RAO «UES of Russia»
Dialogue with Shareholders - New
Initiatives and Next Steps
Presentation by Anatoly Chubais
Chief Executive Officer
25 September 2002
Moscow
Agenda
UES Performance to Date
New Initiatives of UES Management
Progress to Date and Next Steps
1
UES Performance to Date
 Share Price Performance
 Understanding Negative Market Sentiment
Share Price Performance
US cents
24,0
22,0
20,0
18,0
RTS Index
16,0
14,0
12,0
UES
10,0
8,0
UES
09 02
08 02
07 02
06 02
05 02
04 02
03 02
02 02
01 02
12 01
11 01
10 01
09 01
08 01
07 01
06 01
05 01
04 01
03 01
02 01
01 01
6,0
RTS Index
Uncertainties concerning UES reform risks led to share price decline of
47% vs. RTS growth of 29% since the beginning of 2002
2
Understanding Negative Market Sentiment
 Insufficient consideration of minority shareholders’ views regarding
the development of the company’s strategy and restructuring’s
principles
Under
Management
Control
 Insufficient communication to shareholders regarding the goals,
motivation and substance of the management policy
 Premature consideration of asset sales in uncertain sector
conditions
 Final industry structure, regulation and timing remain unclear
Beyond
Management
Control
 Increasing uncertainty due to the delayed submission of legislation
package from June to autumn
 Some Duma deputies support plans to nationalise the Grid and
question pro-rata distribution
Negative market sentiment results from internal and external issues
3
New Initiatives of UES Management
 Seven Steps of UES Management for the
Benefit of Minority Shareholders
 Shareholder Communication
Seven Steps of UES Management for the Benefit of Minority
Shareholders
1. Moratorium on sale of core assets and granting of options to purchase these
assets until the mechanisms of fair valuation and proceeds distribution are
established
2. No pledge of shares for loans
3. No asset transfers to Government other than at fair value
4. Pro-rata allocation of shares
5. Preservation of liquidity of shares at all levels throughout the process
6. Financial / operating results to remain a priority during restructuring
7. Substantial modification of the dividend policy for the benefit of shareholders
4
Shareholder Communication – Significant Intensification
 Real-time
Company website to continue presenting investor information in a timely manner
 Frequently Workshops on aspects of restructuring including valuation, regulation etc
 Monthly
Conference calls with participation of senior management
 Twice a year Investor road-shows with restructuring status and outlook, attended by the CEO
We are committed to increasing transparency of process for all shareholders
5
Progress to Date and Next Steps
 Progress to Date
 Next steps
Progress to Date
 Representation of shareholder interests enhanced
Shareholder
Representation

Board of Directors – three representatives of minority shareholders (D. Herne,
A. Branis, A. Lebedev) and one independent director (R. Birhoff)

Board’s Restructuring Committee – four representatives of minority
shareholders

Board’s Valuation Committee – two representatives of minority shareholders
 Together with minority shareholders UES have developed and approved the rules
of conduct between UES and its subsidiaries and affiliates
 Together with the Government, UES prepared a legislation package regarding
reforms in the industry
Restructuring
 UES Board approved the “UES Corporate Code”
 UES is finalising a strategic plan for the restructuring period (“3+3 program”)
 UES has taken initial steps towards creation of market infrastructure (System
Operator, Trading System Administrator, Transmission Grid)
 Deloitte & Touche - on valuation methodology
Advisors
 Alfa Bank/Merrill Lynch - on restructuring and shareholder communication
UES is undertaking one of the most challenging restructurings in corporate
history. Definite progress has been made and the next steps are well defined
6
Next Steps
 Create a new working group, comprising the CEO, minority representation and
advisors to review and optimise a step-by-step strategic plan
 Present UES strategic plan (“3+3 program”) reflecting the comments of minority
shareholders in Q4 2002, addressing:

General approach to the restructuring

Corporate governance

Legislative and regulatory environment

Final structure

Transition mechanism

Timetable
 Workshops on UES restructuring program and valuation
7