SECURITIES PROSPECTUS

According to the issuer’s forecast, the above-mentioned factors will exist until 2011.After that, the issuer expects RAB tariff-setting system to be implemented into businesspractices, which can greatly improve the issuer’s performance.Action which the issuer takes and action which the issuer plans to take in the future to benefitfrom these factors and conditions:To form optimal tariffs for its companies, the issuer systematically interacts with tariffauthorities to set the tariffs including all economically feasible costs (whenever possible) and setreasonable loss limits. It also seeks to reduce costs, minimize losses by renovating worn-outequipment and expand the scope of provided services by commissioning new facilities.The issuer also takes action to get involved in the development of regulatory frameworkfor the electric power industry. In particular, the issuer plans to participate in the work performedby Nonprofit Partnership Council for Organizing Efficient System of Trading at Wholesale andRetail Electricity and Capacity Market in order to be actively involved in the process.Better performance of the entire industry will also be achieved by:- balancing the interests of customers, investors and the government;- implementing long-term projects, attracting long-term investments at the lowest price;- allocating risks among all stakeholders in an optimal manner;- creating incentives encouraging companies to improve their performance due to costreduction and investments in new technologies;- developing power grid facilities using scientifically grounded technical solutions andtechnologies tested in the operation of state-of-the-art electrical equipment;- ensuring a fair price of electricity transmission services depending on their reliabilityand quality.Methods which the issuer uses and methods which the issuer plans to use in the future toweaken the adverse effect of factors and conditions affecting the issuer’s activities:The principal method which the issuer uses and plans to use in the future to weaken theadverse impact of factors and conditions is operational planning based on the analysis ofeconomic situation.Material events/factors which can have the strongest adverse effect on the possibility of equalor higher performance of the issuer in the future compared with its performance in the mostrecent reporting period and the likelihood of such events (factors):Possible negative factors which can affect the issuer’s activities include the inadequacy ofelectric grids in certain constituent entities of the Russian Federation in an environment of rapidpower consumption growth, which leads to the overloads of transmission lines, substationtransformers and equipment wear and tear, thus reducing the reliability of power supply tocustomers and causing additional financial costs to maintain its operation.In the issuer’s opinion, events and/or factors which can have the strongest adverse effecton the possibility of the issuer’s good performance in the future are negligible.Material events/factors which can improve the issuer’s performance, their likelihood anddurationPossible material factors which can improve the issuer’s performance include theimplementation of RAB tariff-setting system into business practices. RAB tariff-setting systemwould allow the government to create market conditions in the monopolistic economic sectorand oblige the regulator to monitor service quality and reliability parameters, prepare long-termindustry forecasts and balance the interests of investors and customers. The issuer assesses thelikelihood and duration of such factor as considerable.5.5.2. Competitors of JSC IDGC Holding127