APPROVED by the Decision of the Management Board of JSC SGC TGC-8 Minutes dated 10.11.2006 No. 70/06 QUARTERLY REPORT Open Joint Stock Company South Generation Company– TGC-8 Issuer's Code: 3 4 3 0 8 - Е 3rd Quarter 2006 Issuer's Location: 32 Krasnaya Naberezhnaya Str., Astrakhan, Russian Federation The information contained in this Quarterly Report is to be disclosed pursuant to Russian Federation securities legislation General Director ____________ V.S.Gvozdev Date _10_November 2006 Signature Acting Chief Accountant ____________ N.A.Timchenko Date _10_November 2006 Signature SEAL Contact Elena N. Pavlova, Head of Shareholder Relations Department of JSC SGC TGC-8 Phone (863) 255-55-65 e-mail: [email protected] Web site: http://www.tgk-8.ru/index.php?id=34&lang=en CONTENTS Introduction-------------------------------------------------------------------------------------------------------------------------------4 I. Brief Information about Issuer's Management Bodies Members, Bank Accounts, Auditor, Appraiser and Financial Consultant as well as about Other Persons Who Have Signed the Quarterly Report--------------------------------------------7 1.1. Issuer's Managerial Bodies Members------------------------------------------------------------------------------------------7 1.2. Issuer's Bank Accounts----------------------------------------------------------------------------------------------------------8 1.3. Issuer's Auditor (Auditors) Data-----------------------------------------------------------------------------------------------9 1.4. Issuer's Appraiser Data---------------------------------------------------------------------------------------------------------10 1.5. Issuer's Consultants Data-------------------------------------------------------------------------------------------------------10 1.6. Quarterly Report Signatories--------------------------------------------------------------------------------------------------10 II. Basic Details of the Issuer's Financial and Business Performance------------------------------------------------------------11 2.1. Data of the Issuer's Financial and Business Performance------------------------------------------------------------------11 2.2. Issuer's Market Capitalization-------------------------------------------------------------------------------------------------12 2.3. Issuer's Liabilities---------------------------------------------------------------------------------------------------------------12 2.3.1. Accounts Payable-------------------------------------------------------------------------------------------------------------13 2.3.2. Issuer's Credit History--------------------------------------------------------------------------------------------------------13 2.3.3. Issuer’s Backing Liabilities Relating to Third Parties--------------------------------------------------------------------15 2.3.4. Other Issuer's Liabilities-----------------------------------------------------------------------------------------------------15 2.4. Objectives of the Issue and Use of Proceeds--------------------------------------------------------------------------------16 2.5. Risks Related to Investing in the Issue Securities being Placed hereunder----------------------------------------------16 2.5.1. Industry-Related Risks-------------------------------------------------------------------------------------------------------16 2.5.2. Country-Related and Regional Risks---------------------------------------------------------------------------------------16 2.5.3. Financial Risks----------------------------------------------------------------------------------------------------------------17 2.5.4. Legal Risks--------------------------------------------------------------------------------------------------------------------18 2.5.5. Risks Relating to the Issuer's Activity--------------------------------------------------------------------------------------18 III. Detailed Information about the Issuer--------------------------------------------------------------------------------------------20 3.1. Issuer's Background and Development---------------------------------------------------------------------------------------20 3.1.1. Issuer's Corporate Name-----------------------------------------------------------------------------------------------------20 3.1.2. Issuer's State Registration Data---------------------------------------------------------------------------------------------20 3.1.3. Issuer's Incorporation and Development-----------------------------------------------------------------------------------20 3.1.4. Contacts------------------------------------------------------------------------------------------------------------------------22 3.1.5. Taxpayer's Identification Number------------------------------------------------------------------------------------------22 3.1.6. Issuer's Affiliates and Representative Offices-----------------------------------------------------------------------------22 3.2. Issuer's Key Business Activities-----------------------------------------------------------------------------------------------23 3.2.1. Issuer's Sector-----------------------------------------------------------------------------------------------------------------23 3.2.2. Issuer's Key Business Activity----------------------------------------------------------------------------------------------23 3.2.3. Key Products (Works, Services)--------------------------------------------------------------------------------------------24 3.2.4. Raw Materials and Issuer's Suppliers--------------------------------------------------------------------------------------25 3.2.5. Issuer's Markets of Products (Works, Services)---------------------------------------------------------------------------26 3.2.6. Information about Issuer's Licenses----------------------------------------------------------------------------------------32 3.2.7. Issuer's Joint Ventures--------------------------------------------------------------------------------------------------------33 3.2.8. Additional Requirements Applicable to Issuers that are Joint Stock Investment Funds, or Insurance Companies ------------------------------------------------------------------------------------------------------------------------------------------33 3.2.9. Additional Requirements Applicable to Issuers whose Key Activity is the Production of Minerals---------------33 3.2.10. Additional Requirements Applicable to Issuers Providing Communication Services------------------------------34 3.3. Issuer's Prospective Activities-------------------------------------------------------------------------------------------------34 3.4. Issuer's Participation in Industrial, Banking and Financial Groups, Holding Companies, Concerns and Associations---------------------------------------------------------------------------------------------------------------------------34 3.5. Issuer's Subsidiary and Dependent Companies------------------------------------------------------------------------------34 3.6. Composition, Structure and Value of the Issuer's Fixed Assets, Information on the Proposed Acquisition, Replacement and Retirement of Fixed Assets and about any Encumbrances of Fixed Assets-----------------------------37 3.6.1. Fixed Assets-------------------------------------------------------------------------------------------------------------------37 IV. Issuer's Financial and Business Performance-----------------------------------------------------------------------------------38 4.1. Issuer's Financial and Business Performance--------------------------------------------------------------------------------38 4.1.1. Profit and Loss----------------------------------------------------------------------------------------------------------------38 4.1.2. Factors Affecting the Issuer’s Proceeds of the Sale of Products, Works, Services and Issuer’s Key Business Profit (Loss)---------------------------------------------------------------------------------------------------------------------------39 4.2. Issuer's Liquidity and Equity and Current Assets Adequacy--------------------------------------------------------------39 4.3. Amount and Structure of the Issuer’s Equity and Current Assets---------------------------------------------------------39 4.3.1. Amount and Structure of the Issuer’s Equity and Current Assets------------------------------------------------------39 4.3.2. Issuer's Financial Assets-----------------------------------------------------------------------------------------------------40 4.3.3. Issuer's Intangible Assets----------------------------------------------------------------------------------------------------41 4.4. Issuer’s Research and Development, Licenses, Patents and Know-How Expenditure and Policy-------------------42 4.5. Analysis of Issuer’s Key Business Trends-----------------------------------------------------------------------------------42 V. Detailed Information about Members of Issuer’s Management and Financial Control Bodies and Issuer’s Employees Summary---------------------------------------------------------------------------------------------------------------------------------47 2 5.1. Structure and Competence of the Issuer’s Management Bodies----------------------------------------------------------47 5.2. Information about the Members of the Issuer’s Management Bodies----------------------------------------------------53 5.3. Information about Remuneration, Benefits and/or Compensation of Expenses