Wholesale Generating Company OAO OGK-3

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In March 2007, the Russian metals company OAO Norilsk Nickel bought 17.83 million shares or 37.9% stake in OGK-3 for US$3.08 billion. OGK-3 was one of Russia’s six thermal power generation companies created based on the thermal generating assets controlled by RAO UES. OGK-3 had a combined installed capacity of 8,500 MW and six power plants (Kostroma, Pechora, Cherepetsk, Kharanorskaya, Gusinoozerskaya and Yuzhnouralskaya). OAO Norilsk Nickel acquired the 37.9% stake in the company in a competitive tender by offering the highest price for 18 billion of new shares in OGK-3, which were part of an initial public offering (IPO). Six other bidders including Russian Gazprom, Finish Fortum Oyj, Italian Enel, French Mechel and Gaz de France, US Integrated Energy Systems participated in the tender. Norilsk Nickel offer represented a 10% premium over the market price of those shares in March 2007. For that reason, most minority shareholders did not exercise their preemptive right to buy new shares. The new shares of OGK-3 issued in this IPO were 18 billion of which only 163.7 million shares were bought by the existing OGK-3 shareholders executing their pre-emptive rights. OGK-3 issued new shares on 13 March 2007. With the IPO transaction, Norilsk Nickel increased its stake in OGK-3 from 14% to 51.9% while RAO UES’s stake was reduced from 59.7% to 37.08%. Norilsk Nickel and other minority share holders had shares of OGK-3 as a result of the Russian voucher privatization program which partially divested the regional power utilities or Energos in 1993. In August 2007, Norilsk Nickel purchased additional shares of OGK-3 from of its existing minority shareholders thus increasing its share in the utility to 53.83%. In September 2007, RAO UES sold 5.25 billion of its shares in OGK-3 or 11% of the company’s charter capital to Norilsk Nickel for US$954 million. That is the same price per share than that paid by Norilsk Nickel for the March IPO. After that transaction, the stake of Norilsk Nickel in OGK-3 increased to 64.89% while that of RAO UES decreased from 37.08% to 26.02%. On July 1, 2008, as a part of reorganisation of RAO UES, Norilsk Nickel received an additional 6,692 million shares of OGK-3. As a result of this restructuring, Norilsk Nickel's effective ownership in OGK-3 increased to 82.7%; however, subsequent share sales had reduced its stake to 60.15% as of end 2009. Over 2003-2007 period, the Russian power sector underwent significant restructuring. Until 2003 the main assets of RAO UES, the state-owned holding for energy companies, were united into regional vertically integrated energy companies: 73 regional power utilities or Energos which produced and transmitted electricity and heat. RAO UES also centrally managed 32 Federal Power Plants, the Central Dispatch, High Voltage Grid plus Grid Service. 2003 energy sector reform envisioned a new organizational structure that included companies involved in potentially competitive activities (power generation and sales, repair and services) and natural monopolies (transmission, dispatching). As a result of the reform RAO UES was planned to be dissolved on July 1, 2008. The companies replacing RAO UES were: a System Operator was to receive functions and assets of regional dispatch administrations; a Federal Grid Company (FSK) was to manage the trunk grids; 11 interregional distribution grid companies were to manage regional distribution grids; RAO Eastern Energy Systems Holding was to manage energy companies of the East and isolated power systems of the Far East region; six wholesale generation companies (OGKs) were formed on the basis of large federal plants; one Hydro OGK was to manage large hydro plants; 14 territorial generation companies (TGKs) were formed on the basis of combined heat and power plants and Inter RAO UES was to remain the major investor and a leading exporter and importer of electric power in Russia. Rosenergoatom was to include all nuclear power plants. Wholesale generation companies (OGKs) were formed in 2004-05 on the basis of large federal power plants with a typical installed capacity of 1000-2000 MW. These large power producers were to become the largest participants and the main competitors on the wholesale power market. Seven of such companies were created in the process of reform: six of them incorporated large thermal power plants (OGKs) and one incorporated large hydro power plants (Hydro-OGK). In an effort to restrict the monopoly influence on the competitive wholesale power market, each of the OGKs was established on the basis of power plants geographically dispersed across the country. The reform also created Territorial generation companies (TGKs) by uniting combined heat and power plants with a typical installed capacity of 100-500 MW which were located in a few neighboring regions or one macro region. The territorial generation companies would sell electricity as well as supply regional consumers with heat energy. Interregional Distribution Companies were formed as operating companies to manage electricity distribution networks located in a number of neighboring regions. As of June 2010 he Company’s ultimate controlling party was “Norilsk Nickel” (66.75%). The rest of the shares are held by nominee holders (12.88%), (VTB bank 15.90%), individuals (3.49%), and others (0.98%). As of 2010 the company was made up of 6 power plants: Gusinoozerskaya TPP, Kostromskaya TPP, Pechorskaya TPP, Khranorskaya TPP, Cherepetskaya TPP, Yuzhnouralskaya TPP. As of end of 2010, the construction of 2 225MW units at Cherepetskaya TPP was 20% complete. On 23 March 2011 MMC Norilsk Nickel? exchanged ordinary registered shares of WGC-3 for the ordinary non-documentary shares of OJSC Inter RAO UES? (?Inter RAO?) with a ratio of 35 shares of Inter RAO for 1 share of WGC-3. In this process Norilsk Nickel acquired 14.19% shares in InterRAO UES. As a result Inter RAO became ultimate shareholder of the Group. As at 30 June 2011 Inter RAO owned 81.93% of the Group shares. The rest of the shares are held by individual and nominee holders (18.07%) As of end 2011 the shareholder structure of OGK-3 was: InterRAO UES (81.93%), Shares in Treasury (4.14%) and minority shareholders (13.9%). The powerplants in OGK-3 were: Kostromskaya SDPP, Cherepetskaya SDPP, Pechorskaya SDPP, Kharanorskaya SDPP, Yuzhnouralskaya SDPP, Gusinooserskaya SDPP, and Dzhubginskaya TPP. utility website http://www.ogk3.ru/en-main/ 2011 capacity breakdown http://www.ogk3.ru/en-generating_capacity/ http://www.ogk3.ru/en-shareholder_capital/ % private in 2011 = minority private shareholders 18.1% + 30% (%private Interrao) * 86% = 42%