1. The European Union’s CARDS programme for the Balkan region – Contract No. 52276 This project is funded by the European Union Regional Electricity Balkan Infrastructure Study (REBIS) & Generation Investment Study (GIS) Progress Reports, 22 October 2003 This project is realised by the PwC Consortium

2. PwC Consortium2 REBIS – Amended ToRs Since the Athens process meeting in Rome, the TORs of the REBIS work have been amended. The overriding objectives of the work are the: 1.Production of a report on the progress achieved in the creation of national and regional market rules enabling a functional regional market and; 2.Identification of what work, if any, remains to be completed. The GIS study has been incorporated into the overall project scope.

3. PwC Consortium3 GIS – current status Work to be undertaken by PwC, CMcK, Atkins, MWH, SEEC and Adica consulting. The interactions between regional market development (under REBIS) and priority investments (under GIS) captured through the involvement of the Consortium in the two separate strands of the project. Administrative delays in finalising of contract Work is being part-funded by the original REBIS Consortium

4. PwC Consortium4 REBIS – Activities to date First engineering data gathering visits undertaken in July 2003 and responses to the detailed technical questionnaire are being received. 11 questionnaires distributed, a few still outstanding. Major objective: –to understand the current infrastructure, limitations and management –to formulate approach to improvement to match REM requirements –to modify ideal market requirements to something manageable within current and future technical constraints.

5. PwC Consortium5 REBIS – Next steps Commercial and legal meetings scheduled mid-November in the region. –Invitations currently being sent out to ministries, regulators, TSOs and utilities. –Objectives to understand current position and expected developments and to explain commercial and legal questionnaires. Draft commercial and legal questionnaires developed. –To be finalised and issued to recipients in November –Objective to provide information to underpin understanding of current and planned developments within beneficiary countries and region We aim to derive draft proposals during Q1 2004 for refinement during the remainder of the year.

6. PwC Consortium6 GIS - Aims Two main strands of the GIS work: 1.demand forecast; 2.generation and infrastructure requirements assessment. Focus on CARDS countries Also covers Romania and Bulgaria Consultation with Donors and recipient countries through Athens process forum.

7. PwC Consortium7 GIS - Deliverables Demand deliverable: comprehensive demand forecast, which takes into account impacts of reform, and most recent projections and uncertainty associated with economic growth in the region. Reliant on factors such as: 1.Historic demand data 2.Economic data for beneficiary countries; 3.Price elasticity of electricity demand 4.Impact of energy efficiency measures.

8. PwC Consortium8 GIS - Methodology Generation and infrastructure requirements assessment to be undertaken using WASP and GTMax software packages, which have been extensively used in the region. Deliverables: alternative development options based on: 1.Least cost plans for national utilities without the benefit of regional co-operation; 2.Unconstrained least cost development plan for all regional power systems participating in the SEE REM; 3.Detailed market simulation for 2010 and 2015 to consider operating conditions in the SEE REM based on the candidate projects identified in the regionally integrated scenario.

9. PwC Consortium9 GIS - considerations Locational marginal pricing: –Assess the potential for “approximately similar LMPs” –Important to define LMP clearly –Consider added value of later investments to achieve similar LMPs when compared to uniform prices. Use of previous analysis: –Maximise use of previous work undertaken in the region –Meet with Donors to ascertain data and analysis availability –Liaise with other consultants on concurrent studies

10. PwC Consortium10 GIS – Anticipated Consultation Two general workshops for stakeholders, both linked to Athens process meetings. At the first, in approximately 6 months, we anticipate discussing the demand forecast and the alternative power supply options. At the second, in approximately 11 months, we expect to discuss the draft final report including the final results of the demand forecast and the results of the generation expansion analysis.