World Forum on Energy Regulation IV Athens, Greece October , 2009 Regulatory challenge of Russian energy sector reform Dominique Fache, General director for Russia and CIS ENEL

Dominique Fache - World Forum on Energy Regulation IV - Athens, Greece - October 18-21, 2009 Enel: Global dimension¹ 22 countries\ four continents Total capacity of MW 259,7 TWh/year of electricity generated km of power lines km of gas pipelines 52,4 million customers people 1,6 million investors 13,1 billion euros of EBITDA ¹Figures as of

Dominique Fache - World Forum on Energy Regulation IV - Athens, Greece - October 18-21, 2009 Russian energy sector structure Capacity of RAO UES 67 GW Capacity OGK 77 GW Capacity TGK 54 GW OGK1 OGK2 OGK3 OGK4 OGK5 OGK6 2

Dominique Fache - World Forum on Energy Regulation IV - Athens, Greece - October 18-21, 2009 Enel: Presence in Russia First Vertical Integration Built in Russian Energy Sector Integration allows hedging the risks on huge liberalised market, primarily hedging gas supply risks for ENEL OGK-5 Supply Power generation Upstream gas 20% of SeverEnergiya (50% - Gazprom, 30% - ENI) 55.9% of ENEL OGK5 49.5% of RusEnergoSbyt Largest independent retail power company in Russia 35 TWh sold in regional offices and 7 branches Main supplier to Russian Railways (15 year long- term power supply contract). Gas fields in the north of Western Siberia Covering the demand of OGK-5’s gas-fired plants Core asset of Enel’s vertical chain in Russia 3

Dominique Fache - World Forum on Energy Regulation IV - Athens, Greece - October 18-21, 2009 Regulatory framework Generation Transmission / Dispatching DistributionRetail Thermal generation - full privatization almost completed Nuclear and Hydro - State controlled Grids state controlled Dispatching separated from transmission and state controlled) 11 Distribution Companies (MRSK) possibly privatized in the future ~130 supply companies Privatization of Guarantee Suppliers Tariffs are regulated on cost plus basis Planned gradual switching for RAB regulation Tariffs are regulated on cost plus basis Switching for RAB regulation in delay Separate payments for energy and capacity Energy: free market (DAM, BM) Capacity: free market (short run since July 2008, long term is still pending) Exchange for forward contracts of electricity and capacity (since Jan 2009 ) 4

Dominique Fache - World Forum on Energy Regulation IV - Athens, Greece - October 18-21, 2009 FREE MARKET REGULATIONS It is very difficult to find a balance between the price welcomed by customers and the payment “motivating” producers for further investments. 5

Dominique Fache - World Forum on Energy Regulation IV - Athens, Greece - October 18-21, 2009 Difficulties in taking consolidated decisions ATS FTS GENERATORS NETWORKS SALES MINENERGO MARKET COUNCIL COUNCIL OF ENERGY PRODUCERS FAS SYSTEM OPERATOR MRSK FSK CRISIS ENERGY COMMISSION 6

Dominique Fache - World Forum on Energy Regulation IV - Athens, Greece - October 18-21, 2009 The importance of the Regulatory framework Values Independence and autonomy of Regulator Consistency over time Transparency of market rules and procedures Predictability of evolution Key Principles Market forces drive profitability and returns Regulated returns reflecting industry/country profile for mandated programs and natural monopolies Fair return on investments (especially mandatory investments) Legal reliability guaranteeing security of investments Reliable regulatory framework = incentive for investors 7

Dominique Fache - World Forum on Energy Regulation IV - Athens, Greece - October 18-21, 2009 Status of market reform Market liberalization Households still regulated Gas prices 8

Dominique Fache - World Forum on Energy Regulation IV - Athens, Greece - October 18-21, 2009 Capacity market Why should be capacity remuneration implemented? supply adequancy Short-run Capacity market opened 2H 2008 investment incentives Price predictability Long-run Capacity Market Market Rules still in discussion First auctions for 2011 delivery postponed from December 2009 (as early planned) to September 2010* * should be held by September

Dominique Fache - World Forum on Energy Regulation IV - Athens, Greece - October 18-21, 2009 Capacity market Short-run Capacity market opened 2H 2008 Long-run capacity market model (rules still in discussion) ~ Year N КОМ Delivery period Time necessary to carry out new investments 4 years new – N years old – 1 year By September 2010 auction with delivery in 2011 will be carried out By November 2010 all transitional auctions with delivery

Dominique Fache - World Forum on Energy Regulation IV - Athens, Greece - October 18-21, 2009 Collection problems Increasing debts vs generators Accumulated debts is around 34 bln. RUR (July 2008 – September 2009) retail marketwholesale market Increasing non payments problem Accumulated debts is around 90 bln. RUR (July 2008 – September 2009) Financial Guaratees You can consume and not pay? Telemetering 11

Dominique Fache - World Forum on Energy Regulation IV - Athens, Greece - October 18-21, 2009 Tariff VS Intensity 12

Dominique Fache - World Forum on Energy Regulation IV - Athens, Greece - October 18-21, 2009 Smart technologies for the future Smart Grids Integration and management of renewables Local energy dispatching Self-fixing grids Electronic metering for electricity and gas 30 mln of electronic meters ALREADY installed in Italy Exploitation of remote management of gas meters Development of a multi-metering infrastructure 13

Dominique Fache - World Forum on Energy Regulation IV - Athens, Greece - October 18-21, 2009 Enel Group: Key Priorities in Russia Power and Gas Market Opening Long-run Capacity Market Tariff Imbalances Energy Market Cap Collection Problems Efficiency 14

Dominique Fache - World Forum on Energy Regulation IV - Athens, Greece - October 18-21,