Company history

The history of JSC INTER RAO UES includes three main stages: that of CJSC INTER RAO UES, the period of reorganization of the Company on the basis of JSC Sochinskaya TES, and the latest chapter of the work of JSC INTER RAO UES.

CJSC INTE R RAO UES

CJSC INTER RAO UES was established in 1997 as a 100% subsidiary of RAO UES of Russia.

In 2001 the Company started expanding the area of its activity – projects of trading with non-Russian electric power in foreign markets were inaugurated. The first large project was organization of export of electric power produced by Ignalinskaya AES (Lithuania) to Belarus and to the Kaliningrad Oblast. In the same period the first subsidiaries for operations in foreign power markets were established.

In 2002 the Company started independent export of electric power from Russia, as well as another new activity – generation of electric power, having leased a unit of the Iriklinskaya GRES power plant (JSC Orenburgenergo).

In 2003 a new period of development of the Company started – 40% of its shares were sold to FSUE Rosenergoatom Concern. Aside from changes in the share capital structure this event resulted in a considerable increase in the potential of the Company in the area of crossborder supply of electric power – CJSC INTER RAO UES in fact became a unified export and import operator of two of the largest producers of electric power in the country.

At the same time the Company became a bidder at the FOREM auction of surplus power.

In 2003 export supplies were made to 12 CIS countries and to other states. Seeking permanent expansion of its business, the Company started supplementing export of electric power with import activities, and with trading operations beyond import of electric power to the customs territory of the Russian Federation, working through the domestic wholesale electric power market, while developing production of its own electric power.

In 2003 the Company started active purchase of electric power assets abroad.

Continuing to increase the volume of trading operations, CJSC INTER RAO UES started a wide-ranging investment programme. From 2003 to 2005 CJSC INTER RAO UES and its subsidiaries invested about 350 million US dollars in the purchase of foreign power assets.

During the same period JSC INTER RAO UES Group received management rights for JSC Khramhesi GES-1 and JSC Khramhesi GES-2 in Georgia, trust management of rights under shares of CJSC Armianskaya AES, and purchased the Sevano-Razdanskiy Cascade of Hydroelectric Power Plants (CJSC MEK) in Armenia.

In 2004, an INTER RAO UES subsidiary trading company, RAO Nordic Oy, became one of major business entities in Finland.

In 2005, as part of a settlement of electric power arrears of businesses in Kazakhstan, CJSC INTER RAO UES was given ownership of 50% of shares in the company JSC Stantsiya Ekibastuzskaya GRES-2. In March of the same year a joint Russian-Tajik venture called JSC Sangtudinskaya GES-1 was established with CJSC INTER RAO UES among its shareholders.

In 2005 CJSC Moldavskaya GRES joined INTER RAO UES Group. This asset has a strategic value for development of trading operations in the direction of Europe.

In the same year CJSC INTER RAO UES purchased a shareholding of 25% + 1 share of JSC Severo-Zapadnaya TETs, acting as investor in financing completion of the station’s second power-generating unit.

Simultaneously the geography of operations of the Company expanded considerably. In 2005 CJSC INTER RAO UES completed a transaction to acquire 70% of shares in the Turkeybased company TGR Enerji, with the aim of preparing for a scale-up in business activities and implementation of investment projects both in Turkey and in promising markets of neighbouring states.

In 2006 the Armenian Commission for the Regulation of Public Services authorized the sale of 100% of shares in CJSC Electric Networks of Armenia to CJSC INTER RAO UES’s subsidiary Interenergo B.V.

By late 2006, CJSC INTER RAO UES was already active in the markets of a number of countries in Europe and Asia. There was a significant increase in the scale of cross-border supply of electric power.

In addition to active investment activity and expansion of the geography of export and import operations, Company management paid significant attention to increasing the efficiency of management of existing assets. In 2006 CJSC INTER RAO UES introduced necessary changes into the system of management of all areas of activity, and started development of risk management mechanisms related to the foreign economic operations of the Company.

REORGANIZATION

A new stage of development of the Company started in 2007, when on February 9 the Board of Directors of JSC RAO UES of Russia approved “Main Provisions of Strategy of CJSC INTER RAO UES” envisaging dramatic growth in the value of the business by 2015.

Within the framework of implementation of strategic provisions it was also decided to consolidate the generating assets of JSC Severo-Zapadnaya TETs, JSC Ivanovskiye PGU, JSC Kaliningradskaya TETs-2 and JSC Sochinskaya TES under the management of CJSC INTER RAO UES within one company. This decision was a part of wide-scale programme of action for reform of the Company and its transformation.

The target Company was established around JSC Sochinskaya TES in the course of the final stage of reorganization of JSC RAO UES of Russia within the framework of the state programme of the power industry reform.

Reorganization of JSC RAO UES of Russia was a continuation of the reform of the power industry which started in 2001. The goals and objectives of this reform were defined in Resolution of the Government dated July 11, 2001 №526 “On Reform of the Power Industry of the Russian Federation” and later on defined in the concept strategy of JSC RAO UES of Russia “5+5”. Its main goal was to create a new demonopolized structure of the industry, where JSC RAO UES of Russia ceased to be a government monopoly and was transformed into a number of government and private companies.

On October 26, 2007 the General Meeting of Shareholders of JSC RAO UES of Russia was held, at which, among others, a decision was taken on the reorganization of JSC RAO UES of Russia in the form of separation of JSC Inter RAO UES Holding with simultaneous affiliation of the latter to JSC INTER RAO UES.

In accordance with the separation balance sheet of JSC RAO UES of Russia, JSC Inter RAO UES Holding received, among others, blocks of shares in JSC Ivanovskiye PGU, JSC Severo-Zapadnaya TETs, JSC Kaliningradskaya TETs-2, CJSC INTER RAO UES and JSC Sochinskaya TES owned by JSC RAO UES of Russia.

During the period December 17 to December 19, 2007 Extraordinary General Meetings of Shareholders of CJSC INTER RAO UES, JSC Kaliningradskaya TETs-2, JSC Severo-Zapadnaya TETs and JSC Ivanovskiye PGU were held, at which decisions were taken on reorganization of these companies in the form of affiliation to JSC Sochinskaya TES, as well as a meeting of the Management Board of JSC RAO UES of Russia (functioning as the sole shareholder of the Company) on issues of reorganization of JSC INTER RAO UES.

The terms and conditions of affiliation of the above companies to JSC Sochinskaya TES, in particular coefficients and procedure of conversion of shares of the companies to be affiliated into the shares of JSC Sochinskaya TES, were determined in the multilateral Agreement of Affiliation of JSC Inter RAO UES Holding, CJSC INTER RAO UES, JSC Ivanovskiye PGU, JSC Kaliningradskaya TETs-2 and JSC Severo-Zapadnaya TETs to JSC Sochinskaya TES, approved by the General Meetings of Shareholders of the reorganized companies.

In April 2008 JSC Sochinskaya TES was renamed Open Joint Stock Company INTER RAO UES.

The consent of the Federal Antimonopoly Service for affiliation of JSC Inter RAO UES Holding, CJSC INTER RAO UES, JSC Ivanovskiye PGU, JSC Kaliningradskaya TETs-2, JSC Severo-Zapadnaya TETs to JSC Sochinskaya TES was received on January 28, 2008.

Reorganization of JSC INTER RAO UES was carried out in 2 stages:

As a result of the reorganization JSC Sochinskaya TES, JSC Severo-Zapadnaya TETs, JSC Ivanovskiye PGU and JSC Kaliningradskaya TETs-2 ceased to exist as independent legal entities and were transformed into branches of JSC INTER RAO UES; the Company received the status of a Russian generating company.

JSC INTER RAO UES

As the result of the reorganization JSC INTER RAO UES became a major generating company in the leading position in Russia in the area of export and import of electric power. The total installed capacity of the power plants owned or managed by the Company in 2008 was about 8,000 MW.

In the reporting year the Company continued activities started by CJSC INTER RAO UES for entering European markets and developing foreign economic activity. In particular JSC INTER RAO UES completed the transaction of purchase of 49% of shares of CJSC Moldavskaya GRES, therefore consolidating 100% of the shares of this company. In November, within the framework of a visit of the Prime Minister of the Russian Federation, V.V. Putin, to the Republic of Moldova, JSC INTER RAO UES and Moldovan governmental enterprise Moldelectrica signed an Agreement about Implementation of the Project of Assignment of Power-Generating Units of Moldavskaya GRES for Radial Operations with Romania.

The main types of activities of JSC INTER RAO UES are generation of electric and thermal power and sales of electric and thermal power in the wholesale market of power (capacity) to consumers, and the export and import of electric power.