1. www.ero-ks.org REGULATORY FRAMEWORK AND MARKET OPENING Krenar Bujupi ERO Board Member 1 March 2016, Prishtina

2. KOSOVO ENERGY SECTOR Cogeneration 2

3. MULTI YEAR TARIFF 2007 2009 20132014201520162017 256.7 274.3 256.5 224.6 139.8 136.9 2011201220102008 256.5 156.4 180.3 215.6 135.0 TOTAL MAR OF THE SECTOR (€m) 253.5 224.6 249.2 Allowed with Periodic Review Annual adjustment MAR before privatization of Distribution and Supply 243.5 Proposed MAR for 2016 3

4. TOTAL MAR OF THE SECTOR (€m) 4

5. AVERAGE PRICE FOR HOUSEHOLD CUSTOMERS FOR 2014 Turkey 9.8 10.5 Slovakia Croatia 13.2 Hungary 9.5 Montenegro 8.8 Moldova 8.5 Macedonia 6.8 Albania 6.2 Serbia 5.4 Kosovo 5.2 Bosnia 6.5 €c/kWh 5

6. Turkey 7.9 9.99 Slovakia Croatia 11.71 Hungary 8.4 Montenegro 6.5 Moldova 7.9 Macedonia 10.8 Albania 8.1 Serbia 7.6 Kosovo 7.3 AVERAGE PRICE FOR NON-HOUSEHOLD CUSTOMERS FOR 2014 Bosnia 6.5 €c/kWh 6

7. CONSUMPTION, PRODUCTION AND LOAD SHEDDING (GWh) 7

8. IMPORT AND EXPORT 8

9. KEK GENERATION AND MINING INVESTMENTS *There are almost € 300 million CAPEX Allowed for KEK Generation and Mining 9

10. KOSTT INVESTMENTS *There are €137 million CAPEX allowed for KOSTT *The highest value of investment is realized in 2015 due to Interconnection Line with Albania 10

11. DSO/KEDS INVESTMENTS *There are more than €100 million CAPEX allowed for DSO 11

12. DISTRIBUTION LOSSES 12

13. KEK Mine Kosovo A Kosovo B TSO/MO DSO Supply KEK Mine Kosovo A Kosovo B TSO/MO DSO Supply KEK Mine Kosovo A Kosovo B TSO/MO DSO Supply KEK Mine Kosovo A Kosovo B TSO/MO DSO Supply KEK Mine Kosovo A Kosovo B TSO/MO DSO Supply pre-2005 Vertical integration 2005 TSO/MO unbundling 2013 DSO/PS unbundling 2014 DSO/PS unbundling Further unbundling Current strategy Increased capacity Decommission - align with NKPP Rehabilitation Legend State ownership Private ownership MARKET DEVELOPMENT

14. PP Kosovo B Transmission Distribution New Kosovo PP Renewable energy sources Decommissioning of PP Kosovo A THE FUTURE OF ENERGY SECTOR GENERATION Supply Supplier X Supplier C Supplier B Supplier A

15. SUMMARY AND FUTURE STEPS The multi-year tariff system improved the predictability of the energy sector regulatory framework which facilitated investment in the energy sector Additional investments have led to significant improvements in security of supply, reduction of losses, elimination of bottlenecks o Remove structural barriers to market opening ERO with the support of USAID through Repower project, is currently undertaking a Cost of Service Study which will identify the extent of cross-subsidization between customer categories; Cross-subsidies to be eliminated o Road-map for market opening to identify necessary steps currently being developed; o Market concentration and low number of suppliers is a challenge Regulation Market orientation and deregulation

16. Thank you! Energy Regulatory Office Rr. Dervish Rozhaja Nr. 12 Prishtinë, Kosovë 10000 (Tel) + 381 (38) 247 615 info@ero-ks.org www.ero-ks.org