April 23, 2012, Ufa (Russian Federation, Republic of Bashkortostan) – OJSC “Bashkirenergo” (MICEX, RTS: BEGY, ISIN: RU0009044242) – publishes audited consolidated financial statements for FY2011 prepared in accordance with IFRS.

OJSC “Bashkirenergo” managed to improve its results of 2010: net profit from continuing operations reached 3,409 thsd RUR and accounting results from alienation of retail company - 7,949 mln. RUR.

On September 12, 2011 a deal was struck between JSC “RusHydro” and OJSC “Bashkirenergo” to sell LLC “Energeticheskaya Sbytovaya Kompaniya Bashkortostana” (LLC ESKB) to LLC ESK RusHydro (a subsidiary of JSC “RusHydro”).

For the purpose to present comparable indicators in accordance with the rules of reporting all indicators of 2010 were corrected taking into account sale of LLC ESKB.

KEY FINANCIAL RESULTS:

· The Company’s revenue for 2011 declined by 10.5% to 56,261 mln RUR (1,747 mln USD) versus the same period of 2010. Revenue for the fourth quarter of 2011 grew by 32.4% and amounted to 15,313 mln RUR (476 mln. USD).

· Operating profit increased by 9% Y-o-Y reaching 4,386 mln RUR (136 mln USD). Operational profit for the Q4 2011 dropped by 82.8% compared to the same period of the previous year to 148 mln RUR (4.6 mln USD).

· OIBDA after 12 months of 2011 was 7,908 mln RUR (246 mln USD) or 4.53% higher comparing with the same period last year. The same indicator for the fourth quarter of 2011 was 1,020 mln RUB (32 mln USD), reduced by 41.68% Y-o-Y.

· Net profit for 2011 including result from sale of LLC “ESKB” amounted to 7,949 mln RUR (247 mln USD), up 185 % in comparison with 2012.

· Net profit from continuing operations of 2011 increased by 25% to 3,409 mln RUR (106 mln USD) compared to 2010 results. In Q4 of 2011 net profit from continuing operations reduced by 64% versus similar indicator of the previous year and amounted to 167 mln RUR (5 mln. USD).

· OIBDA margin for 12 months increased from 12% in 2010 to 14% this year.

· As at December 31, 2011 the Company’s financial debt amounted to 2,268 mln RUR (70.4 mln USD), with debt/OIBDA ratio at the level of 0.29.

KEY OPERATING RESULTS:

· OJSC “Bashkirenergo” total power generation in 2011 was 22 779 mln kWh, gaining 0.7% Y-o-Y.

· The capacity factor of OJSC “Bashkirenergo” power stations remained at a level of 61%.

· Heat output of the Company amounted to 25,118 thousand Gcal gaining 4 % over the results of 2010.

 · In 2011 the specific consumption of equivalent fuel decreased by 3 g/kWh for electricity generation to 320 g/kWh, and by 1.4 kg/Gcal for heat output  to 143 kg/Gcal compared to the previous year.

· The transmitted electricity losses in 2011 increased from 1.44% to 1.48% in the transmission grid, with distribution grid losses increasing from 8.82% to 9.13%.

Andrey Makarov, CEO of OJSC “Bashkirenergo” commented the results 2011:

«A share of OJSC “Bashkirenergo” in total Russian power output reached 2.19% in 2011, in UPS Urals it was 8.9%. During the last year power generation was extended by 0.7% to 22 779 mln kWh . The year results demonstrated that the Company remains competitive in second pricing zone Urals with traditional excess of generating capacity. We consider the growth of the heat output by 4.1% Y-o-Y as exceptionally positive on the background of complicated situation in the heat generation sector, underfunding from the side of owners of regional thermal grids and established low tariffs. Despite negative impact of heat sector on holding’s total results we managed to improve indicators in comparison with 2010. The Company’s net profit significantly exceeded target indicator and reached 7,949 mln. RUR. Sale of power supply asset executed in September had a material impact on financial results of the Company. We have started the process of Company’s reorganization for the purpose to comply with the Russian legislation and sale of LLC “ESKB” became the first step in this process».

RESULTS OVERVIEW

The FY 2011 power generation increased by 0.7% to 22,779.34 mln kWh. The heat output of OJSC “Baskirenergo” grew 4.1% to 25 118 thousand Gcal in 2011.

A decrease in specific consumption of equivalent fuel for electricity generation (-3 g/kWh) and heat output (-1.4 kg/Gcal) compared to 2010 substantially contributed to a positive financial results of OJSC “Bashkirenergo”. The biggest impact on fuel consumption rate was made by the implemented energy saving and energy efficiency programs, including the redistribution of heating load.

Key Financial Performance Indicators,in mln RUR

Key Operating Results

REVENUE

The company’s revenue declined by 10% comparing with the 2010 year result to 56 261 mln RUR. Power and capacity comprising the largest share in revenue structure (72% of revenue) reduced by 15% to 40 353 mln RUR. At the same time operating expenses declined greater than revenue by 12% to 51 875 mln RUR.

Revenue reduction is a result of reclassification of all operations of LLC ESKB into the separate line “Profit from the discontinued operations”.

Considering the fact that before January 1, 2011 OJSC “Bashkirenergo” had the status of the guaranteeing provider (retail company) with LLC ESKB acting only as an agent, its deconsolidation had the most impact on revenue and operational expenses for 2010 and 2011.

OPERATING EXPENSES

The decision to sell the retail company mostly impacted the amount of  purchased electricity which decreased in 2011 by 79% versus 2010 result to 3 304  mln RUR (103 mln USD).

Fuel costs 2011 representing 52% of total operating expenses increased 12% and amounted 26,877 mln RUR (835 mln USD) and were driven by a 15% gas price indexation, as well as by a 4% rise in heat output, 0.3% rise of power output by thermal power plants. The slower growth pace of fuel costs compared to gas price hike is explained by the reduction in specific consumption of equivalent fuel.

Fixed costs which represent 36% of total operating expenses declined in 2011 by % amounted to 18,506 mln RUR.

Staff costs being the largest item of fixed costs (17% of total operating expenses) rose by 4% against 2010 to 8,737 mln RUR (271 mln USD).

Repairs and maintenance together with costs of materials and spare parts (7% of operating expenses) were cut down 29% in 2011 compared to 2010 and comprised 3,314 mln RUR mostly due to a 48% cut in expenditure on material and spare parts.

Other operating expenses declined by 9% to 833 mln RUR (26 mln USD).

 FINANCIAL POSITION

As of the balance sheet date, the total assets of OJSC “Bashkirenergo” amounted to 65,033 mln RUR (2,019 mln USD) increasing by 13% from the beginning of the year.

The share of non-current assets was 83% of total assets and amounted 53,769 mln RUR (1,670 mln USD), while the share of current assets was 17% or 11,264 mln RUR (350 mln USD). In 2011 non-current assets increased by 4% as a result of 10% increase in property, plant and equipment due to new commissioning and increase of construction in-progress. The disposal of LLC ESKB lead to increase of current assets by 78% due to 4 time increase of cash and equivalents to 2 953 mln RUR and deposits to 2,006 mln RUR.

The 33% growth of trade and other receivables was mainly driven by growth of receivables for heating of housing and community facilities.

Capital and reserves as of December 31, 2011 made up 86% of the total equity and liabilities amounting to 55,713 mln RUR (1,668 mln USD). Upon the disposal of the retail company loans and borrowings became the largest liability (2,265 mln RUR or 70 mln USD), along with trade and other payables (2,312 mln RUR of 72 mln USD) and other tax payables (1,044 mln RUR or 32 mln USD) comprising 24%, 25% and 2% of capital and liabilities respectively.

The free cash flow grew 88% to 6,553 mln RUR (204 mln USD) mostly due to 5,7 bln RUR (179 mln USD) of cash received from the disposal of a subsidiary.

CAPITAL EXPENDITURE

Investment program of 2011 made up 6,029 mln RUR (184 mln USD) increasing by 93% compared to the previous year. The growth of CAPEX was conditioned by the decision of the Board of Directors on renewal of construction of CCGT CHP plant-5 dated April 29, 2011. Construction of CCGT-60 unit at CHP plant-2 of Ufa and GTPP-16PA with waste-heat boiler at Zauralskaya CHP plant were the other key projects of generating capacities construction in 2011.

EVENTS AFTER THE REPORTING DATE

On March 26, 2012 the Board of Directors of OJSC “Bashkirenergo” had a meeting where the main terms and conditions of Company’s reorganization were accepted for further approval at the extraordinary General meeting of shareholders which will take place on June 20, 2012.

The proposed reorganization of OJSC “Bashkirenergo” is to be conducted in the form of a spin-off resulting in the establishment of two companies: generating company called Open Joint-Stock Company “Bashenergoactiv” (JSC Bashenergoactiv) which will obtain the shares of LLC “Bashkir Generation Company”, LLC “Bashkir Heat Distribution Grid”, and LLC “CCGT CHPP-5”, and power grid company called Joint Stock Company «Bashkirian Power Grid Company» (JSC “BPGC”).

Simultaneously with the spin-off JSC Bashenergoactiv is to be merged with Open Joint Stock Company “INTER RAO UES” (JSC “INTER RAO UES”).

 Subsequently ordinary and type A preference shares of JSC “Bashenergoactiv” are to be converted into additional shares of JSC “INTER RAO UES” in accordance with merger agreement of JSC “Bashenergoactiv” to JSC “INTER RAO UES” and based on the decisions of general shareholders meetings of OJSC “Bashkirenergo” and JSC “INTER RAO UES”.

OUTLOOKS

It is expected that growing rates of electricity prices shall be materially lower than in 2011. Readjustment of tariffs will start from July 1, 2012. The Federal Tariff Service stipulated 6% growth of tariffs for population (or 3% year average) and 15% for other consumers (or 7.5% year average). The set KOM prices for the 2012 capacity being 4% lower than in this year makes the management take even more cost cutting measures of the fixed costs in order to maintain the generation business margins.

On December 30, 2012 the State Committee on tariffs of RB determined long-term regulation characteristics and established tariffs 5-year ahead for OJSC “BSK” This will make it possible to forecast financial results with high degree of reliability

OJSC BASHKIRENERGO AND SUBSIDARIES

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AT 31 DECEMBER 2011 (AUDITED)

in millions of Russian Roubles

OJSC BASHKIRENERGO AND SUBSIDARIES

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE three and NINE months ENDED 31 DECEMBER 2011 (AUDITED)

in millions of Russian Roubles

OJSC BASHKIRENERGO AND SUBSIDARIES

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE PERIOD ENDED 31 DECEMBER 2011 (AUDITED)

in millions of Russian Roubles