1. Howard Wright London, 5 September 2012 Introduction to Energy Exchanges - UK Power Market

2. 2 Agenda Introduction Purpose of an Exchange Memberships & Volumes Products Notifications Results

3. 3 3 APX-ENDEX today 592 TWh total traded and cleared volume in 2011 427 memberships across the markets from 13 countries 10 spot and futures markets operated in the Netherlands, UK and Belgium Nottingham London Amsterdam Brussels

4. 4 4 APX-ENDEX Markets TenneT RTE Power UK Power NL Elia Gas UK Gas NL Belpe x Gas ZEE Gas NL Future s Power BE Future s Power NL Futures Power UK Futures

5. 5 Shareholder Structure Stakeholders Member Advisory Boards assist the Executive Board by giving advice on matters relating to the strategy of the group, product development, rates, membership fees and clearing arrangements.

6. 6 6 1999 – Launch of the Amsterdam Power Exchange; Launch of EnMO, the first European screen-based spot market for gas trading 2000 – UKPX, UK’s first independent power exchange, established 2001 – APX UK spot market launched 2002 – ENDEX Futures Exchange launched 2003 – APX UK and EnMO integrated to APX 2005 – Launch of Dutch TTF spot market Launch of Belgian Zeebrugge gas hub 2006 – Belpex established. First market coupling initiative launched with APX-ENDEX Power NL spot market coupled with Belgium and France 2008 – APX and ENDEX merge 2010 – APX-ENDEX and Belpex merge 2011 – APX-ENDEX launches the world’s first biomass exchange History of APX-ENDEX

7. 7 Multi-year contracts Yearly contracts Quarterly contracts Long term Markets Spot & Short term markets volume Load ProfileTrading Portfolio Energy Trading – Why? Monthly contracts

8. 8 Energy Trading – Why? For different purposes Sourcing, optimization and balancing Arbitration Hedging Speculation By different types of companies Producers Suppliers Larger end-users Banks and financial institutions Speculators In different ways Bilateral Brokers Exchange ‘Over The Counter’ (OTC)

9. 9 Purpose of an Energy Exchange Fair and orderly market Transparent and trustworthy price formation Competitive, transparent and efficient fees Member support and trust Improve market conditions for trading Rules and Regulation for each APX-ENDEX market Business procedures for APX-ENDEX and members to ensure the fair and orderly working of the market

10. 10 Products & Services – What? Exchange trading Clearing Settlement Nominations Indices Historical data Trading takes place on EuroLight trading platform or Trayport GlobalVision. Central (Clearing) Counter party (CCP): APX (CCP) or ECC (CCP) becomes a party to every trade, acting as buyer to market participant sellers, and seller to market participant buyers. Allows members to trade anonymously. Clearing: management of post-trading, pre-settlement credit exposures, to ensure that trades are settled in accordance with market rules, even if a buyer or seller should become insolvent prior to settlement. Financial Settlement: This involves the payment of the purchase price. Physical settlement/Nominations: This involves physical delivery of energy to perform contractual obligations. APX-ENDEX will indicate to TSO on behalf of market participant how much energy he intends to transport by submitting nominations. Exchange always has a zero net position. APX-ENDEX provides information transparency by providing market data and indices for use by traders, energy suppliers, energy-intensive industries and government bodies. Fully Integrated Services

11. 11 Products & Services – What? SpotForwards & Futures T (before start of delivery) Volume 2 Days APX-ENDEX operates spot markets and futures markets in a complex regulatory environment characterized by different jurisdictions, a variety of government bodies and energy as well as financial regulators. Spot markets are ‘non-financially regulated’ markets. Delivery of commodity starts within 2 days (max.) after a transaction has been concluded. Future markets (APX-ENDEX Derivatives B.V. and APX Commodities Ltd) are financially regulated markets. Delivery of gas can start more than 2 days after a transaction has been concluded.

12. 12 Benefits of an Exchange Central clearing and settlement (both physical and financial) Anonymity Standardised products Non-discriminatory rules and regulations Regulatory supervision Efficient and secure trading platform Transparency Index and data products

13. 13 13 APX-ENDEX Memberships per Market 65 Power members / 78 Gas Members/ 10 Future Members

14. 14 APX-ENDEX – Member Base Some examples

15. 15 15 APX-ENDEX Total Volume per Market

16. 16 Services: Power Spot UK APX Power UK Spot and Prompt Market Within day and day ahead HH, 2H, 4H, Day ahead combination blocks, base and peak days and base weeks All Spot and Prompt products are cleared and delivered by APX Power UK APX Day Ahead Auction Day Ahead double sided blind auction APX Power UK Third Party Notification Services Notification of participants OTC trades by APX Power UK to ECVAA Power Indices MIDP data provider (used to calculate cash out prices) Reference Price Data Historical Data OTC Broker Give-up 16

17. 17 Services: Power UK Futures Contract series: EFE & OTC Clearing of; 3 EFA Months ahead; base & peak 4 EFA Quarters ahead; base & peak 4 EFA Seasons ahead; base & peak 2 SCM Months ahead;base Product specifications: Delivery PointElexon NominationsECC to Elexon Minimum volume1 MW Minimum tick£ 0.01/MWh Expiry2 or 3 days to delivery CascadingSeason: 1 Q + 3 M Quarter: 3 M Month: 28, 35 or 42 days Trading channels: Bilateral, registered and cleared via ENDEX Over the counter (OTC) Non-anonymous & cleared via ENDEX Anonymous & cleared via ENDEX ENDEX Futures Exchange, automatically cleared

18. 18 18 Clearing APX-ENDEX Trading Member European Commodity Clearing AG APX-ENDEX Clearing B.V. Trading Member Spot trades Derivatives trades Clearing and settlement services Clearing and settlement services

19. 19 Trading Platform EuroLight-Trayport Translator Integration of EuroLight and Trayport onto one screen Trayport GV 8.5 view 19

20. 20 A Market View

21. 21 UK Spot and Prompt Products 21

22. 22 APX Power UK Volumes

23. 23 Breakdown of Contracts Traded – Old example!

24. 24 Delivery / Notification APX Power UK is authorised to act as an ECVNA (energy contract volume notification agent) for all trades on the exchange APX Power UK automatically notifies ECVAA (energy contract volume aggregation agent) of traded positions After every trade a new net notified position is sent for all 48 settlement periods APX Power UK notifies both legs of the trade as central counterparty Trade remains anonymous from trade to delivery APX Power UK assumes risk for delivery failure Net notified positions available on Elexon 7 day report for reconciliation

25. 25 MIDP APX-ENDEX acts as a market index data provider (MIDP under contract to the system operator. Index prices are generated in respect to each BSC settlement period, and are calculated as each relevant HH product closes for trading. These index prices are used to set the ‘reverse price’ for the imbalance settlement process. http://www.bmreports.com/servlet/com.logica.n eta.bwp_MarketIndexServlet?displayCsv=f alse

26. 26 Data RPD - Reference Price Data Provides the market place with a reliable, robust and authoritative half hourly index Indices APX Power UK Base Load Spot Index APX Power UK Peak Load Index Extended Peak Load Index Off Peak Index Two index fixings published: ‘mid-day fix’ VWAP of all trades executed within 08:00 and 12:00 ‘end of day fix’ VWAP all trades executed within 08:00 and 18:00

27. 27 Results - Website

28. 28 Summary Market facing challenges Contestability of markets – Ofgem liquidity review Developing liquidity along the curve Integration of European Markets Increased intermittency of supply Demand load management Managing Intermittency Credit arrangements APX-ENDEX has lowered barriers to entry Lower clip sizes + clearing efficiencies 65 members signed-up over 10 years of successful operation Member-led exchange Forefront of market integration

29. 29 Thank you for your attention

30. 30 Amsterdam Australia Building Hoogoorddreef 7 1101 BA Amsterdam The Netherlands T +31 20 305 4000 F +31 20 305 4001 London 6th Floor 21 Southampton Row London WC1B 5HA United Kingdom T +44 20 7841 5600 F +44 20 7841 5601 Brussels Boulevard de L’Impératrice 66 1000 Brussels Belgium T +32 240 346 50 F +32 240 346 70 Nottingham Ergo Building, Mere Way Ruddington Fields Nottingham NG11 6JS United Kingdom T +44 115 921 7421 F +44 115 921 7420