Development Prospects and new challenges Sonelgaz Development Prospects and new challenges Mr. Mohamed Arkab President & CEO

Summary General Informations Energy transition and prospects Strategy and prospects Conclusion

I- General Informations 1- Algeria in brief 2- Presentation of Sonelgaz 3- Regulatory Framework Governing the Activities of the Electricity and Gas Distribution Sector 4- Evolution of main parameters of electricity and gas networks;

Algeria 1. Algeria in brief 2,4 millions square km Population about 41 millions inhabitants, 9 millions customers connected to electricity network Electrification rate more than 99% 5 millions customers connected to natural gas pipeline network. Penetration of gas distribution rate near 59%. Gdp per Capita : 3 844 US $ (2016) Algeria

2. Presentation of Sonelgaz (1/3) Sonelgaz, is the historical operator in the field of : Generation, transmission and distribution of electricity Transmission and distribution of gas by pipelines, has been restructured from a vertically integrated company to a holding driving an industrial group consisting of several companies and various trades. These companies undertake all operational activities. The holding ensures steering through the definition and implementation of the development strategy of its affiliates and their related activities.

2. Presentation of Sonelgaz (2/3) Creation of Sonelgaz to replace EGA (Electricity and Gas of Algeria) 1969 Transformation of Sonelgaz into a group of companies 2002 Launch of the business activities spin-off process 2004 Change of the statutes of Sonelgaz, established as a holding company 2011

Main areas of activity: Presentation of Sonelgaz (3/3) Generation, transmission and distribution of electricity Consisting of about thirty companies controlled by Sonelgaz and a dozen joint ventures activating in electricity and gas fields. Main areas of activity: Transport and distribution of gas by pipeline Research, Training, Services Engineering & Construction Electricity and gas Manufacture & Maintenance of Equipment

3. Regulatory Framework Governing the Activities of the Electricity and Gas Distribution Sector (1/2) Promulgation in February 2002 of the new law on electricity and the distribution of piped gas to establish reforms in the sector concerned; Creation of an independent regulatory body, the Electricity and Gas Regulatory Commission (CREG in January 2005); Suppression of the monopoly on the production, transmission and distribution activities carried out by the operator Sonelgaz; Free access to transport and distribution systems for all operators (free access by third parties to networks),

3. Regulatory Framework Governing the Activities of the Electricity and Gas Distribution Sector (2/2) Openness to competition and private investment for the power generation sector; Granting of concessions for the distribution of electricity and gas; Establishment of a market operator for the wholesale electricity market; Possibility for large consumers and distributors (eligible customers) to choose their suppliers; Establishment of an incentive framework for renewable energies Transformation of Sonelgaz into a group of companies ("Groupe Sonelgaz").

4. Evolution of main parameters of electricity and gas networks (1/3) Year 2000 Parameters Year 2017 Growth 2000-2017 (%) 5907 Installed Capacity (MW) 19 471 330 % 12285 Electricity Transport Network (km) 29 379 240 % 4250 Gas Transportation Network (km) 20 722 490 % 192 481 Electricity Distribution Network (km) 329 782 170 % 1 6571 Gas Distribution Network (km) 99 136 600 % 4 544 289 Number of Customers for Electricity (unit) 9 164 334 200 % 1 394 159 Number of Customers for Gas (unit) 5 248 788 380 % 10

Electricity networks in Algeria (2016) Electrification rate : 99% GENERATION INSTALLED CAPACITY Interconnected Network : 17 477 MW Isolated Networks : 786 MW Adrar Regional Network : 719 MW GENERATION Interconnected Network : 64.1TWh Isolated Networks : 1.0 TWh Adrar Regional Network : 1.1 TWh

The 400 kV Network

Algerian Gas Transport Network Penetration rate of natural gas distribution 59%

II- Energy transition and prospects 5 - Forecast for electricity demand by 2027 6 - The prospects of development,… 7 - Context and challenges of the transition to renewable energies; 8 - Consistency of the national renewable energy program by 2030; 9 - Supply perspectives by 2027;

5. Forecast for electricity demand evolution by 2027 For the Interconnected Grid (RIN) For the In Salah - Adrar - Tamanrasset Pole (PIAT) MW GWh Capacity Growth Power Generation Increase Capacity Growth Power Generation Increase

6. The prospects of development,… The energy supply system has undergone tremendous growth driven by demand for electricity and natural gas New infrastructure needs by 2027 : 17 210 MW in electricity Generation capacity 32 890 km electricity grid in VHV- HV 128 500 km electricity distribution network and around 4.2 millions additional electricity customers. 6 570km of additional gas transportation network. 62 840 km of gas distribution network and nearly 4,2 millions gas customers. 16

7. Context and challenges of the transition to renewable energies Satisfaction of demand and securing energy supply (electricity and gas) in the long term; Preservation of fossil resources; Development of alternative sources of energy and adoption of an energy mix for the medium-long term; Algeria's international commitments in the context of handling environmental issues (climate change) and, more generally, the promotion of sustainable development; Availability of an important potential, namely solar; Issues : Reduction of fuel consumption; Development of an energy mix ; Promotion of energy saving and energy efficiency Diversification of national economy and creation of a new socio-economic dynamic around renewables. 17

8. Consistency by technology of the national renewable energy program by 2030 Global consistency 22 GW Geothermal Photovoltaic Wind CSP: Concentrated Solar Power Biomass Cogeneration 18

9. Supply perspectives by 2027 Approved scenario for development plan RIN et PIAT RGS With : 344 MW PV + 10 MW Wind (installed) With 25 MW PV (installed) Scenario : implementation of 4 GW With : 344 MW PV + 10 MW Wind (installed) 4 000 MW en PV (projected) With 25 MW PV (installed) 123 MW PV (projected)

9. Supply perspectives by 2027 (continued) Conditions of massive integration of renewable energies in the electric system Need to mobilize conventional means of production to cover peak demand in the evening. - The development of the conventional power generation capacity with flexibility characteristics will continue to overcome the constraints of intermittency and specificity of these resources (duration of sunshine). 5 2 1 3 4 2 3 2 Allure de la production PV 1 1 3

III- Strategy and prospects 10. Industrial Development Strategy 11- Implementation strategy for renewable energies.

10. Industrial Development Strategy In the framework of Sonelgaz Group companies’ projects and activities, it is about: Developing and encouraging national and/or international partnership to encourage the emergence of a national industrial system. Undertaking any initiative aiming to develop national capacities in terms of engineering, services, works and manufacturing in connection with facilities construction, operation and maintenance; 22

11. Strategy implementation of the program (1/2) is part of a global approach in order to meet national energy needs, based on the principle of localising in Algeria the manufacture of equipments, Gradual localisation of all value chain links (integrated industrial energy system from equipment manufacturing, construction, operating and maintenance services), Partnership Development for Industry and Engineering, Registration of a maximum of national potential sub-contractors in tender documents of solar power plants & solar kits, Establishment of a favorable political and regulation framework (program classified as a national priority, etc.). 23

11. Implementation strategy for renewables (2/2) Creation of a subsidiary dedicated to Renewable Energies and conventional power plants for the Greater South Grid, (SKTM); Acquisition of technologies through the implementation of pilot and experimental projects along with research for strategic partnership (plants of Ghardaia - Kabertene - Hassi R’mel ...); Investment in human potential (establishment of renewable energies programs in Sonelgaz technical schools, training in the extent of the carried out projects, ....); Partnership with universities, research centers and companies (implementation of R&D in support of the program with CDER, CRTSE (formerly UDTS), etc…); 24

IV. Conclusions / perspectives Shift towards energy transition started; Continuing long-term approach  search for economically viable solutions to meet the increasing demand for energy (competitive price per kWh); Opportunity for Algeria to sustain itself as a major player in the energy market; Development of the sectors backed up by a strong industrial localisation; Sonelgaz is getting ready by the : Upgrading of its networks and introducing smart grids, Study of a portfolio of sites, Adaptation of commercial management; Training of its staff. Sonelgaz, is open to partnership by: Making available its experience and its means of erection, or even its adapted infrastructure (Rouiba Eclairage) that can accommodate PV industrial activities; Development of Sonelgaz Group companies at an international level  opportunity for exporting products made in Algeria. 25