary funds (federal, municipal) 0.0 0.0 0.0 0.0 Borrowings (interest) 624.9 0.0 0.0 624.9 Borrowings (additional emission) 0.0 0.0 0.0 0.0 Connection payment 603.9 725.7 554.1 1 883.7 Other external resources, including partnership in construction at 0.0 0.0 0.0 0.0

External resources External the expense of other resources

1 in forecast prices, no VAT

Company's 2009 Back to Contents >> business report 49 2009 Operating results

Grids development and exploitation

Our strategic aim lies in consolidation of This strategy is realized by concluding rental municipal grids with the Company’s grids to agreements, acquisition of grids as well as create a united grid zone on the service area. stripping, maintenance and exploitation of Creation of the united energy zone will: no-man’s assets located on the municipal 1. Liquidate unfair territorial grids and this, territories. in its turn, will result in more “transparent” In 2009 ОАО “IDGC of Urals” increased its regional tariff model and decrease of tariff share on communal energy market1 by 1.2% burden for consumer. (of overall C.U. on the territory). As of 2006- 2. Optimize production processes. 2008 ОАО “IDGC of Urals” increased its 3. Lead to cuts in the Company’s operating market share by 6% of overall C.U., mean- expenses and tariff decrease. while, number of conventional units of ОАО 4. Ensure simultaneous development and “IDGC of Urals” increased by almost 72 agreement of the plans focused on evolu- thous. C.U. (by 14.5%). tion of the energy system and communal energy sector. 5. Ensure more thorough control over increase of communal load and timely

1 6-10 kV energy transmis- measures taken to change network config- sion market (to end user). uration and new facilities commissioning.

Acquisition of no-man’s grids

Increase in the Company’s Conclusion . .U c.u. from consolidation of rental contracts C ’s ny a Acquisition p m of local grids o C e h

U . C

INTERREGIONAL DISTRIBUTIVE G RID C OMPANY IDG C Back to Contents >> 50 OF URALS Voltage Class 220 kV 110 kV 35 kV 10 kV 6 kV 0,4 kV TOTAL Permenergo - 4 829 3 511 17 530 2 112 13 957 41 938 Sverdlovenergo 27 7 978 1 847 12 369 1 343 11 773 35 336 Chelyabenergo - 5 368 2 718 14 737 1 022 12 131 35 976 ОАО “IDGC of Urals” 27 18 174 8 075 44 636 4 477 37 861 113 250

Aerial and cable line length 110 kV line (in lines/ in chains) 35 kV line

10 kV line 35 kV line As of 01.01.2010, the overall length of aerial lines (in chains), belonging to subsidiaries of km 10 kV line AL 6 kV line ОАО “IDGC of Urals”, totaled 113 250 km, including:

0.4 kV line 6 kV line

km Overall length of aerial lines (in chains), as

0.4 kV line of 01.01.2010, totaled 122 094 km. Overall length of cable lines as of 01.01.2010 totaled CL 4 691 km, including:

Voltage Class 110 kV 35 kV 10 kV 6 kV 0,4 kV TOTAL Permenergo 12 78 203 1 141 754 2 187 Sverdlovenergo - - 78 226 268 572 Chelyabenergo 1 12 678 398 841 1 931 ОАО “IDGC of Urals” 13 90 959 1 765 1 863 4 691

As of 01.01.2010, number of substations, belonging to the Company, totaled 1 006, installed capacity totaled 20 453 MVA.

MVA 35 kV substations 110 kV line

PS 35 kV PS 110-220 kV Total PS Number Capacity, MVA Number Capacity, MVA Number Capacity, MVA Permenergo 180 1 691 168 5 791 348 7 482 Sverdlovenergo 92 565 266 6 451 358 7 015 Chelyabenergo 120 970 180 4 986 300 5 956 ОАО “IDGC of Urals” 392 3 226 614 17 227 1 006 20 453

Company's 2009 Back to Contents >> business report 51 2009 Operating results

Overall number of 6-20/0.4 kV transformer substations, аs of 01.01.2010, reached 27 390, installed capacity totaled 7 407 MVA. The breakdown is presented below:

TP 6-20/0.4 kV Total TP Pole-mounted Package Indoor Number Capacity, MVA Permenergo 163 9 328 1 423 10 914 2 754 Sverdlovenergo 2 031 4 674 858 7 563 1 952 Chelyabenergo 1 738 5 306 1 869 8 913 2 701 ОАО “IDGC of Urals” 3 932 19 308 4 150 27 390 7 407

Pole-mounted substations MVA Indoor substations Package substations

Further grid development plans

ОАО “IDGC of Urals” is one of the largest >>Decrease of energy losses by voltage energy companies in the Urals region manag- regulation in 6-10 kV networks, inactiva- ing grids in the Sverdlovsk, Chelyabinsk and tion of unloaded transformers, unloading Perm regions. of overloaded line segments, enhancement Intensive residential construction, alongside of network transferring capability by taking with infrastructure development, as well as measures of reactive power management. production increase and construction of new >>Perfection and quality increase of mainte- plants in 2006-1H 2008 lead to ultimate nance and repair services, decrease in the loads of the operating grids. Even during en- number and duration of interruptions using ergy consumption decrease the current load cutting-edge technologies. of several 35,110 kV substations exceeds >>Monitoring of the current equipment status permissible loads. Zones experiencing energy and implementation of modern testing and capacity deficiency are listed below: diagnostic methods and devices. >>The Sverdlovsk region (Serov-Bogoslovsk and >>Reconstruction of substations increasing Sverdlovsk energy center); installed transformer capacity. >>The Chelyabinsk region (Chelyabinsk, >>Implementation of cutting-edge com- Chebarkul-Miass, Zlatoust-Kropachevo energy munication devices and telematics, IT centers); development. >>The Perm region (Perm-Zakamye and >>Special machinery update. Berezniki-Solikamsk energy centers). >>Usage of new IT services at managing grids on SAP 6.0 platform. Under the existing rates of new construction and reconstruction the Company’s grids The development of our grids is based on become physically and morally outdated. the schemes for grid development in our Average depreciation of substation equip- service area. These schemes are developed ment as well as cable and aerial lines is alongside with development plans of all approx. 70%. To ensure reliable and sustain- energy system participants and regional load able operations our priorities are: increase forecasts. Main principles, funda- >>Overcoming the aging of our fixed assets mental for perspective development strategy (replacement of morally and physically of IDGCU’s grids, are: obsolete equipment, usage of cutting- >>Demand satisfaction and energy capacity edge heavy-duty and reliable technologies, reserve creation getting ahead of regional equipment and materials). economies’ growth.

INTERREGIONAL DISTRIBUTIVE G RID C OMPANY IDG C Back to Contents >> 52 OF URALS >>Provision of high-quality and reliable energy >>High-voltage laboratories update; supply. >>Client support centers development; >>Creation of new supplying centers. >>Automation of business processes and >>Unloading of current transits. financial activities; >>Radial circular network structure. >>Implementation of the ecology policy; >>Limitations of 35 kV voltage usage and >>Improvements in labor protection. transition of the networks to higher voltage classes. >>220 kV grids development to transmit and distribute capacity from master PS-220(500) kV substations and energy stations; >>Usage of up-to-date equipment. Our main development priorities are: >>Connection of new consumers to our grids to ensure sustainable development of the Urals region and increase in energy transmission. >>Construction of grid objects to liquidate zones experiencing capacity shortages and provision of reliable and no-break operation of the energy system. >>Creation of the united energy grid zone, i.e. consolidation of grids located in our service area to ensure reliable energy supply as well as creation of opportunities for efficient development of the regional energy system. Development of our production complex shall ensure implementation of federal programs, national projects, regional programs and local development plans. ОАО “IDGC of Urals” elaborated target programs, fundamental for long-term programs of the Company’s grid development: >>Overall reconstruction of PS 35-110 kV, reconstruction of TP, RP 6-10/0.4 kV; >>Reconstruction of 35, 110 kV, 0.4-10 kV aerial lines, reconstruction of 0.4-10 kV cable lines; >>Replacement of 35-110 kV oil switches for air-free and SF6 circuit breakers, changes of 6-10 kV oil switches for air-free ones; >>decrease of “close” energy centers; >>New construction of PS-35-110 kV, 35-110 kV lines, grids construction; >>Reactive capacity compensation; >>IT infrastructure development; >>Metering system development; >>Communications and ACS development; >>RPA device development; >>Replacement of current transformers and 35-110 kV voltage transformers, change of aerial fuses for overvoltage limiters, replacement of high-voltage transformer leads, replacement of OLTC, replacement of CP devices for switches, replacement of accumulator batteries;

Company's 2009 Back to Contents >> business report 53 2009 Operating results

Pacts concluded with regional authorities. Federal target programs

Pacts The following pacts on construction and reconstruction of energy capacity, concluded concluded between OAO “RAO UES” and regional author- with regional ities, are in force on our service area till 2011: authorities Sverdlovsk region (Pact #38 dd. 14.12.06, adjusted on 20.06.2008), Chelyabinsk region (Pact #45 dd. 25.12.2006), Perm region (Pact #30 dd. 21.09.2007).

2009 investment program capex according to the pacts:

Plan, RUR mln., no VAT Fact, RUR mln., no VAT Completed, % Permenergo 1 139.5 1 227.5 108% Sverdlovenergo 123.9 120.2 97% Chelyabenergo 115.3 121.3 105% ОАО “IDGC of Urals” 1 378.7 1 469.0 107%

Accomplished objects of the 2009 pacts: Permenergo Sverdlovenergo Spent: RUR 121.3 mln. (105%). Launched: Spent: RUR 1 227.5 mln. (108%). Launched: 26.3 km of lines (174%). 45.3 km of lines and 80 MVA (68% and 100% All objects stipulated in 2009 investment of plan figures correspondingly). program were completed. Objects: Objects: >>Construction of PS-220/10 kV “Anna” >>Construction of 110 kV aerial line: (as of 31.12.2009, the object was put to overhangs to PS-220 kV “Soboli” (as operation). of 31.12.2009, the object was put into >>Reconstruction of 110 kV aerial line “Tura- operation). Kvarts” (as of 31.12.2009, the object was >>Rise of 2 chained 110 kV aerial line put to operation). “Lyuzen-TES-4” and 110 kV aerial line >>Reconstruction of 110 кkV aerial line “TES-10-TES-4” and repair on 110 kV aerial “Tura-NGTES, NGTES-Krasnouralsk” (as line “TES-10-TES-4” and 110 kV aerial line of 31.12.2009, the object was put to “Yayva-TES-10”. (as of 31.12.2009, the operation). object was put into operation). Chelyabenergo Spent: RUR 120.2 mln. (97% of plan figures). Launched: 13.7 km of lines and 133 MVA (472% and 101% of plan figures correspondingly). All objects stipulated in 2009 investment program were completed. Objects: >>Reconstruction of PS-110 kV “Shershnevskaya” (as of 31.12.2009, the object was put into operation in 3Q 2009, 2x25 MVA transformers installed). >>Reconstruction of PS-110 kV “Taganai” (as of 31.12.2009, the object was put into operation in 1Q 2009, 2x40 MVA transformers installed.

INTERREGIONAL DISTRIBUTIVE G RID C OMPANY IDG C Back to Contents >> 54 OF URALS Federal target We participate in the federal target program “Affordable housing”. The Company builds up program new capacity in loaded energy centers to enable execution connection of new residential complexes and industrial enterprises. Our results are described below:

Project Aim Implementation plan Perm region Construction of “Iva” substation Provision of energy supply to Application submitted (energy supply to “IVA-1”): 8, overall capacity - 39 195 (110/6 kV 2*25 MVA, 110 kV “Iva” urban district in Perm kW. In 2008 there were 3 contracts. Contracts implemented: 1, capacity 2 000 aerial line), construction of 6 (capacity demand is 67.5 MW) kW, overall price RUR 20 mln. kV grids “Iva” substation is being currently designed. Its launch is planned in 2011, plan year for completion of the project – 2013.

Construction of “Sviyazeva” sub- Provision of energy supply to Designing works - 2008 station (110/6 kV 2*25 MVA, “Bakharevka” urban district Termination of the project – 2012. 110 kV aerial line) (37.5 MW) in Perm Reconstruction of PS-110/35/6 Provision of energy supply to Applications submitted: 4, overall capacity: 8 800 kW. Connection contracts kV “Okulovskaya”, construction “Akulova” urban district in concluded: 4, overall capacity: 8 800 kW, overall price: RUR 159 446 thous of 6 kV grids Perm (capacity demand – 8.8 One connection contract (overall capacity 0.3 MW, total price - RUR 4 099 MW) thous.) was already performed by the parties. We connected the construction site to PS “Okulovskaya”. Other 3 contracts stipulate connection of 1-3 construction stages (overall capacity – 8.5 MW, total price RUR 155 345 thous. In 2009 we prepared a PS “Okulovskaya” reconstruction project and connected 1st stage of the residential complex. Termination of the project – 1Q 2012. Chelyabinsk region Construction of PS-110 kV Provision of energy supply to The object was put into operation in December 2009. 2 40 MVA transform- “Massivnaya” (Chelyabinsk) “Zapadny luch” and “Massiv” ers were mounted. The construction enabled to redistribute loads of PS urban districts in Chelyabinsk “Severnaya” and PS “Sportivnaya”, it ensures additional energy supply and possibility of further residential construction and industry development. Construction of distributive Provision of energy supply to In 2008-2009 we constructed RP “Rodnik”, cable lines from PS “Sportivnaya” grid from PS - 110/10 kV “Zapadny luch” and “Rodnik” to RP “Rodnik” (overall length -1.1 km). These objects were built and put into “Sportivnaya” and PS - 110/10 urban districts. operation. In 2010 we plan to complete construction of a cable line from PS kV “Massivnaya” in Chelyabinsk “Massivnaya” to RP “Rodnik”.

Company's 2009 Back to Contents >> business report 55 2009 Operating results

Local grids Implementation of our united grid zone strategy (by acquisition and concluding consolidation rental contracts) resulted in a considerable and creation increase of the Company’s share on com- of the united munal market. Thus, in 2009 we concluded 6 long-term rental contracts with municipalities grid zone and various institutions. On the whole, we within the concluded 37 rental contracts, servicing more that 35 700 c.u., as well as acquired more Company’s than 4 400 c.u. service area

Asset value (RUR, Rental price Specifications Energy supply, Losses, thous. thous., incl. VAT ) (RUR, thous., thous. kWh per kWh per year incl. VAT) km MVA c.u. year Permenergo 188 984.18 5 900.00 1 455.74 258.79 7 538.87 337 286 88 814 Sverdlovenergo 24 266.54 31 879.91 1 358.3 131.52 6 498.98 307 070.47 119 373.38 Chelyabenergo 53 433.1 - 30.38 17.6 200.5 37 385.33 954.58 ОАО “IDGC of Urals” 266 683.82 37 779.91 2 844.42 407.91 14 238.35 681 741.8 209 141.96

In 2010 we shall continue integrating regional energy facilities. We also try to prolong our present rental contracts and conclude new ones. We plan to conclude 13 new rental contracts with municipalities and other proprietors (overall service volume - 32 000 c.u.)

We plan to conclude 13 new rental contracts with municipalities and other proprietors (overall service volume - 32 000 c.u.)

2010 2011 ВСЕГО: Acquisition, Acquisition, Acquisition, RUR, thous. RUR, thous. RUR, thous. Acquisition of grid assets 193 857 227 000 420 857

Sverdlovenergo 80 287 120 000 200 287

Permenergo 26 975 77 000 103 975

Chelyabenergo 86 595 30 000 116 595

Long-term financial investments 23 435 23 435 46 870

INTERREGIONAL DISTRIBUTIVE G RID C OMPANY IDG C Back to Contents >> 56 OF URALS Client Relationship

Our main activities are based on the client- support departments and centers as well centric strategy aimed at improving client as persons, authorized for client relations, relationship. We created and maintain the perform the following functions: system designed to ensure management, >>Registration and processing of consumer control and efficiency evaluation of registra- complaints/ applications; tion and application review procedures. Our >>Creation and update of data base for our main tasks we strive to reach within our united telephone client support center client-oriented strategy are as follows: (TCSC); >>Registration and quick processing of con- >>Building-up and control of information sumer complaints/ applications; exchange on consumer disconnection >>Control of consumer service processes; between district dispatchers and our united >>Creation and development of “live” con- telephone client support center; sumer support centers; >>Control over consumer service grade; >>Maintenance and development of united >>Building-up regular feedback process (con- telephone client support; sumer questioning); >>Optimization and unification of interaction >>Building-up CRM system designed for satis- between consumers and IDGC/ branches/ fying their fair claims. structural units; >>Shaping internal client-oriented environment. To increase customer service grade and ensure the principle of single contact point, client relationship is supported by special subdivisions – CR department in Chelyabenergo, Client Relations Center in Permenergo. To reach the goals, the client

Our main activities are based on the client-centric strategy aimed at improving client relationship

Company's 2009 Back to Contents >> business report 57 2009 Operating results

2009 Requests were submitted to us through our united client support center as well as complaint and Permenergo telephone support. The subject application of the requests was as follows: analysis Number of requests 2008 2009 Connection 545 563 Energy transmission 6 497 10 229 Metering 1507 1 592 Bill payments, discounts 2 253 1 173 Questions from external companies 45 59 Inquiries 10 875 9 926 Energy stealing 349 75 Other questions 250 288 Total 22 321 23 905

Request analysis resulted in the following conclusions: >>Due to the territorial expansion of our >>Due to informing consumers using other united telephone client support we observe sources (media, information stand, hand- an increase in number of requests; outs, corporate web-site) we observe a >>Due to improved quality of retail suppliers’ decrease in requests for information. operations we observe a decrease in number of requests related to energy retailing (bill payments, discounts);

Development During 2009 our united TCSC operated only in >>Equipping with new appliances and devices Chelyabinsk and Sverdlovsk regions, we had enabling to increase client service efficien- of consumer a separate TCSC of our Permenergo branch. cy basing upon cutting-edge technologies communica- Since December 2009 our united client sup- of call processing (communications tions port began to operate in Perm region in a test channel increase, update of information mode. Since 01.01.2010 our client support service and registration system, changes in channels operates on the overall service area. Besides information operator support). TCSC we have two “live” client support cen- >>Ensuring operations of our united TCSC on ters in Chelyabenergo’s production divisions the entire IDGC’s service area. (“Magnitogorsk grids” and “Central grids”). >>Creation of “live” client support center Our main goals in 2010 lie in overall efficient at Sverdlovenergo’s production division development of client service system which (Nizhny Tagil grids). includes a range of technological and organi- >>Deep analysis of the feedback. zational measures:

INTERREGIONAL DISTRIBUTIVE G RID C OMPANY IDG C Back to Contents >> 58 OF URALS Information technologies

Information telecom system of OAO “IDGC as data storage and network-user manage- of Urals” is a wide-area IT infrastructure. ment services). Automation of the Company’s System maintenance and support represent subdivisions and branches comprises auto- a number of services (application manage- mation of financial, economic and operating ment services, technological services as well activities.

Computerized One of the Company’s most important infor- In 2008-2009 our branches completed mation systems is a computerized dispatcher management of main and reserve channels technological management system (CDMS) comprising for dispatcher communication and techno- management 3 independent branch segments. CDMS in logical data transmission between own grids systems each branch ensures acquisition of operat- management systems (GMS) and dispatcher ing grid status data; interaction between our centers in production divisions. Therefore, productive divisions, telematics exchange all three GMS contain technical pack- and cooperation with CDMS of the regional ages enabling GMS to perform its operating dispatcher center of ОАО “System operator of functions. UES”. The CDMS consists of appliances and devices, grid management centers, system of telematics data acquisition and transmission as well as telematics system.

Telecommuni- Our telecom system is a transporting envi- e-mail services, corporate telephone network, ronment, enabling the management of all dispatcher fixed-line and mobile services as cations business processes, based on communica- well as audio and video conferencing. tion channel network uniting all Company’s objects. The Company’s personnel has an access to business and technological management systems, access to Internet and

Program OAO “IDGC of Urals” possesses 351 metering devices (overall number is 1701) that were for creation mounted at our expense. We also concluded (update) of contracts on metering data exchange. wholesale Therefore, ОАО “IDGC of Urals” is able to obtain information on the volume of energy energy transmitted to our regional networks using market FMS both own and allied fiscal metering systems.

Company's 2009 Back to Contents >> business report 59 Содержание

INTERREGIONAL DISTRIBUTIVE G RID C OMPANY IDG C Back to Contents >> 60 OF URALS Tariffs

Company's 2009 Back to Contents >> business report 61 Tariffs

Energy transmission tariffs

Energy transmission tariffs are approved are flat for all consumers at the same voltage by local executive tariff authorities (Perm, level, located within the limits of the region Sverdlovsk, Chelyabinsk regions) within and belonging to one group (category), ir- ultimate tariffs adopted by the Federal Tariff respective of the grids they are connected Service. Detailed information on our tariffs to. ОАО “IDGC of Urals” is a holder of united can be found at section “To Clients”. (boiler) tariffs. Boiler tariffs include expenses According to the Russian legislation, energy on energy transmission services incurred by transmission tariffs for each branch of ours all grids in a certain region.

Analysis of 2006-2010 average transmission tariff (RUR/MW, no VAT)

2006 2007 change 2008 change 2009 change 2010 change 07/06 08/07 09/08 10/09 Permenergo 417 510 22% 533 4.6% 618 16% 819 32% Sverdlovenergo 330 417 26% 447 7.3% 545 22% 723 33% Chelyabenergo 233 362 56% 382 5.4% 446 17% 740 66% ОАО “IDGC of Urals” 322 421 31% 446 6% 531 19% 750 41%

In 2009 the growth of our average transmis- Average transmission tariff sion tariff totaled 19%, meanwhile the growth (RUR/MW, no VAT) of the required gross revenues (RGR) reached 24%. In 2010 the tariff grew by 41% (RGR - by 11%). A considerable growth of 2010 average tariff was caused by the recession, evident Sverdlovenergo as the decrease of productive supply used Chelyabenergo in overall forecast balance (as compared to ОАО “IDGC of Urals” 2009) and fixed costs on maintaining reliabil- Permenergo ity and high-quality transmission services set forth by legislation.

INTERREGIONAL DISTRIBUTIVE G RID C OMPANY IDG C Back to Contents >> 62 OF URALS The structure In our expense structure federal factors tariff system (Permenergo). On the whole, contribute 42% of the revenues (payments the overall maintenance expense growth ap- of the to FSK UES, loss compensation expenses). proved by regulators in 2009 totaled 24% (8% approved The growth is determined by the Federal Tariff in 2010). Average inflation reached 11.7%, RGR from Service and wholesale market liberalization. 2010 inflation is forecast by the Ministry of Economic Development at 6.1%. Exceedence transmission Transmission services rendered by local grids are paid by OAO “IDGC of Urals” (“boiler” over inflation during the tariff setting is services holder), according to the tariffs approved by imposed by the required priority development regulators for every grid company. Share of of the grid infrastructure (tariffing required expenses for services rendered by other grids investments) to prevent restraining post- is different at the revenue structures of our crisis economy development since there branches. It depends upon the number of are infrastructure limitations of industry and grids comprising the regional “boiler”. In the residential development. Sverdlovsk region the “boiler” tariff scheme is Investment expenses, taken from revenues, in force since 2007. The number of compa- totaled RUR 1 540 mln. in 2008 tariffs, 2009 nies comprising the “boiler” is the largest investment component, contained in the among the regions and totaled approx. 100 transmission tariffs, increased by 60% (RUR companies. They contribute 37% to the 2 470 mln.) and, irrespective of the reces- Sverdlovenergo’s RGR (the Permenergo’s sion, is retained at RUR 2 250 mln. RGR – 18%, the Chelyabenergo’s RGR – approx. 7%). The required gross revenues for maintaining the Company’s activities (expenses on equipment maintenance and exploitation, repairs, salaries, taxes, income spent on development) are calculated and approved according to the “Expenses+” tariff system (Sverdlovenergo and Chelyabenergo) and RAB

The structure of the approved RGR from transmission services

Cost of losses

Payments to OAO “FSK UES” Cost of services rendered by other grids Cost of own maintaining expenses

In our expense structure federal factors contribute 42% of the revenues

Company's 2009 Back to Contents >> business report 63 Tariffs

RAB methodology

RAB (Regulatory Asset Base) methodology transmission was of no interest to investors is a system of the long-term tariff regulation, until very recently, since grid companies had based on the regional demand in infrastruc- no healthy profit and adequate yield on the ture investments, ensuring return and yield invested capital. Such situation was bred by of invested capital. One of the fundamental the traditional tariff mechanism. The neces- ideas of the energy sector reforms lies in tran- sity of changing this tariff system has been a sition to tariffs that will enable companies to debating point for a long time but real steps obtain economically sound profit and to raise promoting the change were made only in investments for further development. Energy 2008.

Transition to RAB enables the companies to obtain economically sound profit and to raise investments for further development

Permenergo FST Decree #204-e/2 dd. 14.10.2008 “On tariffs are approved in compliance with an- approval of ultimate maximum transmission nual amendments to the decree. Permenergo tariffs in the Perm region” approved 2009- is a 100% “boiler” holder. Individual two-rate 2011 ultimate two-rate voltage-differentiated non-differentiated tariffs to be paid to local tariffs. Alongside with the above-mentioned grids are annually approved. decree, the Perm regulator adopted its Flat “boiler” tariffs are calculated by RAB decree (#89-e dd. 16.12.2008 “On long-term methodology. Basic RAB parameters are as flat (boiler) transmission tariffs in the Perm follows: region”) that approved 2009-2011 two-rate tariffs for our Permenergo branch. Residential

Full invested capital RUR 41 024 452.90 thous. Residual invested capital RUR 21 011 725.00 thous. Return rate for the capital invested prior to 01.01.2009 2009 – 6 % 2010 – 9 % 2011 – 12 % Return rate for the capital invested since 01.01.2009 12 % Return duration 35 years Consumer price index 2009 – 8.4 % 2010 – 7.0 % 2011 – 8.2 % Operating expenses efficiency index 1% Net working capital RUR 454 930.97 thous. Expense elasticity ratio (assets number) 0.75

INTERREGIONAL DISTRIBUTIVE G RID C OMPANY IDG C Back to Contents >> 64 OF URALS Due to the recession, evident as but not limited to productive supply decrease in the Perm region, our Permenergo branch does not receive all the proceedings, calculated according to RAB parameters. The situation evolved into a significant decrease of our investment plans:

RUR thous., no VAT 2009 2010 Approved in Actual Change Calculated according to long-term Forecast Change tariff RAB parameters Revenues 11 274 297 10 597 255 -677 042 13 810 057 11 920 487 -1 889 570 Investment program 3 467 933 743 183 -2 724 750 5 036 547 1 749 066 -3 287 481

To prevent the situation in 2011 we plan to request the federal regulator to exceed flat “boiler” tariffs over the approved ultimate tariffs or to review the latter. Besides, following the end of the first long-term regulation period, we plan to request the regulator to include the shortfall in revenues into the next regulation period. In accordance with Federal decree #30-r dd. 19.01.2010, Sverdlovenergo and Chelyabenergo will shift to the RAB system since 01.01.2011.

Sverdlovenergo and Chelyabenergo will transit to RAB on 01.01.2011

Company's 2009 Back to Contents >> business report 65 Содержание

INTERREGIONAL DISTRIBUTIVE G RID C OMPANY IDG C Back to Contents >> 66 OF URALS Internal control and risk management

Company's 2009 Back to Contents >> business report 67 Internal control and risk management

Internal control system

The To ensure efficient resource use, asset >>The Regulations on Internal Control preservation, law observance and reliable Procedures (approved by the BoD decision, development financials we created internal control system Protocol# 49 dd. 26.12.2008); of our internal in 2008. All procedures and processes of the >>The Regulations on the Internal Control and control system are regulated by the following internal Audit Department (ICA department); documents: >>The Regulations on the procedures for system >>The Regulations of the BoD Audit arrangement of inspections held by the Commission (approved by the BoD, internal control and audit department. Protocol #45 dd. 09.09.2008);

Participants The Board of Directors defines the internal Internal control is focused on our main lines control policy and evaluate the efficiency of of activities, including but not limited to finan- of the internal the internal control procedures. The Audit cial, economic, and investment operations. control Committee of the BoD generally evaluates system the internal control procedures, including statements and reports prepared by the ICA department. The CEO is responsible for the internal control procedures proper. The ICA department directly evaluates the adequacy, sufficiency and efficiency of the internal control procedures as well as executes control over procedure observation.

The BoD

The ICA The CEO department

Internal control system

Other The Audit subdivisions Committee

INTERREGIONAL DISTRIBUTIVE G RID C OMPANY IDG C Back to Contents >> 68 OF URALS 2009 results According to the schedule the ICA department During 2009, apart from the inspections, the had seven auditor inspections of our subsidiary department held non-scheduled thematic and associated companies (SACs), 11 inspec- inspections on certain violations, internal and tions of financial and operating activities in external correspondence, tender documentation the Company’s subdivisions, 1 inspection of and technical enquiries submitted for tenders financial and operating activity of a Company’s (in terms of ultimate prices for services) as well subsidiary. To reinforce control over expenses, as prepared expert reports on the documents document preparation and tendering processes submitted by the tender participants (in terms of we created an ICA directorate within the ICA project and constructing services). department. The schedule inspections were The ICA department constantly improves the selective and focused, primarily, on the following internal control and risk management system. activities: Alongside with the measures, taken to improve >>Auditing activities in purchasing, investments, the internal control system, we elaborated repairs and connection. and adopted the Regulations on inspections >>Auditing observance of the local acts by the performed by the ICA department as well as the Company’s subdivisions; guidelines on pricing design and construction >>Auditing receivables and payables accounting; services. >>Auditing expenses on external and internal services; >>Auditing accounting, property preservation and usage; >>Auditing financial and operating activities in SACs by the audit commissions; >>Exercising control over elimination of violations revealed by the previous inspections.

Risk management

The activities of OAO "IDGC of Urals" are af- With a view to prevent potential risks, OAO fected by a range of factors that are beyond the "IDGC of Urals" regularly monitors social Company's control. Many of the risk factors be- economic and normative legal environment, low are of macroeconomic character and typical forecasts international economic environ- for any company. Certain business segments are ment, elaborates possible future scenarios and subjects to certain risk factors. Risks in energy strategic plans and executes control over opera- transmission, to a certain extent, derive from tions. Decisions on risk management taken by risks in the wholesale and retail energy markets. our top managers are in compliance with the These developing markets, in their turn, are current Russian legislation and provide good more risky than developed markets (dealing balance between positive effect from decisions with other products and services) and include and expenses caused by implementing them. significant legal, economic and political risks. Implementing decisions we constantly analyze Dynamic development of these markets enables their practical effectiveness. Main risk manage- us to suppose that this information can quickly ment methods used by OAO "IDGC of Urals" become obsolete. The current information include: uncertainty and the dynamism of the factors can >>Insurance (property, industrial objects and influence the Company's future activities, asset transport, civil liability, medical insurance, sale and observance of maturity dates. Besides, etc.); several risks, being currently insignificant, can >>Diversification of retail market with a view to become economically viable in future. allocate consumers in overall volume; Risk management in OAO "IDGC of Urals" is >>Rejection to work with unreliable contractors; exercised on a systematic ongoing basis. The >>Diversity in purchasing materials, equipment, Company is always active in detecting events services to reduce the Company's depen- having potentially bad influence on any aspect dence on certain contractors; of its activity, in evaluation and control of >>Rejection to promote investment projects would-be negative consequences or possibili- with a potentially high risk level. ties of such consequences, in implementation To minimize the risks all remarks and com- of efficient measures on risk minimization or ments, prepared by the ICA department during liquidation as well as in correcting the results their inspections, are analyzed, and recom- of the chosen strategy. The risk management mendations on the correction and prevention of system is focused on achieving the Company's such situations are given. aims, decreasing the possibility of potential losses, providing long-term stable operations and observing the balance of interest of all interested parties.

Company's 2009 Back to Contents >> business report 69 Internal control and risk management

Industry risks

Energy transmission as well as connection and volumes, introduction of tender selection to networks is state-regulated activities. of service and supplier companies, provision Therefore, regulator's approval of the tariffs of system reliability. directly influences the gained revenues. This Risk management in industrial safety is causes the following risks: ensured by observing the federal legislation >>Approved tariffs are lower than economi- on industrial safety and our industrial safety cally viable levels. control system. >>Revenues are reduced due to changes in real structure of energy transmission (as com- Ecological risks, evidenced as possible trans- pared to the one used while approving tariffs). former oil leakages (due to absence of oil >>Extra expenses, related to cross-subsidi- receivers) into rivers and lakes that may lead zation, that disable setting economically to oil pollution on fishing grounds. Infringes viable tariffs for the Company; of nature-protection legislation may impose >>Risks related to alterations in legislation on high fines on the Company. To decrease market pricing electric and power energy. ecological risk OAO “IDGC of Urals” adopted the Ecological Policy Realization Program and The RAB tariff methodology additionally arranges activities on open air protection, creates the risks of disagreement with sound water and ground use. In the course of regulating authorities over evaluation results the activities, envisaged by the perspective of the initial investment base, prepared by technical update and reconstruction program, independent appraisers, and the approval of the Company replaces its obsolete equipment yield rate at the level below economically vi- and components by modern ones designed able. As a result, we may encounter problems to ensure high ecological safety. For further with investment financing. improvement of environmental activities we The Company’s measures to manage the risks: implement the system of ecological manage- >>Cooperation with the federal and regional ment, compliant with the ISO-14001-2004. regulators on economic feasibility of ex- The absence of development plans in some penses included into tariffs as well as on regions and cities give rise to the risk of changing the Russian pricing legislation, uncertainty on ultimate volumes of en- keeping in mind disco's interests in setting ergy transmission. Besides, the risk is also energy tariffs on retail markets; connected with uncertainty on the end of >>2. Elaboration and integration of long-term the recession. These circumstances make regional development programs as well as it impossible to accurately forecast sector conclusion of contracts with regional and investments which could satisfy growing de- local authorities that would stipulate the mand in mid- and long-term perspective. This volumes of investments; risk mainly affects fulfillment of obligations >>3. Reduction of the Company's expenses; in terms of energy transmission. To minimize >>4. Gradual transition to the RAB tariff model the risk the united sales department of our enabling to secure long-term investments Company cooperates with the federal and into grids as well as to decrease the influ- local authorities on elaboration of regional ence of subjective factors onto tariffs. economic development plans in mid- and Unsatisfactory equipment status (physical long-term perspective. It also cooperates with and moral depreciation) is the reason for the regulators on setting transmission tariffs operational risks. These risks include: promoting investment component, focused >>Deterioration of operating and economic on the increase of transfer capacity. equipment indicators; Risks, related to possible price change >>Unfavorable ecological consequences; on materials, spare parts and services on >>Danger of accidents with partial or full en- foreign markets, do not occur since we do ergy shortage ending in unfavorable social not transmit energy and buy spare parts consequences; and equipment abroad. The risk of possible >>Risk of personnel industrial injuries; domestic price change, primarily decrease, is >>Danger of chronic accidents. viewed as unlikely. These risks can be mini- The occurrence of the risks may lead to ac- mized by increase of operating efficiency by cidents (equipment breakdown) and building implementing operating expense decreasing destruction. Chronic accidents can lead to programs (creation of competitive environ- system separation, consumer rolling black- ment while purchasing goods and services, outs and critical mode operations. To prevent optimization of repair and capital expendi- the risks the Company takes all measures to tures, etc.) and well-balanced financial policy. provide equipment and building reliability at Taking into account the above-mentioned, the appropriate level, namely: 100% fulfill- we consider that possible deterioration of ment of repair programs, implementation situation in the industry is able to affect the of modern non-stop diagnostics methods, Company's activities but they should not constant optimization of spare part structure impact greatly its liability discharge.

INTERREGIONAL DISTRIBUTIVE G RID C OMPANY IDG C Back to Contents >> 70 OF URALS Federal and regional risks

ОАО "IDGC of Urals" operates in Russia and this reduced loan financing and well-balanced explains the dependence of its operating results financial policy. upon social and economic domestic situation. ОАО "IDGC of Urals" regularly interacts with Risks, related to social economical and political the federal institutions and other interested processes in Russia, are beyond the Company's parties to reduce the effect made by the risks. control. Russian economy is only partially Risks related to the regional geography, includ- protected from international market recessions ing disaster danger, possible transportation and delays in economic development. Financial termination due to remoteness and/or inacces- problems and escalated risks of investing into sibility, do not have a significant impact on the emerging countries during financial crisis cut Company's operations, since the service area is the volume of foreign investments and had not largely subject to the mentioned risks. Risks a negative impact on the Russian economy. of disaster danger are viewed by the Company Besides, since Russia produces and exports as minimal. Possibility of armed conflicts and large volumes of gas and oil, Russian economy national or regional emergency is insignifi- is oil and gas price-sensitive. Oil price reduction cant. In case of possible armed conflicts, the already considerably slowed down the develop- Company may be under the risk of asset dam- ment of the Russian economy. The recession age. The risks, including those with unplanned has limited the access of the majority of eco- expenses to mitigate the consequences, are nomic entities, including OAO "IDGC of Urals", to covered by insurance. debt capital markets and had a negative impact on purchasing power of our consumers. In December 2009 rating agency “Standard and Poor’s” revised its rating forecast on the RF ratings (from “Negative” to “Stable”) and confirmed long- and short-term foreign currency ratings at “BBB/A3” and national currency rating at “BBB/A2”. The risk of decrease in the Russian sovereign rating, according to the evaluations provided by Standard and Poor's, Fitch, Moody's, may have a negative impact on the national and regional economies. Besides, sovereign credit rating decrease, as a rule, causes decrease in credit ratings of financial institutions, operating in Russia, and this has a negative effect on various economy sectors and directly increases risks for many economic entities, including ОАО "IDGC of Urals". The Company cannot directly influence the increase of the Russian credit rating. However, we suppose that the decrease of the sovereign rating will not strongly affect our activities. It is also noteworthy that the company has a positive public credit history (successful redemption of our 2 bond issues in 2008 and 2009 according to public offers) and regularly discharges its obligations to banks. Regional risks in our operations mainly occur when a regional regulator ignores some of the economically viable expenses, submitted by us to be included into the corresponding tariff. This circumstance can have a significant impact on the Company's investment program. Changes in political situation in our service area with a negative impact on our activities and economic situation cannot be predicted. The majority of these risks are beyond our control due to the scale of the risks. In case the national and regional political and economical situation destabilizes and nega- tively affects our operations, the Company will take anti-recessionary measures to decrease negative effect as much as possible, including decrease and optimization of operating costs and other expenses, reduced investments,

Company's 2009 Back to Contents >> business report 71 Internal control and risk management

Financial risks

ОАО "IDGC of Urals", as any economic entity, forecasts (namely up to 30-40% per year), is subject to various financial risks. Since we plan to limit expense growth, to decrease ОАО "IDGC of Urals" does not provide services receivables and the average turnover period abroad and the Company's contractors are (including changing the terms of the current Russian residents, service prices and obliga- contracts) as well as to maximize tariff growth tions are nominated in Russian rubles, the within normative limits. Nevertheless, ОАО risk of currency exchange rate is viewed "IDGC of Urals» views the possibility of high as low. Since OAO “IDGC of Urals” has open inflation in mid-term perspective as a very low credit lines in several banks and interest rate one due to declared intentions of the Russian changes influence the activities of economic government and Central Bank to carry out entity, there exists the risk of interest rate anti-inflation policy. changes. To minimize the risks the main aim of the Company is providing stable cash flow, covering expenses on operating, investment and financial activities. While planning 2009 budget OAO “IDGC of Urals” took a range of measures including investment program decrease and investment efficiency increase, 2009 cost optimization and keeping borrowings at an appropriate level. Our main consumers are power supply companies supplying energy to end users. Therefore, main buyer-related risk is the risk of receivables increase due to violation of payment discipline by end users and necessity to obtain additional credit resources. There is also the risk of fund insufficiency of the Company's bank accounts due to temporal cash deficiency between getting money from supply company and financing current operations. To minimize the risks ОАО "IDGC of Urals" carries out well-balanced credit policy and manages the receivables (optimization). Besides, the Company executes control over contractors' payment discipline as well as plans to increase the share of direct contracts with consumers in own sales structure. In case of situation deterioration and increase of non-payments the Company plans to use regional authorities and courts to solve the problems. Inflation directly depends on political and economical situation. According to official data, 2004 inflation in Russia totaled 11.7%, 2005 inflation - 10.9%, 2006 inflation - 9%, 2007 inflation - 11.9%, 2008 inflation - 13.3%, 2009 inflation – 8.8%. Negative inflation effect on our activities can be related to the following risks: >>Risk related to losses in real value of receivables in case of significant payment delays; >>Risk of interest payable increase; >>Risk of prime cost increase due to price increase on energy carriers, transportation services, wages and salaries, etc.; >>Risk of decrease in real value of investment objects. If inflation growth exceeds the regulated tariff growth, the Company's profitability will decrease. Therefore, in case of considerable growth of real inflation over the Government

INTERREGIONAL DISTRIBUTIVE G RID C OMPANY IDG C Back to Contents >> 72 OF URALS Legal risks

Since we operate in Russia and do not export payments. The corresponding normative legal goods and services, we may face the risks acts often have obscure wording or terms occurring domestically. This is typical for with no precise legal definition. Besides, the majority of businesses operating in Russia. Russian Ministry for Finance and the Federal The businesses encounter with legal risks, Tax Service, authorized to provide official related to controversial interpretation of le- explanations of tax legislation, often give gal norms that may lead to incorrect taxation explanations and comments which contradict and tax payments. To reduce the risks our both tax legislation norms and relevant legal accounting and legal departments constantly practice. Fiscal bodies are guided by the acts improve tax base methodology and control and documents of the mentioned bodies compliance with the current legislation. which are aimed solely at refilling budgets Besides, there are also risks of losses related on different levels, moreover, often doing vio- to legislation changes as well as incorrect lence to rights and legal interests of taxpayer. legal document preparation and activities Preparation and submission of tax reports, maintenance. To minimize the risks all opera- alongside with other elements of tax relation tions undergo an obligatory preliminary legal regulation system, are the competence of, expertise. primarily, tax institutions which enjoy the right We, alongside with all joint-stock companies to charge additional taxes, levies and fines. operating in Russia, can face the risk of legis- As a result, tax risks in Russia are consider- lation changes (federal laws and subordinate ably higher than tax risks, typical for countries legislation) regulating shareholder and with developed market economy and tax corporate relations. ОАО “IDGC of Urals”, as system. Tax risk may include: possibility of an issuer, is subject to the risks of sharehold- new taxes and levies; possibility of current tax ers’ appeal on major and interested parties rate increase; tax base extension, changes in transactions (when such transactions are terms and order of tax payments and report- concluded without proper preliminary BoD ing. The most significant tax risk for OAO or AGM approval as well as those approved "IDGC of Urals" is the risk of tax rate increase. with violations). To minimize the risks the In our opinion, the Company fully observes Company has an obligatory preliminary legal tax legislation in terms of its operations, but analysis of transactions with a view to find still this does not eliminate potential tax risks reasons for preliminary corporate procedures in case of changes in the federal fiscal policy stipulated by the legislation in force and/ in relation to certain taxes and levies as well or the Charter. In case of necessity such as changes (not for taxpayer benefit) in court transactions are submitted for review by the practice on certain tax cases. According to competent management bodies of ОАО “IDGC Article 5 of the Russian Tax Code, we aspire to of Urals”. plan our financial and operating activities taking into account changes in tax legislation. Shareholder relations risks include the register risks, “greenmail” risks, risks of The Company also undergoes the risks non-friendly shareholder activities aimed related to changes in court practice on the at putting AGM in jeopardy. To minimize the issues related to our operations (including risks the Company’s register is administrated licensing) which can have a negative impact by a professional registrar (operating since on results of such operations as well as re- 1990-s) which traditionally occupies top sults of the current issuer’s lawsuits. The our lines in registrar ratings (including "reliability" activities are subject to risks related to the criteria). The Company also takes measures legal system in Russia. These risks include, aimed at shareholder relations - information particularly, possible contradictions between disclosure in the order stipulated in normative the Russian legislation and legal acts of local legal documents as well as meetings between executive bodies and local regional authori- the Company's management and sharehold- ties as well as the lack of court practice on ers aimed at explanation of current operating applying several legal acts. At the moment the issues in the Company's activities. possibility of changes in court practice related to our activities is viewed as insignificant and Like any other company the Company is a will not have a great influence on our activi- taxpayer. In its activities the Company faces ties. In case the changes are introduced, we the risks related to tax legislation altera- shall plan our financial and operating activi- tions. Currently tax relations in Russia are ties according to these changes. regulated by the Russian Tax Code, a range of federal laws adopted in compliance with the Russian Tax Code, regional laws as well as subordinate legislation of local authorities. Official list of taxes and levies includes VAT (value-added tax), income tax, property tax, unified social tax and other obligatory

Company's 2009 Back to Contents >> business report 73 Содержание

INTERREGIONAL DISTRIBUTIVE G RID C OMPANY IDG C Back to Contents >> 74 OF URALS Shareholder equity and securities

Company's 2009 Back to Contents >> business report 75 Shareholder equity and securities

Shareholder equity

The Charter capital of ОАО “IDGC of Urals” The Charter capital is represented by did not change during 2009 and, as of 87 430 485 711 common shares with the 31.12.2009, totaled RUR 8 743 048 571.1. nominal value of RUR 0.1 per each.

Outstanding and declared shares as of 31.12.2009:

Shares Number Nominal value (RUR) Outstanding common shares 87 430 485 711 0.1 Declared common shares 2 475 713 367 0.1

Shareholder capital structure Overall number of accounts, belonging to as of 31.12.2009 the Company’s shareholders and nominal holders registered in the Company’s register, as of 01.01.2009, totaled 18 116 accounts, as of 31.12.2009, it amounted to 17 904 accounts.

Nominal holders

Legal entities Natural persons The largest holder of the Company’s shares is OAO “Holding IDGC” (nominal holder – ООО “Depositary and corporate technologies”). It possesses 51.52% of voting shares. Large stock share is possessed by the following FAUGI OAO “Holding IDGC” nominal holders: ZАО “Depositary clearing company” (33.53%), ZАО “National deposi- Others tary center” (5.60%), ZАО “ING Bank Eurasia” ZAO “DKK” (1.0%). NP “NDC”

ZAO “ING Bank”

Information on our shareholders (exceeding 1%) as of 31.12.20091

Holder Number of common shares % of overall shares ООО “Depositary and Corporate Technologies” (Nominal holder) 45 041 557 954 51.52% ZАО ”Depositary Clearing Company” (Nominal holder) 29 103 807 614 33.53% ZАО “National depositary center” (Nominal holder) 4 892 430 148 5.60% Federal Property Fund (FAUGI) 3 245 685 561 3.71% ZАО “ING Bank Eurasia” 870 582 524 1.00% Other 4 066 021 840 4.64%

1 according to the data submitted by OAO “Central For information on the current structure Moscow Depositary” of shareholder capital and cross-holding, please, visit ”Shareholder Capital” at Section “Investors and Shareholders” of the corporate web-site.

INTERREGIONAL DISTRIBUTIVE G RID C OMPANY IDG C Back to Contents >> 76 OF URALS The company and stock market Quotation As of 31.12.2009, common shares of ОАО “IDGC of Urals” were listed and traded at lists Quotation lists “B” of the leading Russian stock exchanges - ОАО “SE “RTS” and ZAO “SE “MICEX”.

Information on the Company’s shares

Exchange Ticker Trading volume1 Capitalization Share price as of 31.12.2009 as of 31.12.2009 ОАО “Stock exchange “Russian MRKU (classic market) RUR 38 108 460 RUR 20 983 316 571 RUR 0.26 Trading System” MRKUG (exchanging market) ZAO “Stock exchange “Moscow MRKU RUR 573 585 510.03 RUR 22 329 746 051 RUR 0.2563 Interbank Currency Exchange”

1 RTS and MICEX data

General During 2009 situation on global and domestic banks as well as increase in commodity financial markets was very stringent. In 1Q prices. In 3Q and 4Q 2009 global stock indi- overview of 2009 the market was shocked by negative ces continued to grow. Global markets rally the stock news from the USA and Europe. In 2Q 2009 stopped at the end of the year, when macro- market the market was influenced by the following economic positive features were overcome by positive factors: meeting of G-20 leaders harmful news from Dubai World investment that proposed specific measures on global fund which was on the verge of wreck as well economy recovery after the recession, disclo- as negative news from Greece with its large sure of decent quarterly reports by American national debt.

Dynamics of FTSE, NASDAQ, NIKKEI and the Russian stock indices RTS and MICEX in January-December 2009 (stock exchange data)

RTS MICEX

month

Company's 2009 Back to Contents >> business report 77 Shareholder equity and securities

Overview The dynamics of the Company’s shares, on the changes in market value of other Russian the whole, echoed main trends of the RTS companies. A considerable revaluation of of the and MICEX indices but still was better than the grids happened in the end of 3Q and 4Q Company’s market itself. During 1Q 2009 quotes were 2009 after the Government recommended share trading in sideways trend, however, in 2Q 2009 the the regulator to shift all the grids to the RAB quotes began to grow and this coincided with system.

Dynamics of the Company’s quotes Dynamics of the Company’s quotes and the MICEX and MICEX PWR indices in 2009 and the RTS and RTSeu indices in 2009

IDGC of Urals IDGC of Urals

month month

According to the data provided by the stock totaled RUR 573.6 mln., in share terms - exchanges, as of December 31, 2009, the 3 445.5 mln. The Company’s capitalization, trading volume in RTS since January 2009 as of 31.12.2009, increased by 187.0%, as totaled RUR 38.1 mln. (343.1 mln. shares). compared to January, 2009 and totaled RUR On MICEX the trading volume in money terms 22.3 bln.

Bonds

After 2008 merger when ОАО “Permenergo”, bln. into 2 bond issues of OAO “IDGC of Urals” ОАО “Sverdlovenergo” and ОАО (01- and 02-series). In May, 2008 02-series “Chelyabenergo” merged into OАО “IDGC of bond issue was redeemed in full according Urals” there was a conversion of Permenergo to the offering. After public offering in May bonds (01-series) and Chelyabenergo bonds 2009 ОАО “IDGC of Urals” acquired 99% of (01-series) with the overall value of RUR 1.6 01-series bonds.

Information on activities on the debt market in 2009

Issue Volume Coupon rate Placement date Maturity date Status IDGC of Urals, RUR 1 000 000 000 1-6 coupon – 8.15% 30.04.08 22.05.12 99% redeemed (May, 2009) 01 series 7-10 coupon – deter- Offer -27.05.09 4-01-32501-D mined by the issuer 25.05.10 IDGC of Urals, RUR 600 000 000 8,4% 30.04.08 13.05.10 100% redeemed 02 series (May, 2008) 4-02-32501-D

As of 31.12.2009, 1 638 01-series bonds were in circulation. As of the reported period, ОАО “IDGC of Urals” paid out the 4th coupon (RUR 40 640 thous.) and 5th coupon (RUR 67 thous.).

INTERREGIONAL DISTRIBUTIVE G RID C OMPANY IDG C Back to Contents >> 78 OF URALS Dividend history

ОАО “IDGC of Urals” did not adopted a a decision not pay out 2008 dividends. Net decision on dividend payout (quarterly and profit equaling RUR 861 352 thous., accord- 2005-2006 dividends). In April, 2008 the ing to shareholder decision, was distributed Management Board of ОАО RАО “UES of as follows: enterprise development (RUR Russia”, the Company’s AGM, took a decision 818 284 thous.), reserve fund (RUR 43 068 to pay out 2007 dividends (RUR 4.0 mln). thous.). On June 19, 2009 the Company’s AGM took

Dividend history of ОАО “IDGC of Urals”

Period, share category Dividend per share, RUR Overall dividends, RUR Paid as of 31.12.2008 (RUR) 2007 Common 0.0015941 4 007 863.86 4 007 863.86 2008 Common - - -

According to the merger contract the Company binds itself on dividend payout on ОАО “Permenergo”, ОАО “Sverdlovenergo” and ОАО “Chelyabenergo”.

Dividend history of DGCs merged into OAO “IDGC of Urals”.

Period, share category Dividend per share, RUR Overall dividends, RUR Paid as of 31.12.2008 (RUR) ОАО “Permenergo” 2003 Common 5.825 210 928 842.00 210 405 797.07 Preferred 5.825 66 134 137.50 64 754 019.63 9М 2004 Common 18.09 655 056 266.40 653 390 695.51 Preferred 18.09 205 384 815.00 200 930 554.58 2005 Common 2.1803694 78 953 269.50 78 718 002.05 Preferred 8.1792162 92 862 731.71 90 670 759.70 2006 Common 2.0458756 78 083 121.36 77 781 192.09 Preferred 5.80586429 65 916 881.32 63 908 633.04 ОАО “Sverdlovenergo” 2003 Common 0.1447 75 683 626.06 75 437 493.33 Preferred 0.1447 25 227 529.29 24 615 358.38 9М 2004 Common 0.273 142 783 632.29 142 242 936.1 Preferred 0.273 47 569 185.09 46 361 772.42 2004 Common 0.353883 185 086 806.40 184 434 876.28 Preferred 0.353883 61 662 724.10 60 330 162.28 2005 Common 0.01342 7 018 889.80 6 988 571.33 Preferred 0.01342 2 338 390.62 2 267 064.41 2006 Common 0.0619594 32 405 816.91 32 281 617.08 Preferred 0.0619594 10 796 181.70 10 455 475.42 ОАО “Chelyabnenergo” 9М 2004 Common 0.0377 202 451 482.00 202 052 640.85 Preferred 0.09 50 084 752.52 46 935 298.98 2004 Common 0.0093035 43 236 963.31 43 931 757.34 Preferred 0.007871 6 762 918.21 6 068 124.18 2005 Preferred 0.003961 3 403 368.56 2 927 804.06

Company's 2009 Back to Contents >> business report 79 Содержание

INTERREGIONAL DISTRIBUTIVE G RID C OMPANY IDG C Back to Contents >> 80 OF URALS Corporate governance

Company's 2009 Back to Contents >> business report 81 Corporate governance

The structure and principles of corporate governance

ОАО “IDGC of Urals” places a special empha- activities, including its financial status, sis on corporate governance on the principle social and ecological indicators, perfor- that high quality of corporate governance is mance results, shareholding and managing a main factor for its successful activity, and structure as well as free access to informa- this finally determines its reputation and tion required for all interested parties). investment attractiveness. Development The Company observes the requirements of corporate governance enables enhance- set forth by the Russian legislation on ment of business process efficiency and their corporate governance. ОАО “IDGC of Urals” transition to a new quality level. To ensure strives to adhere to recommendations of the high-quality corporate governance and to gain Russian Corporate Governance Code (rec- understanding between the Company and its ommended for use by the Russian Federal shareholders OAO “IDGC of Urals” assumed Securities Commission – Decree #421/r dd. obligations to adhere to the following funda- 04.04.2002) and corporate governance prin- mental principles of corporate governance in ciples approved by the leading international its activities: practice. For detailed information on observ- >>fairness (assuming obligations to ensure ing our Corporate Governance Code, please, equal attitude to all stockholders and to visit Section “Corporate Governance” at our enable efficient protection when their rights corporate web-site. are violated); >>management accountability (bearing Our corporate governance system com- responsibility to stockholders for efficient prises the General Shareholder meeting, management and proper control over the Board of Directors, collegiate executive body Company’s activities and acting according (Management Board) and sole executive body to the approved decision-taking system); (General Director or CEO). >>transparency and timely information disclosure (disclosing reliable information on significant facts related to the Company’s

Corporate governance system as of December 31, 2009 General Shareholder Meeting Board of Directors General Audit Commission Managing Director Board Head Personnel and Remuneration Committee Office Strategy and Development Committee Connection Committee

Permenergo (regional branch) Reliability Committee Sverdlovenergo (regional branch) Audit Committee Chelyabenergo (regional branch)

INTERREGIONAL DISTRIBUTIVE G RID C OMPANY IDG C Back to Contents >> 82 OF URALS Management and Control Bodies

In accordance with the Charter of OAO “IDGC >>The Regulations on the Procedure for of Urals”, our management bodies are the Convention and Arrangement of the Board General Shareholder Meeting, Board of of Directors of OAO “IDGC of Urals” (ap- Directors, Management Board and General proved by the Management Board of ОАО Director. The Audit Commission is a body for RАО “UES of Russia”, protocol #1829 pr/3 controlling financial and operating activities dd. 28.02.2008). of the Company. >>The Regulations on the Management To ensure shareholder rights to manage Board of OAO “IDGC of Urals” (approved the company and to take decisions on the by the Management Board of ОАО RАО most important issues we have the following “UES of Russia”, protocol #1829 pr/3 dd. internal documents, regulating management 28.02.2008). bodies, listed below: >>The Regulations on the Audit Commission >>The Charter of ОАО “IDGC of Urals” (ap- (approved by the Management Board of proved by the Management Board of ОАО ОАО RАО “UES of Russia”, protocol #1865 RАО “UES of Russia”, protocol #1829 pr/3 pr/3) dd. 28.02.2008) The Charter and other internal documents, >>The Regulations on the Procedure regulating the activities of our management for Convention and Arrangement of bodies, can be found at Section “Internal the General Shareholder Meeting of Documents” of our corporate web-site. OAO “IDGC of Urals” (approved by the Management Board of ОАО RАО “UES of Russia”, protocol #1829 pr/3 dd. 28.02.2008)

The General Shareholder Meeting

The supreme management body of ОАО Company’s annual report, annual accounting “IDGC of Urals” is the General Shareholder statements (including profit and loss state- Meeting (GSM). The procedure for conven- ments), 2008 profit distribution, election of tion and arrangement of the Company’s BoD and MB members as well as approval of GSMs is stipulated by the Charter and the the Company’s auditor. Regulations on the procedure for convention The full version of the protocol can be found and arrangement of the Company’s GSM. Our at Section “Corporate Governance” of our AGM held on June 19, 2009 (AGM protocol corporate web-site. #1) adopted resolutions on approval of the

Company's 2009 Back to Contents >> business report 83 Corporate governance

The Board of Directors

The BoD administers the Company’s ac- powers, including pre-term cancellation of tivities, except for the issues referred by the their employment agreements; Federal Law “On Joint-Stock Companies” >>approval of the Company’s business and the Charter to the GSM competence. The plan (adjusted business plan), including BoD ensures functioning of control over the investment program and reports on their Company’s executive bodies, efficient interac- execution as well as approval (adjustment) tion between the Company’s bodies as well of control cash flow indicators; as protection and observation of rights and >>creation of branches and representative legitimate interest of our shareholders. The offices, their liquidation as well as introduc- BoD competence includes decision-taking on tion of amendments related to creation the following key issues: of branches and representative offices >>determination of the Company’s priorities (including changes in names and residence and strategy; of branches and representative offices) and >>convention of annual and extraordinary liquidation to the Charter; GSM as well as announcement of a new >>determination of the Company’s pur- GSM date instead of a failed one due to the chasing policy, including approval of the lack of quorum; Regulations on the procedure for purchas- >>approval of a GSM agenda; ing goods and services; >>placement of Company’s bonds and other >>adoption of a resolution on the CEO’s pro- issue securities, except for the cases stipu- motion for state awards; lated by the Russian legislation; >>determination of the Company’s policy >>approval of an Issue Decision, Prospectus aimed at increasing reliability of grids and and Issue Result Report, approval of other electric devices and equipment, in- reports on buy-back, reports on share cluding approval of the Company’s strategic retirement results, reports on buy-back programs on increasing reliability of grid demand results; complex, development of grids and their >>determination of price (monetary appraisal) safety. for property, placement and buy-back The BoD consists of 11 members. The BoD prices in cases stipulated by the Federal members are elected by the GSM till the next Law “On Joint-Stock Companies”; AGM. According to a GSM resolution, the pow- >>election of the Company’s CEO and pre- ers of the BoD members can be terminated term termination of the CEO’s powers pre-term. including adoption of resolution on pre- term cancellation of the CEO’s employment The BoD, active prior to the AGM held on agreement; June 19, 2009, was elected on the AGM >>determination of the MB membership, held on April 30, 2008 (protocol of the MB of election of the MB, setting of the remunera- ОАО RАО “UES of Russia” #1865 pr/3# dd. tions and compensations paid to the MB 30.04.2008) consisting of 11 members: members, pre-term termination of their

INTERREGIONAL DISTRIBUTIVE G RID C OMPANY IDG C Back to Contents >> 84 OF URALS BACKGROUND INFORMATION1

Aleksandr Nikolayevich CHISTYAKOV BoD Chairperson Born in 1973 Education: Saint Petersburg University of Economics and Finance. Since 2002 First Deputy MB Chairperson at ОАО “FSK UES”.

Konstantin Vladimirovich SHEVCHENKO BoD Deputy Chairperson Born in 1977 Education: Drexel University (USA, 1998). Since 2006 Director of Moscow representative office of “EDM Electricity Distribution Management (Cyprus) Limited”

Aleksey Olegovich BOBROV Education: Sverdlovsk Law Institute. Born in 1968 Since 2005 General Director of ОАО “IDGC of Urals” (till March, 2009)

Yuri Vitalyevich LOGINOV Education: Russian University of Peoples’ Friendship (2004). Born in 1981 Since 2008 Head of Section of Corporate Governance and Development Department at GK “Rosnanotekh”.

Petr Mikhailovich EROKHIN Education: Urals Polytechnics Institute. Born in 1946 Since 2002 General Director of the Urals ODM branch of ОАО “SO UES”.

Aleksey Dmitriyevich GLUSCHENKO Education: Irkutsk State Economic Academy. Born in 1974 Since 2007 Senior vice-president of Strategy Arrangement Center at ZАО “UES”.

Pavel Ivanovich OKLEY Education: Omsk Institute of Railroad Engineers. Born in 1970 Since 2008 Deputy General Director – Technical Director at ОАО “Holding IDGC”.

Vyacheslav Mikhailovich KRAVCHENKO Education: Moscow State University (1995). Born in 1967 Since September, 2008 up to present – General Director at ООО “RN-Energo”.

Tatyana Vladimirovna GAVRILOVA Education: State Institution of High Economics School. Born in 1982 Since September, 2006 up to present – analyst at “Halcyon Advisors”.

Pavel Sergeyevich LAZOVSKY Education: Karaganda Polytechnics Institute. Born in 1949 Since 2005 General Director at MES of the Urals branch of ОАО “FSK UES”.

Leonid Evgenyevich SPITSYN Education: Moscow State University (1985). Born in 1963 Till July, 2008 Head of IT Department at OАО RАО “UES of Russia”

1 all BoD positions are as of the election date

Company's 2009 Back to Contents >> business report 85 Corporate governance

The AGM held on June 19, 2009 elected the BoD consisting of 11 members:

BACKGROUND INFORMATION1

Nikolai Nikolayevich SHVETS BoD Chairperson Born in 1956 Education: Military Academy of General Staff (1997). Since 2009 up to present General Director at ОАО “Holding IDGC”

Konstantin Vladimirovich SHEVCHENKO Education: Drexel University (USA, 1998) Born in 1977 Since 2006 up to present Director of Moscow representative office of “EDM Electricity Distribution Management (Cyprus) Limited”

Svetlana Andreyevna MURAVYOVA Education: Moscow State University (2008) Born in 1973 Since 2006 up to present Head of Corporate Section at Moscow representative office of “EDM Electricity Distribution Management (Cyprus) Limited”

Sergey Nikolayevich POPOVSKY Education: Krasnoyarsk Non-ferrous Metals Institute (1993). Born in 1971 Since 2008 up to present Deputy MB Chairperson at NP “Market Council”

Valery Mukhamedovich SHOGENOV Education: International University (Moscow, 2002). Born in 1981 Since 2008 up to present Deputy Department Director at Russian Ministry for Energy

Sergey Nikolayevich IVANOV Education: Moscow Engineer Physical Institute (1984). Born in 1961 Since 2008 up to present First Deputy MB Chairperson at ОАО “FSK UES”

Petr Mikhailovich EROKHIN Education: Urals Polytechnics University (1969). Born in 1946 Since 2002 up to present General Director of the Urals ODM branch of ОАО “SO UES”

Valery Nikolayevich RODIN Education: Urals Polytechnics Institute (1974) Born in 1952 Since 2009 up to present General Director at ОАО “IDGC of Urals” Shares in the charter capital – 0.0081%

Andrei Borisovich LUKIN Education: Saint Petersburg State Technical University (1994). Born in 1970 Till 2009 Director (Head) of Strategy and Development Center at ОАО”Holding IDGC”

Yuri Nikolayevich PANKSTYANOV Education: State University of Management (2002) Born in 1980 Since 2008 up to present Head of Tariff Department at ОАО “Holding IDGC”

Aleksey Vladimirovich DEMIDOV Education: Saint Petersburg Institute for Trading and Economics (1998). Born in 1976 Since 2009 up to present General Director for Economics and Finance at ОАО “Holding IDGC”

1 all BoD positions are as of the election date

No transactions on share acquisition and alienation were performed by the BoВ members during the reported period. To ensure objectivity of the taken decisions and balance of interest expressed by different shareholder groups the Company strives to have at least 3 (three) independent directors.

INTERREGIONAL DISTRIBUTIVE G RID C OMPANY IDG C Back to Contents >> 86 OF URALS The BoD remuneration

Criteria determining amount and payment >>Additional remuneration paid for net profit frequency of the BoD remunerations as (under Russian Accounting Standards) ap- well as amount of expense compensation, proved by the Company's AGM. related to execution of the BoD member’s >>Additional remuneration paid for increasing functions, are stipulated by the Charter and the Company's market capitalization during the Regulations on BoD Remuneration and the BoD terms of office. Compensations (approved by the Company's The BoD Chairman's remuneration is AGM on 30.04.2008). increased by 50%. Total remunerations in According to the Regulations, the BoD remu- 2009 totaled RUR 4 028 493, including the neration consists of fixed and variable parts BoD, active prior to the GSM held on June 19, and includes 3 payment categories: 2009 - RUR 2 122 760; as well as the BoВ, >>For each BoD session in which a BoD mem- active after June 19, 2009 RUR 1 905 733. ber participated (individual work). Thereby, participating in an extramural BoD session, a BoD member earns 5 minimum monthly tariff rates of 1 grade worker, set forth by sector tariff agreement in Russian Electricity Sector as of the date of the session (intramural session - 10 tariff rates);

The BoD activity in 2009

The BoD sessions are held on a regular basis, The BoD also regularly reviewed CEO’s re- but no less than once a month. In 2009 ports on various performance directions and there were 14 sessions, one of them was BoD resolution execution. In 2009 the BoD held intramurally. Among the most important approved 13 interested-party transactions. resolutions adopted by the Company’s BoD The review of such transactions is provided in in 2009 the following resolutions could be the Appendix herein. There were no transac- emphasized: tions acknowledged by the Federal Law “On >>Approval of target indicators for 2009 key Joint-Stock Companies” as major as well performance indicators; as other transactions which are, under the >>Approval of the Company’s 2009 business Charter, subject to major transaction approval plan (protocol #58 dd. 04.08.2009); procedure in 2009. >>Approval of the Annual purchasing program The resolutions adopted by the Company’s for 2009; BoD can be found at Section “Corporate >>Approval of the Company’s participation Governance”of our corporate web-site. in non-profit partnership “Energostroy” (protocol #61 dd. 13.11.2009) and “Energoproject” (protocol #63 dd. 29.12.2009) >>Election of new membership of the BoD committees (protocol #58 dd. 04.08.2009); >>Termination of powers and election of the Company’s MB (protocol #59 dd. 15.09.2009); >>Approval of the Regulations on managing the Company’s housing and communal utilities; >>Approval of a new version of the Corporate Governance Code (protocol #55 dd. 02.06.2009).

Company's 2009 Back to Contents >> business report 87 Corporate governance

The BoD Committees

For preliminary approval of the most impor- and liabilities, structure and membership tant issues and recommendations to the of the Committees. In their activities the BoD the Charter envisages Committees Committees adhere to federal laws, other nor- designed to take decision on the issues. The mative legal acts of the Russian Federation, BoD Committees are consultative bodies the Charter, the Regulations on the proce- enabling efficient general management by dure for convention and arrangement of BoD the BoD. The Committees are not managing sessions, BoD resolutions. As of 31.12.2009 bodies and are not authorized to act on the ОАО “IDGC of Urals” has the Audit Committee, Company’s behalf. The Committees perform Personnel and Remunerations Committee, according to the Regulations stipulating Strategy and Development Committee and the legal status, aims and goals, rights Reliability Committee.

The Audit The Audit Committee elaborates recom- legislation, Russian and international stan- mendations and proposals for the BoD that dards. The Membership of the Committee is Committee are related to arrangement of audit, reveal- determined by the BoD resolution and totals (the mem- ing and prevention of situations enabling three members. In 2009 there were 3 Audit bership was appearance of financial and operating risks. Committee sessions. The Committee analyzes the Company’s The current membership is as follows: elected on financials and results of the external audit 31.07.2009) for compliance with the current Russian

Yuri Nikolayevich PANKSTYANOV The Committee Chairperson, a BoD member of ОАО “IDGC of Urals”, Head of Tariff Department at ОАО “Holding IDGC” Andrei Borisovich LUKIN A BoD member of ОАО “IDGC of Urals” Svetlana Andreyevna MURAVYOVA A BoD member of ОАО “IDGC of Urals”, Head of Corporate Section at Moscow representative office of “EDM Electricity Distribution Management (Cyprus) Limited”

The resolutions adopted by the Audit Committee can be found at Section “Corporate Governance” of our corporate web-site.

INTERREGIONAL DISTRIBUTIVE G RID C OMPANY IDG C Back to Contents >> 88 OF URALS The Personnel The Personnel and Remunerations successful performance. The member- Committee ensures assistance to the BoD ship of the Committee is determined by the and Remu- in solving personnel, social and corpo- Company’s BoD and totals six members. In nerations rate governance issues. The main task of 2009 there were 5 session of the Committee. Committee the Committee is to involve highly-skilled The current membership is as follows: personnel to the Company’s management (the mem- and creation of impetus required for their bership was elected on 31.07.2009)

Viktor Evgenyevich LUTSKOVICH Committee Chairperson, Deputy Head of Personnel Department at ОАО "Holding MRSK" Natalya Ilyinichna ERPSHER Head of Organization Development Department at ОАО "Holding MRSK" Aleksei Alekseyevich KRASNIKOV Deputy General Director for Security and Control at ОАО "IDGC of Urals" Vladimir Mikhailovich MATYUK Personnel and Organizational Development Director at ОАО "IDGC of Urals" Svetlana Andreyevna MURAVYOVA A BoD member of ОАО “IDGC of Urals”, Head of Corporate Section at Moscow representative office of “EDM Electricity Distribution Management (Cyprus) Limited” Evgeny Vladimirovich LUGOVOY Investment analyst at Moscow representative office of "E.D.M. Electricity Distribution Management (Cyprus) Limited"

The resolutions adopted by the Committee can be found at Section “Corporate Governance” of our corporate web-site.

The Strategy The Committee is qualified to play the leading determined by the BoD resolution and totals role in determination of strategic aims of the seven members. In 2009 there were 5 ses- and Develop- Company’s activities, development of priori- sions of the Committee. ment Commit- ties, evaluation of the Company’s efficiency in The current membership is as follows: tee (the mem- the long-term perspective and elaboration of recommendations for the BoD on adjustment bership was of the current strategy. The membership is elected on 31.07.2009)

Vladimir Vasilyevich KUZNETSOV Committee Chairperson, Head of Strategy and Development Center at ОАО “Holding IDGC” Marina Aleksandrovna LAVROVA Deputy Head of Business Planning Department at ОАО "Holding MRSK" Sergey Aleksandrovich SEMERIKOV A member of the IDGCU’s MB, Deputy General Director for Capital Construction at ОАО “IDGC of Urals” Konstantin Vladimirovich SHEVCHENKO Director of Moscow representative office of "E.D.M. Electricity Distribution Management (Cyprus) Limited" Irina Vladimirovna BOGACHEVA Leading expert of Investment Department at ОАО "Holding MRSK" Olga Vladimirovna TKACHEVA Deputy Head of Corporate Governance and Shareholder Relations Department at ОАО "Holding MRSK" Dmitry Sergeyevich FEDOROV Investment analyst at Moscow representative office of "E.D.M. Electricity Distribution Management (Cyprus) Limited"

The resolutions adopted by the Committee can be found at Section “Corporate Governance” of our corporate web-site.

Company's 2009 Back to Contents >> business report 89 Corporate governance

The Reliabil- The Committee is aimed at elaboration and membership is determined by the BoD and submission of recommendations (con- totals six members. In 2009 there were four ity Committee clusions) to the BoD and executive body sessions of the Committee. (the mem- in evaluation of technical departments, The current membership of the Committee is bership was completeness and adequacy of measures on as follows: incident and large technological violations elected on as well as control over their execution. The 31.07.2009)

Olga Valentinovna ZUYKOVA Head of Production Control and Labor Protection Department at ОАО "Holding MRSK" Yuri Vyacheslavovich LEBEDEV A MB member, Deputy General Director for Technical Issues - Chief Operating Officer at ОАО "IDGC of Urals" Viktor Yakovlevich OVCHINNIKOV Deputy Chief Engineer for Technical Monitoring, Production Control and Labor Protection at ОАО "IDGC of Urals" Evgeny Vladimirovich LUGOVOY Investment analyst at Moscow representative office of "E.D.M. Electricity Distribution Management (Cyprus) Limited" Aleksandr Nikolayevich FILINKOV Director for mode management - chief dispatcher at Urals’ ODM branch of ОАО "SO UES". Aleksandr Mikhailovich ERMAKOV Head of section of Department for Capital Investment at ОАО "Holding IDGC".

The resolutions adopted by the Committee can be found at Section “Corporate Governance” of our corporate web-site.

The General Director

Operating control over OAO “IDGC of Urals” complex in the Sverdlovsk region. Under his is administered by the sole executive body management the energy sector of the Central - General Director. The CEO’s competence in- Urals has overcome 1998 non-payment cludes all the current operating issues, except crisis reaching the strategic aim lying in for issues referred to the GSM’s competence. reliable energy and heat supply to consum- General Director of OAO “IDGC of Urals” ers of the Sverdlovsk region. In 2005 Valery Valery Nikolayevich RODIN took up his post Rodin became the head of OAO “TGK-9” on March 30, 2009 according to a BoD reso- following Sverdlovenergo reorganization. lution (protocol #52 dd. 27.03.2009). In 2006 he began to work at OAO “TGK-1” (St. Petersburg), at first as the First Deputy Valery Nikolayevich RODIN was born in General Director - Acting General Director and Serov (the Sverdlovsk region), on May 01, later as the CEO. Valery Rodin was honorably 1952. In 1974 he graduated from the awarded with the title of “Honorable Power Urals Polytechnics Institute (qualified in Engineer of Russia”, “Energy Sector Veteran”, Thermal Power Plants). After graduation as well as the Certificate of Honor granted by and up to 1988 Valery Rodin worked at the Governor of the Sverdlovsk region. Iriklinskaya GRES, Orenburgenergo District Operational Department. He started as a The amount of the CEO’s remuneration, supervising foreman and was promoted according to item 18.6. of the Charter, is further up to the COO position. In 1988 determined by the employment agreement Valery Rodin was appointed as the COO of concluded between him and the Company. TEO Uralenergo (Ekaterinburg). In 1992 The terms of the CEO’s employment agree- he became the Chairman of Uralenergo ment are approved by the Company’s BoD. comprising the Urals energy complexes: His share in the charter capital is 0.0081%. Sverdlovenergo, Permenergo, Chelyabenergo, There were no transactions on acquisitions Orenburgenergo, Kurganenergo, Kirovenergo, or alienation of shares during the reported Udmurtenergo, Bashkirenergo. In 1994 period. Valery Rodin was appointed as the CEO of OAO “Sverdlovenergo”. For more than 10 years he successfully administered energy

INTERREGIONAL DISTRIBUTIVE G RID C OMPANY IDG C Back to Contents >> 90 OF URALS The Management Board

The Management Board of OAO “IDGC V.V. Kalsin (protocol #54 dd. 12.05.2009). of Urals” was created to clarify the most On September 11, 2009 the following important operating issues that should be persons were elected to the Company’s collegiately discussed and solved as well as MB – O.M. Abrosimova, chief accountant, conscious timely and efficient execution of and A.A. Krasnikov, Deputy General Director the BoD’s and GSM’s resolutions. The MB for Security and Controlling. On October 21, activities are regulated by the Charter and the 2009 the MB membership was extended Regulations on the Company’s Management up to 10 members. The following members Board. The Management Board consists were elected to the Company’s MB: E.G. of the most competent and experienced Popov, Deputy General Director for Corporate specialists able to properly discharge their Governance, O.B. Moshinskyi, Sverdlovenergo obligations on the Company’s performance. Director, O.M. Zhdanov, Permenergo Director The MB is presided by the Company’s CEO. as well as I.V. Butakov, Chelyabenergo On April 16, 2008 the BoD elected the Director. Company’s MB, membership totaling 7 per- Therefore, by the end of 2009 the Company’s sons (protocol #39 dd. 18.04.2008). On May Management Board comprises 10 members 08, 2009 the BoD terminated the powers of and is as follows: the following MB members - A.I. Sedykh and

Name Position Valery Nikolayevich RODIN The Management Board Chairperson. Born in 1952 CEO at ОАО „IDGC of Urals”(since March, 2009) Share in the charter capital is 0.0081% Yuri Vyacheslavovich LEBEDEV Deputy General Director on Technical Issues – Chief Operating Officer at OAO “IDGC of Urals” Born in 1963 Evgeny Gennadyevich POPOV Deputy General Director for Corporate Governance at OAO “IDGC of Urals” Born in 1959 Olga Mikhailovna ABROSIMOVA Chief Accountant at OAO “IDGC of Urals” Born in 1953 Share in the charter capital is 0.000947%. Aleksey Alekseevich KRASNIKOV Deputy General Director for Security and Controlling at OAO “IDGC of Urals” Born in 1950 Sergey Aleksandrovich SEMERIKOV Deputy General Director for Capital Construction at OAO “IDGC of Urals” Born in 1979 Sergey Mikhailovich ZOLOTAREV Deputy General Director for Development and Sales at OAO “IDGC of Urals” Born in 1966 Oleg Borisovich MOSHINSKYI Deputy General Director – Director at Sverdlovenergo branch of ОАО “IDGC of Urals” Born in 1969 Share in the charter capital is 0.00000128% Oleg Mikhailovich ZHDANOV Deputy General Director – Director at Permenergo branch of ОАО “IDGC of Urals” Born in 1959 Igor Vladimirovich BUTAKOV Deputy General Director – Director at Chelyabenergo branch of ОАО “IDGC of Urals” Born in 1961

There were no transactions on acquisitions agreements (including amount of remunera- or alienation of shares during the reported tion) concluded with the MB members on period. behalf of the Company are determined by According to the Charter, the employer’s the CEO. There are no remunerations paid rights and liabilities on behalf of the Company to the MB members for participation in MB are discharged by the BoD or a person autho- sessions. rized by the BoD. The terms of employment

Company's 2009 Back to Contents >> business report 91 Corporate governance

The Audit Commission

The Audit Commission is an independent performs according to the Regulations on body executing control over financial and op- the Audit Commission stipulating the legal erating activities of the Company. It is elected status, aims and goals, rights and liabili- by the AGM for the period ending on the date ties, structure and membership of the Audit of the next AGM, membership totaling 5 Commission. Control over the Company’s persons. The Audit Commission is indepen- operations is exercised by the following mem- dent from executive bodies of the Company’s bership of the Audit Commission elected by management bodies. The Audit Commission the AGM held on June 19, 2009:

Position1 Vitaly Valeryevich SHELKOVOY Deputy Head of Internal Audit Department at ZAO "IES" Sergey Borisovich SIDOROV Head of Internal Audit Department at ОАО “Holding IDGC” Irina Vasilyevna MIKHNO Deputy Department Head - Head of Section of Internal Audit Department at ОАО "Holding IDGC" Olga Vladimirovna ROKHLINA Leading Expert of Internal Audit Department at ОАО "Holding IDGC" Mikhail Vladimirovich SMIRNOV Head of Section of Corporate Governance and Shareholder Relations Department at ОАО "Holding IDGC"

1 all positions are as of the election date

The Audit Commission covers the following >>Analysis of timeliness and correctness of spheres: payments to contractors, various budgets, >>Audit of financial and operating documen- shareholders and other creditors; tation of the Company, including initial >>Analysis of payments of the Company’s accounting documents (if required); debtors (in terms of timeliness and ad- >>Monitoring of legality of resolutions and equacy of measures taken by our executive operations of the Company’s management bodies); bodies, including concluded contracts and >>Other activities within the competence of completed transactions; the Audit Commission. >>Audit of the conformity of the transactions’ The amount and procedure of remunera- terms to the terms of transactions, made tion payment to the Audit Commission are under the comparable circumstances; stipulated by the Regulations on remunera- >>Analysis of the conformity of accounting tions and compensations paid to the Audit policy to the current normative documents; Commission members approved by GSM. >>Analysis of the Company’s financial situation, reserve revelation for improving the Company’s economic situation;

External Independent audit of the Company’s finan- IDGC”. The tender commission recommended cials is exercised by an independent auditor ZAO “NP Consult” as the auditor for OAO auditor that is approved by AGM. In 2009 the auditor “IDGC of Urals” that was subsequently ap- nominee was chosen by the tender commit- proved as 2009 auditor by the AGM. tee on auditor selection for ОАО “Holding

Subsidiaries and Associated Companies. Participation in non-profit companies

In its SAC management system ОАО “IDGC of value. Thus, during 2009 the Company can- Urals” strives to optimize the asset structure celled its investments in ОАО “Bulat” Plant”. by reducing participation in non-core or ineffi- As of 31.12.2009, ОАО “IDGC of Urals” is a cient business as well as in business, unable stakeholder of the following companies: to consolidate assets for increasing their

INTERREGIONAL DISTRIBUTIVE G RID C OMPANY IDG C Back to Contents >> 92 OF URALS Name Type of activity Share in the Charter capital, Further Plans %/ Number of shares Subsidiaries ОАО “Ekaterinburg Electric Grid Energy transmission and distribution 91.044 / 983 278 240 Retaining its share Company”

ОАО “Ekaterinburgenergosbyt” Energy purchase and sales on wholesale and 91.044 / 983 278 240 Retaining its share retail markets OAO “Sverdlovskenergozhylstroy” Construction 100 / 80 000 000 Retaining its share ОАО “Permenergotrans” Forwarding operations 100 / 1 530 233 Retaining its share ОАО “Permelekrosetremont” Repair of energy equipment 100 / 853 389 Cancellation ZАО “Insurance company Insurance services 99.87 / 19 974 Cancellation “Privat-Energostrakh” ООО “Security Service “Permenergo” Security services 100 Retaining its share Associated Companies ОАО “Kurganenergo” Energy transmission and distribution 49 / 78 887 994 Retaining its share ZAO “Managing Company Stage of removal from United State Register 45 / 18 000 Cancellation “Energofinance” of Legal Entities Other Companies ОАО “OGK-2” Energy and heat production 0.000567 / 185 595 Cancellation ОАО “TGK-9” Energy and heat production 0.004150 / 325 277 400 Cancellation ОАО “Sverdlovnergosbyt” Energy purchase and sales on wholesale and 0.01738 / 121 240 Cancellation retail markets ОАО “FSK UES” Energy transmission and distribution 0.000054 / 624 009 Cancellation ООО “Insurance company “The ring Insurance services 7.4037 Cancellation of the Urals” ОАО “Perm Airlines” inactive 10 / 50 Cancellation ОАО “Uralenergostroy” Inactive. Under bankruptcy process 5.73 / 27 000 Cancellation

The overall financial investments of the Company (RUR 1 185 413 597) and other companies is RUR 2 290 056 852, including subsidiaries (RUR 11 438 960.). (RUR 1 093 204 295), associated companies

Participation in non-profit organizations ОАО “IDGC of Urals” participates in the following non-profit organizations:

Name Main line of activities Year of participation Non-profit Partnership “Innovations in the Energy Assistance in implementation and usage of the leading technical solu- 2006 Sector” tions in energy sector All-Russia Industry Association of the Energy Sector Protection of the interests of sector employers 2008 Employers Non-state Infant School “Ryzhiki” Upbringing, teaching and rehabilitation of children between 1-7 years old 2008 Non-profit Partnership “Training System“ Оказание услуг в области профессионального образования 2008 Non-state Pension Fund of the Energy Sector Pension provision for the fund members 2008 Non-profit Partnership “The Council of the Energy Support to veterans 2009 Sector Veterans” Non-profit Partnership “Energostroy” Assistance in increasing quality and safety of construction-assembly 2009 work on capital construction objects Non-profit Partnership “Energoproject” Development and approval of the Partnership’s normative docu- 2009 ments, including demands on competence certificates during project documentation.

Company's 2009 Back to Contents >> business report 93 Содержание

INTERREGIONAL DISTRIBUTIVE G RID C OMPANY IDG C Back to Contents >> 94 OF URALS Personnel policy and social responsibility

Company's 2009 Back to Contents >> business report 95 Personnel policy and social responsibility

The personnel policy of OAO >>Attraction and support of young professionals; “IDGC of Urals” is aimed at timely >>Elaboration of social programs; and adequate hiring of personnel >>Creation and support of organizational discipline, strengthening of duty performance possessing required qualification. and responsibility of personnel for their To reach the aim we take the following professional duties, strengthening of labor measures elaborated in accordance with the discipline; policy priorities: >>Shaping and strengthening of the >>Optimization and stabilization of full-time Company’s corporate culture. personnel of the key structural subdivisions The personnel policy is aimed at personnel care, of the Company; strengthening and development of personnel >>Elaboration of conative mechanisms in- potential as well as at creation of highly-duty creasing labor interest and satisfaction; team-oriented personnel able to respond to the >>Continuous perfection of personnel recruit- market changing demands. ment and development system to solve the current and future goals of the Company;

The Company’s personnel structure Changes in the structure and number of our shares of officers, clerks and workers did not personnel demonstrate general tendencies change significantly and demonstrate optimal of reorganization in the energy sector. In balance. The personnel category structure is 2009 the personnel totaled 11 585 (+1 590 characterized by domination of workers due persons on 2008) due to transition of meter- to specificity of technological process imply- ing, maintenance and repair as well as IT ing high level of labor input. services to non-contracted forms. In 2009

The Company’s personnel structure in 2007-2009 Our age structure is characterized by domi- in terms of personnel categories nation of personnel under the following age categories - up to 35 and from 45 to pensioners). For the last three years we observe an increase in number of young personnel and this characterizes us as a company attractive workers clerks officers for young specialists.

The Company’s age structure in 2007-2009

up to 35 years 35-45 years 45 years — working pensioners pensioners

The personnel structure in terms of education Our qualification structure given below is as of 31.12.2009 characterized by equality of workers with higher and second-level education. Turnover

highervocational secondary vocational general of employers in 2009 considerably decreased education education secondary education (2007 – 7%, 2008 – 6.4%, 2009 – 4.2%) and it demonstrates general tendency of personnel stabilization provided by correct selection, The Company's staff turnover dynamics arrangement and motivation of the personnel, social guarantees and compensations.

INTERREGIONAL DISTRIBUTIVE G RID C OMPANY IDG C Back to Contents >> 96 OF URALS Personnel training and development

The personnel development system of ОАО “IDGC of Urals” is regulated by the Regulations on personnel training and development, and includes training and development of technical staff, non-core staff and candidate pool development.

Training and development of technical staff

Training of this personnel category is regu- educational institutions with a educating lated by the Rules of personnel development license in productive, ecological, fire secu- in the Russian energy sector approved by the rity, labor protection (St. Petersburg Energy Russian Ministry of Energy. In 2009 techni- University, UGTU-UPI, Urals Center of Labor cal staff, especially workers, were trained in Protection for Energy engineers, KPK TEK, the the Sverdlovenergo training center (equip- Urals University of State Fire Service of the ment training, development of operating Russian Ministry of Emergency Situations, and repair staff). Apart from this training the Urals State Mining University, Perm State center, our specialists and officers attended Technical university, etc.).

Development of non-core staff

Non-core staff is trained within the education totaled RUR 11 869 thous. There Company’s operating and strategic aims also exist the following aspects in our system in various educational institutions of of personnel training: Ekaterinburg, Perm, Chelyabinsk, Moscow, >>Target preparation of the Company’s per- St. Petersburg (Law school “Statute”, Russian sonnel and students in higher schools and Fund of Educational Programs "Economics secondary-level educational institutions and Management", Institute of Advanced (extra- and intramural education in UGTU- Training of State Service, Academy of National UPI, PGTU and Urals energy colleges); Economy under the President of RF, etc.). >>Stipend projects (successful intramural In 2009 4 421 workers were trained (42% high-school and college students are of average headcount). 2009 expenses on granted with a stipend).

Candidate pool development

Arrangement and development of our candi- the candidate pool are as follows: production date pool is one of HR policy directions. The divisions in our regional branches (productive process involves both internal and external division director, chief operating officer, chief human resources. The arrangement of the accountant, etc.), in executive office (senior candidate pool is aimed at hiring of highly- and middle managers). Our candidate pool skilled personnel. Main positions covered by currently contains 884 employees.

Company's 2009 Back to Contents >> business report 97 Personnel policy and social responsibility

Social responsibility

Our social policy is one of the most important Our social program includes voluntary medi- directions, a constituent part of our internal policy cal insurance (VMI) and accident and illness aimed at ensuring social stability of the person- insurance, rendering medical services in health nel by social programs and activities. Our social posts, sanatorium-resort therapy, children health- program is mainly aimed at: promotion campaign, other cultural and health >>Care of personnel, their families and our promotion activities for personnel and their fami- industry veterans. lies, veteran care, non-state pension provision as >>Creation of socially responsible corporate well as discounts, guarantees and compensa- image for attraction and care of highly- tions stipulated by our collective agreement. skilled personnel. >>Creation of favorable labor atmosphere. >>Provision of appropriate living after retirement.

Social policy in 2009 1. Personnel health promotion: periodic 5. Voluntary Medical Insurance: number of health examination (5 030 employees), flue personnel that got various medical treat- and cephalitis vaccination (8 150 employment, including outpatient treatment, ees), rehabilitation and recovery treatment emergency service, rehabilitation and (280 employees). dental services totaled 10 019. 2. Support to workers and their families: num- 6. Non-state pension provision: we increased ber of children sent to sanatoriums and the amount of non-state pensions paid resorts – 1 150, personnel that received to war veterans, pensioners obtaining compensation for kindergartens – 2 180 non-state pension – 4 667 (number of employees. pensioners that arranged the pension in 3. Veteran Care, including WW2 participants 2009 is 656). (110 employees), workers on the home In 2009 all social programs were realized in front (508 employees): creation of the full. A special attention was paid to veterans Veteran Council, arrangement of veteran and children health promotion. As a result, clubs, rendering welfare assistance, ar- we observed a decrease in childcare sick lists rangement of veteran congratulations, and increase in the number of young special- collection of exhibits to the museum, ists (656 employees were retired). face-lifting of veteran apartments by young specialist council. 4. Accident and illness insurance: 6 146 employees are under insurance, including 4 246 of employees subjects to special risks.

Average salary One of the important parts of our personnel The salary is paid timely and in full. Average policy and personnel management system is a salary in the Company’s regional branches is system of material stimulation of the personnel. higher than average regional salary in 2009. It is aimed at uniting the Company’s interests This demonstrates that our regional branches and financial expectations due to increase in retain competitiveness among industrial labor satisfaction and further extension of self- producers and are still employees attractive for realization. The company strictly adheres to the personnel on the regional labor markets. requirements set forth by the labor legislation.

INTERREGIONAL DISTRIBUTIVE G RID C OMPANY IDG C Back to Contents >> 98 OF URALS Welfare and Charity

In 2009 we held two social projects – “OAO “IDGC of Urals” is a territory of good deeds” (collection of clothes, toys and other things for children) and “Donating blood you save lives” (donor blood campaigns). Charitable contributions were done by our personnel without financial support of the company. Our first project focused on day-care institutions dealing with orphans and children without parental custody. All in all, we helped more than 2 000 children living in the Urals orphan homes. Our second project involved 500 workers and focused on children undergoing treatment in the Urals oncology and hematol- ogy centers. In 2009 charitable financial support was approved only in Permenergo. Institutions and organizations covered by its charity program are parts of long-term charity projects of IDGC of Urals. Thus, during 2009 we supported public fund “Pearl of the Urals” (support and promotion of Perm Academic Theatre). Besides, in the Perm region we covered the following charity activities: care of the younger generation, revival of spiritual and historical centers.

Company's 2009 Back to Contents >> business report 99 Содержание

INTERREGIONAL DISTRIBUTIVE G RID C OMPANY IDG C Back to Contents >> 100 OF URALS Ecological policy

Company's 2009 Back to Contents >> business report 101 Ecological policy

In 2009 ОАО IDGC of Urals >>Water conservation: laboratory analysis of ground-water quality, cold water metering continued its activities aimed at on artesian wells. air and water protection, land >>Land conservation: ecological control conservation and decrease in over land near landfills, biochemical waste analysis. pollutant effects. Main legislation requirement is obligatory Thus, we took the following measures within payments for negative environmental impact. the frameworks of 2008-2010 Ecological Every quarter we make payments and coor- Policy Program: dinate them with Rostekhnadzor (Russian >>Air protection: development of drafts of Technical Supervising Body). sanitary protection norms, laboratory analysis over air quality and level of physical factors effects.

Payments for negative environmental impact, RUR thous. 2006 2007 2008 2009 Permenergo 738 1 628 1 774 1 698 Chelyabenergo 580 1 471 2 064 1 495 Sverdlovenergo 470 376 829 1 368 ОАО IDGC of Urals 1 788 3 475 4 667 4 561

Ecological expenses comprise activities under 208-2011 Ecological Policy Program, waste and drain disposal as well as ecological training for the personnel.

Ecological (direct and non-direct) expenses, RUR thous. 2006 2007 2008 2009 Permenergo 2 368 2 661 2 246 3 843 Chelyabenergo 1 240 1 570 903 3 378 Sverdlovenergo 4 733 7 030 6 307 6 155 ОАО IDGC of Urals 8 341 11 261 9 456 13 376

Payments for negative environmental impact

RUR thous.

INTERREGIONAL DISTRIBUTIVE G RID C OMPANY IDG C Back to Contents >> 102 OF URALS Company's 2009 Back to Contents >> business report 103 Содержание

INTERREGIONAL DISTRIBUTIVE G RID C OMPANY IDG C Back to Contents >> 104 OF URALS Contact information

Company's 2009 Back to Contents >> business report 105 Contact information

Should you have any questions that were not disclosed by this annual report, do not hesi- tate to contact us at the addresses provided below:

Full name Open Joint-Stock Company “Interregional Distributive Grid Company of Urals” Short name IDGC of Urals ОАО Location 140 Mamina Sibiryaka Ulitsa, Ekaterinburg, Russia, 620026 Postal address 140 Mamina Sibiryaka Ulitsa, Ekaterinburg, Russia, 620026 PSRN 1056604000970 TIN/ KPP code 6671163413/ 667250001 Bank details: Operating account #40702810300010000927, Central Subsidiary ООО KB “Agropromkredit” (Moscow), RCBIC 044525109 Correspondent account #30101810500000000109 in Operations Department of Moscow MTA of the Russian Central Bank E-mail: [email protected] Web-site www.mrsk-ural.ru Contact telephone: /343/ 215-26-00 /343/ 215-25-51 Corporate Secretary Sergey Anatolyevich GUSAK Corporate Governance Department Investor Telephone: /343/ 215-26-65 Relations Fax: /343/ 215-25-84 [email protected] Our registrar Name ОАО “Central Moscow Depositary” (ОАО “CMD”) Location 3B Orlikov Pereulok, Moscow Postal address 34/8 Bolshaya Pochtovaya Ulitsa, Moscow, 105082 Tax Payer Number 7708047457 Telephone (495) 221-13-34 License number 10-000-1-00255 Issued on September 13, 2002 Maturity date For an indefinite term Issuing authority Federal Securities Commission

INTERREGIONAL DISTRIBUTIVE G RID C OMPANY IDG C Back to Contents >> 106 OF URALS Shareholders can obtain detailed information on shareholding at our subsidiaries as well as the Registrar subsidiaries:

Perm Permenergo branch of ОАО IDGC of Urals 48 Komsomolsky Prospekt, Perm, 614990 Contact telephones /342/ 240-63-59 /342/ 240-62-63 Shareholder relations department Telephone: /342/ 240-67-36, /342/240-73-18 Fax: /342/ 240-73-60 Off. 327 48 Komsomolsky Prospekt, Perm, 614990 Perm branch of ОАО CMD 6th floor, 50 Lenina Street, Perm, 614990 Telephone/ Fax: /342/ 218-01-66 Chelyabinsk Chelyabenergo branch of ОАО IDGC of Urals 5 Revolutsii Square, Chelyabinsk, 454000 /351/ 267-85-20 Shareholder relations department Telephone: /351/ 267-87-04, /351/ 267-85-20 Fax: /351/ 267-80-10 Yuzhno-Uralsky branch of ОАО “CMD” 21 Timiryazeva, Chelyabinsk, 454091, Telephone: /351/ 265-87-10 Ekaterinburg Sverdlovenergo branch of ОАО IDGC of Urals 140 Mamina Sibiryaka Ulitsa, Ekaterinburg, 620000 Ekaterinburg branch of ОАО “CMD” 180 Soni Morozovoi Ekaterinburg, 620000

Company's 2009 Back to Contents >> business report 107 Содержание

INTERREGIONAL DISTRIBUTIVE G RID C OMPANY IDG C Back to Contents >> 108 OF URALS Abbreviations

Company's 2009 Back to Contents >> business report 109 Abbreviations

AC Audit Commission AGM Annual General Shareholder Meeting BoD Board of Directors BRIC Brazil, Russia, India, China CEO Chief Executive Officer COO Chief Operating Officer CU Conventional unit EGM Extraordinary General Shareholder Meeting ENES United national energy system FSC Federal Securities Commission GRES State Power station GSM General Shareholder Meeting IAS International Accounting Standards IDGC Interregional Distributive Grid Company IT Information technologies kV kilovolt kW kilowatt KTP Package substations MB Management Board MVA Megavoltampere OAO Form of business ownership in Russia (Open Joint-Stock Company) OLTC Open loop tracking complex OOO Form of business ownership in Russia (Limited Liability Company) RAS Russian Accounting Standards RUR Russian ruble SAC Subsidiary and associated company SCO Shanghai Cooperation Organization VMI Voluntary Medical Insurance ZAO Form of business ownership in Russia (Closed Joint-Stock Company)

INTERREGIONAL DISTRIBUTIVE G RID C OMPANY IDG C Back to Contents >> 110 OF URALS Company's 2009 Back to Contents >> business report 111 Содержание

INTERREGIONAL DISTRIBUTIVE G RID C OMPANY IDG C Back to Contents >> 112 OF URALS Appendices

Company's 2009 Back to Contents >> business report 113 Appendices

2009 Interested-party transactions1

Interested party Parties and subject of agreement Agreement Price Protocol #50 dd 13.02.2009 P.M. Erokhin was simultaneously a BoD member of OAO ОАО “IDGC of Urals” RUR 7 989 025 “IDGC of Urals” and a MB member of ОАО “SO UES”. ОАО “SO UES” (Tenant) Immovable asset lease A.N. Chistyakov was simultaneously a BoD member ОАО “IDGC of Urals” (Owner) - of ОАО “IDGC of Urals” and MB member of ОАО “FSK ОАО “FSK UES”. UES”. Additional agreement to contract on grid object usage dd. 20.09.2005 ОАО “Holding IDGC” possessing more than 20% of ОАО “IDGC of Urals” RUR 447 764.13 per month voting shares in ОАО “IDGC of Urals” (transactor), in af- ОАО “TGK-9” filiation with ОАО “IDGC of Urals” possessing more than ООО “SB “Permenergo” (Contractor) 20% of the other transactor (ООО “SB “Permenergo”). The Contractor renders security services of rooms, property and personnel of Permenergo. A.D. Gluschenko was simultaneously a BoD member ОАО “IDGC of Urals” (Client) Determined according to the in ОАО “IDGC of Urals” and a BoD member at ОАО OAO “TGK-9” price list for repair and calibra- “TGK-9”. Repair and calibration testing services tion testing services ОАО “Holding IDGC” possessing more than 20% of ОАО “IDGC of Urals” (Client) - voting shares in ОАО “IDGC of Urals” (transactor), OAO “Sverdlovenergozhylstroy” in affiliation with ОАО “IDGC of Urals” possess- Additional agreement to contract #162 dd. ing more than 20% of the other transactor (OAO 05.10.2006 between ОАО “IDGC of Urals” and OAO “Sverdlovenergozhylstroy”). “Sverdlovenergozhylstroy” A.D. Gluschenko was simultaneously a BoD member ОАО “IDGC of Urals” - in ОАО “IDGC of Urals” and a BoD member at ОАО OAO “TGK-9” (Tenant) “TGK-9”. Additional agreement to contract #95/1641 dd. 01.04.2005 on immovable asset leasing at 4 Chistopolskaya Ulitsa, Ekaterinburg Protocol #53 dd. 20.04.2009 P.M. Erokhin was simultaneously a BoD member of OAO ОАО “IDGC of Urals” RUR 1 018 244.64 per month “IDGC of Urals” and a MB member of ОАО “SO UES”. ОАО “SO UES” (Tenant) Additional agreement to leasing contract A.N. Chistyakov was simultaneously a BoD member ОАО “IDGC of Urals” (Contractor) Determined according to price of ОАО “IDGC of Urals” and a BoD member of ОАО ОАО “Glavsetservis UNES” calculation “Glavsetservis UNES”. Services on high-voltage and substation equipment testing A.D. Gluschenko was simultaneously a BoD member ОАО “IDGC of Urals” (Client) Overall price does not exceed in ОАО “IDGC of Urals” and a BoD member at ОАО OAO “TGK-9” RUR 5 mln and is determined “TGK-9”. Repair and calibration testing services according to the price list for repair and calibration testing services A.N. Chistyakov was simultaneously a BoD member ОАО “IDGC of Urals” (Lessor) RUR 79 675.28 per month of ОАО “IDGC of Urals” and a BoD member of ОАО ОАО “Glavsetservis UNES” “Glavsetservis UNES”. Leasing of immovable property, total area – 213.03 sq.m, location: 33 Malysheva Ulitsa, Nizhnyaya Tura, the Sverdlovsk region. ОАО “Holding IDGC” possessing more than 20% of ОАО “IDGC of Urals” RUR 26 732 per month voting shares in ОАО “IDGC of Urals” (transactor), ОАО “Ekaterinburgenergosbyt” in affiliation with ОАО “IDGC of Urals” possess- Additional agreement #2 to contract #00/131-08 dd. ing more than 20% of the other transactor (ОАО 05.02.2008 on local fixed-line services “Ekaterinburgenergosbyt”). ОАО “IDGC of Urals”, affiliated entity of ОАО “Holding ОАО “IDGC of Urals” RUR 28 384.9 per month IDGC” that possesses more than 20% of voting shares ОАО “Ekaterinburgenergosbyt” in ОАО “IDGC of Urals” (transactor), in affiliation with Additional agreement #3 to contract #00/131-08 dd. ОАО “IDGC of Urals” it possesses more than 20% of the 05.02.2008 on local fixed-line services other transactor (ОАО “Ekaterinburgenergosbyt”).

1 Our Board of Directors approved 30 interested-party transactions in 2009.

INTERREGIONAL DISTRIBUTIVE G RID C OMPANY IDG C Back to Contents >> 114 OF URALS Interested party Parties and subject of agreement Agreement Price A.N. Chistyakov was simultaneously a BoD member ОАО “IDGC of Urals” (Lessor) RUR 22 738.32 per month of ОАО “IDGC of Urals” and a BoD member of ОАО ОАО “Glavsetservis UNES” “Glavsetservis UNES”. The Contractor provides possibility of equipment and personnel placement ОАО “IDGC of Urals”, affiliated entity of ОАО “Holding ОАО “IDGC of Urals” (Lessor) RUR 1 299 852.74 per month IDGC” that possesses more than 20% of voting shares ОАО “Ekaterinburgenergosbyt” in ОАО “IDGC of Urals” (transactor), in affiliation with Additional agreement on renewal of contract #00/77- ОАО “IDGC of Urals” it possesses more than 20% of the 08 dd. 01.02.2008 on leasing of immovable property other transactor (ОАО “Ekaterinburgenergosbyt”). located at 17A Kosmonavtov Prospekt, Ekaterinburg A.N. Chistyakov was simultaneously a BoD member ОАО “IDGC of Urals” (Lessor) RUR 847 685 per month of ОАО “IDGC of Urals” and a BoD member of ОАО ОАО “Glavsetservis UNES” “Glavsetservis UNES”. Additional agreement #1 to immovable property leasing contract #0089 dd. 16.02.2009 P.M. Erokhin was simultaneously a BoD member of OAO ОАО “IDGC of Urals” RUR 15 749.42 per month “IDGC of Urals” and a MB member of ОАО “SO UES”. ОАО “SO UES” (Tenant) Additional agreement #3 to movable property leasing contract #109-11 dd. 01.02.2005 P.M. Erokhin was simultaneously a BoD member of OAO ОАО “IDGC of Urals” - “IDGC of Urals” and a MB member of ОАО “SO UES”. ОАО “SO UES” Agreement on protecting information being a commercial secret A.N. Chistyakov was simultaneously a BoD member ОАО “IDGC of Urals” RUR 22 691.64 per month of ОАО “IDGC of Urals” and MB member of ОАО “FSK ОАО “FSK UES” UES”. Services on prompt maintenance of equipment on 110 kV aerial line (Chaikovsky, the Perm region). Protocol #55 dd. 02.06.2009 ОАО “Holding IDGC” possessing more than 20% of vot- ОАО “IDGC of Urals” RUR 700 000 ing shares in transactors ОАО “Tyumenenergo” (Contractor) Contract on commutative services in arrangement of sport competitions Protocol #58 dd. 04.08.2009 V.M. Shogenov was simultaneously a BoD member ОАО “IDGC of Urals” (Contractor) - in ОАО “IDGC of Urals” and a BoD member in ОАО ОАО “Glavsetservis UNES” “Glavsetservis UNES”. Additional agreement to contract #043-212/09 dd. 15.04.2009 ОАО “IDGC of Urals”, affiliated entity of ОАО “Holding ОАО “IDGC of Urals” (Lessor) RUR 1 309 917.78 per month IDGC” that possesses more than 20% of voting shares ОАО “Ekaterinburgenergosbyt” in ОАО “IDGC of Urals” (transactor), in affiliation with Additional agreement #4 to leasing contract #00/77- ОАО “IDGC of Urals” it possesses more than 20% of the 08 dd. 01.02.2008 on providing additional room other transactor (ОАО “Ekaterinburgenergosbyt”). #218 (3rd floor), total area: 15.4 sq.m., located at 17A Kosmonavtov Prospekt, Ekaterinburg. Protocol #59 dd. 15.09.2009 V.M. Shogenov was simultaneously a BoD member ОАО “IDGC of Urals” (Lessor) RUR 125 650 per month in ОАО “IDGC of Urals” and a BoD member in ОАО ОАО “Glavsetservis UNES” “Glavsetservis UNES”. Contract on leasing immovable property in an office building located at: 5 Ploschad Revolutsii, Chelyabinsk ОАО “IDGC of Urals”, affiliated entity of ОАО “Holding ОАО “IDGC of Urals” RUR 2 344 569.14 IDGC” that possesses more than 20% of voting shares ОАО “EESK” in ОАО “IDGC of Urals” (transactor), in affiliation with Contract on support and development mySAP ERP ОАО “IDGC of Urals” it possesses more than 20% of the system other transactor (ОАО “EESK”). ОАО “IDGC of Urals”, affiliated entity of ОАО “Holding ОАО “IDGC of Urals” RUR 1 374 110 IDGC” that possesses more than 20% of voting shares ОАО “Ekaterinburgenergosbyt” in ОАО “IDGC of Urals” (transactor), in affiliation with Contract on support and development mySAP ERP ОАО “IDGC of Urals” it possesses more than 20% of the system other transactor (ОАО “Ekaterinburgenergosbyt”).

Company's 2009 Back to Contents >> business report 115 Appendices

Interested party Parties and subject of agreement Agreement Price ОАО “Holding IDGC” possessing more than 20% of vot- ОАО “IDGC of Urals” RUR 22 170 000 ing shares in ОАО “IDGC of Urals” (transactors) ОАО “Holding IDGC” Contract on arrangement of functioning and development of UES of Russia Protocol #61 dd. 13.11.2009 ОАО “Holding IDGC” possessing more than 20% of vot- ОАО “IDGC of Urals” - ing shares in ОАО “IDGC of Urals” (transactors) ОАО “Holding IDGC” Additional agreement #1 to contract on arrangement of functioning and development of UES of Russia (in terms of grids) ОАО “IDGC of Urals”, affiliated entity of ОАО “Holding ОАО “IDGC of Urals” (Agent), RUR 1 180 per one procedure, IDGC” that possesses more than 20% of voting shares ОАО “EESK” (Principal). no more than 2% of book value in ОАО “IDGC of Urals” (transactor), in affiliation with Legal and real activities executed on behalf of and of the Company’s assets ОАО “IDGC of Urals” it possesses more than 20% of the at the expenses of the Principal that are related to other transactor (ОАО “EESK”). purchasing materials and other resources, goods and services stipulated by the Regulations on the procedure of goods and services purchase arrangement for ОАО “EESK” Protocol #62 dd. 30.11.2009 Shareholder of ОАО “IDGC of Urals” (ОАО “Holding ОАО “IDGC of Urals” RUR 296 610.17 per month IDGC”), possessing more than 20% of voting share of ОАО “Engineer Center of the Urals Energy Sector” the other transactor (ОАО “Engineer Center of the Urals (Contractor) Energy Sector”), possessing more than 20% of voting The Contractor is obliged to elaborate technical shares ОАО “IDGC of Urals” documentation (stage “Working documentation. Adjustments”) on PS-220/10 kV “Anna” and overhangs of 220 kV aerial line ОАО “IDGC of Urals”, affiliated entity of ОАО “Holding ОАО “IDGC of Urals” (Assignor) RUR 5 575 402.68 IDGC” that possesses more than 20% of voting shares ОАО “Ekaterinburgenergosbyt” (Assignee) in ОАО “IDGC of Urals” (transactor), in affiliation with Contract on assignment of rights of demand ОАО “IDGC of Urals” it possesses more than 20% of the other transactor (ОАО “Ekaterinburgenergosbyt”). ОАО “IDGC of Urals”, affiliated entity of ОАО “Holding ОАО “IDGC of Urals” (Assignor) RUR 398 705.94 IDGC” that possesses more than 20% of voting shares ОАО «ЕЭСК» (Assignee) in ОАО “IDGC of Urals” (transactor), in affiliation with Contract on assignment of rights of demand ОАО “IDGC of Urals” it possesses more than 20% of the other transactor (ОАО “EESK”).

INTERREGIONAL DISTRIBUTIVE G RID C OMPANY IDG C Back to Contents >> 116 OF URALS Information on observing the requirements of the Corporate Behavior Code developed by the Russian Federal Securities Commission

Prepared according to the FSC’s Decree #03-849/r dd. 30.04.2003 on guidelines for arrangement of reports on observing Corporate Behavior Code in annual reports prepared by joint-stock companies

Statement of Corporate Behavior Code Observed/ Comments not observed General Shareholder Meeting Shareholder notification on holding a GSM no less Observed Our shareholder notification procedure is set forth in item 11.5, Art.11 than 30 days prior to the GSM date irrespective of the Charter. According to item 11.5 of the Charter: “The message on a of agenda issues unless legislation stipulates a GSM arrangement is published in Rossiyskaya Gazeta as well as at our larger term. corporate web-site within 30 (Thirty) days prior to GSM date”. Provisioning shareholders with a possibility of Observed The Company observes Art.51 of the Federal Law on Joint-Stock familiarization with the list of persons authorized to Companies. The list of persons authorized to participate in a GSM is participate in a GSM since the date when informa- provided for familiarization on the demand of the persons included onto tion on a GSM arrangement was announced and the list and possessing no less than 1% of votes. Meanwhile, passport until an intramural GSM is closed (in case of an details and postal address of natural persons shown in the list are dis- extramural GSM – until the deadline for voting closed only with their sanctions. papers’ receipt. Provisioning shareholders with a possibility of Observed According to Art. 52 of the Federal Law on Joint-Stock Companies and familiarization with the materials, subject to item 11.7, Art.11 of the Charter our shareholders have a possibility, disclosure during a GSM arrangement by electronic within 20 days (in case when a GSM agenda contains an issue on reorga- means of communications, including Internet. nization – within 30 days) prior to the GSM, of familiarization with GSM materials at the Company’s executive office and other places (addresses should be given in a message on a GSM arrangement). The familiarization procedure for persons authorized to participate in a GSM with information (materials) on its agenda and list of such information (materials) are determined by a resolution of our BoD. Besides, according to item 4.1 of the Regulations on the procedure of GSM convention and arrangement, the materials on GSM agenda should be published on the Company’s web-site no later than a shareholder notification on a GSM arrangement. These materials are also recommended to be published in English. Besides means, stipulated by the above-mentioned Charter article, the information is published on the corporate web-site at Section “Shareholders and Investors” both in Russian and English (http:// www.mrsk-ural.ru/ru/687). During preparation of our 2008 AGM we arranged special rooms for shareholders to get familiarized with the GSM materials at the location of OAO “IDGC of Urals”, OAO “Central Moscow Depositary” at location of our regional branches as well as on GSM date at GSM place. During our AGM held on June 19, 2009 these Charter requirements were fulfilled without violations. Provisioning shareholders with a possibility to Observed According to subitem 2, item 6.2, Art.6 of the Charter shareholders are introduce an issue to GSM agenda or to demand entitled to introduce proposals to GSM agenda in a way stipulated in the convention of GSM without submitting an extract Russian legislation and Charter. According to item 13.1, Art. 13 of the from the register in case his share rights are re- Charter shareholders (a shareholder) possessing in total no less than 2% corded in the shareholder register system (in case of voting shares, within 60 days following the end of financial year, are his share rights are registered at DEPO account authorized to introduce issues into GSM agenda and promote candidates – an extract from DEPO account for executing the to the BoD and Audit Commission. The Company provides shareholders above-mentioned rights). possessing more than 2% of shares a possibility to execute rights stipulated by the Charter and Russian legislation submitting an extract from DEPO account (in case his share rights are registered on DEPO account), no other documents required. A Requirement, stipulated by the Charter or inter- Partially observed Our Charter and other internal documents do not contain statements nal documents, on obligatory presence of the CEO, stipulating their obligatory presence at GSM, however, historically the MB members, BoD members, Audit Commission CEO is present at GSM. In accordance with item 10.10, Art.10 of our members and Company’s auditor at GSM. Charter GSM is presided by the BoD Chairperson. In case the BoD Chairperson and his deputy are absent, GSM is presided by any BoD member according to a resolution of BoD or BoD members present at GSM.

Company's 2009 Back to Contents >> business report 117 Appendices

Statement of Corporate Behavior Code Observed/ Comments not observed Obligatory presence of candidates while GSM re- Not observed There are no special statements in the Charter. Historically, when GSM views issues on the election of the BoD members, reviews issues on the election of BoD members, CEO, MB members, AC CEO, MB members, Audit Commission members members, all candidates receive GSM invitations. as well as an issue on approval of the Company’s auditor. Presence of items stipulated by the internal docu- Observed Item 5.1 of the Regulations on the procedure of GSM convention and ments on the participant registration procedure. arrangement defines the registration procedure of persons authorized to participate in GSM. Board of Directors Presence of items stipulated by the internal docu- Observed According to subitem 19, item 15.1, art.15 of the Charter, the BoD comments on BoD powers to approve financial plan on petence includes �approval of business plan (adjusted business plan) an annual basis. including investment program, and quarterly report on the execution; approval (adjustment) of control cash flow indicators; Presence of items stipulated by the internal docu- Observed Items 3.1, 5.1, 6.2, 6.4 of the Regulations of Internal Control Procedures ments on risk management procedure. (approved by a BoD resolution, protocol #49 dd. 26.02.2008) Presence of items stipulated by the Charter and Observed According to subitem 12, item 15.1, art. 15 of the Charter, the BoD other internal documents on BoD right to adopt competence includes authority to elect the CEO and pre-term terminate resolution on suspension of the authority exercised his powers, including adopting a resolution on pre-term cancellation of by the CEO appointed by GSM. his labor contract. Presence of items stipulated by the internal Partially observed In accordance with subitem 13, item 15.1, art. 15 of the Charter, the BoD documents on BoD right to set requirements to competence includes determination of MB membership, election of MB qualifications and remuneration of the CEO, MB members, setting of remunerations and compensations paid to them, members, heads of main structural subdivisions. pre-term termination of their powers, including pre-term cancellation of their labor agreements. Presence of items stipulated by the internal docu- Observed According to item 21.6, art. 21 of the Charter a labor agreement on ments on BoD right to approve terms of contracts behalf of the Company is signed by the BoD Chairperson or a person with the CEO and MB members. authorized by the BoD. Besides, according to item 21.7, art. 21 of the Charter, the BoD or person authorized by the BoD determines the terms of labor agreement with the CEO and MB members as well as, according to item 21.9, art. 21 of the Charter, exercises rights and liabilities of employer in relation to the CEO and MB members. Presence of items stipulated by the Charter and Not observed There is no such requirement in the Charter and other internal other internal documents on requirement that dur- documents. ing approval of the agreement terms with the CEO (managing company, manager) and MB members BoD votes belonging to the CEO and MB members are not counted. Presence of 3 independent BoD directors, meeting Observed The BoD includes no less than 3 (three) independent directors. All BoD the requirements of the Corporate Behavior Code. members, except for V.N. Rodin, the CEO, and N.N. Shvets, the BoD Chairperson, are independent. Absence of persons, found guilty in committing Observed There are no such persons in the BoD of OAO “IDGC of Urals” elected economic crimes or crimes against the state, by the AGM held on June 19, 2009, and there were no such persons in federal or local authorities or underwent penalty previous BoDs. under administrative law for offences in business activities or in the sphere of finance, taxes and levies as well as securities market, in the Board of Directors. Absence of persons which are stockholders, CEO Observed There are no such persons in the BoD of OAO “IDGC of Urals” elected by (managing director), member of managing body AGM held on June 19, 2009. or employee of its competitor, at the Board of Directors. Presence of items stipulated by the Charter on Observed According to item 16.2, art.16 of the Charter “BoD members are elected requirement to elect the BoD using cumulative by GSM according to the procedure set forth in item 10.8, art.10 of the voting. Charter”. Item 10.8, art. 10 of the Charter defines that the BoD is elected by cumulative voting. Presence of items stipulated by the internal docu- Observed According to the Corporate Governance Code (approved by a BoD resolu- ments on BoD members’ obligation to refrain from tion, protocol #55 dd. 02.06.2009) a BoD member should refrain from actions that can lead to or are potentially able to actions that can, in his opinion, lead to the conflict of interest as well as lead to a conflict of interest and in case of such should immediately inform the BoD on the conflicts. conflict – obligation to disclose information on the Besides, item 3.5.of the Regulations on the procedure of BoD conven- conflict. tion and arrangement (approved by EGM – Management Board of ОАО RАО “UES of Russia”, MB protocol #1829/pr1 dd. 28.02.2008) BoD members, while exercising their rights and liabilities, should act in the interests of the Company, exercise their rights and liabilities conscientiously and reasonably.

INTERREGIONAL DISTRIBUTIVE G RID C OMPANY IDG C Back to Contents >> 118 OF URALS Statement of Corporate Behavior Code Observed/ Comments not observed Presence of items stipulated by the internal docu- Partially observed Requirements to disclosing insider information are stipulated by item 4 ments on BoD members’ obligation to notify the of the Regulations on insider information of OAO “IDGC of Urals”. Thus, BoD in written form on intention to make transac- information on all insider transactions with the securities of the Company tions with the securities of joint-stock company in or its SACs, according to the Regulations on insider information, is re- which they are BoD members or BoD members of vealed and controlled by a special subdivision of the Company executing its SACs as well as disclose information on such control over insider information. Besides, according to item 4.2 of the transactions. Regulations, insiders are obliged, no later than 3rd day of the month following the reported one, to submit a written declaration on transactions with the securities of the Company or its SACs as of the reported period to a subdivision controlling insider information usage. Presence of items stipulated by the internal docu- Not observed According to item 18.2, art.18 of the Charter BoD sessions are held on ments on requirement to hold a BoD session no demand but no less than once in a quarter. less than once per 6 week. Arrangement of BoD sessions during the year Observed Our BoD arranges sessions no less than once in 6 weeks. In 2009 we when the annual report is prepared no less than had 14 BoD sessions. once in 6 weeks. Presence of items stipulated by the internal Observed The procedure of BoD session arrangement is regulated by the documents on the procedure for BoD session ar- Regulations on the procedure for convention and arrangement of the rangement and convention. BoD of OAO “IDGC of Urals”. Presence of items, stipulated by internal Observed Subitems 24 and 38, item 15.1, art.15 of the Charter. documents, on the necessity that the BoD should approve transactions of 10% and more of asset value made during usual operations. Presence of items stipulated by the internal docu- Observed According to item 3.1.1 of the Regulations on the procedure for conven- ments on BoD members’ rights for information tion and arrangement of BoD sessions, BoD members are authorized to from executive bodies and heads of main subdivi- obtain information on the Company’s activities, including commercial sions that is required for exercising their functions secrets, to get familiarized with constituting, normative, accounting, as well as responsibility for non-forwarding this reporting, contractual and other documents. information. Presence of the BoD Committee on strategic plan- Observed On 09.09.2008 a BoD Committee on strategy and development was ning or entrusting of such functions onto another created. Committee (except for the Audit Committee and Personnel and Remunerations Committee). Presence of the BoD Committee (the Audit Observed On 09.09.2008 a BoD Committee on audit was created. Committee) that recommends an auditor to the BoD and interacts both with the auditor and the Audit Commission. Presence of independent and non-executive direc- Observed Our Audit Committee includes 3 (three) independent/ non-executive tor only in the BoD. directors (BoD protocol #58 dd. 04.08.2009): Yuri Nikolayevich PANKSTYANOV, Svetlana Andreevna MURAVYOVA, Andrei Borisovich LUKIN The Audit Committee is headed by an independent Observed Our Audit Committee is headed by Y.N. Pankstyanov, an independent director. director. Presence of items stipulated by the internal Observed According to item 11.3 of the Regulations on the Audit Committee, the documents on the right, exercised by all Audit CEO and MB members are obliged to submit information and materi- Committee members for access to any documents als required by the Committee members to take decisions within their and information under condition of confidentiality competence. According to item 12.1 of the Regulations, during discharge of data. of their duties as well as within a year since the termination of their powers in the Committee, persons that are (were) Committee members are obliged to satisfy confidentiality requirements in relation to non-public information obtained due to their activities. Creation of a BoD Committee (Personnel and Observed On 09.09.2008 we created the Personnel and Remunerations Remunerations Committee), which function is to Committee with functions on determining criteria for selection of candi- determine criteria for selection of candidates to dates to BoD and elaborating remuneration policy. BoD members and elaboration of remuneration policy. Personnel and remunerations Committee is Not observed Our Personnel and Remunerations Committee is headed by E.V. headed by an independent director. Lutskovich who is not a BoD member (BoD protocol #58 dd. 04.08.2009) Absence of executive persons of a joint-stock Not observed Our executive persons are in our Personnel and Remunerations company in the Personnel and Remunerations Committee. Committee. Creation of BoD Committee on risks or entrusting Not observed There is no such Committee. such functions onto another Committee (except for the Audit Committee and Personnel and Remunerations Committee).

Company's 2009 Back to Contents >> business report 119 Appendices

Statement of Corporate Behavior Code Observed/ Comments not observed Creation of BoD Committee on corporate conflicts Not observed There is no such Committee. regulation or entrusting such functions onto another Committee (except for the Audit Committee and Personnel and Remunerations Committee). Absence of executing persons of a joint-stock Not observed There is no such Committee. company in the Committee on corporate conflicts regulation. The Committee on corporate conflicts regulation is Not observed There is no such Committee. headed by an independent director. Presence of internal documents, approved by the Observed The procedure for creation of the BoD Committees is stipulated by art. BoD, stipulating the procedure of arrangement and 19 of the Charter. Besides, the procedure for arrangement and opera- operation of the BoD Committees. tion of the BoD committees are regulated by the following Regulations, approved by the BoD (protocol #45 dd. 09.09.2008): the Regulations on the Audit Committee of ОАО “IDGC of Urals”, the Regulations on the Personnel and Remunerations Committee of ОАО “IDGC of Urals”, the Regulations on the Strategy and Development Committee of ОАО “IDGC of Urals”, the Regulations on the Reliability Committee of ОАО “IDGC of Urals”, the Regulations on the Technological Connection Committee of ОАО “IDGC of Urals”. Presence of the quorum determination procedure, Observed Item 18.13, art. 18 of the Charter defines that quorum for BoD session set forth by the Charter, that ensures obligatory arrangement is no less than 50% of the elected BoD members. participation of independent directors in BoD sessions. Executive bodies Presence of a collegiate executive body Observed In accordance with item 21.1, art.21 of the Charter a collegiate executive (Management Board). body (Management Board) was created in the Company (BoD protocol #39 dd. 18.04.2008) Presence of the items, stipulated by the Charter or Observed Subitem 7, item 22, art. 22 of the Charter. The Management Board internal documents, on the necessity to approve competence includes decision-taking on transactions on property, goods immovable property transactions by the manage- and services, book value of each totals 1-25% of asset book value de- ment board, obtaining of credit in case these termined by the date of adoption of the resolution (except for the cases transactions are not large transactions and are not stipulated by subitem 38, item 15.1 of the Charter). subject to usual operations. Presence of the procedure, set forth in the internal Observed The BoD and MB review issues on operations that go beyond financial documents, for approval of operations that go and operating plan, since they are to be included into business plan and beyond financial and operating plan. cash flow plan adjustments which are reviewed by the BoD and MB. Absence of persons being a stock holder, CEO Observed There are no such persons in managing bodies of the Company. (managing director), a managing body member or employee of the competitor among executive bodies’ members. Absence of persons, found guilty in committing Observed There are no such persons in managing bodies of the Company. economic crimes or crimes against the state, federal or local authorities or underwent penalty under administrative law for offences in business activities or in the sphere of finance, taxes and levies as well as securities market, in the Management Board. In case CEO’s functions are exercised by managing company or director – meeting requirements lodged to the CEO and MB members of managing company or director. Presence of items stipulated by the Charter or Observed The Company’s Corporate Governance Code internal documents on prohibition for a managing company (managing director) to exercise the same functions for its competitor as well as to be in any other property relations besides managing services. Presence of items stipulated by the internal docu- Observed According to the Company’s Corporate Governance Code, the CEO should ments on executive bodies’ liability to refrain from refrain from any actions that may lead to the conflict of interest between actions that may lead or are potentially able to lead him and the Company. The CEO should immediately inform the BoD on to conflicts of interest (in case of such conflicts – such conflicts of interest. Besides, item 21.14, art. 21 of the Charter liability to inform the BoD about the conflicts). stipulates that the CEO, MB members, while exercising their rights and liabilities, should act in the interests of the Company, exercise their rights and liabilities regarding the Company conscientiously and reasonably.

INTERREGIONAL DISTRIBUTIVE G RID C OMPANY IDG C Back to Contents >> 120 OF URALS Statement of Corporate Behavior Code Observed/ Comments not observed Presence of criteria for selection of a managing Not observed According to subitem 12, item 10.2, art. 10 of the Charter, decision- company (managing director), stipulated by the taking on transition of the CEO’s powers to a managing company (a Charter and internal documents. managing director) and pre-term termination of his powers is referred to the GSM’s competence. Rights and liabilities of a managing company (managing director) on operating management are determined by the Russian legislation and agreement concluded between such managing company (managing director) and the Company. Submission of quarterly work reports by executive Observed According to subitem 36, item 15.1, art. 15 of the Charter, review of bodies to the BoD. CEO’s reports on the Company’s activities (including execution of his duties), on execution of GSM and BoD resolutions is referred to the BoD competence. On a regular basis (monthly, quarterly, semi-annually, annually) the CEO submits to the BoD the following reports: • On provisioning of insurance coverage (every quarter); • On the Company’s business plan execution (every quarter/annually); • On executing AGM’s resolutions on dividend payout (annually); • On investment program execution (every quarter/annually); • On purchasing program execution (every quarter); • On BoD resolution execution (every quarter); • On non-core assets sale (every quarter); • On execution of the Regulations on Information Policy (every quarter); • On the Company’s credit policy (every quarter); • On fulfilling key performance indicators (every quarter /annually); • On control cash flow indicators as of a certain period (every quarter); • On observing the Company’s Corporate Governance Code (semi-annually); • On preparation of the Company for autumn and winter activity (annually); • On measures taken to transition to the RAB tariff system (every month); • On activities in registration of title on immovable property and registration/re-registration of title on land plots (annually); • On residential communal objects management (annually). Establishment of liability for violations of the Observed The CEO’s and MB members’ agreements stipulate liabilities on viola- Regulations on confidential information usage in tions of the Regulations on confidential information usage. agreements concluded between the Company and the CEO (managing company, managing director) as well as MB members. Secretary Presence of a special officer (company secretary) Observed Sergey Anatolyevich Gusak was elected as our Corporate Secretary whose activity is aimed at provisioning observa- (protocol #57 dd. 20.07.2009). tion of requirements that guarantee realization of shareholder rights and legitimate interests, by executive bodies and officers. Presence of the procedure for nomination (elec- Observed Item 4.2 of the Regulations on the procedure for convention and ar- tion) of secretary and his functions, stipulated by rangement of BoD sessions as well as item 3 of the Regulations on the Charter or internal documents. the Corporate Secretary stipulate the procedure of corporate secretary election. Item 4.3 of the Regulations on the procedure of convention and arrangement of BoD session as well as item 3 of the Regulations on the Corporate Secretary determine his duties. Presence of requirements to secretary candidate Observed Item 20.6, art. 20 of the Charter stipulates that activities regulations, stipulated by the Charter procedure for nomination and termination of powers, term of powers, rights and liabilities of the corporate secretary are stipulated by the Regulations on the Corporate Secretary approved by the BoD. The Regulations stipulate requirements to a candidate for the Company’s corporate secretary. Significant corporate actions Presence of requirement on approval of major Observed According to the Charter, the GSM’s (subitem 17, item 10, art. 10) and transactions prior to making them, stipulated by BoD’s (subitem 24, item 15.1, art. 15) competence includes approval of the Charter or internal documents. major transactions in cases set forth by Chapter X of the Federal Law on Joint-stock. Obligatory involvement of independent appraiser Observed Subitem 45, item 15.1, art. 15 of the Charter sets forth the BoD powers for market value appraisal of property being a to approve a independent appraiser (appraisers) candidate chosen for major transaction. determination of share, property and other assets’ value in cases stipulated by the Federal Law on “Joint-Stock Companies”, the Charter as well as separate BoD resolutions.

Company's 2009 Back to Contents >> business report 121 Appendices

Statement of Corporate Behavior Code Observed/ Comments not observed Presence of prohibition to make any measures, Not observed The Charter does not stipulate such requirements. while acquiring large blocks of shares (acquisition), aimed at protection of interests of executive bodies (or their members) and BoD members as well as deteriorated shareholder positions in comparison to the existing one (in particular, prohibition to adopt a resolution on issuing additional shares, share-convertible securities or issuing securities providing the right to acquire the share of a company, even if the right to adopt such a resolution is approved by the Charter) prior to the end of desired share acquisition date). Presence of requirement, stipulated by the Charter, Observed Subitem 45, item 15.1, art. 15 of the Charter sets forth the BoD powers on obligatory involvement of an independent ap- on approval of an independent appraiser (appraisers) candidate for de- praiser for appraisal of the current market value of termination of share, property and other assets’ value in cases stipulated shares and possible changes in their market value by the Federal Law on Joint-Stock Companies, the Charter as well as as a result of a merger. separate BoD resolutions. Absence of discharge of purchaser’s duties, stipu- Observed The Charter does not contain this requirement. lated by the Charter, to offer shareholders to sell their common shares (issue securities convertible into common shares) during the merger. Presence of requirement, stipulated by the Charter Not observed The Charter does not contain this requirement. or internal documents, on obligatory involvement of an independent appraiser for determination of reorganization share conversion rate. Information Disclosure Presence of an internal document, approved by the Observed The Regulations on Information Policy of OAO “IDGC of Urals” was ap- BoD, determining rules and approaches to infor- proved by our BoD (protocol #47 dd. 18.11.2008) mation disclosure (the Regulations on Information Policy). Presence of a requirement, stipulated by internal Partially observed This requirement is not stipulated by our internal documents. However, documents, on disclosure of information on aims the Company discloses such information while taking decision to issue of share issue, persons reckoning to acquire shares. issued shares, including large block of shares as, well as information whether top managers participate in share acquisition. Presence of the list of information, documents and Observed According to the Regulations on the procedure of GSM convention and materials subject to distribution among sharehold- arrangement, the list of information, documents and materials subject to ers for solving issues submitted to GSM that is distribution among shareholders for solving issues submitted to GSM is stipulated by internal documents. approved by our BoD while arranging a GSM. Presence of a corporate web-site and regular Observed The Company has a web-site where it discloses its information (http:// information disclosure using the web-site. www.mrsk-ural.ru/). The Company ensures timely update of the corporate web-site, including information disclosure according to the requirements of the current Russian legislation and the Regulations on Information Policy. Presence of a requirement, stipulated by internal Observed According to the Regulations on Information Policy, the Company disclos- documents, on disclosure of information on es information on the Company’s shares, shares of the Company’s SACs transactions between the Company and persons, possessed by management and persons affiliated with them as well as who are top managers according to the Charter, information on transactions between the persons and the Company. as well as transactions between the Company and organizations in which the Company’s top managers possess 20% and more of the charter capital or which can be considerably influenced by such persons in a way. Presence of a requirement, stipulated by internal Observed The Regulations on Information Policy of OAO “IDGC of Urals” stipulate documents, on information disclosure on all trans- that the Company discloses information on significant transactions. A actions that can influence the share price. significant transaction is a transaction that can have a significant influence on the Company’s activities. Presence of internal document, approved by Observed The Company approved the Regulations on Insider information (approved the BoD, on usage of significant information on by a BoD resolution, protocol #47 dd. 18.11.2008) activities of a joint-stock company, shares and other securities and transactions with them which is not public and disclosure of which may have a significant influence on market price of shares and other securities.

INTERREGIONAL DISTRIBUTIVE G RID C OMPANY IDG C Back to Contents >> 122 OF URALS Statement of Corporate Behavior Code Observed/ Comments not observed Control over financial and economic activities Presence of internal control procedures, approved Observed Our BoD approved the Regulations on Internal Control Procedures of OAO by the BoD, over financial and operating activities. “IDGC of Urals” (protocol #49 dd. 26.12.2008). Presence of a special subdivision ensuring obser- Observed The Company has a special subdivision – Internal Control and Audit vation of internal control procedures (supervision Department ensuring observation of the internal control procedures. and auditing subdivision). Presence of a requirement, stipulated by internal Observed Item 24.1, art. 24 of the Charter determines the membership of the Audit documents, on determining the structure and Commission. The Regulations on the Audit Commission determines membership of supervision and auditing subdivi- requirements to the Audit Commission membership. sion by the BoD. Absence of persons found guilty in committing Observed There are no such persons in the subdivision. economic crimes or crimes against the state, federal or local authorities or underwent penalty under administrative law for offences in business activities or in the sphere of finance, taxes and levies as well as securities market, in supervision and audit subdivision. Absence of persons which are stockholders, CEO Observed There are no such persons in the subdivision. (managing director), member of managing body or employee of its competitor, supervision and audit subdivision. Presence of the term, stipulated by internal docu- Observed According to the Regulations on the Audit Commission of ОАО “IDGC of ments, to submit documents and materials to Urals”, requested materials and documents should be submitted to the supervision and audit subdivision for appraisal of Commission members within 2 (two) working days since the request. made financial and operating operations as well a According to the Regulations on Internal Control Procedures of ОАО responsibility of executive persons and worker for “IDGC of Urals”, required documents for audit are submitted by heads non-submission in the stipulated terms. of subdivisions, branches and representative offices within 3 days upon request of the subdivision authorized for internal control/ audit. Presence of liability, stipulated by internal Observed The Regulations on the Audit Commission of OAO “IDGC of Urals”, the documents, exercised by supervision and audit Regulations on Internal Control Procedures of OAO “IDGC of Urals”. subdivision to inform the Audit Committee on revealed violations (in case the Committee is absent – to the BoD). Presence of a requirement, stipulated by the Not observed This procedure is not stipulated by the Charter. Charter, on preliminary appraisal by supervision and audit subdivision of expediency of operations that are not stipulated by financial and operating plan (non-standard operations). Presence of the procedure, stipulated by internal Observed Non-standard operations (operations out of financial and operating plan) documents, of non-standard operation approval. are subject to inclusion into business plan and cash flow adjustments. According to subitem 19, item 15.1, art. 15 of the Charter, approval of an adjusted business plan is referred to the BoD competence. Presence of a BoD approved internal document Observed Item 7 of the Regulations on the Audit Commission of OAO “IDGC of stipulating the procedure for auditing financial and Urals” determines the procedure of audit inspections. operating activities by the Audit Commission. Audit Committee’s appraisal of the auditor report Observed According to item 3.1 of the Regulations on the Audit Committee, the prior to submitting it to shareholders on a GSM. Committee exercise control over annual independent audit of consolidated financials and accounting statements of the Company, appraisal of the auditor report. The appraisal of the auditor report as materials to a GSM. Dividends Presence of a BoD approved internal document Not observed The Regulations on Dividend Policy is not approved. which is used by the BoD when it takes decision on dividend recommendations (the Regulations on Dividend Policy). Presence of a procedure, stipulated by the Not observed The Regulations on Dividend Policy is not approved. Preferred shares Regulations on Dividend Policy, of determining were not issued. minimal net profit for dividend payout and conditions when dividends on preferred shares, which amount is determined by the Charter, are not paid out or partially paid out. Publication of information on dividend policy and Not observed The Regulations on Dividend Policy is not approved. changes introduced to it in periodicals stipulated by the Charter for publishing information on GSM arrangement as well as disclosure of this information on the corporate web-site.

Company's 2009 Back to Contents >> business report 123 Содержание

INTERREGIONAL DISTRIBUTIVE G RID C OMPANY IDG C Back to Contents >> 130 OF URALS