10.1.2. Organisation of work on financial markets

In 2001 the Company's operation on financial markets was mainly aimed at:

• attracting loans;
• managing temporarily available cash.

The loan policy of RAO "UES of Russia" was intended to optimise the volumes and composition of borrowed assets, to minimise the costs of debt servicing and implement a mechanism for attracting medium-term investments into development projects.
During the year of 2001 the credit portfolio of RAO "UES of Russia" was mainly comprised of loans taken to cover short-term cash deficits. The Company’s short-term borrowings amounted to 5361 mln roubles at 14% to 17% per annum.
In October 2001 RAO "UES of Russia" signed a loan agreement with the European Bank for Reconstruction and Development. The amount of EUR100 mln was provided in January 2002 directly by the EBRD and by a syndicate of commercial banks for a period of 37 months. The cost of that loan was 9.73%.
In addition to that, in October 2001 the Finance Ministry of the Russian Federation granted a 2605 mln roubles budget credit to RAO "UES of Russia" to finance fuel supplies to energy systems during the autumn and winter consumption peaks in 2001/2002.
In December 2001 RAO "UES of Russia" received a 24 bln roubles medium-term credit (till 2004) from Sberbank of the Russian Federation for replenishing its working capital. The credit was provided at 20% per annum.
The loans granted to RAO "UES of Russia" by the International Bank for Reconstruction and Development were used for specific purposes in accordance with the Russian Government’s decisions. RAO "UES of Russia" uses the loan proceeds to finance the Company's restructuring under the state policy of reform of natural monopolies

Loans and credits of the Company as of 12. 31. 2001

One of the major principles of the financial policy of RAO "UES of Russia" is the increase of the efficiency of the Company's assets management, achieved among other things, through optimisation of the management of temporarily available funds. The Company on the basis of the most favourable profitability/risk and term of investment/liquidity ratios invests temporarily available funds mainly by acquisition of debt securities with interest rates that are in line with or exceed the average interest rate on the market.
The risks associated with the investment of temporarily available funds are managed through the determination of the limits on transactions with various lending institutions. Such limits are determined based on the results of an on-going analysis of the financial condition of potential lenders belonging to financially stable lending institutions from among the largest Russian banks.
In 2001 the return on investment by the Company of its temporarily available cash funds reached 50.4 mln roubles.