Plamen Popov, Managing Director, Statkraft South-East Europe, Bulgaria Statkraft’s experience in the European power markets and view on the markets in South East Europe 18.11.2019 “Energy Streams in Regional and European Aspect” conference   March 12, 2007. Sheraton hotel, Sofia Plamen Popov, Managing Director, Statkraft South-East Europe, Bulgaria

South-East European Power Market as part of Pan-European Market; Highlights Who is Statkraft? South-East European Power Market as part of Pan-European Market; Shall we invent the Bicycle again? (Is the “Copy-Paste” approach from WE to SEE possible?). 18.11.2019

Statkraft Facts and Figures 2005* 100% state owned 2000 employees** 42 TWh production in normal year** 1.9 bn € revenues 0.7 bn € profit after tax 11.3 bn € assets 5.0 bn € equity Second largest producer of enviromentally friendly energy in Europe 14 years experience in the liberalised power market TEV Trondheim 100% Statkraft BKK 49,9% Agder 45,5% Skagerak 66,6 % ScanEnergi 21,4 %*** E.ON Sverige 44,6 %*** Statkraft Markets BV Baltic Cable 66,7 % Warsaw Statkraft Markets GmbH Vienna Budapest Bucharest Belgrade Sofia * € = 8.0 NOK ** incl. TEV, Skagerak *** Financial investment 18.11.2019

Statkraft Core Business Hydro and RES generation + GAS Statkraft owns and operates 156 Power plants. 133 Hydro and 2 Wind in Norway; 19 Hydro in Sweden 4 Hydro in Finland 10 530 MW 292 MW 66 MW 10 888 MW Total installed capacity Average annual production 42 TWh 3 CCGT under construction: 400 MW in Norway; 800 MW in Germany; 400 MW in Germany. Several wind farms in design and construction phase 18.11.2019

The Statkraft Group - from state utility to market player 18.11.2019 The Statkraft Group - from state utility to market player 1895 The State of Norway buys its first ”waterfall”, water rights.  1921 Foundation of Norways Water and Energyworks being responsible for construction and operation of the state’s power plants. 1986 State’s power plants become a division of Ministry for Oil and Energy. 1991 Legal basis for market liberalisation. Goal: More efficient operation and flexible use of power system. 1992 Split up of ”Statkraftverkene” into grid part, Statnett, and commercial part for production and (wholesale) marketing, Statkraft. 1996 Statkraft buys shares in Sydkraft. Nordpool is established. 1998 Opening of Amsterdam office. 1999  Opening of Düsseldorf office. 2000 Political message: ”Time of large-scale hydro projects is over.” 2001 Statkraft takes over 1/3 of Baltic Cable. 2002 No more state guarantees for Statkraft’s debt in the future. 2004 Commercial activities are being transfered from Statkraft SF (”state company”) into Statkraft AS (joint stock company, 100% state owned). Statkraft has been through processes very similar to what we can see happening in the SEE right now. This slide shows the main steps Statkraft has been through for tha last 45 years - our history which is a hundred years long. We were a part of the responsibel Directorat under the Ministry of Oil and Energy until the Energy Act 1990 paved the way or a separation from the public authorities to become a separate company. Grid and generation where separated in 1992 Until that time, electricity prices where fixed by the Parliament every year. Market based oprice formation started in 1992 Consumer prices are lower now than before liberalization 18.11.2019

Statkraft in Continental Europe Trading and Cross Border Trading Complex Green / C02 Power plants Services European borders DC cable active trading infrastructure in place, not active yet under development 18.11.2019

Statkraft in Continental Europe Renewables and CO2 Trading Complex Green / C02 Power plants Services Green Value Certificate market Electricity Wholesale market Electricity CO2 Certificate market CO2 Certificate 18.11.2019

SEE electricity sector in 2005-6 (source UCTE and BSREC) The SCALE 18.11.2019

SEE plans to meet power demand Source: World Bank – 2006 GIS study 18.11.2019

EEX Spot Price History Hot summer: Demand increase & cold spell Start of EU emission trading CO2 & gas prices, cold winter hot & dry summer: demand increase & cooling water problems Hot summer: Demand increase & Cooling water problems Mild winter, lots of wind Emission market crash wet, mild, holidays Coal & oil prices Monthly Average Spot Price in EUR/MWh 18.11.2019

European Spot Prices on the Way to Convergence 18.11.2019

Even Forward Markets Going Parallel 18.11.2019

Athens process Main Athens process achievements: B U T : ITC (CBT) mechanism, similar to the 1st ETSO. (From Apr. 1st 2007 – under question ?????) MoU for REM – in 2005 transferred to a SEE Energy Community Treaty; Regional Grid Code; First draft of Standard Market Design SMD; Coordinated capacity allocation auction project. B U T : . . . . a lot of work, still to be done . . . . 18.11.2019

Single UCTE synchronous zone 3 ITC mechanisms (funds) 18.11.2019

Missing or insufficient market environments Issues to be addressed to the regulators: Non harmonized licensing regimes. The requirements to the potential traders differ from country to country; Complicated and long lasting procedure for application and issuing of licenses in some countries; Relatively high initial and annual fees to obtaining and keeping of licenses; Lack of information in some countries about the current or planned requirements and licensing regime in respect to the wholesale and retail trade; Development of cost reflective transmission tariffs to all market participants; Development of measures to deal with market concentration and vertical foreclosure; 18.11.2019

Missing or insufficient market environments Issues to be addressed to the TSOs: Different cross-border capacity allocation mechanisms applied by TSOs in the region; Lack of information and transparency about the procedures, application mechanisms, gate closure and the final allocation of the cross-border capacity; Missing rules and means for secondary cross-border capacity market; Market based (national and regional) balancing arrangements; 18.11.2019

Missing or insufficient market environments Issues to be addressed to the market operators: Only two PXs – OPCOM and BORZEN: OPCOM – central clearing function is missing. Lack of trust, yet; BORZEN – too small volumes and liquidity; No forward market and market for financial derivatives; No brokers involved to facilitate OTC; Application of market rules to all participants; Insufficient information about market results – prices. 18.11.2019

Thank you for your attention ! plamen.popov@statkraft.com www.statkraft.com 18.11.2019