A significant rise in investments for the development of production facilities is anticipated in 2003 compared to 2002. This is due to SDCs' increased investment possibilities as a result of revaluation of plant and equipment carried out in 2001-2002, and to the continuing wear and tear of fixed assets in the sector, currently in excess of 50%:

Investment allocations at RAO "UES of Russia" Group will increase from RUB 60.4 billion to RUB 83.4 billion.

Investments at RAO "UES of Russia" Company will rise from RUB 17.1 billion to RUB 26.8 billion.

Under the Technical Re-equipment and Reconstruction Program of RAO "UES of Russia", the technical re-equipment and major overhaul is to be carried out at operating power facilities in 2003 (except for the FGC-owned facilities and power plants leased out) for the total value of RUB 24.19 billion compared to RUB 27.63 billion in 2002.

In 2003, about 2,157.5 MW of turbine capacities are planned to be put into operation throughout the Holding Company, with 435.6 MW to be funded by OAO RAO "UES of Russia". 885.1 MW of capacities are to be put into operation as a result of technical refurbishment at operating power plants.

The 2003 investment program of OAO RAO "UES of Russia" (including OAO "UES FGC") has been confirmed by the Russian Government at RUB 26.8 billion (taking into account depreciation and other sources of finance).

Investments in construction of generating facilities and technical upgrade will amount to RUB 13.2 billion. These will be primarily made in the thermal and hydroelectric power plants to be constructed in accordance with the resolutions of the Russian Government and orders of Russia's President, as well as projects near completion and projects ensuring current reliability of power supply.

Investments in power grid projects will amount to RUB 11.3 billion. These are HV lines that ensure transmission of electricity from power plants, both existing and under construction, interconnected power lines and substations, infrastructure facilities, etc.

For the purposes of market infrastructure development, RUB 0.5 billion in funds have been committed to the upgrade of hardware and software of the UES SO-CDA and the Integrated Dispatch Administrations (IDAs), and to the creation of a commercial automated electricity metering system.

In 2003, the investments in development of trunk grids will increase over 70% compared to last year.

In 2003, as before, much attention will be given to re-equipment and reconstruction of the existing trunk grids. RUB 2.3 billion in funds are to be allocated for that purpose in 2003.

RUB 2.3 billion in funds have been committed for the reconstruction of energy facilities, design and development work and infrastructure facilities in the Republic of Chechnya.

The 2003 investment program envisages the commissioning of 272 km of power transmission lines (primarily, these are HV lines for transmission of power produced by the newly commissioned generating units at power plants), 542 MVA of transformer capacity, and 484 MVar of reactive power compensation units.

In 2003 OAO RAO "UES of Russia" will finance industry development projects from its own funds. At the same time, the Company will work to increase the investment attractiveness of generating facilities and attract foreign investors to the power sector. However, to achieve that, the Company will need to overcome the negative impact of the existing tariff-setting system and establish mechanisms ensuring return of investors' funds.

In these circumstances, the Company continues its effort to set up an Investment Guarantee Agency. The Agency will allow investors to receive a guaranteed level of internal rate of return on an investment project even if the market tariff for electricity is lower than the level that ensures an economically justifiable return on investments. This will create conditions for raising investments needed to complete key energy projects.

Given the limited investment resources, the Company implements mechanisms for more effective use of these resources. A system of budgets and treasury operations was introduced for the most important projects. Contractors and equipment suppliers are chosen only on a competitive basis.

Thermal power plants

Hydroelectric Power Plants