Actuality February 11, 2008

   On the Russian trading floors RTS (Russian Trading System) and MICEX (Moscow Interbank Currency Exchange) appeared the new "blue chip" – started trades in stocks of JSC HydroOGK

(JSC RusHydro). According to trades' results of the first day its market capitalization made up $16,4 bln.

   In RTS stocks are traded out of list, on MICEX – in the quoted list "?". JSC HydroOGK reckons that already in May, 2008 the company's stocks will be transferred to the classic market RTS and to the quoted list "B" on MICEX. And in August-September the JSC RusHydro stocks can appear in the list "A" on MICEX. In addition, Vyacheslav Sinyugin, the chairman of the JSC HydroOGK board, already declared about the plans to lead the company stocks out to the London stock exchange in 2008. And before this, in summer, the company intends to start the program of global depositary receipts of 4% volume from the authorized capital.

   Concerning trades start, a starting price for application is set in the trading range $0,0847 (+/-35%). "According to our calculations, JSC RusHydro led about 22% stocks out to the stock exchange", says Derek Weaving, the analyst of IC "Renaissance Capital".

   JSC RusHydro (with the installed capacity 23 308 megawatt) became the largest Russian generation company of non-nuclear cycle, however, unlike other generation branches of RAO UES of Russia, remains under the state control.

JSC HydroOGK, established in the process of energy reform for consolidation

of hydrogeneration assets, completed amalgamation of subsidiaries at the beginning of January. It includes: JSC Volzhskaya HPP,

JSC Votkinskaya HPP, JSC Dagestanskaya RGC, JSC Zhigulevskaya HPP, JSC Zagorskaya PSHP, JSC Zeiskaya HPP, JSC Stavropolskaya EGC, JSC Sayano-Shushenskaya HPP.

After completion of forming of target model of JSC HydroOGK (which takes place on July, 1 2008 by means of joining of JSC Cascade of Nizhne-Cherekskiye HPPs, JSC Irganayskaya HPP and holdings established on the finishing stage of RAO UES of Russia reorganization (JSC State Holding of JSC HydroOGK and JSC Minority Holding of JSC HydroOGK), the stake of minorities will grow approximately up to 40%. The state will possess the controlling stock interest of JSC HydroOGK.

As the result JSC HydroOGK will amalgamate more than 24 gigawatt of generating powers and will become the largest world power company, using renewable energy sources, which stocks are traded on a stock exchange.

   The report about the results of additional emission for consolidation was registered by FFMS (Federal Financial Markets Service) on January, 29, after that started trades on the o

ver-the-counter market (OTC). The cost of first transactions on OTC market totaled $0,089-0,091 per one stock of power company.

In addition, earlier on JSC HydroOGK stocks were concluded forward contracts at the price $0,098-0,102. Thus, investors estimated the cost of incorporated JSC HydroOGK at $17,4-20 bln, or $716-823 per 1 kilowatt of installed capacity. "We suppose that it is quite a high level, hardly giving considerable growth potential", says Irina Filatova, the analyst of IC BrokerCreditService.

   Closing of HPP stocks that joined JSC HydroOGK appeared quite at the high level.

Thus, the costs range of HPP closing almost totally corresponds the trade range on the OTC market – $0,088-0,102 per one stock of JSC HydroOGK. On the whole, the offered prices are levels, and there is no sense the HPP investor to sell the securities below it.

   Derek Weaving considers: "We suppose that in the mid-term and long-term perspective quotations of JSC RusHydro stocks, probably, will decrease because of obvious strategy of the company, aimed mainly at providing cheap electric power of industries and regions of priority development".

   Demand for HPP stocks was very high, as investors understood all positive sides of JSC HydroOGK activity.

It is both the state support (both financial and political) and possibility to gain large incomes at the wholesale market of electric power (because of low production cost), and absence of obligations on power supplies to the wholesale electricity market (WEM), and independence from fuel supplies.

   However, investors should pay attention to the risks of investing in JSC HydroOGK stocks: almost all of them "swirl" round the investment program of power company. On the one hand, JSC HydroOGK did not sign agreements with market administrator about power supplies, consequently, can correct the investment program in accordance with the realities. But on the other, the state as the main stockholder can obligate the company to realize not always economically authorized projects. They include, for example, construction of JSC Yevenkiyskaya HPP with power 20 GW.

   JSC HydroOGK developed three variants of strategic development by 2010: minimization of risks, steady development and maximization

of cost.

As the result, was accepted the "middle" variant. According to it, the investment program of JSC HydroOGK by 2010 is estimated at the size of RUR 192,3 bln ($7,8 bln) and presupposes putting into operation new 4,4 GW of energy powers. In addition, in the company plans is international expansion, supposing acquisition of foreign assets.

   But the day before trades opening, JSC HydroOGK management reminded the investors about the risks that exist in the company, and also reported about the possible price rise of investment program and its adjustment.

As the member of the company board, Vasiliy Zubakin, declared, JSC HydroOGK ran into a substantial price rise of materials and equipment cost, as the result it is forced to correct the investment program and, possibly, give up some planned constructions.

"Price rise for reinforced concrete, steel structures, power equipment substantially outstrips forecasts", he said. "It will result in greater conservatism of the investment program, a halt or preservation of some constructions is possible". "If the state accepts reasoning of JSC HydroOGK management and chooses the realization way of only economically effective investment projects of JSC HydroOGK, it will be a very positive moment in JSC HydroOGK activity", Filatova says.