RO-HU-AT - a pilot project for incremental capacity GRI SEE 18 May 2017, Budapest RO-HU-AT - a pilot project for incremental capacity How to develop functioning markets? Infrastructure needs and initiatives for Europe RO-HU-AT - a key project for Central and South-East Europe

Starting Point 2014 Network users indicated non-binding demand for long term transportation services potential natural gas supplies originating from an upstream project initiative in the Black Sea from Romania (RO) via/to Hungary (HU) and further on to Austria (AT)

TSOs: new gas route - ROHUAT

TSOs: PCI 6.24 - ROHUAT Expansion and refurbishment of the existing gas transportation systems

Open Season Design Relevant interconnection points (IP) RO/HU border @ Csanádpalota (IP1) in both directions HU/AT border @ Mosonmagyaróvár (IP2) just in Austrian direction

preferred option according to outcome of market survey Market integration Allocation Method 3 Outcome market survey of February 2016 (13 answers) Bundled capacity offered as single years If demand > offer, capacities shall be allocated on the basis of the highest individual bidder commitment throughout the period of 15 years at IP Csanádpalota and IP Mosonmagyaróvár Allocation rule core logic: NU contribution = price IP1 * demanded capacity IP1 * number of years + price IP2 * demanded capacity IP2 * number of years Method 3 preferred option according to outcome of market survey

Activities carried out Consultation phase of the draft OS rule book in December 2016 8 March 2017 in Budapest shipper workshop Written comments from stakeholders by the end of March about modification of the OS rule book 11/12 April Legal workshop in Vienna with external stakeholders

Main milestones OS Timeline

OS Activities 2017 29.05.17 01.01.18 01.10.22 17.08.17 01.01.19

OS Activities 2017 29.05.17 30.08.17 13.10.17 01.01.18 01.10.22 17.08.17 01.01.19

OS Activities 2017 29.05.17 30.08.17 13.10.17 01.01.18 01.10.22 17.08.17 27.10.17 01.01.19

OS Activities 2018 29.05.17 30.08.17 13.10.17 01.01.18 22.10.18 01.10.22 17.08.17 13.10.17 01.10.18 01.01.19 Step back right penalty fee= 0,033% of respective value of individual bid

OS Activities 2018 29.05.17 30.08.17 13.10.17 01.01.18 22.10.18 01.10.22 17.08.17 13.10.17 01.10.18 03.12.18 01.01.19

OS Activities 2018 29.05.17 30.08.17 13.10.17 01.01.18 22.10.18 14.12.18 01.10.22 17.08.17 13.10.17 01.10.18 03.12.18 01.01.19

Examples Routes & Tariffs

Capacity products & tariffs

Capacity products & tariffs

Tariffs overview (in local currency) 1,6 ~ 2 €/MWh Entry 0,77 €/kWh/h/y 3,31 €/kWh/h/y 33,3 % Exit 631,25 HUF/kWh/h/y 786,52 HUF/kWh/h/y 70% Entry 1483,63 HUF/kWh/h/y 0 HUF/kWh/h/y 70% Exit 22,45 Lei/kWh/h/y 22,67 Lei/kWh/h/y 70% Exit 631,25 HUF/kWh/h/y 0 HUF/kWh/h/y 70% 98,72 HUF/MWh Reserve price Minimum Premium Premium calculation threshold Entry 22,89 Lei/kWh/h/y 23,12 Lei/kWh/h/y 0% ~ 0,6 €/MWh

Project costs overview (in €) Economic test Total 𝑷𝑽𝒂𝒓 = 1.083.085.494 € f ~ 0,796 PV uc = 850.288.049 € 2,69 % m3 𝑷𝑽𝒂𝒓 = 156.325.000 € f = 0,75 PVuc = 117.243.750 € 𝑷𝑽𝒂𝒓 = 458.314.997 € f = 0,873 PVuc = 401.960.177 € 𝑷𝑽𝒂𝒓 = 441.445.497 € f = 0,75 PVuc = 331.084.122 €

Ranking of Bids results Examples Ranking of Bids results

Conditionality whether the Bidder accepts any partial fulfilment to its Bid in case not the entire amount of capacity applied for could be allocated to the Bidder related to the required quantity (“fill or kill principle”) and/ or whether the Bids are linked over both IPs and/or whether the Bids are linked across a given number of years whether the Bid is conditional on the allocation of a minimum amount of capacity.

Bid results with overbooking fill or kill

Examples Austrian side Economic test

Determination of the economic viability (Austrian side) The economic tests (Economic Test I and Economic Test II) for incremental capacity at the entry point Mosonmagyaróvár are based on the following parameters: PVAR = 156.325.000 EUR f = 0.75 PVUC ≥ 117.243.750 EUR The economic test will be positive if the value of binding commitments of network users is equal to or higher than 117.243.750 EUR. As the allocation of all incremental capacity at the reference price (i.e. 0.77 €/kWh/h/y) would not generate sufficient revenues for a positive economic test outcome, a mandatory minimum premium (i.e. 3.31 €/kWh/h/y) (supplement) is applied for the allocation of the incremental capacity. The mandatory minimum supplement has been calculated based on the assumption of 1.913.490 kWh/h/y minimum booked incremental capacity for 15 years in a row.

Determination of the economical viability Conditions for the calculation of the mandatory minimum premium: 30% of the technical capacity flat booked for 15 years 25% of the total costs socialized on existing IPs of the Austrian system

Determination of the economical viability Tariff composition for the base case

Negative economic test

Negative economic test to be reallocated to top of the initial mandatory premium

Negative economic test Increasing of the minimum mandatory premium part of the tariff ∆ +1,64

Positive economic test

Positive economic test to be subtracted from the initial mandatory premium

Positive economic test decreasing of the minimum mandatory premium part of the tariff ∆−𝟎,𝟖𝟗𝟐

Overall economic tests The project will be realized if all the 3 integrated TSO´s related economic tests in direction RO -> AT and HU -> RO will be positive

Overall economic tests The project will be realized if all the 3 integrated TSO´s related economic tests in direction RO -> AT and HU -> RO will be positive

 alessandro.ischia@e-control.at  www.e-control.at  + 43 1 24 7 24 810  alessandro.ischia@e-control.at  www.e-control.at Contact

Determination of the economical viability base case: generated revenues