European Economic Congress, Katowice, 17 May 2011 Challenges in Gas Transmission: The V4+ Perspective Andreas Rau Member of the Board of Directors

2 100% 56% 35% Holding Trade & Sales Transmission Distribution Storage E&P Storage Employees 893 Turnover > € 800 million Transmission volume 71 bcm Key Business Data  transmission contracts for 90bcm/a  2,270 km of pipelines  four compressor stations (aggregated power >1,000 MW; Veľké Kapušany biggest compressor station in the EU) Facts and Figures 2010

3 About 75% of today’s gas flow from Russia to Western Europe is passing through Slovakia Kiev Minsk Moscow Vienna Warsaw St. Petersburg Berlin Prague Budapest Existing Eustream 90 bcm/a EuRoPol Gaz 33 bcm/a New Nord Stream 2 x 27.5 bcm/a South Stream bcm/a Nabucco 31 bcm/a New projects can easily double existing pipeline capacities! New challenges due to increasing pipe-to-pipe competition! Bratislava Market Position

44 Development of Transmission Capacities in Slovakia Capacity 2009=100% contracted capacities max. technical capacities (acc. to decommissioning plan) expected impact of Nord Stream How reasonable are new routes if they lead to stranded investment elsewhere?

5 Our Vision: A Central European “Gas Turntable” Czech Republic  reverse flow (capacity of 25 mcm/d via Lanzhot) Ukraine  gas storages and E&P?  technical cooperation SK/UA?  reverse flow at SK/UA border (capacity cca. 85 mcm/d) Hungary  SK/HU Interconnector (“bridgehead” for Nabucco)  access to LNG (Krk)? Poland  interconnection PL/SK?  access to LNG (Świnoujście)? Austria  development of Baumgarten Hub  reverse flow (capacity of cca. 40 mcm/d via BOG)

6 Short-term / Short-haul Gas Transmission increasing no. of hub related transactions in SK (e.g. arbitrage NCG/CEGH) sufficient transmission capacities available in Slovakia in the long run (no investment need) new products (e.g. title transfer, VTP prepared) positive impact expected from SK/HU interconnector

7 TSO Cooperation : GATRAC 7 Cross border VP2VP products – Overview Direct connection between respective VPs Bundled products with one single contract (similar “train tickets”) Bookable with each participating TSO on FCFS-principle First product: Firm daily capacity Bookable one to more days ahead* No renomination *More days ahead will be used to allow bookings over the weekend and holidays and to align capacity booking periods with trading times on the EEX Gas Spot Market VP

8 The North-South Gas Corridor discussion triggered i.a. by 2009 gas crisis strong political support by V4+ initiative (six countries directly involved) 2,300 km of pipelines (+upgrade of existing lines) 900,000 t of steel investment approx 3,800 MEUR financing under EU programmes: 220 MEUR access to two LNG terminals (Świnoujście, Krk) Realistic concept for enhancing market liquidity and security of supplies or wishful thinking?

9 SK/HU The Hugarian/Slovak Interconnector I 115 km of pipeline length 5 bcm/a of (design) capacity bidirectional flow investment app. 120 MEUR financing under EERP (30 MEUR) start of operations initially planned for 2013

10 6/2009MoU signed by FGSZ and Eustream 7/2009EEPR application 12/2009 end of non-binding open season 6/2010 end of binding open season I 12/2010 end of binding open season II (start of operations postponed to 2014) 4/2011FGSZ withdraws from project, OVIT new partner on Hungarian side 10/2010 EEPR grant decision by EC The Hungarian/Slovak Interconnector III

11 Conclusions further diversification of transmission routes and supply sources (e.g. Nord Stream, Nabucco, South Stream ) – mainly enhancing east-west capacities huge efforts of TSOs to increase transmission capacities and implement new interconnections (forward and reverse flow) special focus on establishing a north-south corridor in Central Europe significant financial support of EU and political support by V4+ TSOs introducing new products (e.g. GATRAC) some uncertainties as to development of commodity markets some routes already having spare capacities today Start with realistic projects (e.g. HU/SK) and then follow a step-by-step approach (always verifying market demand, needs in terms of security of supply and cost/benefit ratio)

12 For further information:

13 pipe-to-pipe competition EU gas demand stagnating? stricter environmental regulations new unbundling requirements short-term bookings and increased speed of shipper transactions consolidation among European TSOs? Strategic Challenges

14 1- CZ/SK reverse flow Lanžhot 2- AT/SK reverse flow WAG 3- AT/SK reverse flow TAG 4- SK/HU interconnector 5- Internal reverse flow SK 6- Gazelle 7- EuRoPol Gaz / Jamal 8- Nord Stream 9- LNG PL 10- LNG CRO 11- OPAL 12- HU/CRO interconnector 13- Nabucco / South Stream Back-up: Main Gas Corridors in Central Europe 13

15 Virtual Trading Platform Virtual trading point is a requirement of liberalized markets: - it allows exchange of title within the transmission network - it enhances liquidity and trading - it brings additional source of revenues Eustream currently developing respective IT solution