Market liberalization in Moldova -main challenges- Chisinau, May 16, 2013 Veronica Muruziuc Seventh Partnership Activity

MOLDOVAN POWER MARKET -SPECIFICS- Power market opening: - From 1 January 2013, all non-household customers were declared eligible (Electricity Act); - The power market for households will be opened from 1 January 2015 (Electricity Act); - Only one active eligible customer. Lack of generation capacity: -70% of electricity imported from Ukraine and Transnistrian Power plant;

MOLDOVAN POWER MARKET -SPECIFICS- - 30% covered by producers from the right side of Dniestr. Moldovan TSO, Moldelectrica, is a state company and is functionally and legally unbundled; The 3 DSOs performing their activity on a given area carry out both activities of distribution and supply of electricity at regulated tariffs;

Gas Natural Fenosa Distribution and supply at regulated tariffs RED Nord RED Nord Vest Cross-border exchanges from Ukraine Cross-border exchanges from Ukraine Independent power producers Transnistria Independent power producers Transnistria 8 licensees for supply at non-regulated tariffs Legend: Electricity flows Contractual, financial flows (billing and payment) Tariff customers TSO Moldelectrica TSO Moldelectrica 1 1 Regulated Producer HPP Costesti Regulated Producer HPP Costesti 1 1 Eligible customers all non-households Eligible customers all non-households Only one active CHP-North Regulated Producers CHP-1 CHP-2 Cross-border exchanges to Romania in island mode Cross-border exchanges to Romania in island mode Non-regulated CHPs of Sugar Refineries Only one active Picador-Grup Picador-Grup MOLDOVAN POWER MARKET -SPECIFICS-

MOLDOVAN NATURAL GAS MARKET - SPECIFICS - Natural gas market is fully opened; No active supplier at non-regulated tariffs; No active alternative suppliers: natural gas is imported from Russia.

MOLDOVAN NATURAL GAS MARKET - SPECIFICS - Moldovan TSO, Moldovatransgaz, a daughter company of Moldovagaz, is functionally and legally unbundled; The 25 DSOs performing their activity on a given area carry out both activities of distribution and supply of natural at regulated tariffs.

Moldovagaz Moldovatransgaz TSO Distribution Company 12 S&PS O DSO Import Tiraspoltransgaz TSO Final Customer (all customers are eligible but no one have the possibility to buy) 1 Producer DSO S&PS O Import flows from Russian Federation (via Ukraine) Cross-border flows to Romania (natural gas from Russian Federation to Romania) „Darnic-gaz“ JSC Technical LinkCommercial Link 12 Distribution Companies (DC) To DCs connected to Moldovatransgaz network To DCs connected to the neworks of Moldovagaz- daughter DCs 1 Supplier at non-regulated tarfiis MOLDOVAN NATURAL GAS MARKET - SPECIFICS -

COMMITMENTS UNDER TCE In march 2010 Moldova signed the Energy Community Accession Protocol: - Under the treaty Moldova had to transpose the so-called “second energy package”. According to the Ministerial Council Decision from 6 October 2011, by 1-st January 2015, the Energy Community Contracting parties should transpose the so-called “third energy package”: -Directive No. 2009/72/EC; -Directive No. 2009/73/EC;

COMMITMENTS UNDER TCE -Regulation No. 714/2009; -Regulation No. 715/2009. The scope of the “second energy package” and of the “third energy package” - ensure liberalization of energy markets.

TCE Contracting parties

MAIN CHALLENGES Given specifics of the natural gas and power markets in Moldova, the main challenges regarding liberalization of energy markets are: -To ensure effective unbundling of TSO from producers and suppliers in the natural gas sector; -To establish procedure for switching suppliers by customers, in maximum 3 weeks (in both electricity and natural gas sectors);

MAIN CHALLENGES -To encourage the entrance of new suppliers on the energy markets: -introduction of obligation for non-household customers to buy electricity from the market (could be an option?); -To establish a day-ahead market: -At the level of Energy Community a SEE WMO Report was developed. One of the conclusions was that until Moldova joins ENTSO-E (in about 8 years according to the Report), the possibility to create a common market with Ukraine should be considered. -To establish a balancing market, an ancillary services market.

THANK YOU. Veronica Muruziuc Legal consultant National Agency for Energy Regulation Tel , Columna str., 2012, Chisinau, Republic of Moldova