1. Madrid, 12 th April 2010 14th IG Meeting South Gas Regional Initiative

2. 2 14th IG meeting S-GRI- Agenda

3. 3 II.1 Stakehoders‘ comments on the Open Season 2015 procedure After last SG meeting, held on the 16 th of March 2010, Stakeholders were requested to send their comments on the work developed by TSOs and Regulators regarding the procedure of the Open Season 2015 Twelve responses have been received, nine from shippers, one for a customers association, one from a stakeholders association and one from a TSOs One shipper argues that, due to delays in the documentation publication, there has not been enough time to analyze it in detail A French customer association sees the OS as a great opportunity for industrial clients, particularly in the South of France

4. 4 II.1 Stakehoders‘ comments on the Open Season 2015 procedure 1.Investments Four responses points out that costs in France has been sharply increased since 2007; they are considerably higher than the result of calculating them with the Spanish standard built infrastructures in Spain, which fully comply with the best international regulation according to a TSO. On shipper expresses the possibility of a benchmarking between different TSOs should be appropriate Five agents express a need for defining clearly infrastructures to be built and their cost, in particular, how costs are going to be allocated in the case of investments that are associated with two or more entry-exit points. One company suggests that, since infrastructures should be built in the most effective way to pass the economic test, other investment scenarios could be considered One shipper explains that if some infrastructures will be constructed independently of the results of this OS (Rhône axis), it is not possible to admit that the total cost it’s borne by the OS Finally, other agent considers that discussing the investment increase and the network planning in France may delay significantly the process

5. 5 II.1 Stakehoders‘ comments on the Open Season 2015 procedure 2.Tariffs Three responses indicates that tariffs at the S-F border must reflect fairly the cost and be economically justified, requiring further clarification for the proposed increased Five agents state that a different tariff to access France from Spain would be discriminatory with regard to similar entry points to France from other places as Fos LNG terminal. One company explains that at the moment other OS (Fos Tonkin) is being carried out in France without tariff increase. Other response understand that, in a system, small price differences in the entry points could occur. One company asks CRE to clarify if their proposal is to set a premium at the border S-F over other entry points or to set a tariff at the border that will not be modified in the future, regardless the evolution of tariffs at others entry points.

6. 6 II.1 Stakehoders‘ comments on the Open Season 2015 procedure 2.Tariffs (cont.) Arguments defending the current tariff: Shippers entering France through the North will not pay extra fees although a lot of investment are going to be made also in the North of France, where congestion exists, reducing the competitiveness of gas coming from the Iberian Peninsula (2 shippers) The increase of current TPA tariffs is not in line with CRE Deliberation of July 2009 to provide guidance on the French system access organization, so a clarification is required (3 agents) A more expensive tariff will increase the possibility to leave capacity available after the OS and, consequently, some shippers could be interested in waiting after the OS to request that capacity at a lower price (1 agent)

7. 7 II.1 Stakehoders‘ comments on the Open Season 2015 procedure 2.Tariffs (cont.) Three shippers prefer only an Open Season based in one request at the current tariff Five agents underline the possibility to establish a scale of offers system that fluctuates between 90 €/GWh/day and 140 €/GWh/day. Consequently, shippers could indicate how much capacity at several prices they are interesting in booking. This increases the probability of passing the economic test at a lower price. Other agent indicates their preference to request, at least, different capacities with two different prices. One company requests for clarification on how possible tariff increase could affect future ST OSPs Three responses say that the fact that only shippers participating in the OS must establish a financial guarantee for investments that are required by other shippers (LNG terminal users) will affect competition

8. 8 II.1 Stakehoders‘ comments on the Open Season 2015 procedure 3.Economic test Four agents consider that although more transparency is being given to the current economic test, it is not sufficiently explained, justified and discussed (i.e. infrastructure working life, TSOs’ rate of return or the role of the European funds have not been indicated) Two agents think that the economic test has to be designed with a certain degree of flexibility when analyzing the different options, and, with this aim, they propose to offer 90% of capacity for LT contracts. Other company reminds the need for a decision on ST capacities, consistent with the probability of MIDCAT passing the test. Two shippers suggests asking for additional European Funds in the frame work of the Recovery Plan, in order to help the economic test to be fulfilled despite insufficient requests from shippers

9. 9 II.1 Stakehoders‘ comments on the Open Season 2015 procedure 3.Economic test (cont.) One shipper points out that if the economic test were based on the estimated cost by TSOs in 2007, the allocation of the 100% of the capacity in the direction Spain-France direction would just cover 70% of the investments costs. Other companies (2) indicates, in particular, that 70% of the investment coverage must be reviewed lowering the threshold One agent thinks that the current economic test must be reconsidered, since it make no sense applying the cost-reflectivity principle to one entry when this is not the general rule for the rest. It explains that large investments in the Rhône axis is contradictory with freezing GRTgaz North-GRTgaz South tariff or with no revision of cost allocation at exit points. Marginal cost should not be considered in the test, but average costs, to guarantee a fair situation if new entry points benefit from investments triggered by the OS. In other projects the working life considered is 20 years instead of 10 years considered in the OS.

10. 10 II.1 Stakehoders‘ comments on the Open Season 2015 procedure 3.Economic test (cont.) Finally, one company request the southern corridor contribution to European Security of Supply not to be overlooked: the European internal market won’t be completed if a large interconnection between Spain and France is not built. A new interconnection between France and Spain will increase competition in the South of France, involving a decrease in the gas prices that may justify a higher investment costs.

11. 11 II.1 Stakehoders‘ comments on the Open Season 2015 procedure 4.Priority criteria: MIDCAT versus Irún One shipper agrees with the priority criteria foreseen but require investments scenarios and their cost to be revised Other agent considers that MIDCAT maximizes the capacity utilization in the Spanish system and the cost recovery (€/GWh/day). Other reason is that MIDCAT investments are linked to the reinforcement of GRTgaz North and GRTgaz South interconnection, allowing the gas to flow to the north of France, while Irún validation increases the possibility of not validating of GRTgaz North and GRTgaz South interconnection One company prefers building Biriatou first if the entry tariff is not maintained for MIDCAT.

12. 12 II.1 Stakehoders‘ comments on the Open Season 2015 procedure 5.Capacities One response asks for a clear definition of the capacity at GRTgaz North- GRTgaz South IP if investments at Biriatou are validated, while other agent points out that capacities presented by TSOs and by CRE are different, and asks for clarification One shipper asks not to offer capacities inside France in the OS One agent is in favor of minor modifications of the maximum duration of multiannual capacity requests (244 months instead of 240) and of the highest priority requested duration (124 months instead of 120) Additionally, proposes to remove multiseasonal capacities to simplify the procedure if these capacities are marginal, which may be offered in OSPs on ST basis Two respondents are in favor of lifting the coordinated restrictions at different points in order to avoid capacity not assigned

13. 13 II.1 Stakehoders‘ comments on the Open Season 2015 procedure 6.Requesting phases Five responses express their preference for only one phase, including capacity at IP 4. Other is against it 7.Calendar While one agent indicates the possibility to delay up to the 30th of September the launching of the OS as long as it won’t imply any risk, other asks for preserving the launching of the OS in the first semester of the 2010 and a third one asks for a quick launching of the procedure Two responses states that time pressure can not be used as an excuse to impose figures and rules that have been scarcely clarified and agreed 8.Other comments One response explains that shippers should be lifted from their obligations when contracting in the North of France, in the case of a lot of gas will end up coming from the South of France, which will reduce congestion at IP 4 and may make easier a possible merge between GRTgaz North and GRTgaz South zones

14. 14 II.2 II.2 Figures of capacities to be sold OS 2015: FIGURES OF CAPACITIES TO BE SOLD Information by TSOs TSOs to send regulators, before Friday the 16 th, the final capacities with the investments and cost associated.

15. 15 II.3 II.3 Progress on economic test and tariff visibility OS 2015: PROGRESS ON ECONOMIC TEST AND TARIFF VISIBILITY Information by CRE CRE to send to the CNE the economic test to be shared also with Ministries

16. 16 II.4 II.4 Documentation development Documents to be produced by TSOs according to TSOs’ presentation in the 11th SG meeting: Information Memorandum Allocation Rules for 2015 capacities Application forms and related letter of commitment for 2015 capacities Non-Disclosure Agreements between each TSO and interested subscribers (to be signed only by new participants) Capacity booking contract between each TSO in France and subscribers interested in capacities between GRTgaz South-TIGF and/or TIGF-Spain Transmission contract between each TSO in Spain and interested subscribers

17. 17 II.5 II.5 Next steps and calendar Calendar proposed by TSOs in the 11th SG meeting: MARCH – APRIL 2010:  12 th April: S-GRI IG meeting (final decisions) MAY 2010:  3 rd May: Publication of final documents  Before 30 th May: Signing of Confidentiality Agreements between each TSO and interested subscribers not participating in the First Phase. MAY – JUNE – JULY 2010:  SG required?.  10 th -12th May: Information meetings for stakeholders organized by TSOs  17 th May/31 st May: Starting date for submitting requests in the Second Phase of the OS.  31 st May/14th June: Deadline for submitting requests in the Second Phase of the OS.  30 th June/8th July: Publication of results of the Second Phase of the OS.  31 st July: Deadline for the signing of contracts. JANUARY 2011:  31 st January 2011: Approval of GRTgaz and TIGF global investment programs by their respective Boards of Directors.  31 st January 2011: Approval of GRTgaz and TIGF global investment programs by CRE.

18. 18 III.1 current CMP in force at the borders in Portugal CURRENT CMP IN FORCE AT THE BORDERS IN PORTUGAL Information by ERSE

19. 19 III.2 current CMP in force at the borders in Spain CMPs in Spain are regulated in the Royal Decree 949/2001, modified by the Royal Decree 1434/2002 Two long term UIOLI mechanisms are established, not only for entry/exit capacity at international connections but also for the rest of infrastructures including the national transmission system, the LNG terminals and the underground storages Anti hoarding: guaranteeing the use of the contracted capacity, when accessing the infrastructure for 12 month or more, users must establish a deposit equivalent to 12 months of the fix term of the corresponding TPA tariff, taking into account only 85% of the booked capacity. A shipper contracts 100 MWh/day of entry capacity at Larrau to deliver the gas at the AOC TPA tariff in force for this delivery (monthly payment): 8,905 €/MWh/day/month (only fix term) Deposit to be established: 100 MWh/day (contracted) x 0,85 (85% of booked capacity) x 8,905 €/MWh/day/month (fix term) x 12 (months) = 9.083,1 €

20. 20 III.2 current CMP in force at the borders in Spain First UIOLI mechanism in force Applied by TSOs to new access contracts or existing contracts in which capacity has been modified Users must use, at least 80% of the monthly contracted capacity, at least one month of the first six natural months once the service starts (or the first six months after any capacity modification) TSOs must calculate monthly capacity used by their users during this period If the user does not reach the 80% of the monthly contracted during the six months period, it losses the capacity that has not been used, and the proportional part of the deposit Capacity released by application of this mechanism is offered by the TSOs in the primary market

21. 21 III.2 current CMP in force at the borders in Spain A shipper contracts 100 MWh/day of entry capacity at Larrau to deliver the gas at the AOC, and establishes a deposit of 9.083,1 €. The contracted services starts 1 st January 2010 Month Monthly contracted capacity (MWh/month) Monthly used capacity (MWh/month) Monthly used capacity (% referred to monthly contracted capacity) Jan3.1002.40077.4% Feb2.8002.10075.0% Mar3.1002.70087.1% Apr3.0002.00066.7% May3.1002.00064.5% Jun3.0001.60053.4% (used capacity above 80% of contracted capacity in March) UIOLI not applicable

22. 22 III.2 current CMP in force at the borders in Spain A shipper contracts 100 MWh/day of entry capacity at Larrau to deliver the gas at the AOC, and establishes a deposit of 9.083,1 €. The contracted services starts 1 st January 2010 Month Monthly contracted capacity (MWh/month) Monthly used capacity (MWh/day) Monthly used capacity (% referred to monthly contracted capacity) Jan3.1002.40077.4% Feb2.8002.10075.0% Mar3.1002.20070.9% Apr3.0002.00066.7% May3.1002.00064.5% Jun3.0001.60053.4% UIOLI applicable (used capacity always less than 80% of contracted capacity) Minimum capacity that has not been used = 22.6% User losses 22.6% of contracted capacity (22.6 MWh/day). The user’s contracted capacity is reduced to 77.4 MWh/day User losses 22.6% of the deposit (2,052.78 €)

23. 23 III.2 current CMP in force at the borders in Spain Second UIOLI mechanism in force Applied by the Technical System Manager to all existing contracts When the Technical System Manager detects a continuous underuse of contracted capacity (during 12 months, without any month above 80%) by an user at an infrastructure that is congested (there has been access denials due to the lack of available capacity), the Technical System Manager will release not used capacity. Consequently, the user losses the part of the contracted capacity that has not been used and the corresponding part of the deposit. Capacity released by this application of this mechanism is offered by the TSOs to those agents whose access requests were denied.

24. 24 III.3 current CMP in force at the borders in France CURRENT CMP IN FORCE AT THE BORDERS IN France Information by CRE

25. 25 IV. Transparency study update: 2007 Transparency study In July 2007, Regulators published an study on the level of transparency in the Region, since transparency was identified as one of the main priorities to address, in order to overcome the potential obstacles for the development of a functioning gas regional market The main objective was to identify what information is needed by the market players to operate efficient and effectively, how this information should be provided by TSO’s (and by other stakeholders when appropriate) on a fair and non-discriminatory basis, and what regulatory arrangements are necessary to ensure proper monitoring and enforcement Although the Regulation 1775/2005, still in force, only established transparency requirements for TSOs, the study analyses transparency level in transmission, LNG and storage.

26. 26 IV. Transparency study update: 2007 Transparency study The 2007 Transparency study analyzed the degree of detail and accessibility of information published by the following agents (Portugal still derogated from Directive and Regulation application): Transmission  Enagas  Naturgas  GRTgaz  TIGF Results of the 2007 ERGEG monitoring on Transparency requirements of Regulation 1775/2005/EC and 2006 ERGEG monitoring on GGPSSO were also consulted LNG  GDF DGI  Enagas  BBG  Reganosa  Saggas Storage  GDF DGI  TIGF  Enagas

27. 27 IV. Transparency study update: 2007 Transparency study Conclusions of 2007 transparency showed that: TSO’s in both countries, France and Spain, had made relevant improvements on transparency issues during the last years, mainly from the publication of the Regulation 1775/2005. The level of transparency on transmission is, in general, greater than in storage and or LNG terminals There was still room for improvement

28. 28 IV. Transparency study update: New regulatory requirements The third package introduces new requirements on transparency for transmission, LNG and storage infrastructures (Regulation 715/2009): In transmission, obligations in Regulation 1775/2005 regarding transparency are kept (services offered, capacities, tariffs, contractual conditions, infrastructure use, etc.- art. 18 and the annex). Additionally, new requirements are introduced: ENTSO-G must develop a code on transparency rules (art. 8.6.(i)) TSOs must make public ext-ante and ex-post supply and demand information (art. 18.6) TSOs must publish measures taken as well as costs incurred and revenue generated to balance the system (art. 18.6) Information will be published in a meaningful, quantifiably clear and easily accessible manner and on a non-discriminatory basis

29. 29 IV. Transparency study update: New regulatory requirements The third package introduces new requirements on transparency for transmission, LNG and storage infrastructures (Regulation 715/2009) (cont.): In LNG (art. 19): Services offered and conditions applied Technical Information necessary for users to gain effective access Contracted and available capacities Gas storage in LNG tanks, inflows and outflows and storage capacity available on a daily basis, included exempted terminals Tariff derivation, the methodologies and the structure of tariffs Information will be published in a meaningful, quantifiably clear and easily accessible manner and on a non-discriminatory basis

30. 30 IV. Transparency study update: New regulatory requirements The third package introduces new requirements on transparency for transmission, LNG and storage infrastructures (Regulation 715/2009) (cont.): In Storage (art. 19): Services offered and conditions applied Technical Information necessary for users to gain effective access Contracted and available capacities Gas stored, inflows and outflows and storage capacity available on a daily basis, included exempted terminals Tariff derivation, the methodologies and the structure of tariffs Information will be published in a meaningful, quantifiably clear and easily accessible manner and on a non-discriminatory basis If the SSO is the only user of the storage, may submit to the NRA a reasoned request for confidential treatment of information regarding gas stored

31. 31 IV. Transparency study update: New regulatory requirements The third package introduces new obligations for Regulators with regard to transparency (cont.): Monitoring the level of transparency (Directive 2009/73/EC, art. 41.1.(i) and Regulation 715/2009) Ensuring that information regarding demand and supply is made public by TSOs (Regulation 715/2009, art. 18.6)

32. 32 IV. Transparency study update: New regulatory requirements Work program proposed 1.Establish the detailed information to be published by TSOs, LSOs and SSOs according to Regulation 715/2009, to be checked by Regulators. This will include a list of agents obliged in the Region (Spain, France and Portugal – deadline 15 th May 2. Checking of agents’ information publication – deadline 30 th June 3.Publication of the Study – Deadline 30 st September 4.Public Consultation with Stakeholders – October 5.Definition of an action plan to comply with new Regulation - November

33. 33  TSOs to send regulators, before Friday the 16 th, the final capacities with the investments and cost associated. CRE to send to the CNE the economic test to be shared also with Ministries  Next SG meeting: In May, before launching the OS, to inform Stakeholders V. Conclusions and next meetings