1. Jarek Astramowicz 10 March 2003 Polish Energy Market

2. Polish Power Sector - Overview l Generation total installed capacity - 34 200 MW peak demand – 23,000 MW, minimum demand - 15,000 MW annual demestic production – 155 TWh annual domestic consumption – 137 TWh net power exports – 7 TWh 96% of the total power output is generated by the coal fired plants and CHPs (hard coal and lignite) l Transmission Polish Power Grid Company (PSE SA) - owns, operates and maintains the high voltage grid (220 kV, 400 kV and 750 kV) l Distribution 33 local distribution companies they own and operate the medium- and low-voltage transmission and distribution grids (110 kV and below)

3. Regulation l Energy law of 10 April 1997 (last amendments introduced on 1 January 2003) l The President of Energy Regulatory Authority (URE) issuing licences approval and control of energy tariffs control of customer service quality standards

4. Polish Power Grid 750 kV Power Transmission Lines Total Length: 114 km 400 kV Power Transmission Lines Total Length: 4 677 km 220 kV Power Transmission Lines Total Length: 8 127 km 110 kV Cross-border Power Transmission Lines Thermal Power Plants over 1000 MW Thermal Power Plants from 250 to 1000 MW Hydro Power Plants Cities Bełchatów Ostrołęka Lithuania Belarus Ukraine Slovakia Czech Republic Germany Baltic Sea Planned line to Lithuania 500kV submerged line to Sweden, under construction 2 x 310 MW 2 x 875 MW 2 x 290 MW 2 x 410 MW 340 MW 1,300 MW 230 MW 2,000 MW Opole Siersza Skawina Porąbka-Żar P.S. Żydowo P.S. Żarnowiec P.S. Włocławek Solina Jaworzno III 1400 MW Rożnów Poznań Kraków Łęg Olsztyn Siekierki Kraków Turów Szczecin Russia Rzeszów CHP Nowa Sarzyna Gdańsk Konin Adamów Pątnów Płock Dolna Odra Stalowa Wola Kozienice Połaniec Bydgoszcz Warszawa Łaziska Łagisza Dychów P.S. Rybnik Katowice Wrocław 2 x 110 kV 110 kV

5. Privatisation. Distribution company groupings ZE Szczecin ZE Słupsk ZE Koszalin ENERGA Gdańska Kompania Energetyczna ZE Bydgoszcz Energetyka Poznańska Zielonogórskie ZE ZE Gorzów ZE Jelenia Góra ZE Legnica ZE Wrocław ZE Wałbrzych ZE Opole Energetyka Kaliska ZE Toruń Elbląskie ZE ZE Olsztyn ZE Warszawa Teren ZE Płock ZE Łódź Teren ZE Częstochowa ZE Lublin LUBZEL Zamojska Korporacja Energetyczna Rzeszowski ZE ZEORK Skarżysko- Kamienna Beskidzka Energetyka Będziński ZE Górnośląski ZE ZE Tarnów ZE Kraków ZE Białystok ZE Łódź STOEN (Warszawa)  Enea  G-8  L-4  K-4  Other

6. Balancing Market effective introduction in September 2001 and its continuous functioning and improvement by its effective introduction Poland has removed the last remaining structural obstacle in creating a competitive wholesale electricity market current high volumes will get lower as the other market segments (PX, OTC) develop and when pricing mechanism gets adjusted

7. 0 123456789101112131415161718192021222324 day 50 100 150 200 250 price loss profit Contract price CRO 0 50 100 150 200 250 300 350 400 450 123456789101112131415161718192021222324 Contract volume Real demand undercontracted overcontracted day volume Balancing Market till 30th June 2002

8. 0 123456789101112131415161718192021222324 day 50 100 150 200 250 price overcontracted day undercontracted 0 50 100 150 200 250 300 350 400 450 123456789101112131415161718192021222324 Contract volume Real demand volume Contract price CROs CROz CRO Balancing Market from 1st July 2002

9. Balancing Market prices from 1st September 2001 till 30th June 2002

10. Power Exchange over-invested in systems and structure high transaction costs faulty PX participation agreements (all risks shifted onto participants) attempts sophisticated products without first fully developing & mastering the basics major failure - it has not created a reliable index

11. Balancing Market prices from 1st July 2002 till 17th July 2002 Balancing Market and Power Exchange volume from 17th June till 17th July 2002

12. OTC Market relatively high volumes available for trading large number of „active” participants both current & potential objective price index can be created most of the action will take place in the near future

13. „Long-term contracts” they cover only 60% of the market with 30% or more available for trading (10% - is the forced generation) 30% of the Polish wholesale market exeeds 35 TWh of electricity worth almost USD $1 bln „lets learn how to trade the 35 TWh before we attempt to trade the remaining 70 TWh”

16. Company JAC EnTra was established in August 1998 (originally as Enron Poland) and changed its name in February 2002 as a result of an MBO Since MBO additional investors were attracted, resulting in equity capital increase up to a total of almost 17 mln pln 10 year power trading license received in April 1999 10 years domestic gas trading license received in March 2001 and gas import license received in May 2001

17. Commercial achievements to date l Commercial efforts for 2002/2003 Over 1 TWh of electricity for sale contracted for 2003 Three EFET type Master Trading Agreements signed Several EFET Masters under active negotiations 5 year, 50 MW„call” option concluded (valid through September 2005) with the largest Polish power generation group 2003 physical forward power deliveries for 340 000 MWh confirmed with confirmations to be signed next week l Brokerage deals concluded and/or delivered on to date August, September and October 2002 – total deliveries of 150,000 MWh 6 month call option for power import through SwePol link cable concluded with PSE SA 0,3 TWh of power exports concluded during 1999–2000 l Launching electricity trading through its newly established Kantor Energii The first trading session took place on 29 January 2003

19. What is Kantor Energii ? Day ahead and two days ahead, real time, hourly electric energy continuous trading program Internet connection allows for fast and safe (SSL protocole) „click’n trade” activity All transactions are concluded with JAC EnTra at the fixed, listed prices for the same transaction unit (number of MW in one hour) Our bids and offers are continously changed („active market making”) reflecting real-time demand and supply changes

21. Kantor Energii at the Polish power market Supply Demand Power Exchange OTC market Balancing Market KANTOR ENERGII

22. Trade sessions 7:1508:4509:0012:0013:0013:15 Afternoon session – two days ahead contracts concluded Morning session – day ahead contracts concluded Confirmations of the concluded contracts – after each session

23. BM sells BM buys 250 PLN/MWh 50 PLN/MWh 250 0 80 170 230 150 250 280 100 150 90 440 80 410 230 560KE profit/loss KE buys KE sells Transaction example for one hour 09:00 – trading closed

24. Thank you for your attention