E.ON is on the verge of successfully entering the Russian electricity market, one of the world’s largest and fastest-growing energy markets. According to a statement issued by the evaluation commission of RAO UES, the Russian state-owned company, E.ON submitted the best bid for the 47-percent stake in OGK-4, that has being offered by RAO UES. OGK-4 is one of six operators of large-scale generating facilities currently being privatized by RAO UES. The board of directors of OGK-4 has set the purchase price for the upcoming capital increase of about 23 percent. This pruchase price is equivalent to the price E.ON offered for the OGK-4 shares. E.ON also intents to submit a binding offer for this capital increase in order to acquire a roughly 70-percent stake in OGK-4. E.ON would then pay an overall purchase price of 146.5 billion RUB (4.1 billion EUR). Under Russian securities law, after officially acquiring the stake E.ON must make a public tender offer to OGK-4’s minority shareholders.

“The acquisition of OGK-4 would be an another important step into the Russia electricity market, which offers enormous growth potential due to the sharp increase in industrial demand and the need for substantial investments,” E.ON CEO Wulf H. Bernotat explains. “In addition, OGK-4 has a very attractive generation fleet. Its power plants are relatively new and technologically up to date, have a high utilization factor and low fuel consumption. They therefore rank among the best and most efficient in Russia. Moreover, they’re located in high-growth regions. Consequently, we expect this investment to create significant value. It would represent a big step forward in the €60 billion growth offensive we launched this year. OGK-4 is well positioned for the further liberalization of Russia’s electricity market. We want to actively support OGK-4’s management as it continues to position the company and implement its substantial program to build new power plants.”

OGK-4 currently operates four gas-fired power plants and one coal-fired plant with an aggregate installed capacity of approximately 8.6 gigawatts, which is equal to roughly 6 percent of Russia’s thermal generating capacity. The high gas component (about 80 percent) of the company’s fuel mix is typical of all Russian operators of large-scale power plants. About 83 percent of the company’s generating capacity is in the Europe/Urals region in which load growth is expected to be particularly strong due to increasing demand from basic and heavy industry. By 2011, OGK-4 plans to build additional, technologically advanced power plants with a total capacity of 2.4 gigawatts at its existing facilities. For E.ON, OGK-4 represents another important platform for organic growth in the Russian market.

Russia’s electricity market is one of the world’s largest and fastest growing, with an annual growth rate of 5 percent. E.ON’s long-term objective is to establish a strong position in Russia’s fast-growing industrial regions in the Urals, western Siberia, Volga, and central Russia.

It is estimated that Russia’s electricity industry will require investments of more than $120 billion between 2006 and 2010. This will involve not only the modernization of power stations and transmission systems but also the construction of new generation capacity to meet Russia’s growing demand for electricity. RAO UES, Russia’s state-owned holding company for its electricity interests, and the Russian government have therefore taken steps to liberalize the country’s electricity market. These steps include the introduction of a largely deregulated wholesale power market and the privatization of six large power companies, such as OGK-4, currently in RAO UES’s portfolio.