1. 1 1 ROMANIAN ENERGY SECTOR April 2006 Ioan Codrut SERES Minister

2. 2 THE OBJECTIVES AND PRIORITIES FOR THE DEVELOPMENT OF ROMANIA’S ENERGY SECTOR The main priorities are: To preserve the national sovereignty over the primary energy resources and of the national policies in the energy sector;To preserve the national sovereignty over the primary energy resources and of the national policies in the energy sector; To maintain the dependency for imported primary energy resources at an acceptable level and to diversify the import resources;To maintain the dependency for imported primary energy resources at an acceptable level and to diversify the import resources; To support the development of competitive electricity, natural gas and energy markets;To support the development of competitive electricity, natural gas and energy markets; To decrease the negative environmental pressure generated by the energy sector;To decrease the negative environmental pressure generated by the energy sector; To improve the energy efficiency on the entire resources, production, transport, distribution and consumption chain;To improve the energy efficiency on the entire resources, production, transport, distribution and consumption chain; To support the production of energy based on renewable resources;To support the production of energy based on renewable resources; To attract strategic investors for sustaining the restructuring and privatization of the energy sector.To attract strategic investors for sustaining the restructuring and privatization of the energy sector. The general aim of the energy sector is to meet the demand for energy consumption at the lowest price possible, suited for a modern market economy and for a high life standard under the requirements of the quality, safety of supply and sustainable development principles.

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4. 4 NECESSARY MEASURES TO ATTAIN THE PROPOSED OBJECTIVES To improve the energy efficiency on the entire production-transport-distribution-final consumption chain in order to achieve a reduction of the annual energy intensity by 2,5-3% during 2005-2008 in comparison with 2001;To improve the energy efficiency on the entire production-transport-distribution-final consumption chain in order to achieve a reduction of the annual energy intensity by 2,5-3% during 2005-2008 in comparison with 2001; To continue the development of regulatory framework regarding the natural monopole activities on the basis of transparency, non-discriminatory and impartial principles by independent regulatory authorities;To continue the development of regulatory framework regarding the natural monopole activities on the basis of transparency, non-discriminatory and impartial principles by independent regulatory authorities; To maintain the safety of the energy sector through investments in new technologies and the fulfillment of the environmental protection directives;To maintain the safety of the energy sector through investments in new technologies and the fulfillment of the environmental protection directives; The transformation of the state owned companies in the energy sector in order to be important contributors to the state budget and not beneficiaries contrary to the present situation;The transformation of the state owned companies in the energy sector in order to be important contributors to the state budget and not beneficiaries contrary to the present situation; To ensure the supportability of the electricity, heating and natural gas prices for the consumers;To ensure the supportability of the electricity, heating and natural gas prices for the consumers; To support the research and development activities in particular for the development of the technologies aimed at capitalizing the internal primary energy resources including the renewable energy sources.To support the research and development activities in particular for the development of the technologies aimed at capitalizing the internal primary energy resources including the renewable energy sources.

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6. 6 MAIN PROJECTS FOR ENERGY SECTOR The accomplishment of Nabucco Project (natural gas transit from Caspian Sea area to Western Europe, via Romania)The accomplishment of Nabucco Project (natural gas transit from Caspian Sea area to Western Europe, via Romania) Interconnection of natural gas network with:Interconnection of natural gas network with: - the Hungarian system in Arad - Szeghed area - the Ukrainian system in Siret - Cernauti area - the Bulgarian system in Giurgiu - Ruse area The PEOP project (crude pipeline Constanta – Trieste)The PEOP project (crude pipeline Constanta – Trieste) Continuing the civil nuclear program in order to finalize Unit no. 2 (in 2007) and Unit no. 3 (after 2011) of Cernavoda Nuclear Power plantContinuing the civil nuclear program in order to finalize Unit no. 2 (in 2007) and Unit no. 3 (after 2011) of Cernavoda Nuclear Power plant Realization of new hydropower capacities and rehabilitation of existing onesRealization of new hydropower capacities and rehabilitation of existing ones Realization of Tarnita – Lapustesti pumping stationRealization of Tarnita – Lapustesti pumping station Continuing the rehabilitation of electric energy network and increasing the number of interconnections with the EU countries in Black Sea areaContinuing the rehabilitation of electric energy network and increasing the number of interconnections with the EU countries in Black Sea area Participation to the regional energy market implementation, in order to be integrated in the European Union marketParticipation to the regional energy market implementation, in order to be integrated in the European Union market Supporting the establishment of the regional electric energy stock-exchange in BucharestSupporting the establishment of the regional electric energy stock-exchange in Bucharest

7. 7 THE SOCIAL IMPACT OF ROMANIAN ENERGY POLICY Maintaining the electric energy and natural gas prices on a supportable level for population and companies, by:Maintaining the electric energy and natural gas prices on a supportable level for population and companies, by: - Consolidation the competitive energy market - Interconnection with the electric energy and natural gas regional markets - Improvement of price and tariff systems. Reducing the energy price for population and companies by increasing the energy- efficiency, diminishing of specific consumption and using new and advanced technologies in energy sectorReducing the energy price for population and companies by increasing the energy- efficiency, diminishing of specific consumption and using new and advanced technologies in energy sector Increasing the safety of energy supplyIncreasing the safety of energy supply Transition to a direct social protection system for low income population by replacing the social tariff for electric energy and the subsidy for thermo energy with social assistance only for vulnerable consumer categoriesTransition to a direct social protection system for low income population by replacing the social tariff for electric energy and the subsidy for thermo energy with social assistance only for vulnerable consumer categories

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9. 9 REGIONAL ELECTRICITY MARKET  Significant benefits in considering investments on a regional basis in South East of Europe (SEE);  Regional Electricity Market needs the transmission investments to support the transfer of electricity between jurisdictions providing additional benefits from trading perspective;  Regional studies have provided a number of least cost investment plans, providing an indication of the potential generation and transmission options;  Among the most attractive plant from a regional perspective are new Cernavoda NPP units (Romania) and the development of Belene NPP (Bulgaria).

10. 10 STATUS OF NUCLEAR POWER IN ROMANIA   The Ministry of Economy and Commerce is responsible for the national strategy in the energy field, including NPP projects implementation and operation;   Nuclear power in Romania, based on Western safe technology, represents today 10% of the electricity production, with excellent safety and economical performances at Cernavoda NPP – Unit 1;   Based on the long-term commitment to nuclear power of the Romanian Government, the commercial operation of Cernavoda Unit 2 NPP is scheduled for the mid of 2007;   With two units in operation at Cernavoda NPP in 2007, the nuclear power shall generate around 18% of Romania gross electricity production.   Cernavoda NPP will have an important role in Romania for energy security, sustainability and improved environmental protection.   Positive public and local authorities perception of the nuclear energy.

11. 11 FUTURE OF NUCLEAR POWER  Based on a decision of the Romanian Government the Unit 3 and possibly 4 of Cernavoda NPP are intended to be completed through a partnership with local or foreign private investors, without state guarantees.  Cernavoda Unit 3 project was already presented to the potential investors in 2004 and seven of them expressed their interest in developing the feasibility study.  By March 31, 2006 the Feasibility Study will be finalized and the negotiation with investors will start;  Tentative schedule is about 64 months with commissioning in 2013 of Unit 3 and in 2014 of Unit 4.

12. 12 UNITS 3 & 4 PROJECT   The rationale of the Government in undertaking the Project with third party investors include: Bringing foreign expertise and finance into Romania; Bringing major international players into the Romanian energy market in view of the liberalization of the sector; Implementing the Project more quickly than would otherwise be possible given the other financial commitments of SNN and the Government; and The Government’s unwillingness to provide sovereign guarantee for loans and PPAs concluded with state entities.  The Project is expected to be funded on a combined basis in a manner similar to other project financed power plants.  The project will be primarily funded by debt, the debt to equity ratio is expected to be in the region of 70:30.  The debt needs to be secured on the future cash flows and assets of the Project in line with other power plant project financings as no sovereign guarantees may be provided. Various options for structuring the power purchase agreements exist.  To enable the Project to proceed on this basis the additional risks inherent in the operation of nuclear power plants, including waste disposal, risk of nuclear accident and decommissioning of the plant, the Government would be required to confirm that it is willing to take on risks associated with waste disposal and decommissioning in excess of the statutory obligations of the PCO.

13. 13 Natural gas reserves around Europe NABUCCO GAS PIPE LINE PROJECT

14. 14 NABUCCO PIPELINE ROUTE NABUCCO PIPELINE ROUTE

15. 15 NABUCCO PIPELINE ROUTE IN ROMANIA

16. 16 PEOP PROJECT DEVELOPMENT COMPANY PROPOSAL

17. 17 ROMANIA TURKEY UNDERSEA CABLE Pasakoy

18. 18 THANK YOU!