2 3 10. BASIC RISK FACTORS ASSOCIATED WITH ACTIVITY Contents OF THE COMPANY ...... 63

11. INVESTMENT ACTIVITIES ...... 67

1. ADDRESS OF THE MANAGEMENT OF THE COMPANY 12. HR AND SOCIAL POLICY. TO SHAREHOLDERS ...... 5 SOCIAL RESPONSIBILITY ...... 79 1.1. Address of the Chairman of the Board 12.1. HR Strategy and Policy ...... 80 of Directors ...... 5 12.2. Organizational structure ...... 80 1.2. Address of the General Director ...... 7 12.3. Personnel development 2. CALENDAR OF EVENTS ...... 8 and training ...... 81 12.4. Personnel structure ...... 83 3. BACKGROUND OF THE COMPANY ...... 10 12.5. Labour turnover ...... 83 12.6. Recruiting ...... 87 12.7. Compensation and Benefits System ...... 88 4. FINANCIAL AND ECONOMIC PERFORMANCE OF THE COMPANY ...... 13 12.8. Social partnership and interaction with trade union organizations ...... 89 4.1. Analysis of financial performance dynamics in comparison with the previous period ...... 14 12.9. Social Policy ...... 89 4.2. Analysis of solvency and the level 12.10. Social responsibility ...... 90 of credit risk of the company ...... 15 4.3. Dividend History ...... 16

5. CHARACTERISTIC OF ACTIVITY OF MANAGEMENT 13. FINANCIAL STATEMENTS WITH AND CONTROL BODIES OF THE COMPANY ...... 19 APPENDICES ...... 101 5.1. Principles of corporate governance ...... 20 13.1. Balance sheet ...... 102 5.2. Disclosure of information ...... 20 13.2. Income statement ...... 104 5.3. Corporate governance rating ...... 21 13.3. Statement of changes in equity ...... 106 5.4. Management bodies of the Company ...... 22 13.4. Statement of cash flow ...... 108 13.5. Appendix to balance sheet ...... 109 13.6. Audit Report ...... 114 6. Securities of the Company ...... 37 6.1. Data on the authorized capital stock 14. Assessment of the audit report by of the Company ...... 38 the audit committee ...... 115 6.2. Market Capitalization ...... 40 6.3. Data on bonds of OJSC OGK-5 ...... 42 6.4. Circulation of depository receipts of OJSC OGK-5 ...... 43 15. REPORT OF INTERNAL AUDIT COMMISSION ...... 117

7. Participation of the company in other 16. INFORMATION ON OBSERVANCE BY THE COMPANY organizations ...... 45 OF THE CODE OF CORPORATE CONDUCT ...... 123

8. POSITION OF OJSC OGK-5 IN THE INDUSTRY ...... 49 17. INFORMATION ABOUT MAJOR TRANSACTIONS AND TRANSACTIONS WITH RELATED PARTIES 8.1. Competition ...... 50 EXECUTED BY THE COMPANY IN 2008 ...... 135 8.2. Main operating indicators ...... 53 18. THE COMPOSITION OF GENERATING Capacities ....139 8.3. Sales ...... 55 19. Glossary ...... 143 9. STRATEGY AND PRIORITY ACTIVITIES OF THE COMPANY ...... 59 20. CONTACT INFORMATION ...... 147

ogk-5 2008 ANNUAL REPORT 4 5 1. Address of the management of the company to shareholders

1.1. Address of the chairman of the board of Directors

Dear shareholders,

I present to your attention the annual report of The efficiency of the corporate governance system OJSC OGK-5. The year of 2008 has become for the of OJSC OGK-5 based upon principles of accountability, Company the year of integration with the world energy transparency and responsibility to shareholders and leader — the company Enel. investors has been improved.

Enel is the first foreign company which has come to the Implementation of investment projects is one of the Russian power market. We have become pioneers, we most priority directions designated by the Board of are under views of our colleagues and partners all over Directors. During the accounting year the management the world and we can not afford to cede leadership to of the company has been successfully implementing anybody. Leaders get the best and OJSC OGK-5 is a the investment program in practice for purposes of en- bright example of that. suring reliability and efficiency of operation of production branches and implementation of projects for construc- In 2008 eight of eleven places in the Board of Directors tion of new generation units. of the Company were taken by representatives of Enel and independent directors. Our participation in manage- Construction and modernization of capacity units have ment of the company is a new page in the history of been carried out in accordance with the terms estab- development of OJSC OGK-5. lished by the Development Strategy. The first stages have been provided with financing. We have brought to the company advanced corporate governance practices, technological innovations, and Over decades Enel made emphasis on efficient manage- a huge experience of work in a free power market. ment, safety of its employees, energy saving, introduc- No doubt, this will positively influence competitiveness tion of new technologies and, certainly, environmental and growth of the Company value. protection. In Russia our Company realizes these prin- ciples not less efficiently than in Italy or any other part Over the accounting period we have managed to do of the globe. a lot: we have built a vertically integrated structure, provided ourselves with supplies of gas, started up two We can state definitely that we fulfill the obligations as- projects of construction of the power generation units in sumed by entrance to the Russian energy sector and we Ural and Caucasus, and commenced the stage of mod- believe that the government will fulfill its obligations. ernization of the Reftinskaya GRES. I can assure you that the Board of Directors of The team of managers headed by Anatoly Yakovlevich OJSC OGK-5 will continue doing everything possible in Kopsov which which is the strongest one in the power order to maintain the maximum open and confident industry has come to management of OJSC OGK-5. relations established with the investment community.

The Chairman of the Board of Directors OJSC “OGK-5” Dominique Fache

ogk-5 2008 ANNUAL REPORT 6 7 1.2. Address of the General Director

Dear Shareholders,

In 2008 OJSC OGK-5 has been successfully working un- tion of the new system for dry ash and slag disposal will der the management of one of the largest global energy permit to optimize storage of wastes from combustion companies — Enel. Following the results of the year of solid fuel as well as to arrange processing thereof our company has demonstrated high production and which will favorably influence the ecology of the region. financial-economic indicators, stable and partner rela- tions with consumers of heat and electrical power, has Taking into consideration the given rates of design, been actively developing business, modernized and built construction and supply of equipment we state surely up-to-date energy efficient generating facilities. the term of introduction of the first steam and gas power generation units at the power plants of OJSC OGK-5 Production results of OJSC OGK-5 in 2008, notwith- as well as the system for dry ash and slag disposal — standing the deteriorating market environment and the 4th quarter of 2010. reduction of demand for electrical energy during the second half-year, have demonstrated a steady growth For the purpose of efficient responding to challenges in comparison with 2007: Power generation by power conditioned by the new macroeconomic situation the plants of OJSC OGK-5 reached 43,005 GWh and ex- Anti-Crisis Executive Management Group was formed and ceeded the level of 2007 by 12.1%. The equipment proceeded to operation in 2008 at OJSC OGK-5. The pur- availability factor has been increased up to 81.2%. The poses of the group’s work are analysis and optimization of utilization factor of installed capacity of power plants of relations with consumers of power and heat, fuel suppli- OJSC OGK-5 has increased up to 56% (compared with ers, management of costs as well as protection of eco- 51% in 2007). Heat output in 2008 exceeded the level nomic interests of the Company by legal means. of 2007 by 0.7% and amounted to 6,819 thousand Gcal. Net power output in 2008 amounted to 40,729 GWh In 2008 OJSC OGK-5 became one of the first Russian and rose by 11.6% in comparison with 2007. EBITDA energy companies adopting the Code of Ethics. The prin- amounted to 5,304 million rubles. ciples stated in the Code confirm our aspiration to develop honest, responsible and partner relations both A remarkable event in the life of the company in 2008 between employees within the team of OJSC OGK-5 and was opening of construction of steam gas power with all interested parties: state and municipal authori- generation units at the Sredneuralskaya and Nevinno- ties, shareholders, partners, contractors and suppliers. mysskaya GRES. The management of OJSC OGK-5 always emphasizes the issues of modernization of our The Code of Ethics supports the most important prin- generating capacity units. In 2008 the management of ciples of operation of our Company: respect towards OJSC OGK-5 supported by the chief shareholder — the employees and importance of human resources, compet- company Enel — has completed preparatory procedures itiveness, and non-discriminatory access to information, and proceeded to construction of two up-to-date power environmental protection, and inviolability of a person. generation units at the Sredneuralskaya and Nevinno- Adoption of the Code of Ethics confirms reputation of mysskaya GRES. New steam and gas power generation OJSC OGK-5 as one of the leaders of the Russian electri- units will allow to replace the depreciated steam power cal energy industry in the area of corporate governance. equipment, improve reliability of production of power and heat energy as well as technical and economic In 2008 OJSC OGK-5 became one of the examples indicators of our power plants will enforce our position of successful international integration of the Russian in the emerging power and capacity market. energy industry. We are successfully moving towards the set targets maintaining and developing the status In 2008 OJSC OGK-5 carried out design and preparatory of a reliable and stable producer of electrical power and works for construction of a new system for dry ash and heat committed to application of the advanced tech- slag disposal at the largest power plant of the Company nologies, modernization and improvement of efficiency having a system importance for the energy system of of production, inviolately observing interests of its clients Ural and Western Siberia — Reftinskaya GRES. Introduc- and shareholders and protecting interests of employees.

The General Director of OJSC “OGK-5” A.Ya. Kopsov

ogk-5 2008 ANNUAL REPORT 8 9 2. Calendar of Events

Month Event Month Event

January • Securities of OJSC OGK-5 (ordinary registered nondocumentary shares August • On the 8th of August of 2008 the Board of Directors of OJSC OGK-5 approved the in OJSC OGK-5 (the state registration number — 1-01-50077-A, code OGKE) Code of Ethics and the Regulations on Zero Tolerance to Corruption at OJSC OGK-5. and unconvertible interest-bearing documentary bonds of series 01 (the state th registration number — 4-01-50077-A) are included into the quotation list A1 September • On the 16 of September 2008 the Governor of the Sverdlovsk Region E.E. Rossel, of the MICEX stock exchange the General Director of the Italian company Enel Fulvio Conti and the General Director of OJSC OGK-5 A.Ya. Kopsov laid the first stone for the new steam and gas February • Results of the public offer of ENEL investment Holding B.V. were summarized which unit of the combined cycle within the framework of the Sredneuralskaya GRES was sent to shareholders of OJSC OGK-5 on acquisition from them of ordinary located nearby Ekaterinburg and belonging to OJSC OGK-5. shares. The offer was sent in accordance with effective legislation of the Russian • On the 30th of September 2008 OJSC OGK-5 published intermediate consolidated Federation in connection with acquisition by the company ENEL investment Holding financial statements over six months ending on the 30th of June 2008 prepared B.V. of more than 30% shares in OJSC OGK-5. in accordance with the International Financial Reporting Standards (IFRS). • On the 27th of February 2008 the ceremony of awarding of the winners of the IV th annual competition of annual reports and Web sites of companies operating in the October • On the 14 of October 2008 the meeting of the Board of Directors of OJSC OGK-5 electrical energy industry which was organized by the magazine “EnergoRynok” took took place at which the new membership of the Executive Board of the Company place. In the opinion of the authoritative jury, the best corporate Web site in the was elected. electrical energy industry is the Web site of OGK-5 • On the 16th of October 2008 the rating agency Standard & Poor’s values of the corporate governance rating (CGR) for OJSC OGK-5 were raised up to: accord- • On the 16th of April 2008 the Board of Directors of OJSC OGK-5 took the decision April ing to the international scale — 6; according to the national scale — 6.0 and then on appointment of Kopsov Anatoly Yakovlevich as the General Director. they were revoked. The rating agency Standard & Poor’s announced assignment • On the 22nd of April 2008 OJSC OGK-5 became one of the founders of Non-Commer- of the rating “Analysis and assessment of efficiency of corporate governance, cial Partnership “Council of Producers of Electrical Energy” accountability and management” at the level of GAMMA-6. OJSC OGK-5 became the first company in the power sector that was awarded the rating “Analysis and May • On the 28th of May 2008 the annual General Meeting of Shareholders of OJSC OGK-5 assessment of efficiency of corporate governance, accountability and management took place (GAMMA)”.

June • On the 6th of June the first meeting of the Board of Directors of OJSC OGK-5 with November • On the 26th of November 2008 the Governor of the Stavropol Territory V.V. Gaevsky, the new membership took place. Dominique Fache was elected as the Chairman the director of the international division of the company Enel Carlo Tamburi, the chair- of the Board of Directors of OJSC OGK-5. man of the Board of Directors of OJSC OGK-5 Dominique Fache and the General Director of OJSC OGK-5 A.Ya. Kopsov opened in a solemn manner construction of the July • On the 2nd of July 2008 the Board of Directors of OJSC OGK-5 took the decision new 410 MW CCGT (steam and gas power unit) at the Nevinnomysskaya GRES. on placement of securities of the Company — documentary interest-bearing uncon- vertible bearer stock exchange bonds with compulsory centralized storage of series December • On the 11th of December 2008 in Moscow reclamation of ash disposal area No.1 at БО-01 — БО-04, approved the decision on issue and the Prospectus of securities the Reftinskaya GRES of OJSC OGK-5 was recognized the best project in the nomi- of the Company. As of 31 December 2008 stock exchange bonds were not placed. nation “Environmental Protection Technologies” within the framework of the award “The Best Ecological Project of the Year” established by the Ministry of Natural • On the 23rd of July the General Director of OJSC OGK-5 A.Ya. Kopsov, the Execu- Resources and Ecology of the Russian Federation. tive Director of Enel Produzione S.p.A. Livio Vido, Vice President of CJSC “At- omstroyexport” T.V. Ivanov signed the contract for management of engineering, purchase, construction of the 410 MW CCGT power unit on the site of the Nev- innomysskaya GRES between OJSC OGK-5 and the consortium of companies ENEL Produzione S.p.A. and CJSC “Atomstroyexport”. Commissioning of the new CCGT is planned for the end of 2010 in accordance with the previously approved invest- ment program of OJSC OGK-5

ogk-5 2008 ANNUAL REPORT Calendar of Events 10 11 3. Background The installed capacity of the Company’s power plants Name of the power plant Unit of Measurement 2007 2008 of the Company Konakovskaya GRES* MW 2 400 2 460 Nevinnomysskaya GRES MW 1 290 1 290 The Open Joint Stock Company “The Fifth Power Generation Company” Reftinskaya GRES MW 3 800 3 800 (OJSC OGK-5) was incorporated in accordance with Instruction of the Execu- tive Committee of RAO “UES of Russia” No.113r dated the 25th of October Sredneuralskaya GRES MW 1 181,5 1 181,5 2004 within the framework of implementation of the Concept of the Strategy OGK—5 MW 8 671,5 8 731,5 of RAO “UES of Russia” for 2003—2008 “5+5”. At incorporation the property of the Reftinskaya GRES and Sredneuralskaya GRES as well as stocks of shares of OJSC Konakovskaya GRES and OJSC Nevinnomysskaya GRES were * Modernization of turbine units of the power units No.1—3 at К-320-240 has been carried out at the Konakovskaya contributed into the authorized capital of the Company. GRES. This resulted in increase of the installed capacity by 20 MW since the second half-year of 2008.

OJSC OGK-5 was registered by the Inspectorate of the Ministry for Taxa- tion of Russia for the Leninsky District of the city of Ekaterinburg of the Sverdlovsk Region on the 27th of October 2007, certificate series 66 No.004053478, under the main state registration number 1046604013257. On December 25, 2008, OJSC OGK-5 was included into the strategically im- portant backbone enterprises’ list approved by the Government Commission In accordance with the Articles of Association of OJSC OGK-5 the main types for increase of Russian economy sustainability. of activity of the Company are as follows: production of power and heat, supply (sale) of power and heat, receipt (purchase) of power and heat from the wholesale power (capacity) market.

The Company is one of the largest wholesale heat generation companies in Russia. The core type of activity of the Company is production and sale of power and heat. The total installed capacity of power plants of the Company is equal to 8,731.5 MW or about 8.7% of the total installed capacity of heat power plants of the European part of Ural. This includes as follows:

1. The Konakovskaya GRES — 2,460 MW (the Tver Region, the united elec- trical system of the Center);

2. The Nevinnomysskaya GRES — 1,290 MW (the Stavropol Territory, the united electrical system of the South);

3. The Reftinskaya GRES — 3,800 MW (the Sverdlovsk Region, the united electrical system of Ural);

4. The Sredneuralskaya GRES — 1,181.5 MW (the Sverdlovsk Region, the united electrical system of the Ural).

KGRES

MOSCOW

NGRES RGRES

SUGRES

ogk-5 2008 ANNUAL REPORT Background of the Company 12 13 4. Financial and Economic Performance of the Company 14 15 4.1. Analysis of financial performance Current Assets totaled 10,121 million RUR that is by 6,090 million RUR less than the figure posted as of the end of 2007. The decrease is mainly attrib- dynamics in comparison with utable to the use of funds raised during the IPO to cover the financial needs the previous period related to the investment program of the Company.

As of the end of 2008, Total Equity stood at 46,672 million RUR that is by 2008 Income Statement 1,563 million RUR higher than the corresponding value as of the end of Net Revenue totaled 42,846 million RUR, being by 9,382 million RUR higher 2007. The increase is due to the net profit for the accounting period. than the figure posted a year earlier (+28%). The revenue increase is mainly driven by the growth in net power output by 12% (from 36,481 GW·h to Total Liabilities stood at 11,191 million RUR, being by 1,741 million RUR 40,729 GW·h), due to the overall improvement of the availability factor higher than the same figure posted a year earlier. The change is mainly and utilization ratio of the power plants’ installed capacity, as well as owing driven by the increase of short-term borrowings (+1,864 million RUR) used to the increase in the average sale price of power and capacity and due to for bridge financing of long term loans which have been at the final co-ordi- a better sale mix, i.e. increase in the share of free sale of power (28.0% nation phase , as of the end of 2008. of total sales has fallen on the Day Ahead Market).

Gross Profit stood at 4,044 million RUR, being by 1,504 million RUR higher 2008 Cash Flow Dynamics than the same figure posted a year earlier (+59%). Net Cash Flow from Operation for 2008 totaled 3,601 million RUR that is by 374 million RUR higher than the figure posted for the same period of 2007. Profit on Sales amounted to 3,440 million RUR, being by 1,367 million RUR higher than the same figure posted for 2007 (+66%). Net Cash Outflow from Investing Activities totaled 6,671 million RUR that is by 4,655 million higher than that for 2007, due to a larger commitment Net Financial Expenses totaled 156 million RUR, versus net financial rev- of the Company in the execution of the investment program. enues of 390 million RUR achieved in 2007. This reduction can be explained by the financing of the investments performed by the company during the Net Cash Inflow from financing activities totaled 1,866 million RUR versus year related to the construction of two new 410 MW CCGT power units at a net cash outflow of 533 million RUR in 2007. Sredneuralskaya and Nevinnomysskaya GRES industrial sites, construction of the new dry ash removal system at Reftinskaya GRES, and to the moderniza- Audit of 2008 Accounting Statement according to RAS (Russian Accounting tion of the existing plants. Standards) has been performed by CJSC KPMG which was approved as the Auditor of OJSC OGK-5 for 2008 by The Annual General OJSC OGK-5 Share- Net Result From Non-Operating Activities amounted to –1,040 million RUR holders’ Meeting dated of May 2008. versus –431 million RUR a year earlier. The change was mainly driven by non-recurring costs for 513 million RUR, mostly related to restructuring costs. 4.2. Analysis of solvency and the level

Profit before Income Tax totaled 2,244 million RUR, being by 212 million of credit risk of the company higher than that for 2007 (+10%). Throughout the entire period of operation the Company has been con- Net Profit of OJSC OGK-5 for the year totaled 1,563 million RUR, being by stantly demonstrating growth of the net assets value. Ratios of amounts of 241 million lower than the value posted for 2007 (-13%). short-term and long-term liabilities to ownership capital and reserves have been growing throughout 2004—2008 and stabilized by the end of 2008. It is worth mentioning that in 2008 non-recurring income tax charges of This tendency evidences raising by the Company of borrowed funds which, 154 million RUR were booked by the Company. This was mainly attributable on the one hand, is the result of commencement by the Company since to the review of the tax value of fixed assets at Konakovskaya and Nev- 2006 of operational activities and, on the other hand, it is connected with innomysskaya power plants, which were merged into OGK-5 in 2006. Mean- fulfillment of a large-scale investment program for the purpose of fulfill- while non-recurring income tax revenues of 338 million RUR were booked ment of which the Company entered the market of borrowed capital by in 2007. issuing 5-year bonds in 2006 and has been actively raising loans.

Without taking into account the effect of both nonrecurrent cost items, At the same time, the Company has a rather stable financial position and the Company’s Net Profit surpassed the 2007 level by 17%. possibilities for servicing of borrowed funds. This can be supported by a solid gearing ratio of 9.5% (calculated on the basis of 2008 IFRS state- ments). 2008 Balance Sheet As of the end of 2008, Total Assets totaled 57,863 million RUR that is by 3,305 million RUR higher than the figure posted in the previous year.

Non-Current Assets totaled 47,741 million, that is by 9,395 million RUR higher than the value achieved in 2007, due to the capital expenditure pro- gram carried out by the Company in 2008.

ogk-5 2008 ANNUAL REPORT Financial and economic performance of the company 16 17 4.3. Dividend History

Distribution of profits approved by the General Meeting of Shareholders in 2005—2008 (thousand rubles)

While performing accrual and payment of dividends OJSC OGK-5 fulfills requirements of the Federal Law “On Joint Stock Companies” and the Articles of Association of the Company.

Data on the amount of accrued dividends and report on repayment thereof following the results of 2005—2007

The annual general meeting of shareholders of OJSC OGK-5 dated of May 28, 2008, took the decision to pay no dividend for ordinary registered shares of the Company following the results of the financial year of 2007

2005 2006 2007 (Decision (Decision (Decision of the Annual General of the Annual General of the Annual General

Meeting Meeting Meeting of Shareholders dated of Shareholders dated of Shareholders dated of June 24, 2006) of July 01, 2007) of May 28, 2008)

Retained profit (loss) 4 433 336 253 930 1 804 220 of the accounting period

To be distributed between the following: 221 667 28 547 90 211 Reserve fund

Accumulation fund 4 011 667 883 1 714 009

Dividends 200 002 224 500 —

Redemption of losses — — — of previous years

Following the results The accounting period over Following the results of the first half-year Following the results which dividends of the financial year of the financial year of the financial year shall be paid of 2005 of 2006 of 2006

Name of the body taking General Meeting General Meeting General Meeting the decision on payment of Shareholders of Shareholders of Shareholders of dividends of OJSC OGK-5 of OJSC OGK-5 of OJSC OGK-5

Date of adoption June 24, 2006 September 26, 2006 July 01, 2007 of the decision on payment of dividends

Type, type and category Registered ordinary Registered ordinary Registered ordinary of shares shares shares shares

The amount of dividend 0.0066069 0.01047183 0.00634689 accrued per one share, rubles

Total amount of monetary 200 002 000 317 000 000 224 500 000 funds directed (accrued) at payment of dividend, rubles

ogk-5 2008 ANNUAL REPORT Financial and Economic Performance of the Company 18 19 5. Characteristic of activity of management and control bodies of the Company 20 21 OJSC OGK-5 is a company meeting high international standards of corporate For the purpose of determination of the main approaches and principles governance paying significant attention to work with shareholders and inves- of disclosure of corporate information, observance of compulsory re- tors observing information disclosure requirements provided for by legislation. quirements being the ground for inclusion of shares in OJSC OGK-5 into quotation lists of stock exchanges in autumn of 2005 the Board of Direc- The practice of corporate governance at the Company is established in accor- tors of the Company approved the Regulations on the information policy dance with the best world standards and recommendations fixed in the Code of OJSC OGK-5 and the Regulations on insider information of OJSC OGK-5. of Corporate Conduct of the Federal Service for Financial Markets as well as provisions of the Code of Corporate governance of OJSC OGK-5 adopted by In relation to disclosed corporate information the Company follows the fol- the Company in 2006. lowing basic principles:

>> Guarantee of completeness and accuracy of information disclosed 5.1. Principles of corporate governance >> Efficiency of disclosure of information on all material facts concerning financial and economic activity of the Company Corporate governance at the Company is based upon the following prin- ciples: >> Publicity and non-selectiveness of information disclosure.

Accountability. The Code provides for accountability of the Board of Direc- Observance of shareholders’ rights for attending General Meetings of Share- tors of the Company to all shareholders in accordance with effective legisla- holders of OJSC OGK-5 is one of the priority directions in the area of timely tion and serves guidance for the Board of Directors within the framework and full disclosure of information about activity of the company. Information of development of the strategy and execution of management and control notices on execution of General Meetings of Shareholders of OJSC OGK-5 of activity of executive bodies of the Company. and relevant materials are provided for familiarization purpose to persons entitled to attend the General Meeting of Shareholders of the Company Fairness. The Company obliges to protect rights of shareholders and ensure strictly in accordance with the requirement of the Federal Law “On Joint equal treatment of all shareholders. The Board of Directors provides all Stock Companies” and internal regulatory documents of OJSC OGK-5. shareholders with the possibility to obtain efficient protection in case of vio- lation of their rights. As additional sources of timely informing of shareholders and other interested persons on General Meetings of Shareholders to be held periodicals are used Transparency. The Company ensures timely disclosure of accurate informa- including central ones accessible for most of shareholders of the Company. tion on all relevant facts concerning its activity (including financial position, social and ecological indicators, and results of business, ownership structure More detailed information about activity and decisions taken by the Gen- and structure of management of the Company) as well as free access to such eral Meeting of Shareholders, the Board of Directors and Committees of the information for all interested persons. Board of Directors of OJSC OGK-5 as well as full texts of internal documents of the Company including those regulating operation of management and Responsibility. The Company recognizes the rights of all interested parties control bodies of the Company are presented in Internet on the corporate provided for by effective legislation and aims at cooperation with such par- site of the Company: http://www.ogk-5.com. ties for the purpose of its development and ensuring financial stability. 5.3. Corporate governance rating 5.2. Disclosure of information

On the 16th of October 2008 the rating agency Standard & Poor’s values of For the purpose of improvement of information attractiveness, transpar- the corporate governance rating (CGR) for OJSC OGK-5 were raised: ac- ency and information openness in June 2005 the Board of Directors of the cording to the international scale up to 6; according to the national scale Company approved and registered with the Federal Service of Russia for Fi- up to 6.0 and then they were revoked. The rating agency Standard & Poor’s nancial Markets the prospectus of securities of OJSC OGK-5. Beginning from announced assignment of the rating “Analysis and assessment of efficiency that moment OJSC OGK-5 proceeded to disclosure of information about its of corporate governance, accountability and management” at the level of financial and economic activity in form of the quarterly report of the issuer, GAMMA-6. OJSC OGK-5 became the first company in the power sector that notices on material facts, data influencing the value of securities. was awarded the rating “Analysis and assessment of efficiency of corporate governance, accountability and management (GAMMA)”. Information about activity of the company is disclosed on a regular basis and within the terms provided for by effective legislation of the Russian Rating components: Federation in the news line of the information agency Interfax, periodicals accessible for most of shareholders of OJSC OGK-5. Influence of shareholders: 6+

Together with that, information about activity of the company is submit- Rights of shareholders: 7 ted to listing departments of stock exchanges RTS and MICEX as well as Transparency, audit and risk management: 5 presented on the corporate web site (http://www.ogk-5.com). On the site of the company news digests touching upon key events in OJSC OGK-5 are Efficiency of work of the Board of Directors, strategic processes 5+ and initiatives: updated with the maximum speed.

ogk-5 2008 ANNUAL REPORT Characteristic of activity of management and control bodies of the Company 22 23 Independent assessment and objective global criteria play an important role The Board of Directors of OJSC OGK-5 elected permitting to long-term investors, managers, directors and other financially on the 28th of May 2008 interested persons to objectively assess and compare risks of corporate Fache Dominique. He graduated from the Higher School “Mines & Ecole governance in various country contexts. The new methodology GAMMA takes Superieure Electricite” (Paris) in the specialty engineer. From 1993 to 2003 into account changing information needs of the investment community: for he was the Vice President, General Director for Russia and CIS of the com- example, the analysis perimeter includes risk management procedures and pany “Schlumberger”. In various periods of time he headed the Boards of strategic process. Directors of “Schlumberger Ukrgas Kiev”, SUEK, was a Member of the Board of Directors of OJSC “Gazprom”. In 2007 he was the General Secretary of “European Energy House” (France). Since 2007 he has been the Head 5.4. Management bodies of the Company of the Representative Office of Enel Produzione S.p.A. in Russia, the General Director of ENEL RUS. Since February 2008 he has been the Chairman of the Board of Directors of OJSC OGK-5. General Meeting of Shareholders The senior management body of OJSC OGK-5 is the General Meeting of Enrico Viale. In 1982 he was graduated from the Polytechnic Institute Shareholders. The procedure for preparation and holding of the General in Turin (engineering department). From 2003 to 2008 he was the Head of Meeting of Shareholders is determined by the Federal Law “On Joint Stock the “Eastern Europe” division. Since 2008 — the Operations Director for Rus- Companies”, the Articles of Association of the Company as well as the Regu- sia at ENEL, Deputy Chairman of the Board of Directors of OJSC OGK-5. lations on the procedure for preparation and holding of the General Meeting of Shareholders of OJSC OGK-5. Carlo Tamburi. Throughout many years he worked at Citibank NA, Institute of Industrial Development, Ministry of Economy and Finance in Italy. He was In 2008 (on the 28th of May) one annual General Meeting of Shareholders a member of the Board of Directors of such companies as Finmeccanica, Ali- was held at which the following decisions were taken: talia, Wind, and Enel. At present, he is the Managing Director of the Interna- tional Division of ENEL. 1. The annual report of the Company over 2007 was approved. Arcelli Marco Pierro. He was graduated from a university in Genoa. 2. Annual financial statements including the profit and loss report (profit At present he is the Head of the Business Development Department of the and loss accounts) of the Company following the results of 2007 were ap- International Division of ENEL. Before that he was the General Director proved. of Enel Slovénske Elektrárne, the President of Enel North America.

3. Distribution of profits of the Company following the results of 2007 was Gabriele Frea. He is graduated from the faculty of law of the International approved. Free University of Social Science (LUISS). Since 2000 he has been working

4. The new membership of the Board of Directors of the Company was elected. The Board of Directors of OJSC OGK-5 elected on the 31st of August 2007 (worked until the 28th of May 2008) 5. The new membership of the Internal Audit Commission of the Company was elected. Family name, first name, middle name Place of work and position 1 Orudzhev Eldar Valeryevich Deputy Managing Director of Business Unit No.1 of OJSC 6. The auditor of the Company was approved. RAO “UES of Russia” 2 Dominique Fache Head of the Representative Office Enel Produzione S.p.A. 7. The Articles of Association of OJSC OGK-5 in the new version was ap- in Russia, General Director of Enel S.p.A for Russia and CIS countries proved. 3 Bruti Marcello Director for operation of steam and gas power plants of Enel Produzione S.p.A. 8. There was approved the contract for management of engineering, purchase, construction of the 400-450 MW CCGT (steam and gas unit) 4 Akhanov Dmitry Sergeevich Head of the Strategy Department of the Reform Manage- ment Center for implementation of projects for reforming in the territory of the branch Nevinnomysskaya GRES between the Open of AO-energo of OJSC RAO “UES of Russia” Joint Stock Company “The Fifth Power Generation Company” and the 5 Bushin Anatoly Vladimirovich General Director of OJSC OGK-5 Consortium incorporating Enel Produzione SpA and CJSC “Atomstroyex- port” as a transaction between related parties. 6 Zveginsov Stefan Head of the representative office of Enel Produzione S.p.A. in Russia 7 Vasilyev Sergey Vyacheslavovich Head of the legal department of OJSC RAO “UES of Russia” Board of Directors of the Company 8 Kulikov Denis Victorovich Deputy executive director of the Association for protection The Board of Directors of OJSC OGK-5 carries out general management of investors’ rights of activity of the Company and acts within the framework of the compe- 9 Cimini Giorgio General Director of LLC “ENEL ESN Energo” tence and in accordance with the procedure determined by the Federal Law 10 Rohan Gerald Joseph Director for power supply and mining industry Pricewater- “On Joint Stock Companies”, the Articles of Association of the Company and hauseCoopers Russia V.V. the Regulations on procedure for convocation and execution of meetings of 11 Glazkov Grigory Yuryevich Independent Consultant the Board of Directors of OJSC OGK-5. The Board of Directors of the Com- pany consists of 11 members. * Positions of the members of the Board of Directors of OJSC OGK-5 are specified as of the date of election.

ogk-5 2008 ANNUAL REPORT Characteristic of activity of management and control bodies of the Company 24 25 at Enel S.p.A. At present he is the Head of the Department for Structured he has been the General Director of RGС. He is a member of the Institute and International Financing at ENEL. Before that he headed the Department of Energy System and a member of the Association of independent directors. for International Taxation. He is also a Member of the Board of Directors of a number of companies incorporated in the Enel Group. Over 2008 28 meetings of the Board of Directors of OJSC OGK-5 were held (13 meetings in the present-absent form and 15 meetings in the absent form). Claudio Zito. In 1979 he was graduated from the Neapolitan University The Board of Directors of OJSC OGK-5 within the framework of its competence in the specialty “business administration”. Since 2006 he has been work- considered 170 matters and took a number of decisions which caused material ing at Enel S.p.A. Until 2007 he headed the Department for Optimization influence on activity of the Company including the following: approval of the of Business Processes. At present he is the Head of the Control and Planning annual complex purchase program (ACPP) of OJSC OGK-5 for 2008. Approval Department of the International Division of ENEL. of the budget of the Company for 2008, approval of target values of KPIs of the Company for 2008, approval of the investment program of the Company Akhanov Dmitry Sergeevich. In 1999 he was graduated from the Rus- for 2008, approval of the charitable program of OJSC OGK-5 for 2008, consid- sian University of People’s Friendship in the specialty “Economy”, in 2000 — eration of matters associated with preparation and execution of General Meet- in the specialty “Jurisprudence”. He worked at the companies “Nika”, ings of Shareholders, approval of the organizational structure of the executive “Rosprom”, “Center Invest MC”. In 2000—2002 — at the bank “NIKoil”. Since apparatus of OJSC OGK-5, approval of the Code of Ethics of OJSC OGK-5 and July 2000 — the Deputy Head of the Capital Management Department at the Regulations on Zero Tolerance to Corruption of OJSC OGK-5, election of OJSC RAO “UES of Russia”. Since 2004 — the Head of the Strategy Depart- the new membership of the Executive Board of OJSC OGK-5. ment of the Center for Management of the Reform of OJSC RAO “UES of Rus- sia”. Since 2007 — the Head of the Federal Agency for Energy. Share of members of the Board of Directors in the authorized capital stock Zhuravlev Sergey Igorevich. In 1992 graduated from the Higher military of the Company as of the 31st of December 2008 engineering radio-electric college (Cherepovets) with the major “command- engineering, radio communication, foreign language” (with honors). In 2003 Family name, first name, middle name Share of preferred shares, % Share of ordinary shares, % finished MBA-studies at California State University (Hayward, USA), ma- Dominique Fache — — jor — finance. In 2006 graduated from the Business and Economics Institute Enrico Viale — — of the Academy of National Economy under the Government of the Russian Arcelli Marco Pierro — — Federation, major — management. In 2000—2004 — director of the program Akhanov Dmitry Sergeevich — — “Information Technologies” at LLC”New programs and concepts”. In 2002— 2004 worked at OJSC “Shipbuilding plant “Severnaya Verf” as IT Director. Gabriele Frea — — In 2004—2008 worked in the Federal Agency for Management of the State Gerald Joseph Rohan — — Property — Deputy Head of the Department for management of property Zhuravlev Sergey Igorevich — — of the commercial sector organizations. Carlo Tamburi — —

Kozlov Andrey Vladimirovich. In 1998 graduated from the Military space Claudio Zito — — engineering academy named after Mozhaisky, major — engineer for radio Kozlov Andrey Vladimirovich — — electronic (radio-engineer). In 2003 graduated from the Moscow Academy Ponomarev Dmitry Valeryevich — — of Economics and Law, major “Finance and Credits” (diploma with honors). In 2007—2009 took an MBA course — strategic management and entre- preneurship in the Higher School of International Business of the Academy of National Economy under the Government of the Russian Federation. Participation of members of the Board of Directors in meetings of the Board Worked for the Central Bank of the Russian Federation, “Нuawei Technolo- of Directors in the form of presence in 2008* gies Co., Ltd”. In 2005—2008 worked in the Federal Agency for Management of the State Property — Head of the power energy and coal industry sector Number of meetings held Family name, first name, middle name in presence Number of meetings attended (counselor of the Department for Management of the infrastructure branches and companies of the military-industrial companies) Dominique Fache 6 6 Enrico Viale 6 6 Ponomarev Dmitry Valeryevich. He was graduated from the faculty Arcelli Marco Pierro 6 6 of international law of MGIMO (Moscow State University of International Akhanov Dmitry Sergeevich 6 6 Relations) at the Ministry of Foreign Affairs of the Russian Federation and Gabriele Frea 6 6 the department of economy С.Е.Р. of the Paris Institute for Political Science. At the beginning of 1990 he headed the Professional association of partici- Gerald Joseph Rohan 6 6 pants of the financial market, which was subsequently transformed into NAU- Zhuravlev Sergey Igorevich 6 4 FOR. Since 1992 to 2001 he was the president of the Russian Trade System Carlo Tamburi 6 6 (RTS). In November 2001 he was elected the Chairman of the Executive Claudio Zito 6 6 Board of NP “ATS” (renamed into NP “Council of Market”). Kozlov Andrey Vladimirovich 6 5 Rohan Gerald Joseph. He has higher education. From 1993 to 2007 he Ponomarev Dmitry Valeryevich 6 6 worked as the Director of the department of enterprises of the fuel and ener- gy complex at the company Pricewaterhause Coopers Russia B.V. Since 2007 * Information is given over the period since May 28, 2008 (the date of election of the Board of Directors of OJSC OGK-5 in the new membership) till December 31, 2008.

ogk-5 2008 ANNUAL REPORT Characteristic of activity of management and control bodies of the Company 26 27 The amount of remuneration to members of the Board of Directors of the The Committee for Strategy, Development, Business Planning Company is determined in accordance with the “Regulations on payment and Corporate Governance to members of the Board of Directors of OJSC OGK-5 of remunerations and The Committee for Strategy, Development, Business Planning and Corporate compensations” approved by the annual General Meeting of Shareholders of Governance is acting on the basis of the Articles of Association of the Company the Company (Minutes No.1 dated of June 04, 2007) and is paid: for partici- and the “Regulations on the Committee for Strategy, Development, Business pation in meetings; for the indicator of net profit of the Company according Planning and Corporate Governance at the Board of Directors of OJSC OGK-5”. to data of annual financial statements approved by the general meeting of shareholders; in case of increase of the amount of market capitalization of The competence of the Committee for Strategy, Development, Business Plan- the Company over the period of work of the Board of Directors. ning and Corporate Governance within the Board of Directors of OJSC OGK-5 includes preliminary consideration, analysis and development of recommen- In 2008 the total amount of remuneration paid to members of the Board dations on the matters included in the competence of the Board of Directors of Directors of OJSC OGK-5 amounted to 5,818,759.5 rubles (in particular, of the Company: determination of priority directions of activity of the Com- for participation at meetings — 2,929,670.5 rubles and following the results pany; submission of the following questions for resolution by the General of the year — 2,889,089.0 rubles). Meeting of Shareholders of the Company: reorganization of the Company including approval of contracts for merger (acquisition), increase of the authorized capital stock of the Company, adoption of the decision on place- Committees of the Board of Directors ment of bonds and other securities, approval of annual financial statements, Audit Committee payment of dividend; recommendations on the amount of the dividend on The Audit Committee of the Board of Directors of OJSC OGK-5 is acting on shares and procedure for payment thereof as well as adoption of other deci- the basis of the Articles of Association of the Company and the “Regulations sions in accordance with its competence. on the Audit Committee of the Board of Directors of OJSC OGK-5”. Committee for HR and Remuneration The competence of the Audit Committee includes preliminary consideration, The Committee for HR and Remuneration within the Board of Directors analysis and generation of recommendations on certain matters of the of OJSC OGK-5 is acting on the basis of the Articles of Association of the competence of the Board of Directors (approval of the annual report of the Company and the “Regulations on the Committee for HR and Remuneration” Company, approval of the annual financial statements of the Company etc.), within the Board of Directors of OJSC OGK-5”. development of recommendations to the Board of Directors on execution of annual independent audit of Financial statements of the Company, assess- The competence of the Committee for HR and Remuneration includes pre- ment of candidates to auditors of the Company, analysis of Financial State- liminary consideration, analysis and development of recommendations on the ments of the Company and results of external audit of financial statements following matters of the competence of the Board of Directors of the Compa- of the Company, consideration of other matters at the request of the Board ny: election of the General Director of the Company and early termination of of Directors of the Company. his powers, in particular, adoption of the decision on early termination of the

Membership of the Audit Committee as of the 1st of January 2008 Membership of the Committee for Strategy, Development, Business Planning and Corporate governance as of the 1st of January 2008 Family name, first name, middle name Position Family name, first name, Rohan Gerald Joseph General Director of RGC middle name Position Chairman Colosanto Livio Filippo Head of the department of energy resources of the business unit Generation Bruti Marcello Director of the Project of integration of OJSC OGK-5 Enel Produzione S.p.A. Chairman at ENEL Glazkov Grigory Yuryevich Independent consultant Vasilyev Sergey Vyacheslavovich Head of the legal department of OJSC RAO “UES of Russia” Zveginsov Stefan Head of the Representative Office of ENEL Produzione S.p.A. Kulikov Denis Victorovich Deputy executive director of the Association for protection of investors’ rights Kulikov Denis Victorovich Deputy executive director of the Association for protection of investors' rights Krupin Mikhail Lvovich The first deputy General Director — financial director of OJSC OGK-5 Fache Dominique General Director of Enel S.p.A. in Russia and CIS countries Consumi Marco The Director for Development of Business in Russia at ENEL Shamritskaya Victoria Vasilyevna Deputy head of the representative office of ENEL Produzione S.p.A.

The audit committee with this membership acted until the Annual General Meeting of Shareholders (until the 28th of May 2008) after which the commit- The membership of the Committee for HR and Remuneration as of the 1st of January 2008 tee was elected with the following members: Family name, first name, Position middle name Family name, first name, middle name Position Fache Dominique General Director of Enel S.p.A. in Russia and CIS countries Chairman Rohan Gerald Joseph General Director of RGC Chairman Glazkov Grigory Yuryevich Independent consultant Enrico Viale Operation Director for Russia at ENEL Zveginsov Stefan Head of the Representative Office of ENEL Produzione S.p.A. Kulikov Denis Victorovich Deputy executive director of the Association for protection of investors’ rights Gabriele Frea The head of the administration for struc- tured and international financing of ENEL Rohan Gerald Joseph General Director of RGC

ogk-5 2008 ANNUAL REPORT Characteristic of activity of management and control bodies of the Company 28 29 labor contract with him; determination of the quantitative membership of the Corporate Secretariat Executive Board of the Company, election of members of the Executive Board In 2006 the Company approved the “Regulations on the Corporate Sec- of the Company, early termination of their powers and establishment of remu- retary and Secretariat of the Board of Directors of OJSC OGK-5” (Minutes nerations and compensations to them, in particular, adoption of the decision No.5 dated 30.03.2006) developed in accordance with the Federal Law “On on early termination of labor agreements with them; submission for resolution Joint Stock Companies”, the Articles of Association of OJSC OGK-5, internal by the General Meeting of Shareholders of the Company of the matter on del- documents of the Company and recommendations of the Code of Corporate egation of the powers of the sole executive body of the Company to the man- Conduct. agement organization and early termination of the powers of the management organization; approval of the terms and conditions of contracts concluded with The Corporate Secretary is obliged to ensure the following: the General Director of the Company, members of the Executive Board, man- agement organization; other matters related to the above mentioned matters >> observance at the Company of the procedure for preparation and execu- and other matters upon instruction of the Company of the Company. tion of the General Meeting of Shareholders;

The committee with this membership acted until the Annual General Meeting >> efficient activity of the Board of Directors and its committees; of Shareholders (until the 28th of May 2008) after which the committee was elected with the following members: >> the procedure for storage, disclosure and provision of information about the Company. Family name, first name, middle name Position The corporate secretary shall accomplish the functions of the secretary of the Fache Dominique General Director of Enel S.p.A. in Russia Board of Directors of the Company, the General Meeting of Shareholders Chairman and CIS countries of the Company, Committees of the Board of Directors of the Company un- Marco Pierro Arcelli Head of the Development Department of less otherwise is provided for by decisions of the Board of Directors of the the International Administration of ENEL Company. Akhanov Dmitry Sergeevich The Corporate Secretary of the Company shall be elected by the Board of Di- rectors of the Company by majority of votes of its members attending the Reliability Committee meeting. The position of the Corporate Secretary is elective. The Reliability Committee of the Board of Directors of OJSC OGK-5 is act- ing on the basis of the Articles of Association of the Company and the The candidate of the Corporate Secretary is proposed by the Chairman of the Regulations on the Reliability Committee within the Board of Directors of Board of Directors or members of the Board of Directors if no Chairman OJSC OGK-5. of the Company is elected.

The competence of the Reliability Committee includes preliminary consider- The candidate for the position of the Corporate Secretary of the Company ation, analysis and development of recommendations on the following mat- shall have the higher education in law or economics, shall have working ex- ters of the competence of the Board of Directors of the Company: on priority perience in the area of corporate governance. directions of activity including analysis of production activity to the extent of assessment (assessment of readiness of the Company to the autumn-winter Until September of 2008 the functions of the Corporate Secretary were ac- period, organization of the labor protection system, organization of the pro- complished by Dmitry Evgenyevich Andreychenko — Head of the Department duction safety management system etc.), assessment of technical condition, of Corporate Relations of the Corporate Legal Department of OJSC OGK-5 level of operation and repair of energy facilities to the extent of fulfillment (Minutes of the Board of Directors No.19 dated 25.09.07). of plans for repair of energy facilities of the Company and implementation of activities for improvement of the level of operation of energy facilities of Since September 2008 the functions of the Corporate Secretary have been the Company, Planning and analysis of activity associated with renovation of accomplished by Ivanov Alexey Evgenyevich — Head of the Department energy facilities of the Company, assessment of activity of technical services of Corporate Relations at OJSC OGK-5 (Minutes No.23 dated 08.09.2008). of the Company and their heads.

Personnel membership of the Reliability Committee as of the 1st of January 2008 General Director and Executive board of the Company Management of current activity of OJSC OGK-5 is carried out by the sole Family name, first name, executive body — the General Director and the collegial executive body — middle name Position the Executive Board of the Company. Cimini Giorgio General Director of LLC “ENEL ESN Energo” Chairman The General Director and Executive Board of the Company are subordi- Baldacci Aldo Deputy head of the department for environmental protection and safety of the nated to the General Meeting of Shareholders and the Board of Directors International Administration of ENEL of OJSC OGK-5 and act on the basis of the Articles of Association of the Grechenkov Deputy General Director — technical director of OJSC OGK-5 Company, Regulations on the Executive Board of OJSC OGK-5. Nikolai Valeryevich Dmitrieva Head of the Financial and Economic Administration of OJSC OGK-5 Formation of the Executive Board of the Company and appointment for the Valentina Alexeevna position of the General Director of the Company as well as early termina- Zagretdinov Deputy managing director of Business Unit No.1 of OJSC RAO “UES of Russia” tion of powers of the members of the Executive Board and the General Ilyas Shamilevich

ogk-5 2008 ANNUAL REPORT Characteristic of activity of management and control bodies of the Company 30 31 Membership of the Executive Board of the Company as of the 1st of January 2008 Executive Board of OJSC OGK-5 since 06.06.2008 (Minutes of the Board of Directors of OJSC OGK-5 No.17 dated 09.06.2008). Family name, first name, middle name Position Bushin Anatoly Vladimirovich General Director, Chairman of the Executive Board On the 11th of July 2008 on the basis of the decision of the Board of Direc- Krupin Mikhail Lvovich First Deputy General Director — Financial Director tors of OJSC OGK-5 the powers of the Member of the Executive Board of the Company Antipov Maxim Victorovich were terminated (Minutes of the Board Antipov Maxim Victorovich Chief Accountant of Directors of OJSC OGK-5 No.20 dated 14.07.2008). Vologzhanin Dmitry Evgenyevich Deputy General Director — commercial director

Grechenkov Nikolai Valeryevich Deputy General Director — technical director On the 14th of October 2008 on the basis of the decision of the Board of Di- Nazarov Valery Evgenyevich First Deputy General Director for Production rectors of OJSC OGK-5 the powers of the Members of the Executive Board Shepelev Gennady Anatolyevich HR director of the Company Uzornikov Sergey Evgenyevich and Titova Anastasia Val- eryevna were terminated (Minutes of the Board of Directors of OJSC OGK-5 No.25 dated 17.10.2008). At the same meeting of the Board of Directors the decision on election of Marcello Bruti, Chernyshev Evgeny Vasilyevich, Director is exercised on the basis of the decision of the Board of Directors and Luca Sutera to the membership of the Executive Board was taken. of OJSC OGK-5. Thus, as of the 31st of December 2008 the following membership of the Ex- In 2008 the Executive Board of the Company carried out 36 meetings ecutive Board of the Company was formed: in presence and meetings in absence at which 103 issues were given consid- eration. Kopsov Anatoly Yakovlevich — General Director of OJSC OGK-5, Chair- man of the Executive Board. In 1965 he was graduated from the Ivanovo During the year of 2008 the membership of the Executive Board was subject Energy Institute in the specialty “Engineer — heat mechanic for automation”. to a number of changes including the following: After graduation from the institute he worked as engineer of the workshop of the Kaliningradskaya GRES-2 (city of Svetlyi), head of the workshop of On the 6th of February 2008 the Board of Directors took the decision on ter- heat automatics and measurements at the Karmanoskaya GRES REU “Bash- mination of the powers of the General Director Bushin Anatoly Vladimirovich kirenergo” (Bashkir Autonomous Soviet Socialist Republic, village of Karmano- since the 31st of March 2008 (Minutes of the Board of Directors of OJSC OGK- vo). In 80—90’s he took various managing positions at Bashkirenergo and 5 No.3 dated 08.02.2008) RAO “UES of Russia”, worked as the Chairman of the Council of Ministers of the Republic of Bashkortostan. In 2004—2005 he was the Director for capital On the 31st of March 2008 the Board of Directors of OJSC OGK-5 took the construction of the Corporate Center of OJSC RAO “UES of Russia”, Moscow. decision on exclusion from the membership of the Executive Board of Bushin In 2005—2007 he was the General Director of OJSC “Mosenergo”, Moscow. Anatoly Vladimirovich, Krupin Mikhail Lvovich and Shepelev Gennady Since the 1st of May 2008 he was the General Director of OJSC OGK-5. Anatolyevich (Minutes of the Board of Directors of OJSC OGK-5 No.8 dated 31.03.2008). Negomedzyanov Alexandr Alexandrovich — The Chief operating officer. He was graduated from the Ufa Aviation Institute. Since the 70’s to 90’s he The same decision elected into the membership of the Executive Board since took technical managing positions at “Bashkirenergo” of the Ministry of Energy 01.04.2008 Uzornikov Sergey Evgenyevich (the First Deputy General Direc- of the USSR, since 1993 to 1996 — the Deputy General Director for general tor — Financial Director) and Titova Anastasia Valeryevna (the HR Director). matters, head of the commercial unit, deputy general director for realization and mutual settlements at OJSC “Bashkirenergo”. At the end of the 90’s — Due to termination of the powers of the General Director of OJSC OGK-5 beginning of the 2000’s he took managing positions at RAO UES, in particular, Bushin Anatoly Vladimirovich since the 31st of March 2008 (the decision in 2004—2005 the position of the Deputy Managing Director — Executive of the Board of Directors of OJSC OGK-5 dated the 6th of February 2008, Director of Business Unit No.1 of OJSC RAO “UES of Russia”. Since June 2005 minutes No.3), since the 1st of April 2008 Nazarov Valery Evgenyevich was to March 2008 — the first deputy General Director for financial and economic elected the General Director of the Company (Minutes of the Board of Direc- matters, logistics and sales at OJSC “Mosenergo”. Since May 2008 — the First tors of OJSC OGK-5 No.8 dated 31.03.2008). Deputy General Director — Operating Director at OJSC OGK-5.

On the 16th of April 2008 the Board of Directors of OJSC OGK-5 took the Chernyshev Evgeny Vasilyevich — The first deputy General Director — decision on appointment since the 1st of May 2008 of Kopsov Anatoly Yak- chief engineer. In 1979 he was graduated from the Ivanovo Energy Univer- ovlevich as the General Director of the Company and on election him to the sity. From 1984 to 1990 he worked as the deputy head of the workshop for Executive Board (Minutes of the Board of Directors of OJSC OGK-5 No.10 adjustment and testing of equipment at HPP-22 Mosenergo, from 1990 to dated 21.04.2008). 1996 — head of the с 1990 по 1996 — workshop for adjustment and testing of equipment. From 1996 to 2001 — the chief engineer at HPP 22. On the 16th of May 2008 the Board of Directors of OJSC OGK-5 took the decision on early termination of the powers of the following Members of the Marcello Bruti — The first deputy General Director — the project of integra- Executive Board of OJSC OGK-5 (since the 16th of May 2008): Nazarov tion of OJSC OGK-5. In 1978 he obtained a degree in machine engineering at Valery Evgenyevich, Grechenkov Nikolai Valeryevich, Vologzhanin Dmitry the University “La Sapienca” in Rome. In 1991-1997 he dealt with operative Evgenyevich (Minutes of the Board of Directors of OJSC OGK-5 No.15 dated support at the oil power plant in Piombino (1,280 MW). In 1997—1998 he 16.05.2008). was the Director of the brown coal mine in Santa-Barbara (Arezzo). Since 2000 he worked in the position of the director of the production branch On the 6th of June 2008 by the decision of the Board of Directors in Priolo Gargalyo (city of Sirakuza, Sicily) — 3 heat power plants and of OJSC OGK-5 Negomedzyanov Alexandr Alexandrovich was elected to the

ogk-5 2008 ANNUAL REPORT Characteristic of activity of management and control bodies of the Company 32 33 hydraulic power plants with capacity of 1,500 MW. Since 2003 he has been The share of the members of the Audit Commission in the authorized capital stock dealing with matters of technical control of centralized heat generation, man- of the Company as of 31.12.2008 aged construction of new plants fulfilled by Enelpower on behalf of Enel Pro- duzione — 5 steam and gas units with capacity of 380 MW, commencement Family name, first name, middle name Share of preferred shares, % Share of ordinary shares, % of construction of the coal power plant Torre Nord (3х660 MW). Since 2005 Carlo Palasciano Villamagna — 0 he has been responsible for functioning of steam and gas units at power Burova Oxana Vyacheslavovna — 0 plants of Enel (8 plants with capacity of 7,000 MW among which 2,000 MW Chmyrev Alexey Vladimirovich — 0 fall on the peak load of the gas turbine of the open cycle). Francesco Marzullo — 0

Luca Sutera — the deputy General Director — Financial Director. In 1997 he Shevchyuk Alexandr Victorovich — 0 obtained the degree in business administration at the University of Bocconi, Milan. From 2002 to 2005 he was the head of Planning, Control and Risk Management at Endesa Italia; since 2006 he worked as the deputy financial director of Endesa Europe. Chmyrev Alexey Vladimirovich — specialist-expert at the Department for management of property of organizations of the commercial sector at In 2008 the total amount of considerations paid to the members of the Execu- Rosimushchestvo tive Board of OJSC OGK-5 amounted to 509,269.87 rubles (other than the natural person accomplishing the functions of the sole executive body of the Francesco Marzullo — Senior manager of the Department of Internal Audit Company). at Enel

Shevchyuk Alexandr Victorovich — Expert of the Association for protec- Internal Audit Commission of the Company tion of investors’ rights. In accordance with article 23 of the Articles of Association of the Company for accomplishment of control over financial and economic activity the Gen- Payment of remunerations and compensations to members of the Inter- eral Meeting of Shareholders shall elect an Internal Audit Commission. nal Audit Commission of the Company is exercised in accordance with the “Regulation on remunerations and compensations to members of the Internal The Internal Audit Commission of the Company is elected for the term until Audit Commission” approved by the Board of Directors of OJSC RAO “UES the next annual General Meeting of Shareholders. of Russia” (Minutes No.200 dated the 29th of July 2005) accomplishing the functions of the General Meeting of Shareholders at OJSC OGK-5. The Internal Audit Commission acts on the basis of the Articles of Association, Regulation on the Internal Audit Commission of OJSC OGK-5, Regulation on re- The total amount of remuneration paid to the members of the Internal Audit munerations and compensations to members of the Internal Audit Commission. Commission of OJSC OGK-5 in 2008 (for participation in audit) amounted to 67,972.50 rubles. The quantitative membership of the Internal Audit Commission of the Com- pany is 5 persons. Information on availability of internal audit The functions of the internal audit service of the Company are imposed The membership of the Internal Audit Commission on the internal audit subdivision — Internal Audit Directorate. of OJSC OGK-5 Carlo Palasciano Villamagna — the Head of the Department for Tax Policy On the basis of the decision of the Board of Directors of OJSC OGK-5 (Min- at Enel utes No.2 dated 20.02.2007) the following were approved:

Burova Oxana Vyacheslavovna — the Head of the unit for methodology >> The Regulations on the internal control system at OJSC OGK-5, and coordination of the accounting process within the Department for Ac- counting and Reporting at OJSC OGK-5. >> The Regulations on the Internal Audit Subdivision at OJSC OGK-5,

>> The Regulations of cooperation of the Internal Audit Subdivision at OJSC OGK-5 with the Audit Committee of the Board of Directors of OJSC OGK-5, the Internal Audit Commission of OJSC OGK-5, executive bodies of OJSC OGK-5. Data on the share of the members of the Executive Board in the authorized capital stock of the Company as of 31.12.2008 The main functions of the Internal Audit Directorate:

Family name, first name, middle name Share of preferred shares, % Share of ordinary shares, % >> audit: assessment of business processes and procedures at Kopsov Anatoly Yakovlevich — — the Company; Negomedzyanov Alexandr Alexandrovich — — >> development of measures for improvement of efficiency and effectiveness Chernyshev Evgeny Vasilyevich — — of business processes and procedures at the Company, issue of recom- Marchello Bruti — — mendations on their compliance with the organizational structure of the Luca Sutera — — Company;

ogk-5 2008 ANNUAL REPORT Characteristic of activity of management and control bodies of the Company 34 35 >> assessment of efficiency of the risk management system;

>> audit of the system for control over fulfillment of decisions of the General Meeting of Shareholders, Board of Directors and Executive Board of the Company;

>> audit of effective internal documents of the Company and those under development and development of recommendations for improvement thereof;

>> control over fulfillment of requirements of internal documents of the Company by structural subdivisions of the Company;

>> audit of corporate and financial management at the Company;

>> coordination and improvement of internal control procedures at the Company.

Information on availability of external audit The auditor of the Company is Closed Joint Stock Company “KPMG” located at the following address: 123317, Russia, Moscow, Krasnopresnenskaya Nab- erezhnaya, 18. Complex “Bashnya na naberezhnoy”, Block С and registered at the following address: 129110, Moscow, Olympic prospectus, 18/1, office 3035.

Procedure for election of the auditor of the Company On the basis of the decision of the Audit Committee of the Board of Directors (Minutes No.4/08 dated of March 31, 2008) the candidature of Joint Stock Company “KPMG” was preliminarily approved.

The Board of Directors of the Company took on the 16th of April 2008 the decision to propose to the General Meeting of Shareholders of the Company to approve Closed Joint Stock Company “KPMG” as the audit of the Company (Minutes No.10 dated the 21st of April 2008).

On the basis of results of voting at the annual General Meeting of Sharehold- ers of the Company on the matter “Approval of the auditor of the Company” the decision was taken “to approve Closed Joint Stock Company “KPMG” (License for execution of audit activity No.003330 dated the 17th of Janu- ary 2003, the period of validity of the license was extended until the 17th of January 2013) as the auditor of the Company” (Minutes No.1 dated 29.05.2008).

ogk-5 2008 ANNUAL REPORT Characteristic of activity of management and control bodies of the Company 36 37 6. Securities of the Company 38 39 6.1. Data on the authorized capital stock The main shareholders of OJSC OGK-5 the share of which in the authorized capital stock of the Company exceeds 5% (as of December 31, 2008): Number of shares, Share in the authorized As of the 31st of December 2008 the authorized capital stock of OJSC OGK-5 Name units capital stock, % amounted to 35,371,898,370 rubles and is divided into 35,371,898,370 or- The Russian Federation represented by the Federal Agency 9 350 330 680 26.4343 dinary shares with the nominal value of 1 ruble each. Over the entire period for Management of Federal Property of operation since the moment of state registration of the Company (October Closed Joint Stock Company Commercial Bank «Citibank» 21 630 970 015 61.1529 27, 2004) and until the 31st of December 2008 OJSC OGK-5 did not exercise (nominal holder)* any issue of preferred shares. «Gazprombank» (Open Joint Stock Company) 1 862 793 846 5.2663 (nominal holder)** The Russian Federation represented by the Federal Agency for Manage- ment of Federal Property owns 9,350,330,680 ordinary registered shares of * Among others the following owners of shares are also customers of CJSC CB «Citibank»: OJSC OGK-5 which constitutes 26.4343 % of the entire authorized capital ENEL Investment Holding B.V. 19 759 223 043 55.8614 stock of the Company. European Bank for Reconstruction and Development 1 831 509 560 5.1178 The amount of the contribution of the Russian Federation on the basis of the ** Among others the following owner of shares is also a customer of OJSC «Gazprombank»: nominal value of ordinary share of OJSC OGK-5 is equal to 9,350,330,680 rubles. LLC «GAZOENERGETICHESKAYA KOMPANIA» 1 862 759 153 5.2662

The Russian Federation does not own any preferred shares in OJSC OGK-5 since OJSC OGK-5 did not exercise any issue of preferred shares. Circulation of the shares of the Company in the organized The special right for participation of the Russian Federation, the Russian securities market Federation constituent entities and municipal formations in management Ordinary shares in the Company entered the organized securities market of of OJSC OGK-5 («golden share») is absent. Russia in 2005: since September 16, 2005, these shares have been included into the Section of off-list securities of the List of Trade Systems NP «SE RTS», OJSC «SE RTS», since September 14, 2005 into CJSC «SE MICEX», respectively. On the 26th of May 2006 trade of shares in OJSC OGK-5 com- menced in the quotation list «B» of CJSC «SE MICEX», on the 19th of July 2006 — in the quotation list «B» of NP «Stock Exchange RTS». Since the 10th of September ordinary shares have been included into the Morgan Stanley Issue history of OJSC OGK-5

Main issue Additional issue Additional issue Additional issue Additional issue Additional issue

State registration number of the issue 1-01-50077-A 1-01-50077-A-001D 1-01-50077-A-002D 1-01-50077-A-003D 1-01-50077-A-004D 1-01-50077-A-005D

Date of state registration of the issue 24.12.2004 16.03.2006 16.03.2006 28.09.2006 07.08.2007 07.08.2007

Placed shares 29 407 170 459 4 105 388 231 69 5 100 000 000 600 000 400 000

Actually placed shares 29 407 170 459 864 514 976 69 5 100 000 000 168 061 44 805

Method of placement Acquisition of Conversion of ordinary Conversion of or- Public subscription (IPO) Conversion of ordinary registered non- Conversion of preferred registered non- shares by the sole registered shares in OJSC dinary registered documentary shares in OJSC «OGK-5 documentary shares in OJSC «OGK-5 founder of the joint Konakovskaya GRES at- shares in OJSC Nev- Holding» into additional ordinary Holding» into additional ordinary stock company tached to OJSC OGK-5 innomysskaya GRES registered shares in OJSC OGK-5. registered shares in OJSC OGK-5. into additional ordi- attached to OJSC Shares are placed at detachment of Shares are placed at detachment of nary registered shares OGK-5 into additional OJSC «OGK-5 Holding» from OJSC OJSC «OGK-5 Holding» from OJSC in OJSC OGK-5 ordinary registered RAO «UES of Russia» simultaneously RAO «UES of Russia» simultaneously shares in OJSC OGK- with attachment of OJSC «OGK-5 with attachment of OJSC «OGK-5 5 Holding» to OJSC OGK-5 Holding» to OJSC OGK-5

Date of commencement of placement 27.10.2004 01.04.2006 01.04.2006 01.11.2006 03.09.2007 03.09.2007

Date of termination of placement 27.10.2004 01.04.2006 01.04.2006 10.11.2006 03.09.2007 03.09.2007

Date of state registration of the report 24.12.2004 27.04.2006 27.04.2006 13.11.2006 11.10.2007 11.10.2007 on results of issue / date of direction of the notice on results of the issue

Date of cancellation of the individual — 22.08.2006 17.08.2006 20.02.2007 15.01.2008 15.01.2008 number (code) of the additional issue

Name of the registering body The Federal Service for Financial Markets of Russia

ogk-5 2008 ANNUAL REPORT Securities of the Company 40 41 The structure of the authorized capital stock of OJSC OGK-5, Dynamics of the volume of trade of shares in OJSC OGK-5 on MICEX % ‘000

As of December 31, 2007 as of December 31, 2008 300000 26,43% 2,19% 26,43% 1,94%

200000

100000 OGK-5

0 71,38% 71,63% 2008-01-01 2008-02-23 2008-04-18 2008-06-12 2008-08-06 2008-09-30 2008-11-22

Legal entities Legal entities and nominal holders and nominal holders Dynamics of the rate of shares on RTS during 2008 Russian Fedepation Russian Fedepation % Natural persons Natural persons 110

90 Capital International (MSCI) index, since the 15th of October 2007 the shares have been included into the base of calculation of the «Index MICEX — elec- 70 trical power industry» (MICEX PWR). Securities of OJSC OGK-5 are also included in the indices RTSI, RTS2, MICEX. On December 26, 2007, in ac- cordance with Instruction of the Chairman of the Executive Board of OJSC 50 «RTS» No.147, the ordinary shares of OJSC OGK-5 were included into the OGKE quotation list «A1». Code of the shares is OGKE. 30 RTS Index

In January 2008 securities of OJSC OGK-5 (ordinary registered non- documentary shares of OJSC OGK-5 (the state registration number — 10 2008-01-01 2008-02-23 2008-04-18 2008-06-12 2008-08-06 2008-09-30 2008-11-22 1-01-50077-A, code OGKE) were included into the quotation list «A1» of the stock exchange MICEX.

Dynamics of the volume of trade of shares in OJSC OGK-5 on RTS

6.2. Market Capitalization ‘000

40000

As of the 31st of December 2007 the market capitalization of the Company st amounted to 152,770,309,692 rubles. AS of the 31 of December 2008 the 20000 OGK-5 market capitalization of the Company amounted to 36,963,633,797 rubles.

0 2008-01-01 2008-02-23 2008-04-18 2008-06-12 2008-08-06 2008-09-30 2008-11-22 Dynamics of the rate of shares on MICEX during 2008

% As of the 31st As of the 31st 120 As of the 31st of December 2006 of December 2007 As of the 31st of December (the 29th (the 28th of December Date of calculation 2005 of December 2006) of December of 2007) 2008 100 The number of trans- over 10 over 10 over 10 over 10 actions per month 80 Number of shares 29 407 170 459 35 371 685 504 35 371 898 370 35 371 898 370 Nominal value, rubles 1 1 1 1 60 Market value*, rubles 1, 644 3,2640 4,3190 1,045 OGKE Capitalization, 48 345 388 235 115 453 181 485 152 770 309 692 36 963 633 797 rubles 40 Power Index * the market value calculated in accordance with the «Procedure for calculation of the market price of equity securi- 20 ties and investment shares in mutual investment funds admitted to circulation through trade arrangers» approved 2008-01-01 2008-02-23 2008-04-18 2008-06-12 2008-08-06 2008-09-30 2008-11-22 by Resolution of the Federal Commission for the Securities Market of Russia dated of December 24, 2003, No.03— 52/ps, at CJSC «SE MICEX».

ogk-5 2008 ANNUAL REPORT Securities of the Company 42 43 Calculation of the market capitalization of the issuer was carried out on the coupon income in the amount determined in accordance with basis of data of CJSC «SE MICEX» and is presented below. the Resolution on issue and Prospectus of securities.

The market capitalization of the issuer was calculated as the product of the On the 2nd of July 2008 the Board of Directors of OJSC OGK-5 took the deci- number of shares of the relevant category (type) and the market price of sion on placement of securities of the Company — documentary non-con- one share* vertible interest-bearing bearer bonds with compulsory centralized storage of series БО-01 — БО-04, approved the decision on issue and Prospectus of securities of the Company. 6.3. Data on bonds of OJSC OGK-5 As of the 31st of December 2008 the stock exchange bonds were not placed.

In 2006 the Company placed documentary non-convertible interest-bear- ing bearer bonds with compulsory centralized storage at the amount of 6.4. Circulation of depository receipts 5,000,000 bonds with the nominal value of 1,000 rubles each, the total nominal value of 5,000,000,000 rubles, the state registration number of OJSC OGK-5 is 4-01-50077-А dated the 17th of August 2006. Upon obtainment of the permit of the Federal Service of Russia for Fi- The date of discharge of the bonds is the 1820th day from the date nancial Markets to circulation outside the Russian Federation of shares in of commencement of placement of bonds namely the 29th of Septem- OJSC OGK-5 at the amount not more than 7,074,537,100 shares in August ber 2011. Discharge of bonds of the issue shall be exercised in mon- 2007 the program was open for issue of Global Depository Receipts (GDR) etary form in the currency of the Russian Federation on a non-cash for ordinary shares in OJSC OGK-5. The GDR Program was approved and is basis. No possibility of selection of the form of discharge of bonds maintained in accordance with the Regulation S (Reg S). The ratio of GDR to is provided for bond holders. ordinary shares of the Company is 1:50.

The coupon rate for the first, second, third, forth, fifth and sixth coupon peri- The purpose of opening of the OJSC OGK-5’s GDR Program was improvement ods is 7.50% per annum. The coupon rate for the seventh, eighth, ninth and of liquidity of securities of the Company, ensuring growth of the shareholder tenth coupon periods will be determined by the Company. In April 2007 the value of the Company as well as ensuring protection of rights and legal Company carried out payment of the first coupon on the bonds in terms of interests of holders of ADR and GDR issued for shares in OJSC RAO «UES 37 rubles 40 copecks per one bond, the total amount 187,000,000 rubles. of Russia». Holders of depository shares in OJSC RAO «UES of Russia» got rights in relation to securities of the Company in the course of reorganization The depository exercising compulsory centralized storage of the bonds is the of OJSC RAO «UES of Russia» exercised by means of detachment from OJSC Non-Commercial Partnership «National Depository Center» (NDC), license RAO «UES of Russia» of OJSC «OGK-5 Holding» with simultaneous attach- 177-03431-000100 dated the 4th of December 2000, issued by the Federal ment of the latter to the Company. Commission for Securities Market of Russia without any limitation of the period of validity. At that, in connection with requirements and restrictions established by the USA legislation, holders of depository receipts in OJSC RAO «UES of Russia» LLC «OGK-5 Finance» provided the security over bonds of the Company being residents of the USA were able to receive only monetary funds from of the above mentioned issue in form of a guarantee. The scope within sale of shares of OJSC OGK-5 due to them. which the guarantor (LLC «OGK-5 Finance») is responsible to holders of the bonds secured by the guarantee in case of non-performance or improper performance of the Company’s obligations under the bonds is equal to 5,000,000,000 rubles and also includes the sum of the

Dynamics of bonds of OJSC OGK-5 over 2008

%

40

30 Program volume Quantity (% of the Name 20 of deposited authorized of the foreign trade Program name Depository Bank shares capital stock) arranger Sponsored* 10 OGK-5 GDR (ordinary shares) The Bank of New York 400 951 900 1.13 Off-exchange market Mellon of securities 0 2008-01-01 2008-02-23 2008-04-18 2008-06-12 2008-08-06 2008-09-30 2008-11-22 * Information is specified as of 31.12.2008.

ogk-5 2008 ANNUAL REPORT Securities of the Company 44 45 7. Participation of the company in other organizations 46 47 Participatory share in the authorized Name Address Type of activity capital stock, % OJSC «Sanatorium — Stavropol Territory, Provision of sanatorium 99.99 preventorium City of Nevinnomyssk services and medical care «Energetik» ОАО OJSC «ESK» Yamalo-Nenets autonomous Activities associated with 43.48 district, city of Tarko-Sale supply (sale) of power and heat as well as activity associated with receipt (purchase) of power and heat from the wholesale power (capacity) market LLC «OGK-5 Finance» Moscow Investment and financial 100 activity

* Information is provided on organizations the participatory share of OJSC OGK-5 in authorized capital stocks of which exceeds 5%.

OJSC OGK-5 is also a member in a number of non-commercial organizations:

>> Non-state pension fund of power industry;

>> Non-Commercial Partnership «Innovation in the power industry»;

>> All-Russian Industrial Association of Employers in the power industry;

>> Non-Commercial Partnership «Council of the Market»;

>> NP «Council of Producers of power industry».

ogk-5 2008 ANNUAL REPORT Participation of the company in other organizations 48 49 8. Position of OJSC OGK-5 in the industry 50 51 8.1. Competition Location Branch of competitors Competitors Since power plants of OJSC OGK-5 together with other power plants are KGRES United Energy Kostromskaya GRES — 3,600 MW (OJSC OGK-3) incorporated into the unified energy system of Russia with unified electri- System of the Center HPP-26 — 1,410 MW (branch OJSC TGK-3 «Mosenergo») cal communications, processes of generation and consumption of electrical (Central Federal District of the energy then we can say that competitors of OGK are all heat generating Smolenskaya NPP — 4,000 MW (Concern «Energoatom») Russian Federation), companies as well as the Concern «Energoatom» and OJSC «RusHydro» be- United Energy Kalininskaya NPP — 3,000 MW (Concern «Energoatom») ing subjects of the wholesale market of electrical energy. However, at more System of the Leningradskaya NPP — 4,000 MW (Concern «Energoatom») detailed analysis of competition it is necessary to take into account that North — West power plants of OGK-5 are located within the first price zone as well as to Kirishskaya GRES — 2,097 MW (OJSC OGK-6) take into account remoteness of a specific energy supplier from the center Zagorskaya GAES — 1,200 MW (OJSC «RusHydro») of loads and to judge upon the extent of influence of each of the competitors NGRES United Energy Stavropolskaya GRES — 2,400 MW (OJSC OGK-2) on the price situation in the region. System of the South Novocherkasskaya GRES — 2,112 MW (OJSC OGK-6) Hydroelectric power plants (GES) and atomic power plants (AES) in compari- Volgodonskaya NPP — 1,000 MW (Concern «Energoatom») son with heat power plants have the lowest costs at production of electrical power. Also, due to particularities of operation of their generating equipment GES of the United Energy System of the South (OJSC «RusHydro») (safety, environmental protection measures, use of natural resources as RGRES United Energy Beloyarskaya NPP — 600 MW (Concern «Energoatom») well as modes of operation) these types of plants are more competitive in and SUGRES System of Ural Verkhnetagilskaya GRES — 1,497 MW (OJSC OGK-1) the power markets. In its turn, hydroelectric power plants (GES) and atomic power plants (AES), compared with heat power plants, bear higher costs for Novo-Sverdlovskaya HPP — 110 MW (OJSC TGK-9) maintaining availability of generating capacities for bearing load that makes Nizhnevartovskaya GRES — 1,600 MW (OJSC OGK-1) heat power plants more competitive in the capacity market. Permskaya GRES — 2,400 MW (OJSC OGK-1) Surgutskaya GRES-1 — 3,280 MW (OJSC OGK-2) Heat power plants using gas and fuel oil as fuels are in equal conditions from the point of view of competition. Taking into account a significant growth of Surgutskaya GRES-2 — 4,800 MW (OJSC OGK-4) prices for gas and fuel oil in 2008 as well as forecasted dynamics of price growth until 2014 (the Ministry of Economic Development and Trade of the Russian Federation) at rates significantly exceeding rates of coal price growth (the Ministry of Economic Development and Trade of the Russian competing companies on the mode of operation of the Konakovskaya GRES Federation) coal power plants will become more competitive. In comparison is significant during the heating period of time and is associated with intro- with competitors the advantage of OGK-5 is the fact that the fuel balance duction of heat generating companies into operation. has a significant share of coal (48—50%). So, limitations in supplies of gas and fluctuations in prices for fuel oil will affect to a less degree the results The repair of equipment of the following main overhead power transmis- of operation of OGK-5 in comparison with competitors. The Company has sion lines (OTL) and substations significantly influences the operation mode no competitors abroad. of the Konakovskaya GRES: overhead power transmission line of the Ka- lininskaya nuclear power plant (NPP) — Opytnaya, overhead power trans- The main competitive advantages of the Companyare as follows: mission line of the Konakovskaya GRES — Cherepovets, overhead power transmission line of the Kalininskaya NPP — Belozerskaya, overhead power >> the leading position in the area of power sales; transmission line Ochakovo — HPP 26, overhead power transmission line of HPP 26 — Pakhra and substation Belozerskaya, Substation Opytnaya, >> the geographical position of power plants; Substation Vladimir.

>> the optimal structure of the fuel balance; The Nevinnomysskaya GRES The Nevinnomysskaya GRES is situated in a complicated power hub of the >> the high level of personnel’s competence. Unified Energy System of the South. To ensure operation reliability of this power hub, the ODU of the South plans to provide increased load of generat- The volumes of power production and sale by the Company’s power plants ing capacities of the Nevinnomysskaya GRES except for the following: are influenced by operation modes being set in the Unified Energy System, namely: >> operation of the electrical network in repair schemes when limitation of load on the power plant is necessary; >> repairs of network equipment of electrical substations and outgoing ver- head power transmission lines; >> the flood period when limitation of the power plant’s load is caused by increased output of capacity from the GES of the Unified Energy System >> repairs, start-ups, shut downs and modes of operation of generating of the South «locking» the Nevinnomysskaya GRES by modes of the equipment of power plants. electrical network.

Konakovskaya GRES The advantage of the Nevinnomysskaya GRES is its position in the electrical Taking into account the last tendencies for electrical power demand in the network of the South which ensures load and high installed capacity utiliza- Unified Energy System of the Center, influence of generating capacities of tion factor.

ogk-5 2008 ANNUAL REPORT Position of OJSC OGK-5 in the industry 52 53 The Reftinskaya GRES and the Sredneuralskaya GRES 8.2. Main operating indicators The aggregate output of the Reftinskaya GRES and the Sredneuralskaya GRES in 2008 amounted to more than 11.6% of the aggregate output of the In 2008 branches of OJSC OGK-5 generated in total 43,005 thousand MW·h Unified Energy System of Ural. Loading of capacities of the Reftinskaya GRES of electrical power that is by 11.6% more than in 2007. Output by the Kona- is conditioned by total electrical power intensity of the Ural Region and low kovskaya GRES and Nevinnomysskaya GRES reduced by 4.5% and 0.2%, power generation net cost and, as a consequence, by high competitiveness. respectively, while output by the Reftinskaya GRES and Sredneuralskaya Loading of capacities of the Sredneuralskaya GRES, (considering low power GRES increased by 28.1% and 5.7%, respectively. generation net cost) is conditioned not only by the power demand of the Unified Energy System of Ural but also by the heat demand by consumers of the cities: Ekaterinburg, V. Pyshma, and Sredneuralsk Power generation by the Company’s power plants Fuel Factor The main type of fuel used at the Konakovskaya GRES, Nevinnomysskaya Name of the power plant Unit of measurement 2006 2007 2008 GRES and Sredneuralskaya GRES branches is natural gas, while the back-up Konakovskaya GRES Thousand MW·h 8 451 8 504 8 120 fuel is fuel oil. The fuel structure at these plants is as follows: 97—98% falls on natural gas and 2—3% falls on fuel oil. The total amount of gas includes Nevinnomysskaya GRES Million kW·h 6 440 6 236 6 225 the limited volume of natural gas sold at the tariff rate set by the Federal Reftinskaya GRES Million kW·h 18 965 16 363 20 966 Tariff Service of Russia (amounting from 88% to 91% of the total gas struc- Sredneuralskaya GRES Million kW·h 6 575 7 276 7 694 ture), surplus gas (amounts to 1.5% to 2.5%) and gas from an independent supplier or commercial gas (amounts to 6.5% to 10.5%). OGK-5 Million kW·h 40 431 38 379 43 005

Use of large volumes of fuel oil is inadvisable from the economic point of view due to high power production net cost. This cost exceeds the tariff rate in the regulated sector by a factor of two and a half. Use of fuel oil will Dynamics of Power generation, thousand MW·h be practical in case of arising of the relevant market’s price signals while 45 000 45 000 power demand is growing. The cost of fuel oil is subject to material fluctua- tions depending on many factors (oil prices at the external market, demand, 40 000 40 000 seasonal effects). 35 000 35 000

30 000 30 000 Power boiler units of Reftinskaya GRES branch are designed to burn coal from Ekibastuz structure (Republic of Kazakhstan). Since the fuel is delivered 25 000 25 000 to Reftinskaya GRES only from one Supplier, this situation creates the risk 20 000 20 000 for performing uninterruptible fuel supply. At present, tests regarding com- 15 000 15 000 bustion of coals of other brands are being carried out in order to reduce risks associated with fuel supply and unjustified increase in the price of coal from 10 000 10 000 Ekibastuz structure. 5 000 5 000

0 0 In order to reduce risk of interruption of fuel supply the negotiations are be- 2006 2007 2008 КГРЭСNГРЭС RГРЭСSuГРЭСОGК-5 ing held with independent suppliers with regard to conclusion of long-term supply contracts and to purchase fuel oil during the lowest price periods; — 2006 — 2007 — 2008 as to coal negotiations are concerned with conclusion of long-term coal sup- ply contracts. КГРЭС — Konakovskaya GRES To improve its competitive positions the Company is planning to perform NГРЭС — Nevinnomysskaya GRES modernization of operating generating capacities and erection of new ones RГРЭС — Reftinskaya GRES as well as technical re-equipment of fixed assets. SuГРЭС — Sredneuralskaya GRES ОGК—5 — OGK-5 The secret of the Company’s success lies in successful promotion of products to existing target markets as well as possible participation in other target markets wherein the Company has not been present before. Net heat output by power plants of the Company Such promotion is based on the study and analysis of target markets, needs of buyers of electric power and capacity and other products — required vol- Name of the power plant Unit of measurement 2006 2007 2008 umes, prices, quality, terms of delivery, desired services etc. To accomplish Konakovskaya GRES Thousand Gcal 254 229 240 this purpose the system of such analysis is being developed and imple- Nevinnomysskaya GRES Thousand Gcal 1 882 1 781 1 801 mented. At the same time it is studied what kind of internal possibilities has Reftinskaya GRES Thousand Gcal 475 481 462 the Company so as to follow interests of the consumer. Settlement of these issues will allow to attract buyers and to awake their interest in cooperation Sredneuralskaya GRES Thousand Gcal 4 402 4 278 4 316 with the Company, this, in its turn, will enable the Company to reach more OGK-5 Thousand Gcal 7 013 6 769 6 819 vantage point compared with competitors.

ogk-5 2008 ANNUAL REPORT Position of OJSC OGK-5 in the industry 54 55 Konakovskaya GRES. Dynamics of heat output, thousand Gcal The Sredneuralskaya GRES. The Sredneuralskaya GRES branch Structure of power Utilization of capacity in 2008 Utilization of capacity in 2008 generation 7 000 Unit 6 000 Name 2007 2008 19,6% 51,7% 9,0% of measurement 86,3% 4,7% 5 000 power units exclusive Million kW·h 1 872.4 1 985.5 power units inclusive Million kW·h 5 403.8 5 705.1 4 000 Total Million kW·h 7 276.2 7 690.6 3 000

2 000 28,7% 8.3. Sales 1 000 The Company exercises its production activity in the wholesale power Load 0 Load (capacity) market in the First price zone including the European part of the КГРЭСNГРЭС RГРЭСSuГРЭСОGК-5 Reserve Reserve Russian Federation and Ural. Repairs — 2006 — 2007 — 2008 Repairs The main players in the wholesale power market are the following subjects of the wholesale power market: КГРЭС — Konakovskaya GRES NГРЭС — Nevinnomysskaya GRES >> Wholesale generating and territorial generating companies formed as a result The Nevinnomysskaya GRES. RГРЭС — Reftinskaya GRES of reforming of electrical energy industry — OGK, RusHydro (HydroOGK); Utilization of capacity in 2008 SuГРЭС — Sredneuralskaya GRES ОGК-5 — OGK-5 >> Concern «Energoatom»; 66,9% 13,3% >> Power sale companies represented by guaranteeing suppliers, large pow- Structure of power generation, load and capacity reserve er sale companies formed as a result of reforming of the electrical energy industry as well as those which are independent of OJSC RAO «UES of Russia». The Konakovskaya GRES branch Structure of power generation Power 19,8% In connection with issue of Resolution of the Government of the Russian Unit of Name 2007 2008 Federation dated the 31st of August 2006 No.529 «On improvement of the measurement procedure for functioning of the wholesale market of electrical energy (ca- Load 300 MW power units Million kW·h 8 504,6 8 120,0 pacity)» OGK-5 carries out its activity associated with power sale in the fol-

Reserve lowing segments of the wholesale market:

Repairs Regulated Contracts (RC). In 2007 trade of electrical power (capacity) was carried out under the terms The Nevinnomysskaya GRES branch Structure of long-term regulated contracts (RC) concluded in the wholesale electrical of power generation power (capacity) market at regulated prices (tariffs) approved by the Federal Tariff Service of the Russian Federation in 2007. Since 2008 such trade has Unit of Reftinskaya GRES. Utilization Name 2007 2008 been carried out by the indicative price which is determined according to the measurement of capacity in 2008 indexation formula approved by the Federal Tariff Service of the Russian Heat power plant (HPP) Million kW·h 663.3 661.2 Federation. The RC portfolio volume corresponds to the value specified in 2,8% 26,3% 150 MW power units Million kW·h 4 717.6 4 534.6 the power and capacity supply balance sheet indicated by the Federal Tariff CCGT—170 Million kW·h 854.8 1 029.0 Service of the Russian Federation for 2007 (basic volume) decreased by the liberalization share the value approved by the Resolution of the Russian Total Million kW·h 6 235.7 6 224.8 Federation Government dated of April 7 2007, No. 205, taking into account particularities determined by Resolution of the Government of the Russian Federation No.529, dated of August 31, 2006.

70,9% The Reftinskaya GRES branch Structure of power generation Since January 1, 2007, power has been supplied at the regulated prices (tariffs) in the wholesale power market in the following shares of the amount Unit of Name 2007 2008 of power production (consumption) determined for participants of the whole- measurement Load sale market in the forecast balance sheet for 2007 approved in accordance 300 MW units Million kW·h 9 534.1 10 242.2 with the established procedure taking into account particularities of forma- Reserve 500 MW units Million kW·h 6 828.6 10 699.4 tion of power supply to population: Repairs Total Million kW·h 16 362.7 20 941.6 From the 1st of January till the 30th of June 2007 — from 90 to 95 percent;

ogk-5 2008 ANNUAL REPORT Position of OJSC OGK-5 in the industry 56 57 From the 1st of July till the 31st of December 2007 — from 85 to 90 percent; Free Bilateral Contracts (FBC) In the current wholesale power (capacity) market, companies can also enter From the 1st of January till the 30th of June 2008 — from 80 to 85 percent; into free bilateral contracts, which provide a fixed price agreed between by the parties and can be signed for any period. From the 1st of July till the 31st of December 2008 — from 70 to 75 percent; As can be seen from the Table, the Company substantially increased the From the 1st of January till the 30th of June 2009 — from 65 to 70 percent; share of day-ahead market sales in its total sales thanks to liberalization and more effective trading strategy that has made a good contribution to From the 1st of July till the 31st of December 2009 — from 45 to 50 percent; the increase of profit from sales in 2008 versus 2007. Another positive trend was a substantial increase of sales under free bilateral contracts, which are From the 1st of January till the 30th of June 2010 — from 35 to 40 percent; good means of hedging against the risk of DAM price volatility.

From the 1st of July till the 31st of December 2010 — from 15 to 20 percent; Capacity In connection with issue of Resolution of the Government of the Russian Starting from the 1st of January 2011, electrical power shall be supplied in Federation dated the 28th of June 2008 No.476 «On introduction of amend- full by free (unregulated) prices. ments into certain resolutions of the Government of the Russian Federation with regard to matters associated with organization of competitive trade of Day-Ahead Market (DAM) generating capacity in the wholesale power (capacity) market» the principle In the «day-ahead market» surplus (missing) volumes of power are traded of organization of trade of generating capacity has been changed. for ensuring the portfolio of regulated contracts at free (marginal) prices obtained as a result of a competitive tender of price bids from participants Until the second half-year of 2008 the entire installed capacity of a power of the wholesale market for purchase/sale of power. Trade in the DAM (day- plant was sold under regulated contracts (RC) at regulated prices (tariffs) ahead market) is organized and held by OJSC «ATS» (Open Joint Stock approved by the Federal Tariff Service of the Russian Federation. At the Company «Administrator of Trade System»). In accordance with the Resolu- present moment, only the available capacity (installed capacity of the power tion of the Government of the Russian Federation No.205, dated of April 07, plant less restrictions agreed upon with SO (System Operator), for example, 2007, scope of obligations under regulated contracts will be reduced. Thus, heating restrictions during winter) is being sold. volumes of sales in the free sector of the market will increase. A certain portion of available capacity is sold under regulated contracts (RC) The current model of the wholesale market permits to participants of the according to the adjusted tariff approved by the Federal Tariff Service of wholesale power market to sell and to additionally purchase missing volumes the Russian Federation (to be adjusted by the value of available capacity). of power with the hourly breakdown. This is the mechanism of risk hedging At that, the volume of regulated contracts will be progressively reducing in case of impossibility to fulfill obligations under the regulated contract due according to rates of liberalization set by the Government of the Russian to non-compliance of the composition of generating equipment chosen by Federation releasing capacity being sold at «free prices» for capacity. the system operator or where power is generated using more expensive type of fuel. This financial instrument permits to perform supply of power without Trade of liberalized, «free capacity» will be effected through mechanisms producing thereof but by purchasing power at the day-ahead market by the of competitive capacity take-off, conclusion of free contracts (directly with price set as a result of the competitive tender of price bids. the purchaser) and via exchange of power and capacity.

Balancing Market (BM) The compulsory competitive capacity take-off (KOM) is carried out annually Trade of deviations of the actual production schedule from the scheduled one on the basis of bids for the following calendar year and the capacity volume is exercised at the balancing market at prices formed on the basis of a com- required for take-off in relevant area of free flow of capacity (area of free petitive tender upon the marginal principle of bids of participants of the flow of capacity is determined by the system operator — SO) on the basis balancing market (suppliers and consumers with regulated load). Constantly of volumes of generating capacities and consumption volumes accounted for growing market requirements for purchasers of power in relation to more in the forecast balance sheet for the relevant calendar year. accurate planning of consumption and to suppliers — for ensuring strict fulfillment of instructions of the System operator, availability of generation Payment for such capacity is effected at a free price set as a result of com- equipment, result in the fact that volumes of the balancing market will not petitive take-off. Payment for capacity in 2008 is effected at the tariff of the increase but will be rather reducing. Federal Tariff Service of the Russian Federation adjusted to available capacity.

Power Sales by Sector in 2008 versus 2007 Sales of capacity under free contracts may take place through exchange trades on commodity exchanges and through over the counter trade directly Indicator Unit 2007 2008 2008 vs. 2007, % with a counteragent at the contractual price. Power Sales, total thousand MW·h 45 841 50 661 +10.5 RC Sales thousand MW·h 36 559 32 147 –12.1 Calculation of the cost of supplied capacity shall be carried out taking into account «capacity quality». This market mechanism permits to stimulate DAM Sales thousand MW·h 6 681 14 189 +112.4 suppliers to ensure availability of generating equipment. BM Sales thousand MW·h 1 236 1 527 +23.5 FBC Sales thousand MW·h 1 365 2 798 +105.0 In 2008, the average monthly ratio of free capacity sales to total sales DAM Sales on Total Sales % 14.6 28.0 +13.4pp of OGK-5 amounted to approximately 25% that is in line with the liberalized share of capacity available for sale in 2008.

ogk-5 2008 ANNUAL REPORT Position of OJSC OGK-5 in the industry 58 59 9. Strategy and priority activities of the Company 60 61 OJSC OGK-5 is planning to concentrate its activities on the achievement of the following priority aims in the mid-term prospective:

>> Maintain a leading role in the Russian energy industry sector;

>> Take full advantage of market liberalization process taken place in the in- dustry

>> Extract 100% efficiency from the available asset portfolio

>> Ensure financial discipline to maintain the key financial and economic indicators acceptable for the Company and provide compliance with requirements of credit rating and financial covenants of long-term credit agreements with lenders

>> Strict control over investment risk profile under the current market regu- latory scenario

>> Take advantage from Enel’s vertically integrated presence in Russian power market

>> Ensure satisfactory cash return to shareholders

In accordance with these goals, the Company has defined the key levers and target areas of strategic development:

Area Actions

Plant availability • Reducing frequency and duration of repairs and efficiency • Optimization of planned shut downs of plants through implementation of proactive principle to carry out maintenance and repair works • Reorganization of repair activities management procedures • Reduction of specific fuel consumption through equipment modernization and launch of new CCGT units

Market regulation • Proactive and consistent positioning on regulatory market priorities • Cooperation and dialogue with regulatory bodies based on Enel Group’s experience in liberalized markets

Business activity • Focus on bidding strategy improvement and optimization of the power/capacity production • Diversification of fuel sources and logistics • Taking advantage of Enel’s vertical integration chain in Russia (Gas production — power generation — power sale) • Free bilateral contract portfolio development for hedging against the risk of price volatility in the free market

Investment • Timely commissioning of new CCGT units at the Sredneuralskaya and Nevinnomysskaya program GRES • construction of the dry ash and slag removal system to ensure continuity and increase availability of Reftinskaya GRES • Required investments into modernization and reliability to preserve existing capacity and improve performance • Implementation of Environmental action plan according to best available techniques (BAT)

Cost optimization • Procurement optimization • Reorganization of core and infrastructural process supported by the new ERP platform (SAP/R3) • Implementation of staff headcount downsizing plan and centralization of staff functions • Participation in ENEL GROUP ZENIT program aimed at operational excellence of the Company

ogk-5 2008 ANNUAL REPORT Strategy and Priority Activities of the Company 62 63 10. Basic risk factors associated with activity of the Company 64 65 The Company understands risks to which it is exposed in the course of ex- share in the total amount of gas supplies. The Company hopes to take addi- ecution of its activity and achievement of strategic targets. The Company tional competitive advantages from the vertically integrated structure of the is also aimed at the preventive approach to risk management, prevention Enel Group with regard to arranging direct gas supplies from enterprises of risks and mitigation of probable losses rather than liquidation of conse- incorporated in the Enel Group. In addition, purposeful work is being carried quences of realized risk events. out for improvement of planning of purchases of fuel including determination of optimum time of purchase. The Company considers industrial risks as its key risks. The reform of the electrical energy industry is associated with a number of risks which may 4. One more significant production risk of the Company is dependence cause material influence both on business and financial indicators of the on type of coal used at the Reftinskaya GRES. Company. Activity of OGK-5 is exposed to influence of continuously changing industrial regulation. In case of maintenance of rates of the reform in pro- Risk description: The monopoly position of coal suppliers (Kazakhstan) for portion to progress of the reforming process industrial risks will reduce that the Reftinskaya GRES and limited possibilities for use of another type of coal will positively influence the fair value of the Company. conditioned by the necessity of additional operational costs for adaptation thereof to existing technological processes. Below presented are the Company’s risks which, in the opinion of the Com- pany, are critical and threaten activity of the Company. Actions taken by the Company: The Company has carried out a detailed analysis of the effect of use of another type of coal. On the basis of the con- 1. According to estimates of the Company an important industrial risk is the ducted analysis plans are being developed for execution of additional techni- risk of delay of the market liberalization terms. cal activities which will permit to the plant to pass to partial combustion of new types of coals, possibilities for change of the technological process Risk description: Slow-down of growth of tariffs in the regulated power taking into account the used type of coal are being analyzed. market may lead to loss of marginal profit and, as a consequence, limita- tion of possibilities of the Company to carry out modernization of production 5. The risk of unfavorable consequences due to delay in commissioning capacity facilities and to introduce new capacity facilities into operation. of new generation units

Actions taken by the Company: OGK-5 tries to get the maximum pos- Risk description: Fines on the part of state authorities for violation sible profit under the given conditions by means of execution of active work of terms of introduction of generating equipment into operation for the Nev- within the framework of NP «Council of Market», NP «ATS». The Company innomysskaya GRES and Sredneuralskaya GRES provided for by the contract is sure that fulfillment of investment programs for construction of new power for provision of power to the wholesale market dated 18.04.2008. generation units, reduction of production costs and improvement of techno- logical processes will permit to maintain and develop competitive advantages Actions taken by the Company: The Company is the only company in the under any market conditions. energy sector which has fully confirmed invariability of the plans for con- struction of new capacities. The Company takes active steps for fulfillment of 2. In addition, according to estimates of the Company, rather high level the investment program in time by means of strict supervision over progress of wear of fixed assets also representsa material risk. of construction termination of which is scheduled for the 4th quarter of 2010.

Risk description: The main part of generating capacities have a significant OGK-5 is in the process of creation of an efficient risk management system extent of wear. Expensive repair of equipment and downtime in power gen- which will allow to integrate the procedures for identification and manage- eration may lead to material losses. ment of risks into key business processes, in particular, into the processes of adoption of decisions and for making risk management an integral part Actions taken by the Company: The Company is implementing the Invest- of the Company’s culture and activity. The Company has carried out detailed ment program providing for construction of new capacities and the repair analysis of financial and operational risks faced by it within the framework program. The program for reconstruction of existing generating facilities and of execution of its daily activity. On the basis of the conducted analysis risk technical re-equipment of fixed assets is also being developed. Implementa- management plans have been developed and further steps have been ap- tion of these programs should significantly improve reliability of generating pointed for improvement of the risk management system. equipment. The Company may face other risks as well, which are today not known to the 3. One of the material production risks, according to the Company, is de- Company or which are insignificant but which potentially may cause an un- pendence on gas supplies. favorable influence on activity and financial results of the Company in the future. Risk description: Three of four GRES of OGK-5 are operated using natural gas as a fuel. Dependence of OGK-5 on OJSC «Gazprom» creates the risk of use by Gazprom of its unique position for raising prices and limitation of supplies of energy resources.

Actions taken by the Company: The Company pays a lot of attention to fuel supplies and ensuring fuel safety and takes measures for prevention of such risks through operational efficiency improvement due to implementa- tion of programs for reduction of production costs and fuel savings, conclu- sion of long-term contracts with independent suppliers and increase of their

ogk-5 2008 ANNUAL REPORT Basic risk factors associated with activity of the company 66 67 11. Investment activities 68 69 Investment Activities in 2008 >> reduce repair costs for restoring of the boiler’s operability.

6. Complete replacement of RVP (regenerative air preheater) padding pack- CAPEX Structure by Investment Types mln. RUB ages and taking measures on adjusting specifications of RVP so as to comply with standards will enable to: Design and exploration >> improve heating exchange performance; Core facilities: Equipment not work for Other Technical included construction financial re-equipment and in construction for future New invest- >> reduce air intakes; Name reconstruction cost estimates years construction ments Total Nevinnomysskaya 893 18 3 611 0 1524 >> improve the Boiler’s efficiency. GRES Konakovskaya GRES 730 10 17 0 33 791 7. Refurbishment of burner devices at 2К-А will enable to: Sredneuralskaya 341 20 5 272 54 692 GRES >> increase reliable performance thereof; Reftinskaya GRES 2070 23 36 98 1 2229 >> reduce repair costs; Central office 0 17 0 1 160 178

Total on OGK—5 4034 88 61 982 249 5414 >> improve burning mode.

8. Refurbishment of electrostatic precipitators of the power unit No. 2 will List of main objects of the investment program for 2008 enable to improve the efficiency of the electrostatic precipitator and to Reftinskaya GRES branch reach the ash collection efficiency not less than 99%. 1. Repair of the power unit No. 10 enabled restoring the capacity lost due to the accident and prolonging of service life of the unit’s main equipment 9. The works at the power unit No. 8 including replacement of the Boiler’s heating surfaces and compacting of the separating partitions between 2. Modernization of the feed turbo pumps of the 300 MW power units of the convective shaft and “penthouse” with installation of movable gates st. No. 2, 3, 6 will enable to: will improve the reliability of the boiler and reduce the number of shut downs. >> increase reliable performance thereof; Sredneuralskaya GRES branch >> adjust vibration state so as to ensure compliance with standards of PTE 1. Replacement of U-110 8 type switch breakers for SF6 insulated switch (Operations Rules) (to be less than 4.5 mm/s) breakers envisages installation of the 145РМ40-type switch breakers produced by Company “ABB Electro-engineering”. These switch breakers >> increase efficient performance up to 85% provide:

>> reduce operating and repair costs by 1.5 times >> faster damages tripping speed;

3. Supply of the turbo-generator stator of type ТGV-325 -2АU3 to prepare >> high fire safety and performance reliability; the 300MW power units for refurbishment and to provide possibility to increase unit capacity. >> significant increase of periods of time between overhauls;

4. Slug-free combustion system at the 6К-B boiler unit will enable to: >> reducing repair and operating expenses.

>> ensure automated cleaning of the boiler’s heating surfaces; 2. Refurbishment of the HVO (Water Treatment) demineralizer package unit will enable to: >> prevent slugging of the boiler’s fire-chamber during operation; >> reduce significantly the amount of filtering material; >> reduce the number of the boiler’s shut downs. >> reduce plant local consumption of water; 5. During overhauls of the power units No. 2 and No. 8, the following re- construction works have been performed: Replacement of ShPP (Pendant >> reduce the amount of reagents required to regenerate filters; superheater) of stage 1 and the maximum heat capacity zone (ZMT) at К-А,B; ShPP (Pendant superheater) of stage 4 and KPP (Convective >> reduce environmental fees for mineralized water discharges; Superheater) of stage 1 at K-B of the PK-39 boiler of the power unit No.2 will enable to: >> significantly reduce costs for filters repair.

>> increase reliable performance of the boiler unit; 3. Reconstruction of the bulk chemical storage tank unit and reagent-pump- ing unit of the water treatment package (HVO) will enable to improve >> reduce forced downtime due to damages of the heating surfaces: reliability, to save reagents and reduce repair expenses.

ogk-5 2008 ANNUAL REPORT Investment activities 70 71 4. Refurbishment of the 6 kV RUSN (BOP (balance-of-plant) Switchgear) of 2. Refurbishment of DC main distribution board will enable to: the 2nd stage will enable to ensure: >> increase reliability of DC circuits of the main distribution board; >> Stand-alone mode of operation, no replacement of arc-suppressing envi- ronment will be needed; >> reduce repair and operating expenses;

>> High wear-resistance of the vacuum arc-suppressing chambers and their >> Improve performance of DC main distribution board. contacts during switching both load currents and rated operating cut-out currents; 3. Refurbishment of fire alarm system will enable to:

>> Fast restoration of the electrical strength of arcing distance after the arc >> improve reliability of the fire warning system; goes out. >> To bring fire alarm system to conformity with the requirements of the >> Fire safety and easy installation and maintenance. Russian legislation.

5. Refurbishment of Shore Pumping Station including replacement of circu- lation pumps will enable to: Investment Program for 2009—2013 The investment program of the Company for 2009—2013 shall take under >> increase reliable performance of equipment; consideration the following tasks:

>> reduce power consumption of the circulation pumps’ drive. >> Construction of the new highly efficient generating capacities in regions suffering from power shortages; 6. Reconstruction of the No. 11 boiler will enable to: >> Upgrading of equipment so as to provide increase in capacity and efficiency; >> improve the reliability and safe operation of the power plant; >> Replacement of equipment with expired life cycles; >> improve the efficiency of the work due to the reduction of the fuel con- sumption for power generation; >> Improvement of reliability and efficiency of existing capacities;

>> reduce repair costs; >> Implementation of safety and health maintenance policy;

>> improve the competitiveness at the power generation market. >> Implementation of environmental projects;

Konakovskaya GRES branch >> Upgrade of IT systems. 1. Technical re-equipment of the power unit No. 6 will enable to: Construction of new capacities >> improve the reliability and safe operation of the power plant; The Company is performing construction of two new generating facilities with the total capacity of over 820 MW at the production sites of Nevinnomyss- >> improve the efficiency of the work due to the reduction of the fuel con- kaya GRES and Sredneuralskaya GRES. sumption for power generation; Power production is a highly capital-intensive industry and is characterized >> reduce repair costs; by long-term investment cycles and a long payback period. That is why an inevitable demand increase and prospects of power sale at free prices are of 2. Refurbishment of the 6 kV switch gear and control gear of the power unit great interest when estimating the investment return of the projects related No.6 including replacement of cells. to construction of such facilities.

3. Technical re-equipment of the outdoor switchgears ORU-500, ORU-330, The construction of new facilities will require considerable capital expen- ORU-220 with the replacement of the equipment; ditures. For construction of new facilities, the Company is going to use state-of-the-art technologies and high-quality equipment supplied by lead- Nevinnomysskaya GRES branch ing world manufacturers (General Electric, Skoda Power, Nooter/Eriksen, 1. Implementation of vibration monitoring system at the turbine unit of st. Siemens, etc.). The new ССGT (combined cycle gas turbine) units, which are No. 11 will enable to:

>> increase reliable performance of the unit; Planned Project cost production (VAT exclusive), Facility capacity billion RUB >> reduce the number of emergency shut downs of the power units for the rea- sons related to provision of inadequate information about set parameters; Sredneuralskaya ССGT unit ~410 MW 12.5 Nevinnomysskaya ССGT unit ~410 MW 15 >> Reduce duration of the starting sequences thanks to obtaining of timely Total ~820 MW 27.5 and reliable information:

ogk-5 2008 ANNUAL REPORT Investment activities 72 73 planned to be put into operation, will have very low specific fuel consumption >> Modernization of frequency control units; compared to the majority of existing generating capacities in Russia. It will lead to an advantageous position of power generated by the new capacity in >> Implementation of modeling devices with a dynamic scheme and video power output ranging and provide significant cash inflow for future invest- panels. ments. The goals for the construction of each new facility were thoroughly investigated by the Company and independent experts, while the volumes of c) Environmental Projects power and capacity to be supplied by these new generating capacities have already been approved by the System Operator. >> Construction of DARS (Dry ash removal system) at Reftinskaya GRES;

Sredneuralskaya ССGT unit >> A stage-by-stage reconstruction of EPs (electrostatic precipitators) of At present the Company has started the implementation of the project for boiler units at Reftinskaya GRES; the construction of 410-MW Sredneuralskaya ССGT unit. This power plant is located in the Urals federal district, which is one of the most industri- >> Implementation of multistep burning systems at 300MW and 500MW ally developed regions of Russia and is expected to experience high power units. and heat deficit in the future. The ССGT unit will be constructed by 2010 on the territory of Sredneuralskaya GRES and will produce both power and Policy of the Company in the sphere of safety heat. The new capacities are supposed to operate using new combined cycle and health maintenance technologies with efficiency of 57% and more. The Company entered into a Activities planned for 2009 are aimed at achievement of the goals set by long-term contract with ITERA on gas delivery to the given facility. IBERDRO- Mr. Fulvio Conti, Director General of Enel — “Zero accident at production”. LA INGENIERIA Y CONSTRUCCION, S.A.U. (Spain) was selected as General For this purpose a centralized system of labor protection and industrial Contractor for the Sredneuralskaya ССGT project. safety is formed. This system has been created on the basis of interna- tional experience of the Enel Group and requirements of international Nevinnomysskaya ССGT unit standards in this area. In 2011 it is planned to certify it for compliance In order to create extra capacity to perform subsequent replacing the exist- with OHSAS 18001. ing capacities with the expired life cycle and to increase competitiveness of Nevinnomysskaya GRES at the power and capacity market, OJSC OGK-5 is Implementation of environmental projects building a 410-MW CCGT unit on the territory of Nevinnomysskaya GRES OJSC “OGK-5” leads in active policy in the sphere of environment pro- with expected commissioning in 2010. The new capacities are supposed to tection and reducing environmental impact of production. The Company operate using new combined cycle technologies with efficiency of 57% and develops and implements a number of important projects for reducing more (at the specific fuel consumption of ~220 g of coal equivalent per 1 kW environmental impact of production, both during construction of the new thus providing high competitiveness of the new facility). The Company has a contemporary generating capacities with the emission norms in compliance permit for Nevinnomysskaya GRES to use gas up to 2.9 billion m³/year. This with the European standards, as well as for reduction of emissions of the allows using existing gas consumption volumes for the new unit, taking into current equipment with the achievement of emission indicators lower than account the decommissioning of existing capacities. Russian norms.

Increase of Efficiency and Reliability of Existing Power Plants In 2008 the management of the Company started the preliminary proj- The increase of the efficiency and reliability of the existing generating ca- ect works for development of the reconstruction variants of 300 MW pacities is an essential part of the strategic plans and the process of selling Unit # 5 of Reftinskaya GRES, with the planned reconstruction period in power and heat. The Company singles out the following main points of the 2010—2011. During modernization of the Unit # 5 equipment it is decided maintenance program and investment policy aimed at the increase of the ef- to achieve the environmental emissions norms as follows: dustiness ficiency and reliability of capacities: norms — according to the European standards; NOx emissions — accord- ing to the Russian norms. а) Maintenance and repairs. Within the framework of OGK-5’s environmental policy, the 5-year invest- Maintenance of operating capacities is considered to be an important compo- ment program of the Company envisages the construction of DARS and nent of the Company’s investment policy. The major part of the generating replacement of EPs at Reftinskaya GRES. assets needs to constantly undergo maintenance and repairs, both scheduled and extraordinary ones. If timely maintenance and repairs are not provided, This unique project is of great importance for the environmental situation it can lead to power delivery disruptions, and, as a result, to significant in the Urals region and is potentially interesting from the commercial point losses for the Company. Timely maintenance secures and prolongs the life of view. The dry ash removal system will allow decreasing the quantity of cycle of the corresponding assets. stored ash. In its turn, this will help to extend the life of the ash dump at Reftinskaya GRES, decrease water consumption by the hydraulic (wet) ash b) IT implementation removal system and reduce negative environmental impact.

Extension of informational technologies implementation is considered to be In the first half of 2008 the large-scale testing of the dry ash removal system an important component of the Company’s strategic development: at Unit No.6 were finished. The given system has no analogues in Russia, while the combination of dry and conventional wet ash removal haven’t been >> Implementation of automated industrial control systems; used in the world practice before. The commissioning of this system will provide for additional shipping of dry ash to consumers, constructing enter- >> Modernization of monitoring and control systems; prises, in the amount of over 400 thousand tons a year. 5 900 million RUR

ogk-5 2008 ANNUAL REPORT Investment activities 74 75 were allocated by OGK-5 for implementation of the project. It is expected to Innovations and IT technologies commission the new system in 2010. In 2008 within the framework of the project of integration with Enel the audit of IT technologies of OJSC OGK-5 was carried out to evaluate compli- Prospects of technical reconstruction and development ance with Enel’s requirements and the possibility of integration of informa- of the Company tion systems and IT infrastructure. In the 3—4 quarters the work was carried According to the business-plan up to 2013 approved by the Board of Direc- out for reorganization of the structure of IT subdivisions. Telecommunication tors of the Company the total cost of the investment program will total more and production automation units were transferred to technical subdivisions than 50 billion RUB (VAT exclusive), more than half of which will be allocat- since September 01, 2009. At present, the analysis of business processes ed for upgrading the existing production capacities and improvement of their of IT is being carried out for further change of the IT structure to the ex- functional indicators. tent of centralization of functions of management of IT subdivisions of the company. In 2009 within the framework of implementation of the project Investment volumes by areas are substantiated by the following factors: “centralization of functions of management of IT subdivisions” the structure of IT subdivisions will be changed, allocated centers of competence will be >> Introduction of modern technologies while upgrading equipment will al- organized at branches of the company. low reducing specific fuel consumption, at the same time increasing unit capacity. Management automation In July 2008 the Board of Directors of OJSC OGK-5 took the decision on >> Replacement of the life-expired equipment is planned to go in parallel start-up of the project for implementation of the software product “SAP with the increase of the efficiency and capacity of the re-commissioned Wise” for further integration of OJSC OGK-5 into Enel. Within the framework equipment. of this solution and due to increased requirements to quality and accuracy of information, directions of development of IT technologies were revised. In >> Use of exclusively world’s best technologies for new facilities construc- particular, there were started up the first stage of the project for integration tion. of “SAP Wise” as well as projects for introduction of amendments into the operating software on the basis of the platform “1С:8” — modernization with >> For reliability increase, the most efficient equipment should be intro- passage to the new platform “1С8.1”, modernization of the system for repli- duced, what will result in the decrease of maintenance and repair costs. cation of data between production branches, regulation of access to informa- tion resources. Implementation of projects for modernization of information >> The deterioration rate of the GRES’ fixed assets implies considerable systems will significantly improve their reliability and performance. investments so as to provide power plant life support, reconstruction of buildings and structures thereof. For the purpose of improvement of the production planning processes includ- ing processes for adoption of investment solutions, in 2008 there was imple- Automated production mented the IT project for integration of the software “Plexos” for modeling The Automated Process Control Systems (ASUTP) deal with management of the price environment of the wholesale power market in the medium and the technological processes, control the condition of the technological equip- long-term perspective which formed a material competitive advantage of the ment, perform the functions of commercial and technical metering of the Company while working in the wholesale power (capacity) market. energy resources, which leads to higher reliability and failure-proof operation of the Company’s production branches. The main projects which are planned to be implemented together with Enel in 2009 are projects SAP Wise, SAP HR, projects for commercial dispatching. One of the priority directions of the Company’s activities was gaining access In addition to such projects it is planned to modernize the corporate Portal, to the balancing market (BM). Within the framework of this direction, the the electronic document circulation system, to renew the Web site of the Company was the first generating company to receive Acts of Compliance of company. the technological information exchange at the branches, in accordance with the Rules of Procedure for Operating Supervisory Control over Power Mode of IT infrastructure Control Objects of UES of Russia (Appendix No.9 to the Contract on Connec- In 2008 the company completed creation of the back-up infrastructure of the tion to Trading System of Wholesale Market). unified information space in the most critical directions which provides the business with a new extent of continuity of territorially dispersed information In 2008, a new full-scale automated management system was installed services. The unified information space includes the corporate multi-service for power unit No.5 of Nevinnomysskaya GRES, as well as new informa- data transmission network, the unified digital telecommunication network, tion control systems at the power unit No.6 of Konakovskaya GRES and the up-to-date local computation networks of branches and the reserved server power unit No.8 of Reftinskaya GRES. Within the framework of modernization infrastructure. of plant equipment, the full-scale automated control system for the water treatment station of the chemical shop at Sredneuralskaya GRES, system of There have been implemented mobile solutions permitting employees technical registration of power consumption for own needs at Konakovskaya to work with documents, to receive and send e-mails from any point of the GRES and system of commercial metering of heat, drinking water and faecal world, in particular, to work with resources of the corporate information por- sewage of the external facilities at Reftinskaya GRES were installed. tal with a high level of security.

In 2008, at Units Nos.1, 2 of Konakovskaya GRES, certification tests were For integration of IT infrastructures of OJSC OGK-5 and Enel, the data trans- performed and the certificates of compliance with the Standards of participa- mission networks and parameters of corporate networks were adjusted in ac- tion of power units of thermal power plants in regulated primary and auto- cordance with Enel’s standards; there were improved systems for coding of mated secondary frequency control were obtained. data transmitted through corporate channels as well as antivirus protection

ogk-5 2008 ANNUAL REPORT Investment activities 76 77 of servers and working stations, safe access of employees to e-mail systems and the corporate information portal.

The perspective directions of development of the IT infrastructure for 2009 are determined to be as follows: projects of modernization of data transmis- sion systems, passage to the unified provider of telecommunication services which are aimed at ensuring continuity of operation of applications for auto- mation of business processes of the company.

Users’ support In 2008 in accordance with the “IT Policy of OJSC OGK-5” and standards of activity in the area of information technologies the company continued de- velopment of its processes associated with operation of IT systems. Together with Enel Serv. there are being implemented the projects for “management of IT assets” and improvement of the catalogue of IT services aimed at in- crease of the quantity and improvement of quality of provision of IT services. In 2009 within the framework of implementation of the project “centraliza- tion of functions of management of IT subdivisions” allocated call centers will be organized and the catalogue of IT services will be centralized, the basis for organization thereof will be principles of control and continuous improve- ment, reasonable conservatism and documentation

ogk-5 2008 ANNUAL REPORT Investment activities 78 79 12. HR and social policy. Social responsibility 80 81 12.1. HR Strategy and Policy In 2008 the Company’s management approved a five-year headcount restructuring plan which is aimed at aligning the number of employees per HR Strategy and Policy 1 MW of installed capacity ratio to the best international standards in the HR strategy is directly linked with the business strategy of the Com- power sector, changing the quality mix of staff and decreasing the average pany. It is considered as an instrument to realize the Company’s busi- age of employees. ness strategy which is to have a leading position in the national power generation market, achieve world class standards with regard to the main These goals will be achieved through the optimization of HR processes and parameters of efficiency and effectiveness, always improving the internal organizational structure of the Company, the centralization of staff functions know how and use only the best technologies, equipment and business and operating processes within the Company, the development of multi-skill methods. staff competencies, the adoption of new IT platform (SAP/R3) and decom- missioning of old units. To achieve these targets the company needs to develop a strong team of high class professionals in its core business such as operation, main- To increase efficiency and effectiveness of its business processes, mostly tenance, construction and power sale and its key support functions such O&M processes, the Company has launched a project entitled «Zero Base as finance, procurement, legal, HR management, etc. Analysis» which is intended for estimation of organizational structure. This uses an Enel Group methodology which first defines a «reference» The HR management strategy of OGK5 is targeted at attraction, motivation, zero base model of organizational structure of the power plant followed by retention and constant development and improvement of the staff. fine-tuning by taking into account local peculiarities to achieve an optimized and realistic power plant organization model.

12.2. Organizational structure In 2009 it is envisaged to define a zero base reference model, an optimized zero based organization model and develop action plan and timing for 2 pilot projects at Reftinskaya and Konakovskaya GRES. The new organizational During 2008, as a consequence of the change in the shareholding struc- model will require multi-functionality of personnel. ture, the organization of the company has been completely restructured on the basis of the principles of lean organization and segregation of duties. 12.3. Personnel development and training

The above mentioned changes made the organization more flexible and al- lowed the delegation of powers and responsibilities top down to the func- All employees are given equal opportunities of training, personnel devel- tional directors and further on to the middle management. opment and career growth. These opportunities are based on meritoc- racy. That is we promote and reward the ones who have shown by their The new organizational structure of the company has been implemented work, dedication and loyalty that they deserve to be promoted and re- in the central office in Moscow, respective changes will be gradually made warded. in 2009 in the production branches to guarantee internal governance and clear and transparent interactions and reporting between the central office A young talents assessment project was started in 2008 with the goal to and the production branches. identify young employees with high potential and fast track them through the organization to become future leaders of the Company. Each employee Another organizational change started in 2008 that is planned to be from this pool has been assigned a mentor from the experienced managers brought to completion in 2009 is centralization of the non-engineering sub- from the Central office of the Company. The individual development plans divisions that should improve company business processes through their that define participation in the key projects of the Company have been ex- standardization and elimination of duplications and wastes and thus bring ecuted for these employees. along increase of efficiency. This activity shall lead to general improvement of efficiency. In 2008 a new staff performance evaluation system was launched. The Company’s top managers were assessed not only based on their KPIs For support of organizational changes and promotion of international in- (WHAT has been done), but also their behaviour has been assessed for ternal management standards a new system for delegation of powers compliance with the Company leadership model (HOW and BY WHAT was developed and implemented. This system sets out the principles of methods it has been achieved). The Company leadership model reflects delegation and the process of granting and revoking Powers of Attorney corporate behavioural standards, competencies and ethics requirements set within the Company. The power delegation policy reflects provisions of the for employees. Promotion decisions in the Company are driven by the results Code of Business Ethics and determines the main principles of delegation of the evaluation according to the leadership model. In 2009 it is planned which includes the following: separation of duties, correspondence to expand this evaluation to include all the company’s middle management of issued powers of attorney to positions in the organizational structure, and some key non-managerial professional staff. separation of powers, corresponding delegation, the expense limit principle, exclusion of the right of substitution and some other prin- In 2008 exchange programs have been started for IT, HR management, ciples. The new system of delegation of powers guarantees good checks Operations and maintenance, power sale and HSE. Further the Company and balances in the organisation and removes potential conflicts among will form centers of competencies to accumulate knowledge and experience powers of different positions. in the main strategic areas of the Company, such as:

>> Operations, maintenance and repairs

ogk-5 2008 ANNUAL REPORT HR and Social Policy. Social Responsibility 82 83 >> Power sale Age structure of personnel by branches and for the Company as a whole

>> Project management Under 30 31—40 41—50 from 51 to the Working Branch years years years pension age pensioners Total >> Finance management Konakovskaya GRES 167 258 266 160 126 977 >> IT Nevinnomysskaya GRES 142 215 200 88 78 723 >> Risk management Reftinskaya GRES 355 429 414 196 140 1,534 >> HSE Sredneuralskaya GRES 168 203 236 104 98 809

>> Corporate governance Central Office 82 67 47 27 4 227

>> HR management Total 914 1,172 1,163 575 446 4,270

This process is carried out both through getting and sharing knowledge from the best practices within the Enel Group, as well as through external train- ing programs and internal training where the knowledge is shared between branches or organisation units of the company.

In 2008 the concept of multifunctionality was proposed. Multifunctionality provides employees with the possibility to try themselves in other areas of Under 30 31—40 41—50 from 51 to the Working Branch Total activity, to advance qualification, acquire new skills. This gives advantage to years years years pension age pensioners both the Company since job inter-changeability between employees helps to improve efficiency and mitigates risks related to possible resignations of key Konakovskaya GRES 17% 26% 27% 16% 13% 100% staff, and the employees, since it makes their labor more marketable. There are training programs planned in 2009 for spreading the multifunctionality Nevinnomysskaya GRES 20% 30% 28% 12% 11% 100% concept within the company. Reftinskaya GRES 23% 28% 27% 13% 9% 100% Development of the international managers’ pool from the Russian can- didates who have certain potential and score high on the corporate compe- Sredneuralskaya GRES 21% 25% 29% 13% 12% 100% tencies according to the Company leadership model. The purpose is to grow Russian managers to be ready to cover the position in the 1st line of Enel Central Office 36% 30% 21% 12% 2% 100% Group in the future. The employees who are selected into this pool are the Total 21% 28% 28% 13% 10% 100% ones who demonstrate high performance, show initiative, take responsibility and are capable of effective decision making, can see the big picture and act in the interests of the company, know how to tackle issues in a systemic way and see the consequences of their decision making. These employees are given the opportunity to participate in Enel Group projects so that they can get experience and learn best practices both in the technical area as well as in the management area. 10% 21% 13% 12.4. Personnel structure

As of December 31, 2008 the actual number of employees of OJSC OGK-5 was 4,270 persons.

28% 28% 12.5. Labour turnover Under 30 years

The headcount of OJSC «OGK-5» in 2008 has been reduced by 29 and as of 31—40 years

December 31, 2008 stands at 4270. This decrease has been caused by the 41—50 years following labor turnover: From 51 to the pension age

>> 382 hirings out of which 89 hirings refer to the Central Office Working pensioners and 293 hirings refer to plants

ogk-5 2008 ANNUAL REPORT HR and Social Policy. Social Responsibility 84 85 The professional structure of the personnel by branches and for the Company as a whole Nevinnomysskaya GRES I quarter II quarter III quarter IV quarter Total

employments 6 15 8 5 34 Branch Managers Specialists Service staff Workers Total dismissals 5 8 9 10 32 Konakovskaya GRES 1 151 251 574 977 At the own desire 4 3 5 7 19 Nevinnomysskaya GRES 1 63 242 417 723 Retirement — 4 3 2 9 Reftinskaya GRES 1 175 307 1,051 1,534 Upon agreement of the parties — — — 1 1 Sredneuralskaya GRES 127 228 454 809 Redundancy — — — — — Central Office 14 40 158 15 227 Other 1 1 1 — 3 Total 17 556 1,186 2,511 4,270

Branch Managers Specialists Service staff Workers Total Reftinskaya GRES I quarter II quarter III quarter IV quarter Total

Konakovskaya GRES 0.1% 15.5% 25.7% 58.8% 100% employments 34 34 18 51 137

Nevinnomysskaya GRES 0.1% 8.7% 33.5% 57.7% 100% dismissals 38 28 31 38 135

Reftinskaya GRES 0.1% 11.4% 20.0% 68.5% 100% At the own desire 16 6 21 14 57

Sredneuralskaya GRES 0.0% 15.7% 28.2% 56.1% 100% Retirement 5 7 7 15 34

Central Office 6.2% 17.6% 69.6% 6.6% 100% Upon agreement of the parties 5 5 2 — 12

Total 0.4% 13.0% 27.8% 58.8% 100% Redundancy — — — — —

Other 12 10 1 9 32

0,4% 13%

Sredneuralskaya GRES I quarter II quarter III quarter IV quarter Total

employments 24 18 15 6 63 27,8% 58,8% dismissals 18 14 10 16 58

At the own desire 13 11 4 6 34

Managers Retirement 5 3 3 8 19

Specialists Upon agreement of the parties — — — 1 1

Service staff Redundancy — — — — —

Workers Other — — 3 1 4

Konakovskaya GRES I quarter II quarter III quarter IV quarter Total Central Office I quarter II quarter III quarter IV quarter Total employments 14 19 18 8 59 employments 4 34 37 14 89 dismissals 19 43 15 19 96 dismissals 16 40 25 9 90 At the own desire 10 11 13 8 42 At the own desire 2 12 16 4 34

Retirement 5 2 1 6 14 Retirement 2 — — — 2

Upon agreement of the parties — — 1 — 1 Upon agreement of the parties 9 23 5 3 40

Redundancy 3 23 — 3 29 Redundancy 1 — — — 1

Other 1 7 — 2 10 Other 2 5 4 2 13

ogk-5 2008 ANNUAL REPORT HR and Social Policy. Social Responsibility 86 87 OGK-5 I quarter II quarter III quarter IV quarter Total Personnel structure by education level

employments 82 120 96 84 382 Secondary professional, dismissals 96 133 90 92 411 primary professional, Primary Branch Higher professional secondary (full) general (general) Total At the own desire 45 43 59 39 186 Konakovskaya GRES 421 350 206 977 Retirement 17 16 14 31 78 Nevinnomysskaya GRES 427 292 4 723 Upon agreement of the parties 14 28 8 5 55 Reftinskaya GRES 403 1,090 41 1,534 Redundancy 4 23 — 3 30 Sredneuralskaya GRES 281 307 221 809 Other 16 23 9 14 62 Central Office 201 24 2 227

Total 1,733 2,063 474 4,270

Secondary professional, OGK-5 I quarter II quarter III quarter IV quarter Total primary professional, Primary Branch Higher professional secondary (full) general (general) Total employments 1.92% 2.81% 2.25% 1.97% 8.95% Konakovskaya GRES 9.9% 8.2% 4.8% 22.9% dismissals 2.25% 3.11% 2.11% 2.15% 9.63% Nevinnomysskaya GRES 10.0% 6.8% 0.1% 16.9% At the own desire 1.05% 1.01% 1.38% 0.91% 4.36% Reftinskaya GRES 9.4% 25.5% 1.0% 35.9% Retirement 0.40% 0.37% 0.33% 0.73% 1.83% Sredneuralskaya GRES 6.6% 7.2% 5.2% 18.9% Upon agreement of the parties 0.33% 0.66% 0.19% 0.12% 1.29% Central Office 4.7% 0.6% 0.0% 5.3% Redundancy 0.09% 0.54% 0.00% 0.07% 0.70% Total 40.6% 48.3% 11.1% 100.0% Other 0.37% 0.54% 0.21% 0.33% 1.45%

11,1% 40,6% 48,3%

62 186

30

55 Higher professional

78 Secondary professional, primary professional, secondary (full) general At own desire Primary (general) Retirement

Upon agreement of the parties

Redundancy Average staff salary (rub.)

Other Branch Leaders Specialists Workers Total

Konakovskaya GRES 57.590 31.199 26.780 32.642

Nevinnomysskaya GRES 73.458 29.079 21.482 28.569

Reftinskaya GRES 64.457 29.560 23.488 29.529

Sredneuralskaya GRES 70.237 28.861 24.829 33.103

Central Office 221.079 87.313 47.072 107.647

Total 75.194 37.441 24.310 34.628

ogk-5 2008 ANNUAL REPORT HR and Social Policy. Social Responsibility 88 89 >> 411 terminations out of which 90 refer to the Central Office and In 2009 it is planned to spread the MBO system to other management layers 321 to plants The terminations consist of 264 voluntary resignations of the organization. It is also planned to introduce a new approach to the (including 78 retirements), 55 mutual agreements with incentives, 30 re- current discretional bonus program through allocating budgets to different dundancies referring to the outsourcing of the hotel services in KGRES company subdivisions commensurate with their strategic importance for the and 62 other terminations, mostly fixed term contracts. business.

The Company provides a non-state personal pension programs for 12.6. Recruiting all the employees of the pension age in addition to the state pension program.

In 2008 the Company developed and adopted a new recruitment policy. 12.8. Social partnership and interaction with The main principles of the policy are as follows: trade union organizations >> Strict compliance of the recruitment process to the Code of Business Ethics in order to avoid favoritism, nepotism or other forms of discrimina- In April 2008 the Company made a decision to centralize the negotiation tion. process with Trade Unions. The purpose of centralization was the necessity to standardize the collective agreements of the Company and harmonize the >> Alternative approach — selection of the final candidate for each job posi- level of benefits and guarantees provided at different production branches. tion from a number of candidates in order to guarantee sufficient compe- To effectively centralize the negotiation process the council of chairmen tences and professional level of the Company employees. of trade unions to represent interests of employees from all production branches as well as the social partnership committee of OGK-5 representing During 2008, in order to attract young talent the Company has actively interests of the employer have been created. cooperated with leading universities and colleges in Russia. The Com- pany has conducted sponsorship activities, as well as carried out joint During 2008 a series of meetings were conducted the result of which programs with Universities on attraction, training, and recruitment of is a new collective agreement to be signed for all the production branches graduates. in March 2008. Another important achievement of the Trade Unions nego- tiation process is the communication of the Restructuring Plan that started The Enel graduate recruitment program, Energy Without Frontiers was in December 2008. Transparency and collaboration in such a sensitive aspect launched in OGK5 to attract graduates from the best higher schools of Rus- as restructuring proves that the relationship between the employer and the sia. Successful applicants who pass the selection process go through a period Trade Unions are constructive and sustainable. of on the job training in the power plants and in the corporate office of Enel in Italy. These young graduates are later transferred to projects in Russia where they can apply their knowledge and experience and grow profession- 12.9. Social policy ally. In 2008, 8 young graduates have been hired within this program and after 3 months spent in OGK5 they will go to Italy. In 2008 the General Director of OJSC OGK-5 A.Ya. Kopsov approved the Company’s policy in the area of safety and health protection. The policy 12.7. Compensation and benefits system pronounces that preservation of health and life of employees of the company as well as all those who work or is situated in the territory of its facilities is a compulsory condition of its production activity. In 2008 the Company maintained all social benefits and guarantees at the same level in full respect of the collective agreements. The collective agree- At the Central Office of the Company in 2008 the Department for Labor Pro- ments of the Company provide employees with a full spectrum of benefits tection and Industrial Safety was created, forming of a centralized system for that are targeted at protecting the employees and their families in pos- management of labor protection and industrial safety commenced. This sys- sible difficult situations as well as at improving the quality of their lives. tem has been created on the basis of international experience of the Enel The company offers medical insurance, accidents insurance, health checks Group and requirements of international standards in this area. It is planned and health rehabilitation programs, financial support during maternity and to certify the same for compliance with OHSAS 18001 in 2011. childcare. Over 2008 at the branches of OJSC OGK-5 there were carried out 34,478 The most important benefit is the guarantee to adjust salary levels in line classes, instructions and trainings touching upon study and acquisition of with inflation and to pay competitively in the labour market. Consequently skills of safe work. The aggregate number of hours of study amounted to the salary levels in OGK-5 are regularly adjusted for inflation. 71,603 hours (including 7,146 hours — at external training courses). For these purposes the Company spent in 2008 16 million rubles (430 thousand From 2008 the Company started regularly participating in salary surveys in Euro). Costs for medical examination of employees amounted to 3 million order to identify the competitive position of its salaries in the labour market. 200 thousand rubles (86.5 thousand euro); 6 million 880 thousand rubles (184.7 thousand euro) — for services of medical points and medical service. In 2008 a new MBO (management by objectives) system and remu- 51,204 measurements to check for existence of harmful production factors neration policy were introduce for top management aimed to increase their on working places were taken within the framework of the production control motivation and performance. program during the year.

ogk-5 2008 ANNUAL REPORT HR and Social Policy. Social Responsibility 90 91 Costs for provision of employees with special clothes including clothes resis- The Reftinskaya GRES tant to effect of electrical arc amounted in 2008 to 15 million 496 thousand >> Reconstruction of unit No.2 including replacement of heating surfaces rubles (410.7 thousand euro). and burner devices for modernized one

Aggregate costs for execution of attestation of working places as to work- >> Overhaul of electrostatic precipitators ing conditions and execution of expertise of industrial safety of hazardous production facilities amounted to about 30 million rubles (810 thousand >> Implementation of the dry slurry removal system (project development) euro). >> Repair of hydraulic technical structures New methods of formation of the stereotype of positive safe conduct in pro- duction were actively implemented such as «International Week of Safety», >> Ecological activities within the framework of the project «Increase of the «Safety Reviews» involving and headed by the first persons of the Company: capacity of ash disposal area No.2 with reconstruction of GZU (Hydro Ash the General Director of Enel Mr. F. Conti, Head of the Representative Office Disposal)» of Enel in Russia Mr. D. Fache, the General Director of OJSC OGK-5 Mr. A. Ya. Kopsov, the Executive Director of Enel for CIS countries Mr. E. Viale. In gen- >> Development of the design of the sanitary protection zone eral, 7.5 thousand reviews of working places, hazardous production facilities, other checks, audits and inspections were carried out. >> Implementation of the system for non-slurry combustion of fuel on the boiler 6K-B These activities as well as activities planned for 2009 are aimed at achieve- ment of the target set by the General Director of Enel Mr. F. Konti — «Zero The Sredneuralskaya GRES accidents at production». >> Refurbishment of the desalinating package of HVO (Water Treatment) unit

12.10. Social responsibility >> Replacement of oil coolers on turbine No.8

>> Works for reduction of organic pollution of the Isetsky water reservoir us- Environmental protection and industrial safety ing floating bio filters Solution of ecological problems is one of the most important priorities in work of OJSC OGK-5. In 2008 the Board of Directors of the Company ap- >> Organization of metering of quantity of effluent water for each discharge proved the Ecological Policy (Minutes No.28 dated of December 17, 2008). point. The Ecological Policy is based upon principles of ecological safety and rational use of natural resources and expresses intentions of the Company to con- As to application of perspective ecological technologies and solutions tinuously improve ecological indicators of operation of production branches, in power and heat production — at the Nevinnomysskaya GRES and Sred- to observe fulfillment of federal and international standards. neuralskaya GRES there was commenced construction of CCGT — 410 with concentration of pollutants in flue gases not exceeding the level of interna- In 2008 the following ecological activities aimed at protection of the air tional standards. and water basins, protection and rational use of lands, mitigation of impact of physical factors on environment were carried out at branches: For the purpose of ensuring of environmental protection at all production branches of OJSC OGK-5 control over the value of pollution of air basin, The Konakovskaya GRES water facilities and lands has been organized; collection and processing >> Technical re-equipment of the power unit No. 6 of data has been carried out continuously for accounting of the following parameters: >> Repair of the complex of industrial effluent and storm water treatment facilities at the GRES >> The values of gross air emissions of pollutants;

>> Treatment of the fuel oil tank, its diagnostics and repair. >> The volume and quality of effluent waters discharged into water reser- voirs; >> Reconstruction of sludge disposal area No.6. >> The quantity of wastes formed due to production activity. >> Assessment of efficiency and regime adjustment of the fish protection device at BNS-2. The Konakovskaya GRES branch Following the results of operation of the Konakovskaya GRES branch in 2008 The Nevinnomysskaya GRES gross air emission of pollutants reduced by 19% in comparison with that of >> The design for reconstruction of the water treatment unit with applica- the previous year. Reduction took place on account of reduction of the power tion of the water desalination technology on the basis of the reverse production volume by 4.5% and reduction of the share of fuel oil combustion osmosis in the total fuel balance from 1.8% to 1.1%. The main component in gross emission of pollutants at the Konakovskaya GRES branch remains nitrogen >> There was purchased a set of devices for organization of monitor- oxide. Emission of nitrogen oxides amounted to 7,516 tons. There have been ing of emissions of pollutants from boilers and for control of condition no excess of normative values of emissions of pollutants during the account- of ground waters in the area of the waste disposal area. ing period.

ogk-5 2008 ANNUAL REPORT HR and Social Policy. Social Responsibility 92 93 Air emissions of pollutants Dynamics of air emissions of pollutants and the fuel consumption structure Air emissions of pollutants >> Organization of the sanitary protection zone at GRES (taking into account by KGRES. Chart 1 are presented in the chart 1 and in the Table 1. from NGRES. Chart 2 risks against health of population)

8000 12000 Name of the emission Measurement unit 2007 2008 >> Reconstruction of fuel oil unloading ramp No.2 with replacement of semi fuel oil ash tons 4,3 0,6 7000 crossties 10000 sulfur dioxide tons 1 454 848 6000 >> Treatment of pits of artesian wells Nos.3, 5, 6, 7, 8, 9, sanitary technical carbon oxide tons 748 729 8000 5000 sealing of artesian wells No.1, 4. nitrogen oxides tons 9 052 7 516 4000 6000 Total emissions tons 11 259 9 094 >> Treatment of slurry disposal areas. 3000 4000 Nevinnomysskaya GRES branch 2000 Table 1. The fuel consumption structure at KGRES Following the results of operation of the Nevinnomysskaya GRES branch 2000 1000 in 2008, gross air emission of pollutants increased from 0.6% to 1.2% Indicators Measurement unit 2007 2008 in relation to the previous year that is conditioned by increase in the share 0 0 Gas Thousand cubic 2 357 718 2 248 of combusted fuel oil in the fuel balance. 2007 2008 2007 2008 meters 968 Fuel oil Tons 36 926 21 769 Dynamics of air emissions of pollutants and the fuel consumption structure Sulfur Nitrogen Sulfur dioxide Total dioxide oxides Share of fuel oil in the % 1,8 1,1 are presented in the chart 2 and in the Table 4. Nitrogen oxide Carbon Gross fuel balance oxide emissions Name of the emission Measurement unit 2007 2008 fuel oil ash tons 1,2 3,9 Effluent waters of the branch Konakovskaya GRES are subdivided in terms of sulfur dioxide tons 384 1 224 quality into normative-clean (99.8%) and normative-treated waters (0.2%). carbon oxide tons - - The Service Water supply system is of direct flow type. Volume of discharged ef- fluent waters depends on production of electrical energy and amounted in 2008 nitrogen oxides tons 5 233 5 786 to 1,251,300 thousand cubic meters. No excess of the set norms of maximum Total emissions tons 6 122 7 501 permissible concentrations of pollutants in effluent waters was observed.

Table 4. The fuel consumption structure at NGRES Table 2. Dynamics of effluent waters discharge volumes by KGRES Indicators Measurement unit 2007 2008 Gas Thousand cubic meters 1 961 330 1 923 284 Name Measurement unit 2007 2008 Fuel oil Tons 10 015 32 093 Aggregate amount Thousand cubic 1 309 625 1 251 300 Share of fuel oil in the % 0,6 1,9 of discharge meters fuel balance

98% of wastes formed at the Konakovskaya GRES branch are wastes of haz- ard category IV and V: scrap of ferrous metals, insulation wastes, household Table 5. Dynamics of effluent waters discharge debris, construction wastes, worked-out filtering materials etc. volumes by NGRES

Name Measurement unit 2007 2008 Table 3. Formation of wastes at KGRES Aggregate amount Thousand cubic meters 534 455 475 545 of discharge Indicators Measurement unit 2007 2008 Total wastes tons 2566 3376 In 2008 3,785 tons of wastes were produced at the branch Nevinnomysskaya GRES. Increase in formation of wastes was caused by increase in volumes of For the purpose of fulfillment of the Program for implementation of the ecolog- works for modernization of equipment. ical policy at OJSC OGK-5 for 2006—2008 over 2008 for the branch Konakovs- kaya GRES works were carried out at the total amount of 4.472 million rubles. Table 6. Formation of wastes at NGRES Priority ecological objectives for the Konakovskaya GRES branch for the next 3 years are as follows: Name Measurement unit 2007 2008 Total wastes Tons 3 104 3 785 >> Technical re-equipment of the power units No. 4, 5, 8

>> Technical re-equipment of VPU (water treatment plant) with transfer For the purpose of fulfillment of the Program for implementation of the eco- to water from the Volga River logical policy at OJSC OGK-5 for 2006—2008 over 2008 there were carried out works of the total amount of 65.064 million rubles for the Nevinnomys- >> Development of the design of the fish protection device at BNS-1 skaya GRES branch.

ogk-5 2008 ANNUAL REPORT HR and Social Policy. Social Responsibility 94 95 Priority and perspective objectives for the Nevinnomysskaya GRES branch for Dynamics of volumes of discharge of effluent waters are presented in the the next 3 years are as follows: table 8.

>> Reconstruction of the water treatment unit with application of the tech- Table 8. Dynamics of effluent waters discharge volumes from nology for desalination of water on the basis of reverse osmosis. RGRES

>> Development, approval and implementation of the design of the sanitary Name Measurement unit 2007 2008 protection zone. Aggregate value of Thousand cubic meters 25 424 29 071 discharge >> Acquisition and introduction into operation of the complex ASPK-ECOMER on power units Nos.6,7,8, and boilers Nos. 4,5,5а,1,2,3,3а. The volume of discharged effluent waters in 2008 versus 2007 increased and exceeded the agreed limit (25,700 thousand cubic meters). The reason >> Installation of the fish protection system at the Barsuchkovsky water intake. for increase in discharge of effluent waters is execution of scheduled repair of clarified water pump stations returning water into the reverse cycle. >> Reconstruction of the power plant’s compressor unit. Over the accounting year 4,955,669 tons of wastes were produced at the Reftinskaya GRES branch plant. The main portion of wastes (≈ 99%) is represented by wastes of haz- Following the results of production activity of the Reftinskaya GRES branch, ard class V: ash from combustion of Ekibastuz coals. The reason for increase the gross air emissions of pollutants in 2008 versus 2007 increased by 20 % in mass of ash and slurry wastes in 2008 versus 2007 is increase in coal due to increase of fuel consumption as a result of power generation growth. consumption by 2926.42 thousand tons due to increase in power generation. Dynamics of formation of wastes is presented in the Table 9. Dynamics of air emissions of pollutants and the fuel consumption structure are presented in the chart 3 and in the Table 7. Table 9. Formation of wastes at RGRES Name of the emission Measurement unit 2007 2008 Indicators Measurement unit 2007 2008 Solid fuel ash tons 141 957 160 599 Total ash and slurry tons 3 763 012 4 955 669 sulfur dioxide tons 105 692 135 935 wastes carbon oxide tons 727 889

nitrogen oxides tons 49 053 64 741 According to the Program for implementation of the ecological policy at Total emissions, tons 306 244 373 470 OJSC OGK-5 for 2006-2007 over the accounting year there were carried out works for the total amount of 29.189 million rubles at the Reftinskaya GRES branch. Table 7. The fuel consumption structure at RGRES Priority ecological objectives for the Reftinskaya GRES branch for the next Indicators Measurement unit 2007 2008 3 years are as follows: Coal tons 9 552 914 12 479 331 Fuel oil tons 28 530 30 692 >> Reconstruction of the system for dust preparation on the boiler of 300 MW power unit with replacement of burners by low-emission ones.

>> Development and implementation of the dry ash and slurry disposal Air emissions of pollutants by RGRES. Chart 3 system.

400000 >> Replacement of Electrostatic Precipitators on the power unit No.5. 350000 >> Implementation of non-fuel oil ignition system. 300000

250000 >> Implementation of the system for conditioning of exhaust gases.

200000 >> Reconstruction of the water treatment unit. 150000 >> Installation of the fish protection system and assessment of efficiency 100000 thereof. 50000 >> Development of the design of the sanitary protection zone of industrial 0 2007 2008 facilities at the Reftinskaya GRES.

Solid fuel ash Nitrogen oxides Sredneuralskaya GRES branch

Sulfur dioxide Gross emissions In 2008 gross emission of pollutants at the Sredneuralskaya GRES branch amounted to 8,185 tons which is 418 tons less than in 2007. Dynamics of air

ogk-5 2008 ANNUAL REPORT HR and Social Policy. Social Responsibility 96 97 Air emissions of pollutants emissions of pollutants and the fuel consumption structure are presented in >> Implementation of the design of the sanitary protection zone of the en- from SUGRES. Chart 4 the chart 4 and in the Table 7. terprise

10000 Name of the emission Measurement unit 2007 2008 >> Treatment of fuel oil tanks from bottom deposits providing waste disposal. 9000 fuel oil ash tons 3,9 1,7 >> Reconstruction of the fish protection scheme at the coastal pumping station. 8000 sulfur dioxide tons 964 430 7000 carbon oxide tons 153 161 6000 nitrogen oxides tons 6 425 6 527 Charitable and sponsor activities 5000 Total emissions tons 8 603 8 185 Annually OJSC OGK-5 for the purpose of ensuring successful social and 4000 economic development of regions of its presence together with governmental 3000 structures, general public and charitable organizations expands its involve- ment in projects aimed at support of such areas of life as health protection, 2000 Table 10. The fuel consumption structure at SUGRES education, culture, sport and science. 1000 Indicators Measurement unit 2007 2008 0 Gas Thousand cubic 2 358 006 2 523 862 The company firmly observes its tax liabilities towards budgets of all levels 2007 2008 meters thus facilitating strengthening of welfare of population of our country. Con- Fuel oil Tons 25 260 10 438 duct of the socially responsible business is one of the grounds of the devel- Sulfur dioxide Share of fuel oil in the fuel % 1,3 0,5 opment strategy of OJSC OGK-5. Carbon oxide balance

Nitrogen oxides We implement charitable projects in the territory of the Central Russia Effluent waters of the Sredneuralskaya GRES are subdivided in terms of including Moscow, Moscow and Tver Regions, South Federal District as well Gross emissions quality into normative-clean and normative-treated waters. The annual vol- as Ural. ume of effluent waters discharge over 2008 was as follows: In its sponsor and charitable activity the Company is oriented towards en- >> normative-clean waters — 969 thousand cubic meters forcement of social support of population, creation of new working places. We help poor and sick people, invalids, and youth by implementing programs >> normative-treated waters — 1670 thousand cubic meters aimed at enforcement of health of the population, its moral and intellectual development.

Table 11. Dynamics of volumes of discharge of effluent One of the distinguishing particularities of charitable activity of the Company waters at SUGRES is independent work in this direction without engagement of external opera- tors for implementation of regional sponsor projects. Name Measurement unit 2007 2008 Aggregate amount Thousand cubic 2562 2639 In order to respond to the maximum possible degree to needs and problems of discharge meters of people in regions of our presence the coordinating bodies of charitable foundations include employees of our power plants for free.

Table 12. Production of wastes at SUGRES Such a volunteer reserve permits to see behind the formulation «distressed» real people for whom our help and sincere assistance are necessary. Indicators Measurement unit 2007 2008 Total wastes Tons 1206 579 The social partnership program over 2008 approved by the Board of Direc- tors of OJSC OGK-5 included blocks of activities for provision of assistance According to the Program for implementation of the ecological policy at to educational establishments, children and youth collectives, veteran orga- OJSC OGK-5 for 2006-According to the Program for implementation of the nizations, health treatment establishments, ill persons and invalids, support ecological policy at OJSC OGK-5 for 2006—2007 over 2008 there were car- of activities for formation of favorable social and ecological environment ried out works for the total amount of 55.772 million rubles at the Sredneu- in such regions. The total amount of monetary funds aimed by the Company ralskaya GRES branch. for charitable and sponsor targets amounted to 36.5 million rubles.

Priority objectives faced by the Sredneuralskaya GRES branch for the next We consider social programs as an integral part of activity of a today’s so- 3 years are as follows: cially responsible organization. Each year we extend the number of recipients of charitable assistance since we see the ground of efficiency of our chari- >> Reconstruction of the desalination unit HVO for the purpose of reduction table programs in their succession and long-term nature. of intake of water for local needs and reduction of reagent consumption.

>> Reconstruction of the fuel combustion scheme on boilers TGM-96

>> The system for monitoring of emissions of flue gases from boilers of the second stage

ogk-5 2008 ANNUAL REPORT HR and Social Policy. Social Responsibility 98 99 Results of charitable activities in 2008

Directions of Central Office Konakovskaya GRES Nevinnomysskaya GRES Reftinskaya GRES Sredneuralskaya GRES charitable assistance 8 345 000 rubles 9 230 000 rubles 6 675 000 rubles 5 950 000 rubles 6 300 000 rubles

Educational institutions The Ural State Technical University High school No.5, kindergartens Nos.2, 11. The Nevinnomyssk Power engineering Secondary educational schools Kindergartens Nos. 2, 10, 15, 18, 20, «UGTU-UPI», the Ekaterinburg Energy Technical School, kindergartens Nos. 15,17, 39, 44; secondary schools Nos.5, 31; Technical School, ROO «Foundation of Nos. 47, 30. Kindergartens Nos. 15, 20, the Ural Technical School for Metrology the Department Automated Electrical 28, 50, the Children Center and Quality Systems named after D.A. Arzanastsev», «Iskorka», Special Professional the Nevinnomyssk Power engineering Technical School No.1. Technical School, the Konakovsky Power engineering Technical School, the Mos- cow Power engineering Institute.

Veteran organizations The public organization of veterans The City Council of veterans of labor, The Center «Veteran». The public organization of veterans (pensioners) of the Konakovskaya GRES armed force and law enforcement The Public Organization of Vet- (pensioners) of the Sredneuralskaya bodies, the Council of Veterans of erans of the Reftinskaya GRES, GRES. NGRES. The Council of Veterans of War and Workers of the Rear.

Health Care institutions The Municipal Establishment «City Hospi- The Konakovskaya Central District Hospital The City Hospital, the Station The city hospital of Reftinskiy. The Verkhnyaya Pyshma central city tal» of Reftinskiy of the first medical aid, Children city hospital, the Sredneuralskiy Branch hospital.

Children and youth Choral school for boys and youth, the Center Nevinnomyssk Center of Children Arts The Center of Culture and Art, The children school of arts, the Center creative teams for children and youth «Novaya Korcheva», school No.6 (the children tourist of Culture and Rest, the Palace Palace of Culture «Sovremennik» club «Gorizont»), The Center of Culture of Children Arts in Reftinsky, the Children School of Arts, the Children Military Patriot Club «Morskaya Pekhota»

Sick persons The Konakovskaya city public organization The special (correction) board The Verkhnyaya Pyshma District Organi- and invalids ROO «Union of Charitable Organiza- «Parents of children with limited capacity», for children-orphans and children zation of the All-Russian Public Organi- tions of Russia», the charitable society kindergarten No.9 for children with arrested remaining without guardianship of zation of the All-Russia Association of «Maria» (ROO), RBOO «Chernobyltsy development of speech, the Konakovsky spe- parents, with deviations in develop- Invalids (the Sredneuralsk Branch), the of Mintopenergo» cialized House of a child with organic defeat ment of type VIII, kindergarten No.42 Non-Commercial Organization charitable of the central nervous system with violation of the compensatory nature «Mater- foundation «Trezvy gorod» The Center of psyche. nity School for children with arrested of Social Welfare and Health of Sred- development, invalids, Kindergarten neuralsk, address charitable assistance No.46 for children with violations of to sick children and invalids. eyesight, address charitable assis- tance to sick children and invalids.

Sport organizations the Children and youth sport and technical The foundation «Mini-football The children youth sport school of club of carting «Virage», the Autonomous club «Ural-Asbest», the Children Sredneuralsk, the non-commercial or- Non-Commercial Organization «Sport Club Sport School «Olymp» ganization football sport club «Energe- of the Konakovskaya GRES» tik», the public organization Basketball Federation of the Sverdlovsk Region

Religious organizations

Public and social centers The Nevinnomyssk Complex Cen- The Asbest Children House of The Center of social assistance to family ter for Social Service of Population, Asbest, the Center of social as- and children «Solnyshko» in the city the Children orphanage at the Holy sistance to family and children of Verkhnyaya Pyshma Mother Protection Cathedral, the So- in Reftinsky, the Inter-school cial Rehabilitation Center for Minors training combine of Reftinsky «Gavan»

Administrative institu- The administration of the city district tions Sredneuralsk (for execution of mass cultural activities).

Foundations The charitable foundation «Konakovo the 21st century», the foundation «Sredneu- ralsk the 21st century», the foundation «Reftinsk energy men the 21st century», the charitable foundation «Nevinnomyssk the 21st century»

ogk-5 2008 ANNUAL REPORT HR and Social Policy. Social Responsibility 100 101 13. Financial statements with appendices 102 103

13.1. Balance sheet At beginning At end LIABILITIES Line сode of reporting period of reporting period

At beginning At end 1 2 3 4 ASSETS Line сode of reporting period of reporting period III. EQUITY AND RESERVES 1 2 3 4 Share capital 410 35 371 898 35 371 898

I. NON-CURRENT ASSETS Own shares buy-back 411 –684

Intangible assets 110 383 362 Additional capital 420 7 307 768 7 307 768

Property, plant and equipment 120 30 555 669 32 195 629 Reserve capital 430 250 214 340 425

Construction in progress 130 3 716 208 4 898 050 including 431 250 214 340 425

Long-term financial investments 140 64 758 224 758 reserves formed in accordance with law

Deferred tax assets 145 245 153 254 278 Retained earnings (uncovered loss) 470 2 179 367 3 651 944

Other non-current assets 150 3 763 892 10 168 341 SECTION III TOTAL 490 45 108 563 46 672 035 IV. NON-CURRENT LIABILITIES SECTION I TOTAL 190 38 346 063 47 741 418 Loans and credits 510 5 091 445 0 II. CURRENT ASSETS Deferred tax liabilities 515 1 081 673 1 137 627 Inventories 210 2 835 806 3 349 517 Other non-current liabilities 520 1 125 980 including: SECTION IV TOTAL 590 6 174 243 1 138 607 raw materials and other inventories 211 2 193 826 2 866 207 V. CURRENT LIABILITIES rearers and fatteners 212 48 48 Loans and credits 610 6 982 582

finished products and goods for resale 214 3 825 7 537 Accounts payable 620 3 101 309 3 064 982

expenses related to future periods 216 638 107 475 725 including:

VAT on purchased goods 220 23 027 24 476 suppliers and contractors 621 2 159 250 2 374 623 salaries payable 622 71 716 9 855 Accounts receivable (payments expected 230 1 048 300 935 786 beyond 12 months after the reporting state non-budgetary fund liabilities 623 23 649 924 date) tax liabilities 624 415 603 642 439 Accounts receivable (payments expected 240 4 329 141 4 965 357 within 12 months after the reporting other creditors 625 431 091 37 141 date) Payables to participants (founders) in re- 630 19 944 4 630 spect of income payment including buyers and customers 241 1 116 577 2 025 664 Reserves of costs to be incurred 650 153 792 0 Short-term financial investments 250 7 160 272 793 827 SECTION V TOTAL 690 3 275 045 10 052 194 Cash 260 815 242 52 455 BALANCE 700 54 557 851 57 862 836 SECTION II TOTAL 290 16 211 788 10 121 418 Off-balance sheet items TOTAL ASSETS 300 54 557 851 57 862 836 Rented assets 910 37 275 3 306 563

leasing 911 5 287 0

Goods and materials accepted in custody 920 399 263 449 757

Indebtedness of insolvent debtors written 940 208 947 215 187 off to losses

Security of liabilities and payments 950 2 042 129 6 039 366 received

Securities of liabilities and payments 960 — — issued

Depreciation of PP&E 991 497 828

Registered high-security forms 992 9 6

PP&E in operational management 993 77 202 76 889

ogk-5 2008 ANNUAL REPORT FINANCIAL STATEMENTS WITH APPENDICES 104 105

13.2. Income statement BREAKDOWN OF SOME PROFIT AND LOSS

Item For the same period For the same period Item For reporting period of the previous year Name Line code For reporting period of the previous year Name Code profit loss profit loss 1 2 3 4 1 2 3 4 5 6 Profit (loss) on ordinary activities Fines and penalties recognized or in 210 28 686 4 142 36 384 1709 Net revenue from sales of goods, products, 010 42 846 464 33 464 949 respect of which there are court (arbitra- work and services (excluding VAT, excise tax tion) judgements on their recovery and other similar mandatory payments) Profit (loss) of prior years 220 28 091 748 132 425 3133 Cost of products, goods, 020 (38 802 439) (30 925 330) work and services sold Compensation for losses incurred by 230 488 185 566 44 823 168148 non-fulfillment of improper fulfillment of Gross profit 029 4 044 025 2 539 619 obligations Commercial expenses 030 (603 513) (465 621) Forex exchange differences for transac- 240 207 930 421 585 39 379 134 455 Profit (loss) on sales 050 3 440 512 2 073 998 tions in foreign currency

Other income (expenses) Allowances 250 — 113 714 — 0 Interest income 060 173 177 770 534 Written off past due accounts receiv- 260 14 771 — 552 0 able and accounts payable with expired Interest payable 070 (329 387) (380 811) limitation period Income from investments in other entities 080 151 0

Other income 090 2 658 488 1 343 643

Other expenses 100 (3 698 970) (1 775 033)

Profit (loss) before taxes 140 2 243 971 2 032 331

Deferred tax assets 141 167 819 (79 409)

Deferred tax liabilities 142 (279 108) (403 110)

Other similar compulsory payments 146 69 081 254 408

Current income tax 150 ( 638 975 ) 0

Net profit (loss) for reporting period 190 1 562 788 1 804 220

Reference Fixed tax liabilities (assets) 200 211 711 (5 240)

Earnings (loss) per share (in RUB) 201 0,0442 0,0510

ogk-5 2008 ANNUAL REPORT FINANCIAL STATEMENTS WITH APPENDICES 106 107

13.3. Statement of changes in equity II. Reserves Item i. Changes in equity Line Item Name сode Balance Received Used Balance Line Share Additional Reserve Retained profit 1 2 3 4 5 6 Name сode Capital Capital Capital (loss) Total Reserves formed in accordance with law: 1 2 3 4 5 6 7 Reserve Fund Balance as of December 010 35 371 686 7 307 084 221 667 628 505 43 528 942 (name of reserve) 31 of year preceding previous year 151 221 667 28 547 — 250 214 previous year reporting year 152 250 214 90 211 — 340 425 2007 г. Valuation reserves: (previous year) Allowance for doubtful debts Exchange rate differ- 011 X X X –98 –98 (name of reserve) ences previous year 171 435 471 — (2) 435 469 Balance as of January 1 020 35 371 686 7 307 084 221 667 628 407 43 528 844 reporting year 172 435 469 113 714 (412 418) 136 765 of previous year Provisions for liabilities and charges Exchange rate difference 023 Х — Х Х — reserve for year-end remuneration Net profit 025 Х Х Х 1 804 220 1 804 220 (name of reserve) previous year 181 — 153 792 (0) 153 792 Dividends 026 Х Х Х (224 501) (224 501) reporting year 182 153 792 0 (153 792) — Allocations to reserves 030 Х Х 28 547 (28 547) — Reserve for PP&E repairs Increase of capital due to: (name of reserve) previous year 183 — — (—) — additional shares issue 041 212 — Х (212) — reporting year 184 — — (—) — reorganization of legal 043 — 684 Х — 684 entity other 044 — Х — — — Decrease of capital For reference only due to: eorganization of legal 053 — Х Х (—) (—) Item entity Line Balance at begining Balance at end Balance as of December 060 35 371 898 7 307 768 250 214 2 179 367 45 109 247 Name сode of reporting year of reporting period 31 of previous year 1 2 3 4 2008 г. 1) Net assets 200 45 108 563 46 672 035 (reporting year) From budget From non-budgetary funds Balance as of January 1 100 35 371 898 7 307 768 250 214 2 179 367 45 109 247 of reporting year for for report- for previous for reporting previous Exchange rate differ- 103 Х — Х Х — ing year year year year ences 3 4 5 6 Net profit 105 Х Х Х 1 562 788 1 562 788 2) Received for: 210 5 221 1 923 — — Dividends 106 Х Х Х (0) (0) expenses on ordinary activities — total Allocations to reserve 110 Х Х 90 211 (90 211) — including: fund payments to Chernobyl cleanup veterans 211 — — — — Increase in capital by: and support of citizens exposed to adiation additional share issue 121 — — Х (0) — payment of loan interest pursuant to 212 5 221 1 923 — — reorganisation of legal 123 — — Х — — Decree no. 481 of Russian Government entity other 124 — Х — — Decrease in capital by: reorganisation of legal 133 — Х Х — — entity Balance as of December 140 35 371 898 7 307 768 340 425 3 651 944 46 672 035 31 of reporting year

ogk-5 2008 ANNUAL REPORT FINANCIAL STATEMENTS WITH APPENDICES 108 109

13.4. Statement of cash flow 13.5. Appendix to balance sheet

Item Intangible assets For reporting For period of Line Name period 27.10.2004—31.12.2005 сode Item Availability Availability at beginning at end 1 2 3 4 Name Code of reporting year Additions Disposals of reporting period

Balance at begining of year 010 947 311 192 707 1 2 3 4 5 6

Cash flows from operating activities Items of intellectual 010 383 — (21) 362 property (exclusive Trade cash 020 49 824 157 39 758 535 rights to items of intel- lectual property) Other cash receipts 110 2 174 984 1 174 248 including: Cash used for: copyright holder 012 383 — (21) 362 purchasing goods, work, services, raw materials and 150 (39 402 120) (30 991 814) of software, databases other current assets

salaries 160 (2 160 138) (1 411 984)

dividends and interest payments 170 (390 270) (589 720)

taxes 180 (2 808 008) (2 881 429) Property, Plant and Equipment

other expenses 190 (3 637 245) (1 830 695) Item Availability Availability Net cash from operating activities 200 3 601 360 3 227 141 Line at beginning at end of reporting Name сode of reporting year Additions Disposals period Cash flows from investing activities 1 2 3 4 5 6 Proceeds from sales of PP&E and other non-current 210 144 399 140 735 assets Buildings 070 12 342 852 350 608 (43 156) 12 650 304

Proceeds from sales of securities and other financial 220 86 034 93 914 Structures and transfer 075 6 315 014 569 553 (52 148) 6 832 419 investments mechanisms

Dividends received 230 151 0 Machinery and equip- 080 16 669 148 3 231 451 (13 136) 19 887 463 ment Interest received 240 253 073 717 340 Transport 085 146 231 17 889 (3 705) 160 415 Receipts from redemption of loans to other entities 250 145 376 396 157 438 746 Production and work 090 59 236 6 597 (823) 65 010 Purchase of property, plant and equipment, income 290 (210 508) (2 090 365) appliances bearing investments into tangible and intangible assets Other PP&E 110 54 573 8 264 (34) 62 803 Purchase of securities and other financial investments 300 (160 000) (5 000) Plots of land 115 18 017 558 — 18 575 Loans to other entities 310 (139 009 923) (151 530 932) and objects of environ- mental management Other expenses 320 (13 151 036) (6 781 073) Total 130 35 605 071 4 184 920 (113 002) 39 676 989 Net cash from investing activities 340 (6 671 414) (2 016 635)

Cash flow from financing activities

Proceeds from issue of shares and other equity 350 920 0 securities

Proceeds from loans and credits issued to other entities 360 2 501 350 900 005

Repayment of loans and credits (net of interest) 390 (636 500) (1 430 005)

Settlement of financial lease 400 (168) (3 120)

Net cash from financial activities 430 1 865 602 (533 120)

Net increase (decrease) of cash or cash equivalents 440 (1 204 452) 677 386

Cash at the end of the reporting period 450 52 419 815 170

Ruble exchange rate difference 460 309 560 (54 923)

ogk-5 2008 ANNUAL REPORT FINANCIAL STATEMENTS WITH APPENDICES 110 111

At beginning At end Item Financial Investments of reporting year of reporting period

Name Code Item Long-term Short-term 1 2 3 4 At beginning At end At beginning At end Depreciation of PP&E — total 140 5 049 402 7 481 360 Name Code of reporting of reporting of reporting of reporting including: 141 1 660 737 2 369 048 year period year period buildings and structures 1 2 3 4 5 6 machinery, equipment, transport 142 3 352 961 5 068 156

other 143 35 704 44 156 Investments into share capitals 510 64 758 224 758 — — Leased PP&E — total 150 150 927 307 047 of other entities — total including: 151 83528 187837 including affiliates and depen- 511 59 841 224 758 — — buildings dent companies other 153 67399 119210 Rented PP&E — total 160 37 275 #ЗНАЧ! State and municipal securities 515 — — — — including: 161 30 303 22 019 Securities of other entities — 520 — — — — buildings and structures total machinery, equipment, transport 162 6 971 1 478 including debt securities (bonds, 521 — — — — land 163 — 3 283 066 bills of exchange) other 164 1 — Immovable assets accepted for operation and undergoing 164 — 7 531 Loans issued 525 — — — — state registration At beginning At end Deposits 530 — — 7 160 272 793 827 code of reporting year of reporting period Total 540 64 758 224 758 7 160 272 793 827 2 3 4 For reference only. Change of price of PPE objects after modernization, recon- 170 2 096 306 2 871 566 Share of financial invest- struction, or partial dismantling ments having current market value 550 — — — — Investments into share capitals of other entities — total Expenses on research, development and engineering including affiliates 551 — — — — Type of activity Availability Availability and dependent companies at beginning at end of reporting Name Code of reporting year Additions Disposals period Total 570 — — — —

1 2 3 4 5 6 For reference only. Total 310 1 251 0 (1200) 51 For financial investments having 580 — — — — current market value — change including: ( ) in value as a result of evaluation Research of power generating 311 595 0 (544) 51 adjustment units

Analysis of burning modes 312 495 — (495) 0

Other 313 161 — (161) 0

At beginning of reporting At end Code year of reporting year

For reference only. 2 3 4 Total expenses on incomplete research, development and 320 410 — engineering

ogk-5 2008 ANNUAL REPORT FINANCIAL STATEMENTS WITH APPENDICES 112 113

Accounts receivable and payable Provisions

Item Item Balance at beginning Balance at end Balance at beginning Balance at end Name Code of reporting year of reporting year Name Code of reporting year of reporting period 1 2 3 4 1 2 3 4 Accounts receivable: Received total: 810 2 042 129 6 039 366 short-term — total 610 4 329 141 4 965 357 including: including: bills of exchange 811 362 3 648 trade account receivable 611 1 116 577 2 025 664 Property in pledge 820 — — advance payments issued 612 1 687 650 690 808 including: other 613 1 524 914 2 248 885 bills of exchange 821 — — long-term — total 620 1 048 300 935 786 including: advance payments given 622 0 221 520 other 623 1 048 300 714 266 Government assistance Total 5 377 441 5 901 143 Item Accounts payable: For the same period short-term — total 640 3 101 309 10 047 564 Name Code Reporting period of previous year including: 641 2 159 250 2 374 623 1 2 3 4 payments to suppliers and contractors Budget funds received 910 5 221 1 923 in the reporting year — total advance payments received 642 32 799 8 862 including: tax liabilities 643 415 603 642 439 payments to Chernobyl cleanup 911 — — credits 644 0 6 982 582 veterans and support of citizens other 646 493 657 39 058 exposed to radiation long-term — total 650 5 092 570 980 payment of loan interest pursu- 912 5 221 1 923 ant to Decree no. 481 of Russian including: 652 5 091 445 — Government loans other 653 1 125 980 total 8 193 879 10 048 544

Ordinary expenses (by type)

Item For the same period Name Code For reporting period of previous year 1 2 3 4 Tangible costs 710 29 904 054 22 667 445 Wages and salaries 720 1 637 882 1 523 650 Social expenses 730 308 398 289 161 Depreciation 740 2 451 539 2 119 150 Other expenses 750 5 104 079 4 791 545 Total expenses 760 39 405 952 31 390 951 Balance change (increase +, decrease –) work in progress 765 — — future period expenses 766 (162 382) 397 546 provisions for liabilities and charges 767 (153 792) 153 792

ogk-5 2008 ANNUAL REPORT FINANCIAL STATEMENTS WITH APPENDICES 114 115 13.6. Audit report OJSC XXX OJSC XXX Auditors’ report Auditors’ report on the financial statements for 2008 on the financial statements for 2008

Auditors’ report In our opinion, the accompanying financial statements present reliably, in all material respects, the financial position of the Company as at 31 December 2008 and its financial performance for

To the shareholders of the Open Joint Stock Company The Fifth Power Generation Company the period from 1 January to 31 December 2008 inclusive in accordance with the requirements of the reporting legislation of the Russian Federation.

We have audited the accompanying financial statements of the Open Joint Stock Company The Fifth Power Generation Company (hereinafter the “Company”) for the 2008 reporting year.

The financial statements, set on 46 pages, comprise: 06 April 2009 • the balance sheet as at 31 December 2008; Sloutsky Evgeny • the income statement for 2008; Director of CJSC KPMG, • appendices to the balance sheet and income statement including: (power of attorney dated 30 September 2008No. 34/08)

- statement of changes in equity for 2008;

- cash flow statement for 2008; Mukhametzhanova Guzyal In charge of the audit, - attachments to the balance sheet; auditor’s qualification certificate for general audit • explanatory notes to the financial statements. No K015287, valid for an indefinite period

The Executive Body of the Company is responsible for the preparation and presentation of the financial statements. The term “financial statements” refers to financial statements as defined in the Federal Law On Accounting. Our responsibility is to express an opinion on the reliability of the financial statements in all material respects based on our audit.

We conducted our audit in accordance with the Federal Law On Auditing, the Federal Standards on Auditing, internal KPMG auditing methodology, the rules and standards adopted by the Chamber of Auditors of Russia.

The audit was planned and performed to obtain reasonable assurance that the financial state- ments are free of material misstatement. The audit was performed on a sample basis and included examination, on a test basis, of evidence supporting the amounts presented in the 14. Assessment of the audit financial statements and the information disclosed therein on the financial performance of the Company. The audit also included an assessment of the Company’s compliance with the ac- report by the audit committee counting principles and rules in the preparation of the financial statements and a review of key on the 8th of April 2009 the Audit Committee of the Board of Directors of the Company issued a positive assessment estimates made by management, as well as an evaluation of the presentation of the financial of the report of the Company’s Auditor — CJSC KPMG — on the accounting (financial) statements of the Company statements. We believe that the audit performed provides a sufficient basis for our opinion on over 2008. the reliability of the financial statements.

ogk-5 2008 ANNUAL REPORT FINANCIAL STATEMENTS WITH APPENDICES 116 117 15. Report of internal audit commission 118 119

ogk-5 2008 ANNUAL REPORT REPORT OF INTERNAL AUDIT COMMISSION 120 121

ogk-5 2008 ANNUAL REPORT REPORT OF INTERNAL AUDIT COMMISSION 122 123 16. Information on observance by the company of the Code of Corporate Conduct 124 125 Information is provided in accordance with the Procedural Guidelines on the 1 2 3 4 composition and form of presentation of data on observance of the code 7 Availability in internal documents of the joint Observed This norm is stipulated in clause 3.1 of of corporate conduct in annual reports of joint stock companies (approved stock company of the procedure for registration the Regulations on the procedure for of members of the General Meeting of Share- preparation and holding of the general by instruction of the Federal Service for Financial Markets dated of April 30, holders meeting of OJSC OGK-5. 2003, No. 03-849/r)

Board of Directors Provision of the Code Observed or 8 Availability in the Articles of Association of the Observed In accordance with sub-clause 15.2.36 No. of Corporate Conduct not observed Note joint stock company of the power of the Board of of clause 15.2. of article 15 of the 1 2 3 4 Directors for annual approval of the financial and Articles of Association of the Company economic plan of the joint stock company the Board of Directors shall annu- General Meeting of Shareholders ally approve the business plan of the 1 Notification of shareholders on holding of the Observed clause 11.7 of article 11 and clause Company and the report on results of General Meeting of Shareholders not later than 12.6 of article 12 of the Articles fulfillment thereof. 30 days prior to the date of holding thereof of Association of the Company 9 Availability of the risk management procedure at Not The risk management procedure at notwithstanding the issues included in its agenda the joint stock company approved by the Board observed OJSC OGK-5 is not stipulated by any unless a longer period is provided for by the of Directors internal document of the Company. legislation 10 Availability in the Articles of Association of the Not Pursuant to sub-clause 15.2.9 of clause 2 Availability of the possibility for shareholders to Observed Clause 25.6. of article 25 of the Articles joint stock company of the right of the Board of observed 15.2. of article 15 of the Articles of As- familiarize themselves with the list of persons of Association of the Company Directors to take the decision on suspension of sociation of the Company the issue on entitled to attend the General Meeting of Share- Sub-clause 4.4.5. of the Regulations on the powers of the General Director appointed by election of the General Director of the holders, beginning from the date of notifica- the information policy of the Company the General Meeting of Shareholders Company and early termination of his tion about holding of the General Meeting of powers including adoption of decisions on Shareholders and until closure of the intramural determination of the terms and conditions General Meeting of Shareholders, and in case of the labor agreement with the General of an extramural General Meeting of Sharehold- Director and early termination of the ers — until the date of termination of acceptance labor agreement with him, adoption of of voting bulletins the decisions on bringing of the General Director to disciplinary responsibility and 3 Availability of the possibility for shareholders to Observed clause 11.14 of article 11 of the Articles adoption of decisions on encouragement familiarize themselves with information (materi- of Association of the Company of the General Director in accordance als) to be submitted within the framework of with labor legislation of the Russian Fed- preparation for holding of the General Meeting of eration are related to the competence of Shareholders by means of electronic communi- the Board of Directors of OJSC OGK-5. cations including Internet 11 Availability in the Articles of Association of the Partly Pursuant to sub-clause 15.2.9 of clause 4 Availability of the possibility for shareholders Observed The Articles of Association of the Com- joint stock company of the right of the Board of observed 15.2. of article 15 of the Articles of As- to put forward issues into the agenda of the pany as well as other internal docu- Directors to establish requirements to qualifica- sociation of the Company the issue on General Meeting of Shareholders or to demand ments of the Company do not provide tion and the amount of Remuneration of the election of the General Director of the convocation of the General Meeting of Share- for that the shareholder who introduced General Director, members of the Executive Company and early termination of his holders without provision of an extract from the an issue into the agenda of the General Board, heads of the main structural subdivisions powers including adoption of decisions register of shareholders if accounting of its rights Meeting of Shareholders or demanded of the joint stock company on determination of the terms and con- for shares is exercised in the system of main- convocation of the General Meeting of ditions of the labor agreement with the tenance of the register of shareholders, and if Shareholders, shall be obliged to sub- General Director and early termination his rights for shares are accounted for on the mit an extract from the shareholders’ of the labor agreement with him, adop- custody account, the statement of the custody register in such cases. tion of the decisions on bringing of the account will be sufficient for execution of the General Director to disciplinary respon- above mentioned rights sibility and adoption of decisions on encouragement of the General Director in accordance with labor legislation of 5 Availability in the Articles of Association or in- Partly In accordance with clause 10.11. of the Russian Federation are related to ternal documents of the joint stock company of observed article 10 of the Articles of Association the competence of the Board of Direc- the requirement for compulsory presence at the of the Company the Chairman of the tors of OJSC OGK-5. General Meeting of Shareholders of the Gen- Board of Directors (or Deputy Chairman Pursuant to sub-clause 15.2.10 of clause eral Director, members of the Executive Board, of the Board of Directors or any mem- 15.2 of article 15 of the Articles of Asso- members of the Board of Directors, members of ber of the Board of Directors) may chair ciation of the Company the competence the Audit Committee and the Auditor of the joint the General Meeting. of the Board of Directors of the Compa- stock company In accordance with subclause 6.2.2. ny includes payment to members of the of clause 6.2. of article 6 of the Code Executive Board of considerations and of Corporate Conduct of OJSC OGK-5 adoption of decisions on encouragement the Company shall ensure presence at of members of the Executive Board in the General Meeting of Shareholders of accordance with labor legislation of the members of the Board of Directors, ex- Russian Federation. ecutive bodies, the Internal Audit Com- mission and the Auditor of the Company 12 Availability in the Articles of Association of the Observed Pursuant to sub-clause 15.2.9 of clause and shall authorize them to respond to joint stock company of the right of the Board 15.2 of article 15 of the Articles of Asso- questions of the shareholders. of Directors to approve terms and conditions of ciation of the Company adoption of deci- contracts with the General Director and mem- sions on determination of the terms and 6 Compulsory presence of candidates within the Not observed The specified requirements are not bers of the Executive Board conditions of the labor agreement with framework of consideration at the General indicated in the Articles of Associa- the General Director and early termina- Meeting of Shareholders of issues on elections tion or any internal documents of the tion of the labor agreement with him are of members of the Board of Directors, Gen- Company. related to the competence of the Board eral Director, members of the Executive Board, of Directors of OJSC OGK-5. members of the Audit Committee as well as on Paragraph 3 of clause 20.5 of article the issue on approval of the auditor of the joint 20 of the Articles of Association of the stock company Company

ogk-5 2008 ANNUAL REPORT Information on observance by the company of the Code of Corporate Conduct 126 127 1 2 3 4 1 2 3 4 13 Availability in the Articles of Association or in- Partly Pursuant to sub-clause 5.1.2 of clause 20 Availability in internal documents of the joint Partly According to clause 18.2 of article 18 of ternal documents of the joint stock company of observed 5.1 of article 5 of the Code of Corporate stock company of the requirement on holding of observed the Articles of Association of the Com- the requirements providing that at approval of governance of OJSC OGK-5 members of meetings of the Board of Directors at least once pany meetings of the Board of Directors the terms and conditions of contracts with the the Board of Directors of the Company per every six weeks shall be held when necessary but no General Director (management organization, being executive directors shall con- less than once per quarter. manager) and members of the Executive Board stitute no more than 25% of the total 21 Holding of meetings of the Board of Direc- Observed During 2008 28 meetings of the Board votes of members of the Board of Directors be- number of elected members of the tors of the joint stock company within the year of Directors of OJSC OGK-5 were held. ing the General Director and members of the Board of Directors of the Company. over which the annual report of the joint stock Executive Board shall not be taken into account company is executed at least once per every six in counting of votes weeks 14 Availability in the Board of Directors of the Observed The membership of the Board of 22 Availability in internal documents of the joint Observed The procedure for holding of meetings General Meeting of Shareholders of at least 3 Directors of OJSC OGK-5 elected in stock company of the procedure for holding of of the Board of Directors of OJSC OGK- independent directors meeting requirements of accordance with the resolution of the meetings of the Board of Directors 5 shall be regulated by the Articles of the Code of corporate conduct General Meeting of Shareholders of Association of the Company (article 18) OJSC OGK-5 (Minutes No.1 dated and the Regulations on the procedure May 29, 2008) included the following for convocation and holding of meetings directors meeting the requirements of of the Board of Directors of OJSC OGK- independence: Dominique Fache, Enrico 5 approved by General Shareholders’ Viale, Ponomarev Dmitriy Valeryevich, Meeting in 2005. Marco Piero Arcelli, Gabriele Frea, 23 Availability in internal documents of the joint Not observed This is not provided for by the Articles Carlo Tambuti, Claudio Zito, and Jerald stock company of the provision on the necessity of Association of the Company Joseph Rohan. for approval by the Board of Directors of trans- 15 Absence in the membership of the Board of Observed There are no such persons actions of the joint stock company at the amount Directors of the joint stock company of persons of 10 and more percents of the value of assets who have been recognized guilty in commission of the company except for transactions executed of crimes in the area of economic activity or in the course of ordinary economic activity crimes against state authority, interests of state 24 Availability in internal documents of the com- Observed Article 3 of the Regulations on the service and service in local authorities or who pany of the right of the member of the Board of procedure for convocation and holding have been subject to any administrative pun- Directors for receipt from executive bodies and of meetings of the Board of Directors ishments for legal infringements in the area of managers of the main structural subdivisions of of OJSC OGK-5. entrepreneurial activity or in the area of finance, the joint stock company of information required Regulation on inside information at taxes and duties, securities market for accomplishment of its functions as well as re- OJSC OGK-5 16 Absence in the membership of the Board of Observed There are no such persons sponsibility for non-provision of such information Directors of the joint stock company of persons who are a member, General Director (manager), member of the management body or employee 25 Availability of the committee for strategic plan- Observed The Committee for strategy, develop- of a legal entity competing with the joint stock ning under the Board of Directors or imposition ment, business planning and corporate company of the functions of the above mentioned commit- governance under the Board of Directors tee on another committee (except for the audit of OJSC OGK-5 has been created and is 17 Availability in the Articles of Association of the Observed Clause 10.9 of article 10 of the Articles committee and the committee for HR and remu- operated at OJSC OGK-5 (Minutes No.22 joint stock company of the request on election of of Association of the Company nerations) dated of December 23, 2005) the Board of Directors by means of cumulative voting 26 Availability of the committee of the Board of Observed The Audit Committee of the Board of Directors (audit committee) which shall recom- Directors of OJSC OGK-5 was cre- 18 Availability in internal documents of the joint Observed This obligation is stipulated in sub- mend to the Board of Directors of the auditor of ated and is operated at OJSC OGK-5 stock company of the obligation of the Board of clause 5.1.6 of the Code of Corporate the joint stock company and interacts therewith (Minutes No.22 dated of December 23, Directors not to execute actions which will lead governance of OJSC OGK-5 approved and with the audit committee of the joint stock 2005) or potentially may lead to occurrence of any con- by the resolution of the Board of Direc- company flict between their interests and interests of the tors of the Company (Minutes No.12 27 Availability in the membership of the audit com- Observed These requirements are prescribed in joint stock company and in case of occurrence dated of July 07, 2006) mittee of only independent and non-executive clause 6.5 of article 6 of the Regula- of such a conflict — the obligation to disclose directors tions on the Audit Committee of the information Board of Directors of OJSC OGK-5 19 Availability in internal documents of the joint Partially ob- In accordance with article 4 of the Reg- 28 Execution of management of the audit commit- Observed The Chairman of the Audit Commit- stock company of the obligation of members served ulations on Insider Information of OJSC tee by an independent director tee of the Board of Directors of OJSC of the Board of Directors to notify the Board of OGK-5 approved by the Board of Direc- OGK-5 is the independent director — Directors in writing on the intention to execute tors of OJSC OGK-5 (Minutes No.14 D.D. Rohan transactions with securities of the joint stock dated September 23, 2005) members company, members of the Board of Directors in of the Board of Directors of the Com- 29 Availability in internal documents of the joint Observed Clause 11.3 of article 11 and clause which they act or its subsidiaries (affiliates) as pany, members of the Executive Board stock company of the right of access of all the 12.1 of article 12 of the Regulations on well as to disclose information on transactions and the General Director are obliged members of the audit committee to any docu- the Audit Committee of the Board of with such securities executed by them to disclose information on holding of ments and information of the joint stock com- Directors of OJSC OGK-5 securities of the Company to the Audit pany subject to non-disclosure of confidential Committee under the Board of Direc- information by them tors. Then the Audit Committee under 30 Creation of the committee of the Board of Direc- Observed The Committee for HR and remu- the Board of Directors of the Company tors (committee for HR and remunerations) the nerations of the Board of Directors of shall submit the Report on transactions function of which consists in determination of OJSC OGK-5 has been created and with securities of the Company and its criteria of selection of candidates to members of is operated at OJSC OGK-5 (Minutes subsidiaries and affiliates to the Board the Board of Directors and development of the No.22 dated of December 23, 2005) of Directors of the Company. Remuneration policy of the joint stock company

ogk-5 2008 ANNUAL REPORT Information on observance by the company of the Code of Corporate Conduct 128 129 1 2 3 4 1 2 3 4 31 Execution of management of the committee Observed The Chairman of the Committee for 42 Absence in the membership of the executive Observed There are no such persons for HR and remunerations by an independent HR and remunerations of the Board bodies of persons who are a member, General director of Directors of OJSC OGK-5 is Domin- Director (manager), member of the manage- ique Fache meeting the independence ment body or employee of a legal entity compet- requirements ing with the joint stock company 32 Absence of officials of the joint stock company Observed No officials of the Company are includ- 43 Absence in the membership of the executive Observed There are no such persons in the membership of the committee for HR and ed into the current membership of the bodies of the joint stock company of persons remunerations Committee for HR and remunerations of who have been recognized guilty in commis- the Board of Directors of OJSC OGK-5 sion of crimes in the area of economic activity or crimes against state authority, interests of 33 Creation of the risk management committee Partly The Risk Management Committee at state service and service in local authorities under the Board of Directors or imposition of the observed the Executive Board of the Company or who have been subject to any administra- functions of the above mentioned committee on has been created and is operating at tive punishments for legal infringements in the another committee (except for the audit com- OJSC OGK-5. In addition, the functions area of entrepreneurial activity or in the area mittee and the committee for HR and remunera- of the Risk Management Committee are of finance, taxes and duties, securities market. tions) imposed on the Audit Committee of the If the functions of the sole executive body are Board of Directors of OJSC OGK-5 accomplished by a management organization or 34 Creation of the committee of the Board of Direc- Not observed This is not provided for by the Articles a manager — compliance of the General Direc- tors for settlement of corporate conflicts or im- of Association and internal documents tor, members of the Executive Board of the position of the functions of the above mentioned management organization or the manager with committee on another committee (except for the requirements submitted to the General Director audit committee and the committee for HR and and the members of the executive Board of the remunerations) joint stock company 35 Absence of officials of the joint stock company in Not applicable 44 Availability in the Articles of Association or inter- Not observed This is not provided for by the Articles the membership of the committee for settlement nal documents of the joint stock company of the of Association and internal documents of corporate conflicts restriction against the management organization 36 Execution of management of the committee for Not applicable (manager) to accomplish similar functions at a settlement of corporate conflicts by an indepen- competing company and to be in any property dent director relations with the joint stock company except for provision of services of the management organi- 37 Availability of internal documents of the joint Observed The Board of Directors of OJSC OGK- zation (manager) stock company approved by the Board of Di- 5 approved (Minutes No.22 dated of rectors providing for the procedure for forma- December 23, 2005): the Regulations 45 Availability in internal documents of the joint Partly According to clause 20.13 of article tion and work of committees of the Board of on the Committee for HR and remu- stock company of the obligation of the executive observed 20 of the Articles of Association of the Directors nerations; the Regulations on strategy, bodies not to execute actions which will lead or Company the General Director and development, business planning and potentially may lead to occurrence of any conflict members of the Executive Board of corporate governance; the Regulations between their interests and interests of the joint the Company within the framework of on the Audit Committee; stock company and in case of occurrence of such execution of their rights and fulfillment The Regulations on the Reliability Com- a conflict — the obligation to disclose informa- of their obligations shall act according mittee. tion about such conflict to the Board of Directors to interests of the Company, to exercise their rights and fulfill their obligations 38 Availability in the Articles of Association of the Not observed in relation to the Company on a fair joint stock company of the procedure for deter- and reasonable basis. Regulation of this mination of the quorum of the Board of Directors matter is also carried out in accor- permitting to ensure compulsory participation dance with clause 4.3 of article 4 of the of independent directors at the meetings of the Regulations on the Executive Board of Board of Directors OJSC OGK-5. Executive Bodies 46 Availability in the Articles of Association or in- Not observed These criteria are not provided for by 39 Availability of the collegial executive body Observed The Executive Board of the Company ternal documents of the joint stock company of the Articles of Association and internal (executive Board) of the joint stock company has been created and operates at OJSC criteria of selection of the management organi- documents OGK-5. zation (manager) According to clause 20.1 of article 20 47 Submission by the executive bodies of the joint Partly In accordance with sub-clause 30 and of the Articles of Association of the stock company of monthly reports on their work observed 36 of clause 15.2 of article 15 of the Company creation of a collegial execu- to the Board of Directors Articles of Association of the Company tive body — the Executive Board of the the competence of the Board of Direc- Company is provided for. tors of the Company includes consider- 40 Availability in the Articles of Association or in- Not ation of reports of the General Director ternal documents of the joint stock company of observed on activity of the Company, including the provision on the necessity of approval by the fulfillment of his duties by him. executive Board of transactions with real estate, Pursuant to clause 20.2 the General obtainment of credits by the joint stock company Director and the Executive Committee unless the above mentioned transactions relate of the Company are subordinated to the to major transactions and if execution thereof General Meeting of Shareholders and does not relate to ordinary business activity of the Board of Directors of the Company. the joint stock company 48 Establishment in contracts concluded by the joint Observed 41 Availability in internal documents of the joint Not observed This is not provided for by the Articles stock company with the General Director (man- stock company of the procedure for agreement of Association and internal documents agement organization, manager) and members upon transactions going beyond the limits of of the executive Board of liability for violation the financial and economic plan of he joint stock of provisions on use of confidential and service company information

ogk-5 2008 ANNUAL REPORT Information on observance by the company of the Code of Corporate Conduct 130 131 1 2 3 4 1 2 3 4 Secretary of the company 57 Availability in the Articles of Association or in- Not observed These provisions are not fixed in the ternal documents of the joint stock company of Articles of Association and other inter- 49 Availability at the joint stock company of a spe- Observed OJSC OGK-5 approved the Regulations the requirement on compulsory engagement of nal documents of the Company cial official (secretary of the company) the task on the Corporate Secretary and the an independent appraiser for determination of of whom consists in ensuring of observance by Secretariat of the Board of Directors shares conversion ratio in case of reorganization bodies and officials of the joint stock company of of OJSC OGK-5 (Minutes No.5 dated procedural requirements guaranteeing realiza- March 30, 2006). Disclosure of information tion of rights and legal interests of shareholders Observed The Board of Directors of the Company of the company 58 Availability of the internal document approved by the Board of Directors determining rules and approved the Regulations on informa- 50 Availability in the Articles of Association or Observed The procedure for election of the Cor- approaches of the joint stock company to disclo- tion policy of OJSC OGK-5 (Minutes internal documents of the joint stock company porate Secretary and the Secretariat of sure of information (Regulations on the informa- No.14 dated of September 23, 2005) of the procedure for appointment (election) of the Board of Directors is described in tion policy) which is being effective. the secretary of the company and duties of the article 3 of the Regulations on the Cor- 59 Availability in internal documents of the joint Not observed These provisions are not fixed in the company’s secretary porate Secretary and the Secretariat of stock company of the requirements for disclo- Articles of Association and other inter- the Board of Directors of OJSC OGK-5 sure of information on purposes of placement nal documents of the Company 51 Availability in the Articles of Association of the Not This provision is not prescribed by the of shares, on persons intending to acquire joint stock company of requirements to the can- observed Articles of Association of the Company placed shares including a large stock of shares, didate of the company’s secretary and whether senior officials of the joint stock company will participate in acquisition of placed Essential corporate actions shares of the company 52 Availability in the Articles of Association or inter- Partly According to sub-clause 14 of clause 60 Availability in internal documents of the joint Observed In accordance with sub-clause 4.4.2 of nal documents of the joint stock company of the observed 15.2 of article 15 of the Articles of As- stock company of the list of information, docu- clause 4.4 of article 4 of the Regula- requirements on approval of a major transaction sociation of the Company the compe- ments and materials to be submitted to share- tions on information policy of OJSC before execution thereof tence of the Board of Directors includes holders for resolution of issues submitted to the OGK-5 the list of information, docu- approval of major transactions General Meeting of Shareholders ments and materials to be provided 53 Compulsory engagement of an independent ap- Partly According to sub-clause 31 of clause to shareholders within the framework praiser for appraisal of the market value of prop- observed 15.2 of article 15 of the Articles of As- of preparation of General Meetings of Shareholders shall be approved by the erty being the subject of the major transaction sociation of the Company the compe- Board of Directors while taking the tence of the Board of Directors includes decision on convocation of the General approval of the candidate of an inde- Meeting of Shareholders. Sub-clause pendent appraiser for determination 4.4.3 of clause 4.4 of article 4 of these of the value of shares, property and Regulations determines the approxi- other assets of the Company in cases mate list of information (materials) to prescribed by the Federal Law «On be submitted to the annual General Joint Stock Companies», the Articles Meeting of Shareholders. of Association of the Company as well as separate resolutions of the Board of 61 Availability at the joint stock company of a web Observed OJSC OGK-5 carries out operative and Directors of the Company. site in Internet and regular disclosure of infor- regular disclosure of information on the mation about the joint stock company on that corporate web site of the Company in 54 Availability in the Articles of Association of the Not observed These provisions are not fixed in the web site Internet: http://www.ogk-5.com joint stock company of the restriction of ac- Articles of Association and other inter- ceptance within the framework of acquisition of nal documents of the Company 62 Availability in internal documents of the joint Observed In accordance with sub-clause 4.7.1 large stock of shares in the joint stock company stock company of the requirement on disclosure of clause 4.7 of article 4 of the Regu- (acquisition)of any actions aimed at protection of information about transactions of the joint lations on the Information Policy of of interests of the executive bodies (members stock company with persons related in accor- OJSC OGK-5 this information shall be dance with the Articles of Association to senior additionally disclosed by the Company of such bodies) and members of the Board of officials of the joint stock company as well as within the framework of the quarterly Directors of the joint stock company as well as on transactions of the joint stock company with report of the issuer. actions affecting position of shareholders in com- organizations where senior officials of the joint parison with the existing position (in particular, stock company hold directly or indirectly 20 and restriction of adoption by the Board of Direc- more percents of the authorized capital stock of tors before termination of the proposed term of the joint stock company of which may be other- acquisition of shares of the resolution on issue of wise significantly influenced by such persons additional shares, on issue of securities convert- ible into shares or securities providing the right 63 Availability in internal documents of the joint Observed In accordance with sub-clause 4.7.1 of for acquisition of shares in the company even stock company of the requirement on disclosure clause 4.7 of article 4 of the Regula- if the right for adoption of such resolution is of information about all the transactions which tions on the Information Policy of OJSC granted thereto by the Articles of Association) may influence the market value of shares of the OGK-5 the Company discloses within joint stock company the framework of the quarterly report 55 Availability in the Articles of Association of the Not observed These provisions are not fixed in the of the issuer all relevant information joint stock company of the requirement for com- Articles of Association and other inter- which may cause significant influence pulsory engagement of an independent appraiser nal documents of the Company on assessment of the Company by for appraisal of the current market value of shareholders and potential investors. shares and probable change in the market value 64 Availability of an internal document approved by Observed The Board of Directors of the Company thereof as a result of the statutory merger the Board of Directors for use of essential infor- approved the Regulations on insider 56 Absence in the Articles of Association of the joint Observed mation about activity of the joint stock company, information of OJSC OGK-5 (Minutes stock company of the exemption of the acquirer shares and other securities of the company and No.14 dated of September 23, 2005) from the obligation to offer to shareholders to transactions therewith which is not public and sell their ordinary shares of the company (equity disclosure of which may significantly influence securities convertible into ordinary shares) the market value of shares and other securities in case of merger of the joint stock company

ogk-5 2008 ANNUAL REPORT Information on observance by the company of the Code of Corporate Conduct 132 133 1 2 3 4 1 2 3 4 Control over financial and economic activity 71 Availability in internal documents of the joint Not According to sub-clause 5.2.3 of clause stock company of the obligation of the control observed 5.2 of article 5 of the Regulations 65 Availability of procedures approved by the Board Observed OJSC OGK-5 has approved and oper- and audit service to inform on revealed viola- on the internal audit subdivision of of Directors regarding internal control over ates a number of internal documents tions the audit committee and in case of the OJSC OGK-5 the head of the Internal financial and economic activity of the joint stock regulating the procedure for internal absence thereof — to the Board of Directors of Audit Subdivision is obliged to consider company control over financial and business the joint stock company materials of audits and to report on activity of the Company. Thus, ac- results thereof to the General Director. cording to clause 1.5 of article 1 of the Regulations on the internal control 72 Availability in internal documents of the joint Not observed This provision is not indicated in the system (Minutes No.2 dated of Febru- stock company of the requirement for prelimi- Articles of Association of the Company ary 20, 2007) such internal documents nary assessment by the control and audit service of advisability of execution of transactions not of the Company include the following: prescribed by the financial and economic plan of the Regulations on the internal control the joint stock company (non-standard transac- system; the Regulations on the Audit tions) Committee; the Regulations on the Internal Audit Commission; the Regula- 73 Availability in internal documents of the joint Not observed These provisions are not stipulated in tions on the internal audit subdivision; stock company of the procedure for agreement internal documents of the Company the Regulations on interaction of the upon a non-standard transaction with the Board internal audit subdivision with the audit of Directors committee, the Internal Audit Commis- 74 Availability of an internal document approved by Partly In 2005 the General Meeting of Share- sion; as well as the Regulations on the the Board of Directors determining the pro- observed holders of OJSC OGK-5 approved the internal audit subdivision. cedure for execution of audits of financial and Regulations on the Audit Commission of 66 Availability of a special subdivision of the joint Observed The Internal Audit Unit has been cre- economic activity of the joint stock company by OJSC OGK-5 the audit committee stock company ensuring observance of internal ated and operates at OJSC OGK-5. control procedures (control and audit service) 75 Execution by the audit committee of assessment Observed Pursuant to sub-clause 5 of clause 3.1 of the audit report before submission thereof to of article 3 of the Regulations on the 67 Availability in internal documents of the joint Not observed In accordance with clause 1.4 and shareholders at the General Meeting of Share- Audit Committee of the Board of Direc- stock company of the requirement regarding clause 1.5 of article 1 as well as clause holders tors of OJSC OGK-5 the Audit Commit- determination of the structure and composition 3.1 of article 3 of the Regulations on tee shall carry out assessment of the of the control and audit service of the joint stock the internal audit subdivision of OJSC auditor’s report company by the Board of Directors OGK-5 the internal audit subdivision is administratively subordinated to the Dividends General Director of the Company and is 76 Availability of an internal document approved Observed The Board of Directors of OJSC OGK-5 accountable to the Audit Committee of by the Board of Directors guiding the Board has approved the Standard of the the Board of Directors of the Company. of Directors within the framework of adoption dividend policy of OJSC OGK-5 (Minutes The head of this subdivision is appoint- of recommendations on amount of dividends No.2 dated of February 27, 2006). ed to and removed from this position (Regulations on the dividend policy) by the General Director of the Company taking into account recommendations 77 Availability in the Regulations on the dividend Observed The mentioned provisions are fixed in of the Audit Committee of the Board of policy of the procedure for determination of the the Procedure for calculation of divi- Directors of the Company. minimum share of net profit of the joint stock dends of OJSC OGK-5 (annex 1 to the company directed at payment of dividends and Methodological Instructions on Calcula- The organizational structure and the conditions at which dividends shall not be paid tion of Dividends of OJSC OGK-5). staff of the internal audit subdivision or shall not be paid in full on preferred shares, Over the period of its activity since the shall be approved by the General Direc- amount of dividends on which is determined moment of state registration on De- tor of the Company taking into account in the Articles of Association of the joint stock cember 31, 2008 the Company has not recommendations of the Audit Commit- company exercised any issue of preferred shares. tee of the Board of Directors. In this connection internal documents 68 Absence in the membership of the control and Observed These requirements are set in article 3 of the Company does not contain provi- audit service of the joint stock company of of the Regulations on the internal audit sions on preferred shares, in particular, the Articles of Association of the Com- persons who have been recognized guilty in subdivision of OJSC OGK-5 pany does not determine the amount of commission of crimes in the area of economic dividends on such shares. activity or crimes against state authority, inter- ests of state service and service in local authori- 78 Publication of data on the dividend policy of the Partly Data on the dividend policy and ties or who have been subject to any administra- company and amendments made thereto in a observed dividend history of the Company are tive punishments for legal infringements in the periodical publication prescribed by the Articles published on the corporate web site in area of entrepreneurial activity or in the area of of Association of the joint stock company for Internet: http://www.ogk-5.com finance, taxes and duties, securities market publication of notices on holding of General Meetings of Shareholders as well as placement 69 Absence in the membership of the control and Observed These requirements are set in article 3 of such data in the web site of the joint stock audit service of persons being members if ex- of the Regulations on the internal audit company in Internet ecutive bodies of the joint stock company as well subdivision of OJSC OGK-5 as persons who are a member, General Director (manager), member of the management body or employee of a legal entity competing with the joint stock company 70 Availability in internal documents of the joint Not These provisions are not stipulated in stock company of the term for submission to the observed internal documents of the Company control and audit service of documents and ma- terials for assessment of the financial and eco- nomic transaction executed as well as responsi- bility of officials and employees of the joint stock company for failure to submit the same within the stipulated term

ogk-5 2008 ANNUAL REPORT Information on observance by the company of the Code of Corporate Conduct 134 135 17. Information about major transactions and transactions with related parties executed by the Company in 2008 136 137

The management body taking The management body taking Name the decision The party concerned Name the decision The party concerned

The contract for sale and purchase of The Board of Directors ENEL Investment Holding B.V. Supplementary agreement to the con- The Board of Directors ENEL Investment Holding B.V. power (a free bilateral contract for power of OJSC OGK-5 (Minutes No.9 tract for execution of works associated of OJSC OGK-5 (Minutes No.21 sale) concluded between LLC dated of April 07, 2008) with construction of 410 MW CCGT at the dated of July 29, 2008) «Rusenergosbyt» and OJSC OGK-5 Nevinnomysskaya GRES No.139/DNG- 77-478/81400/ENEL-PRO-2008/0012559 dated of April 17, 2008 concluded be- The contract for provision of services The Board of Directors The member of the Board tween OJSC OGK-5, ENEL Produzione SpA associated with execution and dispatch of OJSC OGK-5 (Minutes No.9 of Directors of OJSC OGK-5 and CJSC «Atomstroyexport» of materials between OJSC OGK-5 and dated of April 07, 2008) Orudzhev Eldar Valeryevich is at OJSC «CMD» the same time the Member of the Board of Directors of OJSC «CDM» The contract for implementation of ICT The Board of Directors ENEL Investment Holding B.V. projects within the framework of the of OJSC OGK-5 (Minutes No.21 program for technological integration of dated of July 29, 2008) The contract for provision of services asso- The Board of Directors The member of the Board of Di- OJSC OGK-5 into the system of the Enel ciated with preparation and holding of the of OJSC OGK-5 (Minutes No.9 rectors of OJSC OGK-5 Orudzhev Group and transfer of advanced technolo- general meeting of shareholders concluded dated of April 07, 2008) Eldar Valeryevich is at the same gies for execution of commercial activ- between OJSC OGK-5 and OJSC «CMD» time the Member of the Board of ity to OJSC OGK-5 (OGK-5 ICT Integra- Directors of OJSC «CDM» tion — Phase 1 Plan) concluded between OJSC OGK-5 and Enel Servizi S.r.l. Conclusion of the Preliminary Agreement The Board of Directors ENEL Investment Holding B.V. for conclusion of the Contract for manage- of OJSC OGK-5 (Minutes No.10 Contract for sublease of non-residential The Board of Directors ENEL Investment Holding B.V. ment of engineering, purchase, construc- dated of April 07, 2008) premises between OJSC OGK-5 and LLC of OJSC OGK-5 (Minutes No.24 tion of CCGT with capacity of 400—450 MW ENEL RUS dated of September 30, 2008) in the territory of the Nevinnomysskaya GRES branch concluded between the Open Joint Stock Company «The Fifth Power The contract for sale and purchase of The Board of Directors ENEL Investment Holding B.V. Generation Company» and the Consortium power and capacity (an off-exchange of OJSC OGK-5 (Minutes No.27 including Enel Produzione SpA and CJSC bilateral contract for sale of power and dated of December 01, 2008) «Atomstroyexport» capacity) between LLC «Rusenergosbyt» and OJSC OGK-5

The contract for execution of works under The Board of Directors ENEL Investment Holding B.V. the project of construction of CCGT with of OJSC OGK-5 (Minutes No.10 The contract for sale and purchase of The Board of Directors ENEL Investment Holding B.V. capacity of 400—450 MW at the Nevinno- dated of April 21, 2008) power and capacity (an off-exchange of OJSC OGK-5 (Minutes No.27 mysskaya GRES branch concluded between free contract for sale of power and ca- dated of December 01, 2008) the Open Joint Stock Company «The Fifth pacity) between LLC «Rusenergosbyt» Power Generation Company» and the Con- and OJSC OGK-5 sortium including Enel Produzione SpA and CJSC «Atomstroyexport»

Contract for management of engineer- The General Meeting of Share- ENEL Investment Holding B.V. ing, purchase, construction of CCGT with holders of OJSC OGK-5 (Minutes capacity of 400—450 MW in the territory of the General Meeting of Share- of the Nevinnomysskaya GRES branch holders No.1 dated of May 29, concluded between the Open Joint Stock 2008) Company «The Fifth Power Generation Company» and the Consortium including Enel Produzione SpA and CJSC «Atom- stroyexport»

The bilateral contract for sale and pur- The Board of Directors ENEL Investment Holding B.V. chase of power (a free bilateral contract of OJSC OGK-5 (Minutes No.19 for power sale) concluded between LLC dated of July 04, 2008) «Rusenergosbyt» and OJSC OGK-5

Supplementary Agreement to the pre- The Board of Directors ENEL Investment Holding B.V. liminary contract for construction of of OJSC OGK-5 (Minutes No.21 410 MW CCGT at the Nevinnomysskaya dated of July 29, 2008) GRES No.138/DNG-77-478/81500/ENEL- PRO-2008/0012560 dated of April 17, 2008 concluded between OJSC OGK-5, ENEL Produzione SpA and CJSC «Atom- stroyexport»

ogk-5 2008 ANNUAL REPORT Information about Major Transactions and Transactions with Related Parties executed by the Company in 2008 138 139 18. The composition of generating capacities 140 141 The composition of the main equipment at The composition of the main equipment at the Konakovskaya GRES the Sredneuralskaya GRES At the Konakovskaya GRES there are installed three power units (No.1—3) At the power plant there are installed 9 turbines and 11 boilers including with capacity of 320 MW each (in 2008 turbines K-300-240-1 of plants Nos.1, 3 power units with turbines К-300-240. The installed electrical and heat 2, 3 were remarked) and five power units (No.4—8) with capacity of 300 MW capacity of the Sredneuralskaya GRES amount to 1,181.5 MW each. As of the end of the year the installed capacity of the Konakovskaya and 1,193 Gcal·hour, respectively. GRES amounts to 2,460 MW.

Power Capacity, Type of the Type of the Type of the Year of Power Capacity, Type of the Type of the Type of the Year of unit No. MW turbine unit boiler unit electrical generator commissioning unit No. MW turbine unit boiler unit electrical generator commissioning 1 320 К-300-240-7МР ПП-950-255-ГМ (ПК-41) ТВВ-320-2 1964 Turbines 2 320 К-300-240-7МР ПП-950-255-ГМ (ПК-41) ТВВ-320-2 1965 1 16 Р-16-29/8,5 — Т-4376/142 1933 3 320 К-300-240-7МР ПП-950-255-ГМ (ПК-41) ТВВ-320-2 1965 2 46 ПР-46-29/8,5/0,25 — Т-4376/142 1937 4 300 К-300-240 ПП-950-255-ГМ (ПК-41) ТВВ-320-2 1966 5 16 Р-16-29/1,2 — ТВС-30 1949 5 300 К-300-240 ПП-950-255-ГМ (ПК-41) ТВВ-320-2 1967 6 100 Т-100-130 — ТВФ-100-2 1965 6 300 К-300-240 ПП-950-255-ГМ (ПК-41) ТВВ-320-2 1968 7 100 Т-100-130 — ТВФ-100-2 1966 7 300 К-300-240 ПП-950-255-ГМ (ПК-41) ТВВ-320-2 1968 8 38 Р-38-130/34 — ТВФ-60-2 1966 8 300 К-300-240 ПП-950-255-ГМ (ПК-41) ТВВ-320-2 1969 Boilers 2 — — ТВВ — 1936 3 — — ОГВС — 1937 The composition of the main equipment at 4 — — ОГВС — 1937 the Nevinnomysskaya GRES 5 — — ОГВС — 1939 At the power plant there are installed 13 turbines and 14 boilers including 6 — — ТВВ — 1943 6 power units with turbines К-150-130 and CCGT-170. The installed electri- cal and heat capacity of the Nevinnomysskaya GRES amount to 1,290 MW 9 — — ТГМ-96 — 1964 and 749 Gcal·hour, respectively (in 2008 the unregulated take-off by heat 10 — — ТГМ-96 — 1965 output as steam was introduced on turbine generator No.4). 11 — — ТГМ-96 — 1966 Power units Power Capacity, Type of the Type of the Type of the Year of unit No. MW turbine unit boiler unit electrical generator commissioning 9 300 К-300-240-1 ТГМП-114 ТВВ-320-2 1969 Turbines 10 277 Т-277-240-1 ТГМП-114 ТВВ-320-2 2004 1 25 ПТ-25/30-90/10 — ТВС-30 1960 11 277 Т-277-240-1 ТГМП-114 ТВВ-320-2 1993 2 25 ПТ-25/30-90/10 — ТВС-30 1960 3 80 ПТ-80/100-130/12 — Т3ФП-110-2УЗн 2006 4 50 Р-50-130-1 — ТВФ-60-2 1968 The composition of the main equipment at 5 30 Р-30(100)-130/15 — ТВФ-100-2 1973 the Reftinskaya GRES Boilers At the GRES there are installed ten power units, of these 6 power units with 1 — — ТП-15 — 1960 capacity of 300 MW each with turbine unit К-300-240 and 4 power units with 2 — — ТП-15 — 1960 capacity of 500 MW with turbine units К-500-240. The installed capacity of 3 — — ТП-15 — 1962 the plant is 3,800 MW. 3А — — ТП-15 — 1965 Power Capacity, Type of the Type of the Type of the Year of 4 — — ТГМ-96 — 1968 unit No. MW turbine unit boiler unit electrical generator commissioning 5 — — ТГМ-96 — 1972 1 300 К-300-240 ПК 39-2 ТГВ-300 1970 5А — — ТГМ-96 — 1974 2 300 К-300-240 ПК 39-2 ТГВ-300 1971 Power units 3 300 К-300-240 ПК 39-2 ТГВ-300 1971 6 150 К-150-130 ТГМ-94 ТВВ-165-2 1964 7 150 К-150-130 ТГМ-94 ТВВ-165-2 1964 4 300 К-300-240 ПК 39-2 ТГВ-300 1972 8 150 К-150-130 ТГМ-94 ТВВ-165-2 1965 5 300 К-300-240 ПК 39-2 ТГВ-300 1974

9 150 К-150-130 ТГМ-94 ТВВ-165-2 1966 6 300 К-300-240 ПК 39-2 ТГВ-300 1975 10 150 К-150-130 ТГМ-94 ТВВ-165-2 1967 7 500 К-500-240-2 ПК-57-2 ТГВ-500 1977 11 160 К-160-130 ТГМ-94 ТВВ-165-2 1970 8 500 К-500-240-2 ПК-57-2 ТВМ-500 1978 CCGT 12 145 К-145-130 ВПГ450-140 ТВВ-165-2 1972 9 500 К-500-240-2 ПК-57-3 ТВМ-500 1979 25 ГТ-25-710 ТВФ-60-2 10 500 К-500-240-2 ПК-57-3 ТВМ-500-2 1980

ogk-5 2008 ANNUAL REPORT The Composition of Generating Capacities 142 143 19. Glossary 144 145 1. Company (OJSC OGK-5) Open Joint-Stock Company The Fifth Power 7. Abbreviations of technical terms: Generation Company *PGU — (CCGT) combined cycle gas turbine unit 2. Annual Report — Annual Report of Open Joint-Stock Company The Fifth Power Generation Company for 2006. *KPD — efficiency factor

3. Central Office (CO) — OJSC OGK-5 Central Office Branch * ASUTP — automated process control system

Konakovskaya GRES (KGRES) — OJSC OGK-5 Konakovskaya GRES * GSHU — main control board Branch. * RUSN — BOP (balance-of-plant) switchgear Nevinnomysskaya GRES (KGRES) — OJSC OGK-5 Nevinnomysskaya GRES Branch. * HVO — chemical water treatment;

Reftinskaya GRES (KGRES) — OJSC OGK-5 Reftinskaya GRES 8. GKPZ — annual complex procurement program Branch. 9. GSM — General Shareholders’ Meeting Sredneuralskaya GRES (SUGRES) — OJSC OGK-5 Sredneuralskaya GRES Branch. AGSM — Annual General Shareholders’ Meeting

4. FTS (Federal Tariff Service of Russian Federation) — an authority con- EGSM — Extraordinary General Shareholders’ Meeting trolling operation of power industry entities on the wholesale and retail power markets with regard to approval of rates and volumes of power 10. Code of Ethics — Code of Corporate Conduct recommended by FCSM purchase/sales taking into consideration maximum allowed growth Resolution No. 421/p of 04/04/02. level of end-users’ rates, determined by the Government of the Russian Federation for the forthcoming control period. 11. Measurement units:

OJSC FGC UES — unified national (all-Russia) power grid controlling kW·h (Kilowatt-hour) power output measurement unit. organisation, it provides paid power transmission services to Wholesale Power Market participants and other entities owning power facilities kW (kilowatt) — power measurement unit. (under proprietary right or on the other grounds prescribed by the fed- eral laws) technologically connected to the unified national (all-Russia) MW (megawatt) — power measurement unit. power grid under established procedure. Gcal (gig calorie) — heat measurement unit. OJSC TSOCDU of UES (Transmission System Operator — Central Dispatching Office of UES) means an operational dispatch man- Gcal·hour (gig calorie-hour) — heat output measurement unit. agement organisation implementing a range of measures to ensure centralized management of technological modes of customers’ power facilities and power receivers within the range of Unified Russian Power Grid and technologically isolated regional power systems.

NP ATS (Non-profit Partnership Administrator of Trade System) — in- frastructural organisation of the Wholesale Power Market, the primary tasks of which include the following: arrangement of wholesale power trading, performance of verification and set-offs of traders’ mutual cross-obligations; organisation of warranty and settlement system at the wholesale market, market regulations compliance control.

5. WPCM — wholesale power and capacity market.

6. UES of Russia — unified energy system of Russia.

GRES — State District Power Plant.

TEC — combined heat and power plant.

VL — high voltage power transmission line

TEK — fuel and energy complex

ogk-5 2008 ANNUAL REPORT Glossary 146 147 20. Contact information 148 Company The full name: Open Joint Stock Company «The Fifth Power Generation Company»

The abbreviated name: OJSC OGK-5

The address of the Company: 620219, Russia, Sverdlovsk Region, the city of Ekaterinburg, pr. Lenina, 38 The address of the current executive body of the Company: 119136, Russia, Moscow, the 4th Setunskiy proezd, 10А, building 2 2

Telephone: (495) 380-02-30, 380-02-32 Fax: (495) 380-02-39 E-mail: [email protected] m Address of the page (pages) in Internet where information about the Com- pany is presented: www.ogk-5.com

Depository Bank The name: The bank of New York Mellon

Address: one Wall Street, New York, New York 10286, USA

Web site: www.bankofny.com

Registrar The full name: Open Joint Stock Company «The Central Moscow Depository»

The abbreviated name: OJSC CMD

Address: 107078, Moscow, Orlikov per., 3, building В Postal address: 105082, Moscow, Bolshaya Pochtovaya Street, 34, building 8

Telephone: 221-13-33 Fax: 221-13-83 Web site: www.mcd.ru

Auditor The full firm name: Closed Joint Stock Company «KPMG»

The abbreviated firm name: CJSC «KPMG»

Legal address: 129110, Russia, Moscow, Olimpyisky prospect, 18/1, building 3035 Postal address: 123317, Russia, Moscow, Krasnopresnenskaya Naberezh- naya, 18, complex «Bashnya na naberezhnoy», block C, the 31st floor

Telephone and fax numbers: tel. (495) 937-44-77, fax (495) 937-44-99 E-mail: [email protected] Web site: www.kpmg.ru

ogk-5 2008 ANNUAL REPORT