1. Gas Regional Initiative North-West Transmission System Operators Page 1 Investment work stream GRI North-West Operators‘ Group Investment Work Stream SG London, 14 November 2008 Contact: Bas Barten Gas Transport Services B.Barten@gastransport.nl

2. Gas Regional Initiative North-West Transmission System Operators Page 2 Content  GRI NW investment website  Urgency of a sound investment climate  TSO view on a sound investment climate  Explanation of the status quo of the investment climate  TSO Principles and justification  Way forward

3. Gas Regional Initiative North-West Transmission System Operators Page 3 GRI NW website  Overview of investment activity in the NW region  Up to date information about investment and open seasons  Live since September 2008  www.gasinvestment.org

4. Gas Regional Initiative North-West Transmission System Operators Page 4 Urgency of a sound investment climate Additional gas infrastructure required in the North West region:  Declining production, increasing import from outside the region (and the EU)  Ability to choose in a competitive wholesale market  Lack of capacity at multiple key cross border points  Not enough incentives for most of TSOs to timely deliver the market demand for additional capacity at cross border points

5. Gas Regional Initiative North-West Transmission System Operators Page 5 TSO view on a sound investment climate  A climate where TSOs can build the market demand for capacity in a timely, efficient and economically reasonable way  Not always possible to make clear distinction between national and cross border investment  A sound regional investment climate in the region requires a integral solution where multiple parties have to be involved (Member States, NRAs and TSOs)  The individual national frameworks are hereby the corner stones of this solution and a prerequisite for a regional investment climate  Some frameworks lack the principles proposed by TSOs whereas other have them already implemented

6. Gas Regional Initiative North-West Transmission System Operators Page 6 Current status in Belgium  Relaunched Coordinated Open Season on 23/09/08  Close coordination with GRTgaz and GTS  Binding commitments expected by 03/12/08  Regulated tariff will be applicable  Comfort for shippers: step-out right if regulated tariff exceed the limits stipulated in the proposed agreement

7. Gas Regional Initiative North-West Transmission System Operators Page 7 Current status in France Pros  Longer regulatory period (from 2 to 4)  visibility and predictability  Additional rate for some new investments  incentive for investment  Clearer criteria for granting this additional rate of return  Open seasons with long term commitments Cons  2009 tariff has negative impact on profitability of new investments  Decrease of work in progress rate of return  Fix rate (during 4 years) while the interest rate evolves  In 2007, decrease of standard rate of return (-0.5%)

8. Gas Regional Initiative North-West Transmission System Operators Page 8 Current status in GB Pros  Auctions provide clear market signal in an open an transparent way  Long term auctions scheduled annually but users able to request adhoc auctions at any time  Users commitment underwrite much of the investment Cons  Process not necessarily compatible with neighbouring networks  Requires user commitment before decision to invest. NG has little flexibility to invest on receipt of other market intelligence. (This may lead to some issues with users suggesting NG slow to respond)  Regulator retains ability to disallow investment from RAV if they deem it inefficient or unnecessary

9. Gas Regional Initiative North-West Transmission System Operators Page 9 Current status in Germany New System: Incentive Regulation  New regulatory framework starting in German TSOs in 2010  Approval of TSOs cost base by Bundesnetzagentur (BNetzA)  Investments are treated within so called investment budgets Uncertainty factors for investing in Germany  Application incentive regulation pending in court by actions of TSOs  Benchmark procedure within incentive regulation not defined yet  Design of investment budgets will influence rate of return  Equal return on equity for all kind of investment  Achievement of ROE not assured  Unpredictable framework for unbundling conditions

10. Gas Regional Initiative North-West Transmission System Operators Page 10 Current status in The Netherlands  Old method of regulation based on historical costs and not suited for large cross border competitive infrastructure investment  Clarity new investment policy by MEA and parliament by declaring important investment parameters (investment, ROI and depreciation)  Based on this high level decision investment decisions were taken  High level agreement still has to be translated in a new method of regulation by NRA and amendments to the Dutch gas law  Without a method of regulation or new gas law it is not possible to adjust tariffs and uncertain if GTS can fix tariffs in long term contracts.  GTS is confident that principles in policy will be translated in the method of regulation and Dutch gas law

11. Gas Regional Initiative North-West Transmission System Operators Page 11 GRI NW operator principles  Stable, predictable and fair Stable investment parameters Predictability for the TSO what happens with higher/lower costs/revenues Fair risk/reward ratio  Underpinning of investments Sufficient binding commitments from market, regulators and governments  Improved cooperation both between regulators and TSOs  Clear division and definition of roles and responsibilities

12. Gas Regional Initiative North-West Transmission System Operators Page 12 Contact: Bas Barten Gas Transport Services B.Barten@gastransport.nl Thank you!