Power Machines Board of Directors elected Director General

On September 15, 2006 the meeting of the Board of Directors of Power Machines was held in Saint-Petersburg. The Directors elected new Director General of the company and discussed the company's development concept for the next five years.

The Board unanimously elected Boris Vainzikher Director General of Power Machines. Boris Vainzikher is a member of the Management Board and Technical Director of RAO "UES of Russia". Mr. Vainzikher was also appointed Chairman of Power Machines Management Board. This decision was made by the major shareholders of the company to strengthen the company's position in the domestic power engineering market in the light of the upcoming large-scale reform of the national power sector.

Power Machines major shareholders - Interros Holding Company, RAO "UES of Russia", and Siemens - demonstrated strategic partnership and common understanding of the company’s development plans for the next five years.

The company's development concept elaborated within strategic partnership of Interros, RAO UES and Siemens include production and market strategy, an investment program and technical upgrade, as well as financial model of the company's development.

The new company's priority determines the expanded scale of its domestic market activities. The Power Machines' order portfolio is anticipated to be redistributed towards more than a three-fold increase in domestic market share.

Successful implementation of the development concept will enable Power Machines to maintain and strengthen its leading position and to increase the domestic market share in the face of growing competition from foreign producers.

Power Machines also intends to sustain its position in traditional international markets: China, Vietnam, India, South and Latin America, Eastern Europe, and Middle East.

Company’s shareholders have formulated the structure of the core business of the Company, and highlighted the following business lines:
- development, production and supply of own power engineering equipment;
- maintenance of plant equipment fleet;
- complex turn-key solutions in power plant design, manufacture, supply, and assembly.

Production

The priority in this line is development of its own production and design base in strategic partnership with Siemens. In response to market demands, Power Machines is committed to improving of the existing products and develop new ones in the sectors of thermal, hydro and nuclear plant engineering.

In order to successfully develop this business line Power Machines will reorganize its corporate structure to an integrated company model with a product-oriented divisional structure.

Power Machines' strategy in terms of gas turbine product line expansion is aimed at demand from Russian generating companies, in particular at the needs of combined cycle plants with gas turbines 65 MW to 278 MW capacity.

The Russian market for gas turbines of this range of capacities is estimated at 14,000 MW – 16,000 MW through to 2011, and the percentage of equipment manufactured by Power Machines is expected to be over 80 %.

To implement its technological partnership with Siemens, Power Machines is forming a Gas-Turbine Division. Formation of the division will ease the transfer of brand-new gas-turbine and steam-turbine technologies, including:
- 163 MW gas turbine, an upgraded version of the 160 MW gas turbine manufactured by Power Machines under license of Siemens;
- 278 MW gas turbine, which is a new product for the Russian market. Power Machines is the first Russian company to offer such a turbine to the domestic market.

In addition, the company plans to develop other types of equipment for thermal, hydro and nuclear plant implementing Siemens technologies.

Maintenance

Power Machines is proceeding to develop and implement a new concept of maintenance services for power plant equipment, including equipment produced by Power Machines. The concept is based on the experience of leading international companies in the industry and provides for the creation of regional maintenance centers and a regional warehousing base.

Complex Solutions

Power Machines will systematically develop this line. The company’s international experience and projects related to extension of its own engineering base will enable Power Machines to evolve step by step to a higher level of complex solutions including design and turn-key power plant installation.

To reach the goals set forth in the new corporate strategy, the company will implement the investment program, which supports technical upgrade, development of the production base, acquisition of new technologies and experimental development.

The company's investment program will be undertaken by means of the company’s own borrowed funds. The company does not exclude a decision to issue additional shares, but such a decision should be approved by each of the major shareholders.

Power Machines, as a public company, will make any effort to strengthen its positions on the Russian stock market. The company's aim is to raise the level of corporate governance in the field related to information disclosure, to the implementation of best practice in corporate governance and to improve its interactions with investors and shareholders. The company’s priority task in this sphere is the entry of the of the company’s shares among the blue chips on the Russian stock market.