INTER RAO To Rationalise The Structure Of Power Generation Assets

The list of persons with the right to participate in the meeting and the right to demand buying out their shares is to be formed as of March 15, 2012.

In the course of forming the Group’s target corporate structure which anticipates 100% possession of the main generating assets (according to the Directors Board decisions), it is planned to accomplish the following procedures:

Both JSC OGK-1 and JSC OGK-3 will come through hive-off procedure, so there will two joint companies to spin off – JSC First Generation and JSC Third Generation. All the assets and liabilities of OGK-1 and OGK-3 will be transferred to those new companies. In the same time those new spin off companies will be merged with JSC INTER RAO – Electric Power Plants (nowadays the company operates four power plants, such as Kaliningradskaya TPP-2, Severo-Zapadnaya TPP, Sochinskaya TPP and Ivanovskiye CPP). Meanwhile OGK-1 and OGK-3 will me merged with INTER RAO UES.

Thereby all the highest-output Russian power plants operated by INTER RAO Group will be listed on the balance sheet of the same corporate entity which is a 100% subsidiary of INTER RAO UES.

The swap ratio parameters are based upon the reports of the independent appraiser – the Independent Appraising Institute. The conclusion about correctness of the swap ratio was brought out by Morgan Stanley and Troika Dialog investment banks.

One ordinary share of INTER RAO UES can be converted into 0,0416666666666667 of an OGK-1 ordinary share (24 shares of INTER RAO UES for one share of OGK-1), and 0,025 of an OGK-3 ordinary share (40 shares of INTER RAO UES for one share of OGK-3).

The end of the reorganization is scheduled for the fourth quarter of 2012. As the result the total installed capacity of the united operational company INTER RAO – Management of Electric Power Plants will amount next to 21 GW. Besides that, two second-tier subsidiaries are to be merged with INTER RAO UES. Those are JSC INTER RAO - Energy and JSC INTER RAO - Energoaktiv. Those companies own small minority stake in energy companies which partly belong to INTER RAO UES directly.

"The goal of the reorganization is to consolidate 100% of the Group's major power generating assets and create a common framework of their operational management. It is necessary to simplify the ownership structure of the assets, increasing its transparency and streamlining administrative costs. We expect the reorganization to have a positive impact on investment prospect for INTER RAO. Among other reasons, because of the essential free float increase and elimination of conglomerate discount", said Chairman of the Executive Board of INTER RAO UES Boris Kovalchuk.

Along with optimization of the current structure of INTER RAO Group the head company of the Group - INTER RAO UES - is to be reorganized by acquisition of JSC Bashenergoaktiv.

On the assumption of the preliminary concept of reorganization and in the case of receiving all appropriate corporate approvals by Bashkirenergo and JSFC Sistema, it is expected that Bashkirenergo will be reorganized by disproportionate split in two companies: JSC Bashenergoaktiv (simultaneously merged with INTER RAO UES) and JSC Bashkir Grid Company. At this point Bashenergoaktiv will take control over entire power generation business of Bashkirenergo by obtaining the shares of LCC Bashkir Generation Company, LCC Bashkir heat distribution network, and LCC TPP-5 CPP.

The details of Bashkirenergo reorganization are to be determined by the company's management (corporate governance bodies). Meanwhile the Directors Board of INTER RAO UES has taken all the necessary decisions for Bashenergoaktiv acquisition, including determining the position for the sahereholders vote on the reorganization.

According to the decions of INTER RAO UES Directors Board one ordinary share of INTER RAO UES can be converted into 0,0016588785046729 of an ordinary share of Bashenergoaktiv (602,82 shares of INTER RAO UES for one share of Bashenergoaktiv), and 0,00218293620292083 of priority share of Bashenergoaktiv (458,10 shares of INTER RAO UES for one priority of Bashenergoaktiv). These swap ratio parameters have been acknowledged correct.

The DIrectors Board of INTER RAO UES has also taken decision about settling a bank guarantee agreement with Gazprombank in case of necessity of such element in the deal structure.

With the purpose of conversion of the above-referred companies shares into INTER RAO UES shares the Directors Board is suggesting the General Meeting of Shareholders to approve the increase of share capital by additional issue of ordinary shares. On the assumption of the reorganization details provided the conversion of all minority stakes of the companies to be merged the share capital of INTER RAO UES would increase by more than 10%.

Except the decisions concerning the structure reorganization the Directors Board has also approved the sale of blocking shareholding of JSC ENEL OGK-5.