EFETnet – Well Connected Electronic Confirmation Matching for European Energy Traders

The ad-hoc Response to Absense of Standards:

How does Energy Trading work? Deal negotiated by phone or arranged by broker 1 Trader Broker ETRM System (Electronic Trade & Risk Management) 2 Deal data is transfered to ETRM Systems Back-office Staff Checks & approves 3 4 Classic solution: Trade Confirmations are exchanged by fax 5 Faxed data is matched against ETRM data Manual work, media breaks, typos, high risk  COST

How does Energy Trading work with the EFET Box? Deal negotiated by phone or arranged by broker 1 Trader Broker ETRM System (Electronic Trade & Risk Management) 2 Deal data is transfered to ETRM Systems Back-office Staff Checks & approves 3 EFET Box ebMS 2.0 XML New solution: Standardised exchange of XML documents using ebXML

The EFETnet Mantra: „Yin-Yang-Yong“

The achievement of EFET eCM: Total Interoperability Standardisation standardised „Spaghetti Communication“ No Standard Business Process No Standard for Data Exchnage - No Standard for Document Formats - # Converters ~ # Participants2 “Yin/Yang/Yong”: - Document Standard Interoperable Software - No “Spaghetti” situation - # Converters = # Participants

EFETnet eCM Users & expected Users (Nov. 2006) 22 companies live or with projects started The next Wave UBS, EWE, MVV, CNR, ICP, Delta, WinGas, GazProm, Iberdrola, Man Financial, … >= 35 live end of 07

Example of an EFETnet confirmation Extremely fast Electronic confirmations sent and matched within 2 minutes Typical Electronic confirmations sent and matched within one day

Counterparty and Broker Match Example 5: Trader, Counterparty and Broker involved in eCM, Broker‘s BCN matched with own CNF and BFI, and Counterparty‘s CNF matched with own CNF. Broker Match took place at first

Benefits of eCM Management Legal Business Technical Automate overhead to business Standardise non competitive activities Share costs Legal Increased clarity of business interactions Standardised industry terms and templates Speed of processing new commercial relationships Business Reduced operational risk Scalability & straight through processing (STP) Process standardisation and quality Technical Increased time and budget to deal with ‘higher value’ internal IT Certified industry standard solution can be leveraged for other messages Defined service levels

papiNet Users – A typical 3-Corner Relationship Sales Stock Management Financial Acct. Paper Supplier Transport Purchase Order Order Confirmation Delivery Notes Invoice Call-off Printer Reservation / Order Customer Stock Management Inventory Stock Stock Management Production Management Procurement Financial Acct.

Ponton Consulting Ponton X/P Users

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Contractual framework - overview Status of EFETnet Contractual framework - overview Ponton Consulting GmbH Software Developer Provides an industry wide licence Maintenance, Support & Help Desk EFETnet Agreement Monthly service fee Back to back maintenance, support & help desk Sub-licence EFETnet BV Participant A Participant B Participant C EFET Electronic Confirmation Agreement (ECA): bilateral agreement to exchange confirmations based on EFET Standards

What is EFETnet ? www.efetnet.org Independent company, owned 100% by EFET. Aim is to provide the central infrastructure needed to enable its members to reliably and securely exchange documents within the European energy trading industry. Peer-to-peer document-centric approach based on industry standards like EFET ECM 3.1 and ebXML. In March 2006, EFETnet has 12 corporate customers Initial focus on confirmation process with plans to move to scheduling, invoicing and CO2 title transfers in the future. www.efetnet.org

Further Steps in Standardisation & Implementation Next Steps: Commodities Spanish Swaps Electronic Position Matching Nominations EUA Registry related process Settlement / Clearing

Expansion into neighbouring industry sectors Status of EFETnet Expansion into neighbouring industry sectors Traders & Brokers Brokers: Spectron is life for 10 months, ICAP/GFI/Prebon to implement Electronic Position Matching: Prototype bult by Dec. 06, product by July 07 CO2 Regsitries: Messaging integration developed together with CDC/DEFRA Processes: Registry transfer requests, Registry reports Won against SWIFT! ETSO: Exchange of Power schedule data between European Grid Operators ESS 3.0 Nominations EASEE-gas: Data exchange among gas grid operators (planned) EDIg@s, AS/2 Exchanges: Deutsche Börse/ENDEX/Powernext Central Matching, Clearing

For Example: EUA Registry Interface Status of EFETnet For Example: EUA Registry Interface History Mid 2004 – an ‚API‘ was requested Oct 05 – evaluation conducted: EFETnet, Swift, bespoke build May 06 – questionnaire – to be completed by YOU!!! June 06 – decision expected ? Carbon Expo (May 2006) A lot of interest in EFETnet for carbon CDC keen on EFETnet GRETA/DEFRA still need lobbying Status (Nov. 2006) Demand identified for 6-10 national Registries CDC implementing, integrating with Ponton X/P DEFRA has issues CFT für Registry/messaging interface Trading System vendors start developing interface for EUA transfer notification Integration with pilot users (Gaselys, Electrabel) to start inDec. ´06

Solutions Development Ponton Consulting takes different roles in international B2B integration projects. Business Consulting IT Consulting Standardisation Solutions Development Back-end Integration B2B Integration Standards Internal Processes External Processes Internal Processes M XML M XML XML Customer Supplier ERP - System Transformation / Data Mapping Message Transfer Transformation / Data Mapping ERP - System

Borderline of the EFET Box system EFET Box+ architecture and development Borderline of the EFET Box system Trading Organisation . Same Communication Infrastructure Internet Trading Organisation Trading Organisation ETRM System ETRM System EFET Box EFET Box Match/ Dispatch Match/ Dispatch In Out Out In Audit Trail CNFs Audit Trail CNFs Archive Archive

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