The first phase of reorganization of RAO "UES of Russia" is completed. Two generation companies — OAO "WGC-5" and OAO "TGC-5" — are spun off from the Company. The Company's shareholders receive shares in OAO "TGC-5" and OAO "WGC-5" in addition to their shares in RAO "UES of Russia".

At the Extraordinary General Meeting, shareholders of RAO "UES of Russia" approve key resolutions relating to the final phase of the Parent Company's reorganization. Pursuant to these resolutions, RAO "UES of Russia" dissolves on 1 July 2008, and its shareholders receive shares in 23 key energy companies.

The consolidation process is completed at six thermal WGCs and fourteen TGCs. Shares of all the thermal generation companies created during the reform float on the securities market.

Amendments are adopted to the electricity legislation which make it possible to complete the sector reform, create the legal framework for the operation of the companies of the intended (post-reform) sector structure to be spun off from OAO RAO "UES of Russia" in the future, and ensure reliable operation of the UES of Russia and uninterrupted power supply to customers.

The energy companies of RAO "UES of Russia" launch large-scale construction and modernization of their generation and network facilities envisaged by the Company's five-year investment programme. By 2011, 29,000 MW of generation capacity and about 70,000 km of transmission lines of different voltages are to be brought on line nationwide.

The additional share offerings of 10 generation companies and the sale of the "government stake" shares in 7 WGCs and TGCs owned by RAO "UES of Russia" carried out in 2007 generate about RUB600 billion in direct private investments for the sector development.

Government and corporate resolutions are taken to change the configuration of the interregional distribution companies. 12 IDCs are to be created in the distribution sector, which will be comparable in terms of assets value and will compete among themselves for investments.

A schedule is set for the electricity market liberalization which provides for deregulation of electricity prices on the wholesale market by 2011. By end-2007, electricity deliveries at unregulated prices made about 20 percent of the total wholesale market deliveries.

RAO "UES of Russia" continues its drive to divest its energy retail assets, selling its shareholdings in 22 energy retail companies through public auctions. RAO "UES of Russia" receives RUB13.2 billion in proceeds from the sale of ERC shares, which exceeds the target by one third, succeeding in bringing private strategic investors to these energy retail companies.