1 Singapore Market Developments APEx 2007 Presented by Dave Carlson Chief Executive Officer 15 October 2007

2 Quick recap of NEMS NEMS commenced on 1 January 2003 Mandatory “real-time” pool based model Thermal system (predominately gas & fuel oil) Small, compact, well-engineered system Offer only market (i.e. no demand side bidding) Simple ½ hour trading periods with 65 minute gate- closure for energy, reserve and regulation Very sophisticated nodal price system which models power flows, loses, constraints, co-optimising energy and reserves

3 Quick recap of NEMS Market settled daily (20 days in arrears) Small and concentrated market with a high degree of vertical integration Larger consumers can chose to purchase from a retailer (five active retailers) Smaller consumers (e.g. households) have a regulated tariff, supplied by Market Support Services Licencee, SP Services No formal forward/financial derivative market Vesting contracts in place to mitigate market power

4 Location Map of NEMS Generators Electricity interconnection with Malaysia Natural gas pipeline from Malaysia Tuas Power PowerSeraya SembCorp Represents incineration plants operated by the National Environment Agency Note: The Locations indicated on this map have been approximated and stylised. They do not accurately represent the actual physical location of individual facilities Natural gas pipeline from West Natuna Natural gas pipeline from Sumatra (Asamera) Keppel Cogen Senoko Power

5 Industry players Regulator: Energy Market Authority Market operator: EMC Power System Operator: PSO/EMA Reliable supply/secure operation Transmission licensee: SP PowerGrid (SP PowerAssets) Operates & maintains transmission system Active generation companies: 6 Market support services licensee (MSSL): SP Services Meter reading & electricity supply to non-contestable consumers Active electricity retailers: 5 Sell electricity directly to contestable consumers. Wholesale Market Traders: 2 Providing interruptible load

6 Market governance The day-to-day functioning of the market is governed by the market rules Rules Change Panel oversees development of the market rules Market Surveillance and Compliance Panel monitors rules compliance, market efficiency and fairness Disputes Resolution Counsellor facilitates the resolution of disputes The Regulator (Energy Market Authority) licences all market participants

7 Registered Capacity, Peak Demand and Reserve Margin 1997/ ,000 10,000 8,000 6,000 4,000 2,000 0 Registered CapacityPeak DemandReserve Margin (%) MW % As of 2006, Singapore has a reserve margin of about 88%

8 Reliability of electricity supply Transmission Transmission system consists of network of 400 kV, 230 kV and 66 kV substations interconnected by approximately 5,000 km of underground cables Intertie connection with Malaysia assists to ensure stable and reliable power system Load shedding plan in place to ensure that industrial/ critical needs are met first in contingency/emergency situations Lowest System Average Interruption Duration Index with 0.5 mins outages/ per customer/ per year based on latest KEMA study among 26 global market places

9 Registered Capacity ,500 3,000 2,500 2,000 1,500 1, CCGTSTGT MW Licensed Capacity Senoko Power PowerSerayaTuas Power SembCorp Cogen National Environment Agency Keppel Merlimau Cogen

10 Market Share by Plant Type 2003/ % CCGTSTST Incineration

11 Monthly Average Demand 2003/mid 2007 MW

12 USEP, System Demand and Offered Capacity Daily Average USEP Forecast Daily System DemandOffered Capacity $/MWh Jan FebMarAprMayJunJulAugSepOctNovDec , ,000 3,000 4,000 5,000 6,000 7,000 MW Note: Prices above $240/MWh are not displayed

13 USEP, System Demand and Offered Capacity for Jan-July 2007

14 Oil Prices and USEP WTI USEP 180-CST HSFO Oil Prices JanFebMarAprMayJunJulAugSepOctNovDec US$/barrel USEP S$/MWh

15 Wholesale Electricity Price vs Oil Price 2003/06 WEP180-CST HSFO % is the reference year Since 2003, the wholesale electricity price (WEP) has increased at only about half the rate of the fuel oil price. WEP is the net purchase price paid by retailers inclusive of all administrative costs incurred in the wholesale market.

16 Market performance Electricity prices respond to fundamentals of demand and supply Competition has cushioned impact of oil prices on electricity prices (2003 to 2006) Savings in reserve costs Structural shift from oil to gas-fired generation with over 2 million tons of CO 2 emissions savings Evidence of retail competition e.g. active switching

17 Trends and Outlook Steady demand growth New generation investment has entered the market e.g. Keppel and further planned e.g. Island Power New cogen and trigen facilities announced or under construction Greater competition in the reserve market with demand side participation (interruptible load) Vesting contract quantity reducing Pilot announced for household contestability First MSCP Investigation into market power Shift to gas as dominant fuel source Concerns expressed over long term piped gas supply; ormulsion supply disrupted LNG terminal planned ASEAN discussions recommenced over interconnected grid Divestment of 3 government owned generators taking place