Further Reforms Will Drive Investment in the Russian Electricity Industry, says Frost & Sullivan

LONDON, August 23, 2010 - The Russian electricity industry is one of the largest in the world,
providing numerous opportunities for equipment and services suppliers.
Following a long period of underinvestment, the Russian power generation
industry launched a wide-scale reform in 2003. By 2011, the industry should
emerge in a fully liberalised state, offering a number of opportunities for
strategic and portfolio investors, equipment manufacturers and service
providers. Due to a vast investment programme, the industry aims to upgrade
its dilapidating generating assets, as well as its neglected transmission and
distribution grid.

(Logo: photos.prnewswire.com/prnh/20081117/FSLOGO)

(Logo: www.newscom.com/cgi-bin/prnh/20081117/FSLOGO)

In a recent study performed by Frost & Sullivan
(www.power.frost.com), Strategic Analysis of the Russian Electricity
Industry, key analysts anticipate that the Russian Power Generation Installed
Capacity will reach close to 247,000 MW in 2016 as compared to about 222,000
MW in 2008. Likewise, the binding investment programme will promote the
installment of 40GW of additional thermal capacity by 2016.

"The most important driver for new capacity additions is the
government-approved investment programme to which power generating companies
must adhere," says Frost & Sullivan Research Manager in Renewable Energy,
Alina Bakhareva. "The power generation industry is a key enabler for Russia's
economic growth, as it is fuelled by the expansion of extracting and
processing industries requiring significant amounts of power in their
operations. Although postponed by 2-3 years, investment into new generation
is assured, especially in energy deficit regions of Central Russia."

The growth in installed capacity translates into a healthy demand for
power generation equipment and construction services. Although the
competitive landscape is firmly-rooted, with a large number of both Russian
and international players active in the market, there are certain areas in
which Russian technology trails behind the Western precedent, presenting
great opportunities for international players. For example, although the
construction services market is dominated by local companies, instances
involving the cooperation of Russian and European companies are increasing,
setting the precedent for future development in this area.

However, the Russian market is not easily entered. With high entry
barriers, due to the prevailing culture of preferred suppliers, high reliance
on personal relationships, and bureaucracy, the market is heavily fortified
against international competitors looking to privately penetrate the market.
There are, however, several foreign manufacturers successfully permeating the
market, either through the setting up of a subsidiary or through partnership
with a local player. Russian companies appreciate the value of international
partnerships, particularly with the West.

"Because national research and development, as well as heavy machinery
production, fell behind during the Soviet era," says Bakhareva, "Western
expertise and experience will continue to be in demand in Russia. It is true
that Western companies will require a higher degree of precaution and
preliminary checks when entering the Russian market; however, the level of
opportunities presented justifies the high risk profile."

Further opportunities are expected due to increasing energy consumption
upon recovery from the financial and economic crisis. Eventual economic
stability and increased levels of output by heavy industries such as mining
and metal processing, Oil & Gas, and transportation will encourage
consumption throughout Russia. However, the present infrastructure of Russian
equipment may not be able to bear the increase. Because most equipment is
heavily outdated, past examples show technological failures stimulated by
times of bolstered consumption.

"A large part of the country's power generation infrastructure has been
operating beyond its useful life limit, increasing the risks of technological
failures and decreasing the stability and security of power supply," says
Bakhareva. "Once the electricity demand growth resumes, power shortages may
be looming for several regions in Russia. Thus, increased consumption will
call for new capacity additions and investment."

If you are interested in more information on this study, please send an
e-mail to Chiara Carella, Corporate Communications, at
chiara.carella@frost.com, with your full name, company name, title, telephone
number, company e-mail address, company website, city, state and country.

This Frost & Sullivan research service entitled Strategic Analysis of the
Russian Electricity Industry provides an in depth analysis of the historical
market development, industry structure and major players, end-user analysis
and power consumption trends, major players and policies impacting
electricity supply and prices, market forces (industry challenges, drivers
and restraints), installed capacity and new additions, and industry value
chain. In this research, Frost & Sullivan's expert analysts thoroughly
examine the following markets/applications/technologies: power generation,
transmission and distribution, energy retail, value chain consisting of
equipment manufacturers, stockists/dealers/distributors, EPC contractors and
subcontractors.

About Frost & Sullivan

Frost & Sullivan, the Growth Partnership Company, enables clients to
accelerate growth and achieve best-in-class positions in growth, innovation
and leadership. The company's Growth Partnership Service provides the CEO and
the CEO's Growth Team with disciplined research and best-practice models to
drive the generation, evaluation, and implementation of powerful growth
strategies. Frost & Sullivan leverages over 45 years of experience in
partnering with Global 1000 companies, emerging businesses and the investment
community from 40 offices on six continents. To join our Growth Partnership,
please visit www.frost.com.

    Contact:
    Chiara Carella
    Corporate Communications - Europe
    P: +44(0)20-7343-8314
    M: +44(0)753-3017689
    E: chiara.carella@frost.com

    www.frost.com

Chiara Carella of Frost & Sullivan Corporate Communications - Europe, +44(0)20-7343-8314, mobile, +44(0)753-3017689, chiara.carella at frost.com