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JSC RusHydro announces results on accepting bids for Company shares placed through open subscription

Investors submitted more than 150 bids with a total value exceeding 13 billion rubles. JSC RusHydro adopted a decision to satisfy bids for the acquisition of 7.5 billion shares.


On August 10th, 2009, JSC RusHydro (the "Company") closed the application process for accepting bids to acquire additional shares in the Company through open subscription. During the period in which bids were accepted, the Company received more than 150 offers with a total value in excess of 13 billion rubles. Through the open subscription process, legal and physical entities — both existing RusHydro shareholders and those who did not currently hold the Company’s shares — were eligible to submit offers. 


RusHydro’s additional share issue, placed via open subscription, was registered by the Russian FSFM (Federal Service for Financial Markets) on May 14th, 2009, on the basis of both an October 7th, 2008 resolution by the Company’s Board of Directors and an Extraordinary General Meeting (EGM) of shareholders as of November 17th, 2008. The additional 16 billion ruble share emission was designed to contribute state budget funds into the Company’s charter capital to finance RusHydro’s investment program. The price for the additional share issue was determined by the Company’s Board of Directors on March 11th, 2009 and was set at 1 (one) ruble per share.  According to Russian Federal law "On joint-stock companies", the price for a share issue cannot be set at a price lower than the nominal value per share (1 ruble). As of July 10th, 2009, the price for RusHydro’s shares on the MICEX Stock Exchange stood at approximately 1.10 rubles.


On July 2nd, 2009, the application period for acquiring shares based on preemptive rights was closed. On July 7th, 2009, were totaled the results of implementation of preemptive rights by shareholders. An additional 7,200.4 million shares were placed via preemptive rights, of which 4.923 billion shares were placed in favor of the Russian Federation.


In July 2009, the Company’s Board of Directors made a decision on the size of the additional share emission. Based on the decision to maintain the Russian Federation’s share of RusHydro’s charter capital at level not less than that formed as a result of the re-organization of "RAO UES of Russia" (60.37%), the Board decided to place an additional approximately 7.5 billion shares through open placement.


Based on the applications received, demand for shares during the open placement subscription process exceeded supply by more than 1.5 times, indicating significant interest in RusHydro’s shares.


Given instability in financial markets, significant medium-term volatility in "RusHydro" share prices and the fact that the current price for the Company’s shares exceeds the placement price (1 ruble), RusHydro adopted the following decision to satisfy investor demand:

- approximately 3.5 billion additional shares were distributed to large investment banks and other funds, as well as to physical persons.


When distributing shares between large institutional investors, RusHydro took into account such criteria as: the volume of filed bids, the order in which the bids were filed and certain investors motivation to be long-term investors in the Russian power sector.


In particular, during the process, particular preference was given to investors who had previously held shares in the OJSC-HPPs that were consolidated into "RusHydro" during the comprehensive energy sector reform, and who had subsequently invested in the Company. Attention was also paid to maintaining (and in certain cases, increasing) the portfolios of investors` shares after concluding of forming the RusHydro target model in 2008, including the period when the market price of RusHydro shares depreciated significantly.


The above-mentioned criteria were evaluated on an aggregate basis, but primary weight was placed on the last factor since, in the Company’s estimation, long-term investors drive increases in RusHydro’s market capitalization, decrease the speculative component in the Company’s share price performance and contribute to an increase in the level of corporate governance.


Among physical persons applying for shares, a consider number of applications came from the Company’s current and retired employees, as well as from former workers at the OHSC-HPPs.


Placing additional shares will allow the Company to attract additional resources to finance its investment program under the current conditions of financial market instability:

- approximately 4 billion additional shares were distributed in favor of a 100%-owned subsidiary of RusHydro (OJSC "Hydroinvest").  As a result of this, the Company will be able to capitalize on future increases in the value of the Russian stock market, placing its shares at a higher price, and thus, obtaining additional income in favor of its shareholders.


Within 7 days of notification that its bid has been accepted, investors must pay for the securities. Then, within 8 days of RusHydro receiving funds in its account, Company shares will be assigned to the designated account of the shareholder.


"RusHydro’s" additional share issue, under open subscription, was registered by the Russian FSFM as of May 14th, 2009 in the amount of 16 billion additional shares at a price of 1 ruble per share. The additional share issue was executed to contribute budgetary funds to the Company’s charter capital, in order to finance its investment program.


During an earlier additional share issue in 2008, "RusHydro" placed over 1 billion shares through open subscription at a placement price of 1 ruble per share. Due to unfavorable market conditions, minority shareholders failed to use the full volume of their preemptive rights. As a result, the Russian Federation acquired these non-placed shares in February 2009, at the expense of a portion of 2009 budgetary funds. 


Subsequently, the Russian federal budget was sequestrated by 30%.  Taking this into account, as well as the need for budgetary funds to finance the Kankunskaya HPP project, the balance of state funds planned for investment in "RusHydro’s" charter capital stood at 4.923 billion rubles.


On October 7th, 2008, RusHydro’s Board of Directors approved recommendations to the EGM on approving parameters for the 2009 additional share issue.


On November 17th, 2008, the Extraordinary General Meeting (EGM) of shareholders adopted a decision to increase the Company’s charter capital by placing an additional 16,000,000,000 common shares with a nominal value of 1 ruble per share through open subscription with cash payment for allocated shares.

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