Vienna, 8 April th IG Meeting Meeting Guide

2 4th IG meeting, Vienna, 8 April 2008 Agenda Agenda TopicRapporteur 12.45Arrival and registration 13.00Opening -Approval of the agenda -Approval of the operational conclusions of the 3 rd IG meeting Co-chair 13:15Regional cooperation – Update 2.1. Cooperation of regulators 2.2. Update on Regional Gas Grids 2.3. Update on New European Transmission System 2.4. Cooperation of TSOs -Discussion RCC EFET MOL TSOs 14:30Standardised bulletin board – Update -Discussion TAG GmbH 14.00Coffee break 15.15Status of conclusion of Interconnection Point Agreement at Baumgarten -Discussion TSOs and CEGH 15.45Implementation of EASEE-gas CBPs in the regionEASEE-gas 16.15Infrastructure development: pilot project for SSE regionTSOs and Co-Chair 16.45Strategic advisory panel Co-chair 17:00Closure Co-chair

3 4th IG meeting, Vienna, 8 April Opening  Approval of the agenda  Review of action points from from 3rd SG Meeting ( , Prague)  Approval of minutes from 3rd SG Meeting ( , Prague)  Are there any AOB: Suggestion: Presentation by BOG GmbH on WAG extension  Any other AOB?

4 4th IG meeting, Vienna, 8 April Opening  Review of action points from last meeting

5 4th IG meeting, Vienna, 8 April Opening  Review of action points from last meeting

6 4th IG meeting, Vienna, 8 April Opening  Approval of minutes from 3rd SG Meeting ( , Prague)  Comments – as far as they have been sent – have already been included into the new version of the minutes  All documents are available online: regulators.eu/portal/page/portal/EER_HOME/EER_INITIATIVES/GRI/ South_South_East/Meetings1/SG_meetings/3rd_SSE_SG regulators.eu/portal/page/portal/EER_HOME/EER_INITIATIVES/GRI/ South_South_East/Meetings1/SG_meetings/3rd_SSE_SG  Are there any additional comments?

7 4th IG meeting, Vienna, 8 April Regional cooperation – Update 2.1. Cooperation of regulators  Draft MOU has been circulated for comments  Comments have been received  Main areas:  Co-ordination, information and harmonisation  Regulatory Co-ordination  Regulation of the Gas Market  Sharing of Information  Consultation  Avoidance of Inconsistency of Action  Operation of MoU  Term of MOU and Review  Dispute Resolution  Aim should be to make cooperation visible to the outside world  SSE Regulators‘ network

8 4th IG meeting, Vienna, 8 April Memorandum of Understanding  Aim: discussion of text today  Signing: Next RCC meeting on 9/10 June in Athens, Greece  Aim should be to make cooperation visible to the outside world  Website for SSE Regulators‘ network

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13 4th IG meeting, Vienna, 8 April Regional cooperation – Update  2.2. Update on Regional Gas Grids -Workshop participants identified scope for the regional cooperation in the following areas where regional TSO cooperation delivers the greatest benefits to market integration -Access to capacity/Congestion Management at Cross Border Points -Management of capacities (“one-stop-shop”) -Easier access to the systems through Interconnection Point Agreements -Harmonisation of services -Merging of balancing zones to foster wholesale trading -Regional investment planning to remove physical congestion -Roles and responsibilities -Cost / Benefit analysis

Dipl. Ing. Dr. Stephan Ressl Vice Chairman EFET Europe Gas CChair EFET SSE Head of Business Development EconGas GRI SSE Vienna, European Federation of Energy Traders

Stephan Ressl Vienna, EFET R_ISO Model – Why? R_ISO (multi-TSO) and aspects of security of supply  physical capacity available from source to final customers?  Transport cost clearly calculable at point of supplier‘s decision on where to source gas from?  Historically, many major investments happened because of international (cross-border) consortia/cooperation (e.g. Megal, TAG, BOG,…)  Aim must be that at least some different supply sources must potentially physically arrive in each area – no security of supply without physical interconnection (long term and short term)

Stephan Ressl Vienna, EFET R_ISO Model – Benefits for competition R_ISO and aspects of competition  final customer  Pooling of consumption within one balancing area – increase of negotiating power  Larger netting of imbalance positions reduces opportunity costs for suppliers  More potential suppliers, reduction of market concentration  for shippers/suppliers  More similar customers in one market area  Reduced opportunity cost: nomination, balancing, registration, etc.. reduced risk to deliver  Macro-economic/political  Potential of economies of scale for system operation  Eg potential for higher capacity provision through larger flow optimisation  Reduced national influence Grid 2007

Stephan Ressl Vienna, GRI SSE: EFET R_ISO Model – Comments received  A stakeholder consultation on R_ISO model took place, the deadline was 10 January 2008  Comments from following parties has been received so far:  CEER – supportive, asks for more details  OGP – rather supportive, wants to avoid inefficient structures and more detail on the economies  Eurelectric – supportive  Eurogas – supportive  GTE – does not want to make effort before 3rd package, however acknowledges benefits of European integrated flow optimisation (winter outlook)  Based on the first reaction during the WS in Prague the GRI SSE decided to launch an impact assessment analysis ---> results to be presented in June at SG GRI SSE  EFET has prepared an evaluation paper of the comments received

Stephan Ressl Vienna, GRI SSE: Benefits of integrated flow pattern  GTE presented benefits of European flow optimisation in its winter stress presentation at last meeting in Prague  EFET SSE welcomes the integrated flow optimisation approach by GTE

Stephan Ressl Vienna, Proposed timeline for establishment of a regional E/E model in SSE Harmonisation of rules at regional level (common transmission model) Regional auction platform and market based balancing Harmonised regional network access Coordinated investment planning and regional balancing Joint regional network operation Regional entry-exit model Interconnection agreements (incl. operational balancing accounts) end 2011 mid 2011 end 2010 mid 2010 end 2009 mid 2009 end 2008

Stephan Ressl Vienna, EFET R_ISO Model - Conclusion  EFET is going to contact all interested associations in order to get to a common view on the possible development of the regional model – within next month  EFET believes that starting implementation of such a model now is key for further development of the liberalised market and taking already the elements of the 3rd package on board  For SSE: Wait on the results of the PWC multi-client study (PWC sent out questionnaire to traders and shippers)  For SSE: Establish an advisory panel for additional help  Regions must be established on a pragmatic basis, CEGH finally established, Italy should also introduce a balancing market  Regions obviously must be compatible with each other  Germany is moving:  E-ON CEO Bernotat statement for electricity;  EGT and Bayernet  MOL proposal goes even further

21 4th IG meeting, Vienna, 8 April Regional cooperation – Update  2.3. Update on New European Transmission System

Update on the NETS Concept A new, value creating, cross-border business Initiative 4th IG Meeting Vienna 8th April 2008

Proposal to unite Central and South- Eastern Europe’s gas pipeline networks within a new and independent regional natural gas transmission company Significantly higher value for shareholders than operating separate systems Would be well positioned to leverage international capital markets to finance major infrastructure development projects Consumers would also enjoy the benefits of an integrated platform for natural gas supply and a greater overall security of supply Potential Member Countries of New Europe Transmission System (NETS) Austria Czech Republic Italy Hungary Slovakia Greece Romania Bulgaria Turkey Bosnia Germany Ukraine Moldova Croatia Slovenia Serbia Albania Montenegro Poland Macedonia Source Company Information Review: NETS – The Concept

Status Report of NETS TimingAction/EventDeliverables 15 November – 7 December, 2007 Bilateral technical discussions with TSOs of the reginon (Phase I) Briefing of NETS: - Famililarization of the concept 7 December, 20007Official Announcement of NETS 21 January, 2008ERGEG GRI, PragueOverview of the NETS Concept - presented by Péter Horváth 14 January – 6 March, 2008Bilateral technical discussions with TSOs of the reginon (Phase II) - Organization of Roundtable for TSOs - Proposed workstreams to be discussed in a Roundtable of TSOs 11 February, 2008Central European Natural Gas Summit 2008, Warsaw Gas supply security challanges of New Europe – presented by Lajos Alács 5 March, 2008FLAME, AmsterdamEstablishing a regional unbundled infrastucture company – presented by Lajos Alács March, 20081st Roundtable of TSOs co- organized with and hosted by Transgas SA, in Bucharest, Romania - Alternatives of common operation in the future - Proposed workstreams June, 2008Next proposed meeting of TSOs, in Siófok, Hungary - Discussion of workstream meetings’ achievements

Participants of the 1st Roundtable of TSOs in Bucharest on 14-13th March, 2008 From left to right:Dabris Bucanac - Director of Corporate Functions, Plinacro, Croatia Vlad Pavlovschi - Transgaz SA, Director of Resources, Engineering and Regulation Division, Romania Sasa Ilic - Acting General Manager, JP Srbijagas, Serbia Goran Francic - Plinacro Director of Development Division, Croatia Branko Radosevic – President of the Board, Plinarcro, Croatia Nadzina Ninkovic – BH-GAS, Executive Managaer, Bosnia-Hercegovina János Zsuga – Chief Executive Officer,FGSZ Földgázszállító Zrt., Hungary Vidmantas Jankauskas - Project Ambassador, Expert on Regulatory Issues, REKK, Hungary Ioan Rusu – General Manager, Transgaz SA, Romania László Varró – Chief Economist, MOL GROUP, Hungary Michael Woltran – Managing Director, OMV GAS, Austria Marko Ilersic - Head of Commerce and Finance, Geoplin Plinovodi, Slovenia Iain Smedley - General Manager, Morgan Stanley – London Olivier Silla – Representative of DG TREN, EU

Issues Presented on the 1st Roundtable of TSOs in Bucharest 1.NETS: A Broader Perspective – by László Varró, Chief Economist, MOL GROUP 2.Case Study – Creation of Snam Rete Gas – by Domenico Siniscalco, Morgan Stanley Dealing with financial and structural Issues 3. Alternatives of Common Operation – by Ian Smedley, Morgan Stanley Proposed structure of workstreams Study company considerations 4. Businesss Strategy and Vision – by János Zsuga, CEO, FGSZ Zrt., MOL GROUP Business vision Business strategy and objectives Analysis of synergy potential 5. Regulatory Issues – by Vidmantas Jankauskas, International Expert on Regulatory Issues Review of possible regulatory stragegies Proposed regulatory framework Long term regulatory vision 6. Energy Policy and Public Affairs – by Ian Smedley,Morgan Stanley Governmental dialogue and external dimensions Managing stakeholder communications Public buy-in through public relations 7. Financial and Structural Aspects - by Ian Smedley,Morgan Stanley 8. Next steps to be taken - by László Varró, Chief Economist, MOL GROUP

Steering Committee Business Vision and Strategy RegulatoryEnergy Policy and Public Affairs Financial and Structural Company RepresentativeCompany [ ]BH-Gas [ ]Geoplin Plinovodi (?) [ ]FGSZ Natural Gas Transmission, MOL GROUP [ ]OMV Gas (?) [ ]Plinacro [ ]Srbijagaz [ ]Transgaz SA Achievements: Participants* mutually agreed to investigate NETS’ feasibility by establishing a Steering Committee and delegating representatives in the 4 proposed Workstreams as follows POTENTIAL WORKSTREAM ORGANIZATION Participants*: BH-Gas, FGSZ Natural Gas Transmission Zrt. - MOL GROUP, Plinacro, Srbijagaz, Transgaz SA

Summary of the Event: Common press release in 40 different local and regional media At the end of the meeting Transgaz’s CEO Ioan Rusu stated: “This has been a tremendously successful meeting and a move forward for NETS, this one-of-a-kind initiative in Europe. It demonstrates the high level of business cooperation our companies are capable of, as well as the commitment to competitiveness we are aiming to achieve in the context of an integrated European energy market”. “It is a great honor for BH-Gas and me personally to attend today’s meeting. This event is of great importance for both BiH and BH- Gas, taking into account that the natural gas field in BiH is still developing compared to other companies in the region. The NETS initiative may lead to launching and implementing important development projects for us. Our plans focus on the development of gas infrastructure, in order to increase the capacity of existing transmission systems. At the same time we also concentrate on diversifying the transmission routes and supply sources as well as on constructing underground gas storage. By accomplishing such projects, BiH would increase the natural gas share in the energy mix from the present 7% to the forecasted level of 15% by the end of 2020” said Nadzida Ninkovic, Executive Manager BH-Gas, Bosnia-Herzegovina’s gas transmission company. “This is a great step forward for NETS, as seven of the regions’ leading companies have today said that they support the concept in principle and are interested in working together to see how it can best be turned into reality”, commented Dr János Zsuga, the CEO of MOL Natural Gas Transmission Plc. He added.“ “Plinacro supports the initiative for cooperation, interconnection and joining of TSOs in the region with the aim to find the answer to question and challenges which are to come. We have discussed possible concepts and models of cooperation and interconnection. We think this is an extremely demanding and ambitious project and that today we have made the first step in the right direction. We agree to establish working groups to deal with all aspects from their respective fields in a professional manner and give the exact data as well as the pros and cons, on the basis of which we may bring adequate decisions and propose solutions to our owners. Plinacro will participate in this project and will bring its contribution to it”, said Branko Radošević, President of Plinacro Board, the Croatian gas transmission company. “The meeting in Bucharest confirmed that NETS concept, that aims establishing an independent regional natural gas transmission company is extremely attractive for all participants. It woud help increase the efficiency of existing capacities, bringing benefits that could make each of the markets more reliable in terms of security of supply and growth. Of course, we are at the beginning of a long and challanging harmonisation process of national gas transmission systems, but we believe that the NETS project is feasible. Srbijagas will actively take part in the future steps connected to the NETS project”, said Sása Ilić, General Manager of Srbjgas. The meeting was honored by MrOlivier Silla from the European Commission Directorate for Energy and Transport, who stated: “The Commission supports this project, which provides increased co-operation between TSOs (Transmission System Operators) in a region which is a critical crossroad of many energy markets”. He added, “The Commission’s consideration and support for the project is based on two advantages inherent in the NETS concept: firstly, it is a concept that linking together EU members with not-, or future-EU members and secondly, that NETS can provide the necessary scale for infrastructure development which will enhance competition and security of supply at the same time”.

29 4th IG meeting, Vienna, 8 April Regional cooperation – Update  2.4. Cooperation of TSOs

OMV Gas Move & More. 4th IG Meeting on 8 April 2008 in Vienna MoU between TSO Vienna, April 8, 2008

31 |OMV Gas GmbH, 4th IG Meeting, 8 Apri 2008 Cooperation of TSO’s  Memorandum of Understanding, draft as of 7 April 2008  Draft as of 7 April 2008 has been sent out for comments  Next steps: Exchange of comments and finalization  Topics of discussion  Bulletin Board  Investment and new capacity  Product harmonisation  Transparency Platform  Interconnection Agreement, OBA

32 4th IG meeting, Vienna, 8 April Standardised bulletin board – Update  Contents used by TAG as best practice

33 4th IG meeting, Vienna, 8 April 2008 Status of implementation of bulletin boards

34 4th IG meeting, Vienna, 8 April 2008 Use of bulletin boards  Shippers have made very little use of the bulletin boards so far

35 4th IG meeting, Vienna, 8 April Status of conclusion of IPA at Baumgarten  Update to be provided by CEGH/TSOs

ICA (OBA)ICA (OBA) ERGEGERGEG April 8th 2008April 8th 2008

SPP System BOG System OMV Gas System TAG System SPP System Technical IA Agreements Bilaterally concluded Business IA Multilateral Agreement SPP System CEGH System BOG SystemTAG System OMV Gas System Interconnection Agreement (OBA): Contractual structure

Technical ICP Agreements Bilaterally conclusion Business ICP Multilateral Agreement OBA: Contractual structure Sole purpose: Matching platform dealing with the overall nomination management between transportation and trading activities across the systems Dealing with all technical issues: balancing account, metering methodologies, operation of metering stations between TSO`s

HUB central matching station in between Transportation Systems TAG c c c WAG Regulatory Zone Austria SPP Wheeling storage Wheeling HAG

Operational Efficiency Beneficial development concerning utilization of interruptible services (liquid hub is beneficial for interruptible services) –Efficient operation of nomination management integrating the world of trade; (everybody can transfer gas to 66 counterparts within 2 hours lead time) –In case of interruption any shipper can trade gas on a liquid hub within 2 hours lead time – full integration of storage quantities into the trading activities (wheeling) and shipping activities (more possibilities for shippers to manage interruptible transportation )

Commercial Efficiency TSOs obtain free membership at CEGH platform TSOs have access to Bulletin Board free of charge –(used already twice by TSOs) No fees for shippers! buying or selling at the CEGH No fees for TSOs buying or selling gas at the hub –CEGH to be developed as balancing point TSOs and shippers will have access to future stock exchange (spot market) Transparency is guaranteed by E – Control, Financial authorities (Austrian Financial Markets Supervisory Agency )

Tariff scheme: comparison CEGH - Zeebrugge

SPP System BOG System OMV Gas System TAG System SPP System Technical IA Agreements Bilaterally conclusion Business IA Common agreement SPP System Service provider CEGH System BOG SystemTAG System OMV Gas System Interconnection Agreement (OBA): Revised ICA - Concept

If CEGH would be 100% subsidiary of OMV GAS there would be no resistance integrating trade activities Since GAZPROM will be participating in CEGH, there seems to be some reluctance in this respect Shareholders will enter into discussions these days Future approach

Thank you for your attention

46 4th IG meeting, Vienna, 8 April Implementation of EASEE-gas CBPs in the region  Presentation by EASEE-gas

47 4th IG meeting, Vienna, 8 April Infrastructure development  Analysis of infrastructure projects in the region regarding untilization, market integration and consequences on flows on existing transmission pipelines ●Nabucco ●South Stream ●Italy-Greece-Interconnector (Poseidon) ●Trans Adriatic Pipeline (TAP) ●LNG-Terminal in Krk ●GALSI ●Projects identified in the Gasification Study  Can TSOs provide this information?

48 4th IG meeting, Vienna, 8 April Sample Analysis Nord Stream pipeline

49 4th IG meeting, Vienna, 8 April Infrastructure development  Potential WAG expansion and related coordination with adjacent TSOs - Presentation by BOG GmbH

50 4th IG meeting, Vienna, 8 April Strategic advisory panel  Purpose: to achieve greater level of stakeholder involvement and commitment  A senior representative of each group of stakeholders (e.g. from TSOs, traders, suppliers, ministries,...) should form part of the panel  Task: the main task of the panel would be to define the strategic topics to be dealt with within the region and to set priorities for future work  Strategic advisory panel has been set up in the NW region (‘Programme Board’)  Suggestion: To create such a panel also in the ERGEG GRI REM SSE

51 4th IG meeting, Vienna, 8 April 2008 Strategic advisory panel Regional Co-ordination Committee (RCC) Implementation Group Stakeholder Group Regulators Governments European Commission RCC members + TSOs Hub operators Storage operators IG members + Representatives of: consumers (IFIEC) traders (EFET) suppliers (Eurogas) distributors Strategic advisory panel

52 4th IG meeting, Vienna, 8 April 2008 Update transparency monitoring 2007 – 1 The transparency monitoring report carried out in 2007 found the following main areas of non-compliance of the Austrian TSOs: Requirement of the Gas Regulation Austria 1General 1_1Name of TSO TAGOGGBOG 3TPA services 3_3 Does the TSO offer the following services online Capacity booking0,001,00 Nomination and re-nomination procedures 0,001,00 Transfer of capacity rights0,00 Information on the balancing status of network users 0,001,00 7Technical information 7_5 Rules applicable for connection of infrastructure to the system of the TSO 0,003,000,00

53 4th IG meeting, Vienna, 8 April Update transparency monitoring 2007 – 2 8Capacities 8_1 Does the TSO publish for all relevant points including entry and exit points the maximum technical capacity for daily periods?0,001,00 on a numerical basis?1,00 on a regular/rolling basis?1,00 in a standardised manner?1,00 online?1,00 without charge?1,00 8_5 Does the TSO publish for all relevant points the total contracted interruptible capacity for daily periods?0,002,000,00 on a numerical basis?1,002,000,00 on a regular/rolling basis?1,002,000,00 in a standardised manner?1,002,000,00 online?1,002,000,00 without charge?1,002,00 9Exemptions 9_1 Does the TSO limit publication of information on the capacity situation for certain points of his system due to the Application of the “3 minus shipper rule” [see Art. 6.5 of the Regulation] 0,00

54 4th IG meeting, Vienna, 8 April Update transparency monitoring 2007 – 3 Steps taken by E-Control to arrive at full compliance: October 2007 E-Control requested TAG, OMV Gas and BOG to give reasons for not implementing the requirements as stated in the ERGEG Monitoring Report November 2007 E-Control specified request by pointing to the main areas of non-compliance E-Control set date (31 January 2008) until the TSOs shall have implemented the requirements not yet implemented February 2008 Requirements have been implemented by the TSOs OMV Gas: request for application of the 3-minus-rule at one relevant point  Procedure ongoing

55 4th IG meeting, Vienna, 8 April Update transparency monitoring 2007 – 4 ERGEG to present update of monitoring at 14th Madrid Forum Areas where improvements have been made Regulatory intervention triggering improvements Sanctions imposed by NRAs to ensure compliance

56 4th IG meeting, Vienna, 8 April Closure  Any other business?

57 4th IG meeting, Vienna, 8 April Date and location of next meeting A DATE TO BE NOTED in YOUR diaries!  Next RCC Meeting: Monday, 09/06/2008,  Next SG Meeting: Tuesday, 10/06,  Both at Hotel Divani-Acropolis, Athens, Greece  Special room rates available!

58 4th IG meeting, Vienna, 8 April 2008 Conclusions and Outlook  [to be added]