1. 28 th of February, 2013 www.ispe.ro Romanian Power System – the right time to act Ph.D.(Eng) Carmencita CONSTANTIN, Director of Energy & Environment Strategies Department, ISPE

2. 28 th of February, 2013 - ZF Power Summit ’13 Current situation of electricity generation in Romania Electricity generation structure by resources type, in the last years (Source: RERA annual reports) 2009 and 2011 – dry years, with increased coal based electricity production (37%) 2010 – a rainy year, with increased hydro based electricity production Electricity production from wind, biomass & PV Source: NIS, Energy balances 2009-2011 Increasing RES contribution in the energy mix in the last years PV 1

3. 28 th of February, 2013 - ZF Power Summit ’13 Electricity generation structure in Romania ISPE forecast Scenario – considering NPP : 4 Units at NPP Cernavoda until 2030 Scenario – considering NPP : 4 Units at NPP Cernavoda until 2030 Scenario – considering NPP: 3 Units at NPP Cernavoda until 2020 Scenario – considering NPP: 3 Units at NPP Cernavoda until 2020 Increase of NPP capacity 2

4. 28 th of February, 2013 - ZF Power Summit ’13 Electricity generation structure in Romania ISPE forecast (2) Scenario - without NPP: 2 Units at NPP Cernavoda until 2030 Scenario - without NPP: 2 Units at NPP Cernavoda until 2030 Scenario - without NPP: 2 Units at NPP Cernavoda until 2020 Scenario - without NPP: 2 Units at NPP Cernavoda until 2020 Increase share of natural gas with 3% in 2020 and 7% in 2030 due to the recently discovered reserves in the Black Sea. Same NPP capacity as today 3

5. 28 th of February, 2013 - ZF Power Summit ’13 Future coal based electricity generation needs CCS or CCU deployment 4 www.getica-ccs.ro www.globalccsinstitute.com www.bellona.org/ccs http://www.minind.ro/evenimente/getica_css/index.html

6. 28 th of February, 2013 - ZF Power Summit ’13 Conventional power plants facing today electricity markets Current market conditions for conventional power plants 5

7. 28 th of February, 2013 - ZF Power Summit ’13 Taxation system restraining investments in the power sector Evolution of the end-user electricity price break-down in Romania 6

8. 28 th of February, 2013 - ZF Power Summit ’13 Difficulty in raising funding for the power sector 7 Due to key factors, like new and diversified taxes, increasing risks, soft demand, changes in the market dynamics, uncertainty of the results of the current policies in progress, the power sector becomes less and less attractive for the financial institutions to invest in.

9. 28 th of February, 2013 - ZF Power Summit ’13 Financing the investments in the power sector Raising funds from capital markets implies: ensuring the adequateness of expected return facing competition from other industrial sectors, the banking sector itself and governments In a world of constrained capital resources, the power sector confronts with the following cause and effect problem: 8

10. 28 th of February, 2013 - ZF Power Summit ’13 Factors affecting the financial institutions perspective of the power sector Market dynamics Soft demand Policies uncertainty 9

11. 28 th of February, 2013 - ZF Power Summit ’13 Increasing the attractiveness of the energy sector  Incentives provided to the conventional power plants  Wider introduction of capacity payment mechanisms in order to balance the renewable intermittency  Securing project’s revenues  through the conclusion of long term PPA  Not appropriate for a competitive market but Required by financiers  Predictable regulatory framework, with clear foreseen policies’ results  The risks drivers must be properly managed and mitigated  Adequate remuneration of the risks in the expected profit 10

12. 28 th of February, 2013 - ZF Power Summit ’13 The CO 2 price – driver for investing in the power sector 11

13. 28 th of February, 2013 - ZF Power Summit ’13 Recent important ISPE projects 12 ISPE contribution to the Romanian electricity generation fleet ISPE projects abroad

14. 28 th of February, 2013 - ZF Power Summit ’13 ISPE projects in preparation 13

15. 28 th of February, 2013 - ZF Power Summit ’13 Lack of qualified human resource in the Romanian power sector  Institutions: Government, Agencies  Universities and postgraduate level  Generation and T&D companies: Management: state aid rules, financing sources Operating staff: new technologies  Consultancy and designing companies: ageing human resource 14

16. 28 th of February, 2013 - ZF Power Summit ’13 It is time for action ! 15 Need for review of the National Energy Strategy and Action Plans for electricity generation, transmission and environment investments Planning Monitoring Reporting Dedicated financing programs Electricity = infrastructure, base for economical and social development