FOLLOWING IS THE UDIT OPINION OF PRICEW TERHOUSECOOPERS UDIT RELATED TO THEIR UDIT OF THE 2000 ST TUTORY FINANCIAL ST TEMENTS OF RAO "UES of Russia" (PARENT COMPANY). SUCH FINANCIAL STATEMENTS ARE NOT INCLUDED IN THIS ANNUAL REPORT DOCUMENT. ACCORDINGLY, REFERENCES IN THE AUDIT OPINION TO “ATT CHED FINANCIAL STETEMENTS” AND TO INFORMATION CONTAINED IN “NOTES TO FINANCIAL STATEMENTS” REFER TO INFORMATION NOT INCLUDED WITHIN THIS ANNUAL REPORT DOCUMENT. THE AUDIT OPINION APPLIES ONLY TO RAO "UES of Russia" (PARENT COMPANY) 2000 STATUTORY FINANCIAL STATEMENTS AND NOTES THERE TO, A COPY OF WHICH MAY BE OBTAINED FROM THE COMPANY.
EXTRACT FROM THE SECTION “FIXED ASSETS” OF THE EXPLANATORY NOTES TO RAO "UES of Russia" STATUTORY FINANCIAL STATEMENTS REFERRED TO IN PARAGRAPH 5 OF AUDIT FIRM’S OPINION ISSUED BY PRICEWATERHOUSECOOPERS.
FIXED ASSETS
…On 05 November 1999 RAO "UES of Russia" concluded Lease Contract No. 126 for trust management of the assets of Severny and Bogatyr coal mines with TOO Bogatyr Acsess Komir (Khazakhstan). However, the Trust manager failed to meet the terms of the Contract. In addition, the Trust manager did not maintain separate accounting for trust operations and failed to use a specially opened bank account for effecting relevant settlements, which makes it impossible to fairly establish revenue, expenses and financial results of operations under the trust management. RAO "UES of Russia" cancelled the contract for trust management, and starting 01 November 2000 has leased the assets to the same legal entity …
EXTRACT FROM THE SECTION “LONG-TERM INVESTMENTS” OF THE EXPLANATORY NOTES TO RAO "UES of Russia" STATUTORY FINANCIAL STATEMENTS REFERRED TO IN PARAGRAPH 7 OF AUDIT FIRM’S OPINION ISSUED BY PRICEWATERHOUSECOOPERS AUDIT.
LONG-TERM INVESTMENTS
…According to p.45 of the Regulations on the Accounting and Reporting in the Russian Federation, adopted by Order of the Finance Ministry of the Russian Federation No.34n of 29 July 1998, in the event that the market value of securities as at the end of reporting year is lower than their carrying value, RAO "UES of Russia" should have provided for diminution in value of such securities.
BASED ON THE 2000 RESULTS, THERE ARE 6 SUCH COMPANIES:
BASED ON CALCULATIONS PERFORMED AS PER THE METHODOLOGY OF THE FEDERAL SECURITIES COMMISSIONS, THE FOLLOWING PROVISION FOR DIMINUTION IN VALUE OF THE SECURITIES HAS BEEN OBTAINED:
Issuer |
Number of shares |
Provision for diminution invalue of securities (RR.) |
| ÎŔÎ “Kirovenergo” | 1 374 090 516 | 1 305 385 990 |
| ÎŔÎ “Permenergo” | 23 306 580 | 338 411 542 |
| ÎŔÎ “Samaraenergo” | 1 974 212 100 | 1 302 979 986 |
| ÎŔÎ “Saratovenergo” | 3 115 635 396 | 436 188 955 |
| ÎŔÎ “Tulenergo” | 767 674 368 | 652 523 213 |
| ÎŔÎ “Mosenergo” | 14 379 166 000 | 4 590 705 707 |
TOTAL PROVISION |
8 626 195 393 | |
According to Art.13 para.4 of Law “On Accounting ”No.129-FZ of 21 November 1996, the entity shall have the right not to apply provisions of the regulations, if that, in their opinion, may result in material misstatement (unfair presentation) of accounting data. Based on that provision, RAO "UES of Russia" has come to a conclusion not to apply the requirements set forth in the Regulations on the Accounting and Reporting in the Russian Federation with regard to providing for diminution in value of the securities of the below subsidiaries of RAO "UES of Russia", based on the following grounds:
OAO MOSENERGO
Since the beginning of 2001, the Company's share prices have increased against the
background of positive trends on the Russian Stock Exchange. The market value of the
shares has approached the carrying amount.
OAO KIROVENERGO, OAO PERMENERGO, OAO SAMARAENERGO, OAO SARATOVENERGO, OAOTULENERGO
The shares of the said companies fall into the “second echelon” of securities,
which is characterised by extremely low liquidity (or even the lack of such –
Kirovenergo and Permenergo), as the investor's interest in such shares only arises in the
event of sustained positive trends on the Stock Exchange. Also, RAO "UES of
Russia" did not pur- chase the shares in the said companies, and these shares were
contributed by the State to the share capital of RAO "UES of Russia" upon
its incorporation, with a view to ensure management of those companies within the unified
energy system of the country. To ensure Government control of the electric utilities
industry, the State has legally established that RAO "UES of Russia" shall not
be allowed to dispose of those shares. Finally, lack of appropriate regulations does not
enable RAO "UES of Russia" to quantify the so-called “controlling” premium
on share, to which RAO "UES of Russia" is, undoubtedly, entitled, as it holds
controlling interests in the AO-Energos.
In view of this,RAO "UES of Russia" believe that application of the downward adjustment in respect of the shareholdings within RAO "UES of Russia" investment portfolio,which is provided for in p.45 of the Regulations on the Accounting and Reporting in the Russian Federation adopt- ed by Order of the Finance Ministry of the Russian Federation No.34n of 29 July 1998 and purported to reflect the current level of market prices, makes it impossible to fairly present the financial position and performance of RAO "UES of Russia".
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