1. Carbon Finance and Corporate Strategy Vladimir Litvak, Head, New Power Projects, SUEK Moscow April 28, 2008

2. 2 TGK-13 TGK-12 Far East Energy Company SUEK profile OGK-2 OGK-6 SUEK's Coal Assets Region, where SUEK possesses stakes in energy assets Coal Assets (million tons as of 2007) Reserves5,448 Production90.9 Exports27 Energy AssetsTGK-12 (48.45%)TGK-13 (40.89%) Far East Energy Comp. (31.8%) OGK-2 (44.39%)OGK-6 (52.52%)Total Generation, GW4.42.55.68.79.130.3

3. 3 Power Generation in Russia – Reform Status Revenue $382m Market share 12% 32.0 1.8 200620072008 Final decisions on the reform are taken – reform is irreversible Market liberalization has started IPO of several OGKs and TGKs Key strategic players identified Entrance of international players (E.On, Enel) Post reform Completion of the reform, RAO UES ceases to exist in July 2008 IPO of further generation companies Consolidation among key participants of the market Further international players (RWE, Fortum) Investment in new and revamping of existing generation capacity Further liberalization of the capacity market Principal decisions on the reform are taken Formation of 6 Wholesale Generation Companies (OGK) and 14 Territorial Generation Companies (TGK)

4. 4 Power Generation in Russia – Opportunities and Challenges Substantial value creation in:  Participation in rapid growth of Russian economy  Modernization of plants and equipment  Introduction of management best practices Unprecedented transformation:  Expected level of commitment by investors versus market uncertainty  Lack of experience in construction of plants in Russia  Scale and coordination with primary fuel suppliers Challenges Opportunities

5. 5 Vertical Integration: SUEK Strategy in Energy Sector  Adequate investments  Creation of engineering capability and standardization  Competitiveness  Secure sourcing of fuel  Integrated investment planning  Integrated logistics and storage SUEK’s key strategic visions are size and integration Critical Mass for:

6. 6 Gazprom – SUEK Venture Strategic step with substantial win-win Vehicle to achieve diversification of power generation in the Russian Federation, with particular focus on coal as fuel Plans to obtain public listing after completion of the deal Large scale company able to carry out substantial investments:  reconstruction and building new coal fired electricity capacities based on innovative technologies  developing new technologies of extraction and combustion of coal and coal-bed methane

7. 7 Elements of Power and Heat Investment Program Power and Heat Construction of new power generation capacity, primarily coal-fired units (both condensing and CHP) Rehabilitation/upgrade/repowering/modernization of existing units Environmental Improvements – SOx, NOx, particulates Coal Mining Safety and productivity enhancements Comprehensive utilization of resources (economically and financially sound) Mine degasification, methane removal and recovery Decrease in methane venting (environmental charges)

8. 8 Contribution to climate change mitigation: strategy implications and challenges Power and Heat Higher efficiency of new units: existing plans are to build in 2008-2012 fleet of coal- fired units with average efficiency of 36-38% More aggressive rehabilitation/upgrade program for existing units New generation technologies CC&S Coal methane-based capacity Coal Mining Comprehensive utilization of coal-mine methane, including gob gas and ventilation air

9. 9 Strategy review, implementation and carbon finance instruments SUEK is bringing carbon dimension into its corporate strategy under the current round of strategy review Emphasis is on use of available and future carbon finance instruments Choice of instruments: investment cycle First coal-mine methane utilization project: JI PDD prepared, determination is underway, submission to Russian JI FP is being prepared Power and heat generation: upgrades/modernization – JI? New units – GIS? New instruments – facilities, funds to promote post-2012 reductions, implement clean technologies

10. 10 Summary SUEK is committed to building more efficient coal power plants with efficiency levels as high as is financially and economically justified (given the increased capex, market rules uncertainties and other factors). The new plants will also have lower SOx and NOx emissions The The company intends to contribute to national and international efforts to prevent and mitigate impacts of global climate change and is developing its carbon strategy company is participating in Kyoto Protocol: it is developing the Coal Mine Methane (CMM) utilization project (currently in determination) that will both reduce methane emissions and avoid emissions from additional coal-based generation. It also assesses potential for JI-projects in power and heat generation SUEK is participating in consultations related to post-2012 carbon markets, viewing new financial mechanisms for reduction of GHG emissions and promotion of clean coal generation technologies as potentially effective instruments in “de-carbonizing” coal-based power generation SUEK cooperates with IEA, the World Bank, UNECE and other international institutions on the above SUEK actively discusses with international coal and power companies cooperation in clean coal technologies such as CCS, efficient generation etc. SUEK is working with the Russian Government to help to develop legislation and other incentives to improve efficiency of coal power generation and make it more environmentally benign