1. Gas Regional Initiative – North West Region London 13 and 14 November 2008 Project manager: Erik Rakhou Investment project – I1 (in co-operation with I2) Encouraging regional Investment climate for transmission capacity at X-borders

2. 2 London workshops: 13 and 14 november 2008 Outline presentation Is there urgency with transmission investment ? Project scope Project objectives ? -Intermezzo: But investments are happening ? Results project so far? Next steps project ? What can we expect from tomorrows workshop? Preview of tomorrows presentation on consultation

3. 3 London workshops: 13 and 14 november 2008 The regional need for investment supports need for regional encouragement of investment climate in Strategic Roadmap of the GRI NW. Expected further rise in gas demand, especially power generation Long term decline in indigenous EU/regional gas production Rising need for gas imports (both pipeline and LNG) Needs of new projects – LNG re-gasification terminals, import pipelines, gas- fired power plants & new gas storage Even greater cross-border gas flows within our region “The development of the region’s gas transmission network should be based on regional…rather than national planning” (*) * A Vision and a Roadmap for the Gas Regional Initiative North West, 4 April 2008 “Network development must be effective and meet the needs of the region, including the need to respond to diverse sources of gas to ensure supply security” (*)

4. 4 London workshops: 13 and 14 november 2008 The regional investment climate: ‘timely, sufficient and efficient” sum of 9 national investment climates moving in 1 direction of incentivising x-border co-operation. NW GRI Project Objectives: By end 2008: understand existing incentives on TSOs to make additional capacity available efficiently By end 2009: an agreed regional framework for new cross border investments should be in place By end 2009: begin to establish and implement co-ordinated incentive mechanisms Success Criteria summary: Efficient TSOs can recover their costs & earn a reasonable return commensurate with risk Adequate cross-border investment leading to increased trade & greater price convergence Regulatory regimes support investment in capacity beyond contractual commitments from network users, if adequate * A Vision and a Roadmap for the Gas Regional Initiative North West, 4 April 2008 “The investment climate should be such that investments in capacity…are sufficient and timely and persistent physical congestion is avoided” (*) - NW GRI focus on cross-border (**) transmission capacity investment - * A Vision and a Roadmap for the Gas Regional Initiative North West, 4 April 2008 * * Leading to in/decrease of capacity at a regional interconnection point

5. 5 London workshops: 13 and 14 november 2008 Pa ge 5 Overview of investment activity in the NW region Up to date information about investment and open seasons Live since September 2008 www.gasinvestment. org GRI NW website: Overview of investment activity

6. 6 London workshops: 13 and 14 november 2008 Current status of investment projects shows a certain progress but issues remain. Especially in central countries of the region (outcome of just finalised consultation) National regulatory regimes are evolving/maturing to respond to markets TSO investment already rising in several countries to meet market needs  Thank you to TSOs for launching “www.gasinvestment.org” “Open Season” (OS) processes increasingly used across the region to gauge market demand and secure User Commitments which help to underpin investment  System is not perfect. OS “User Commitment” rules varied significantly (*) A number of projects have already been successful in promoting network expansion (e.g. IUK, BBL, Fluxys, GTS etc) Individual TSO Projects have seldom been formally co-ordinated across borders  This is now starting to change – e.g. Fluxys/GRT-Gaz (ongoing) and GTS/GUD (recently initiated) Regional ‘grassroots’ move to improve cross-border co-ordination and build on positive experience is already taking place at a national level… Is that enough? * CRE is leading project on co-ordination of ‘open seasons’ under strategic roadmap. Both GRI projects closely coordinate.

7. 7 London workshops: 13 and 14 november 2008 Project update: small steps already made. Every day like today we make 1 more together. NW GRI Investment Project Plan completed in summer 2008 Consultation/questionnaire launched at end September, on the basis of investment principles proposed by the TSOs and questions on regional investment climate in general  Principles were discussed in workshop RCC/TSOs on 19.08.08 leading to a RCC consultation paper by end of September Around 25 responses, from both TSOs and network users of the whole region  Including 1 association, 2 special responses of German operators & TSO lead group.  16 Network Users; 6 TSO’s. Responses justifying way forward are to be discussed at tomorrow’s Stakeholder Group meeting  Preview is available if time allows.

8. 8 London workshops: 13 and 14 november 2008 GRI NW operator principles as consulted  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 Pa ge 8

9. 9 London workshops: 13 and 14 november 2008 Project next steps from now to end of 2009 Encourage(d)‏ Sound Regional Investment Climate By end of 2009 (1)Incentives report and work on regulatory certainty via ‘MoU’/ similar (“script” for investing) (2) Virtual test Case (? TSO/EFET) (3) Signing of ‘MoU’/ similar And, if relevant, advise to governments

10. 10 London workshops: 13 and 14 november 2008 Consultation: preview of results (1) To provide background on tomorrows workshop presentation by preview of discussion points Just having principles apparently is not enough (think of similar CEER principles from 2003). It is about dialogue and using principles in practice. This consultation proves use of active dialogue.

11. 11 London workshops: 13 and 14 november 2008 Consultation: preview of results (2) Regional investment climate in general:  Having just perfect national climates is not enough  Focus of national climates for “ sufficient and efficient” is not proven wrong  To improve “timely”, x-border investment must be incentivised -Including a trade off between user commitments, capacity for ‘later’ entrants and need for anti-incentive to ‘goldplate’ the system.  To improve “sufficient”, clarity is needed on valid (regional) signals to trigger investment -Crucial to link investment approvals to efficient congestion management

12. 12 London workshops: 13 and 14 november 2008 Consultation: preview of results (3) 4 principles consulted (only principle on division of responsibilities almost unanimously supported)  Especially predictability (reg. certainty) and incentive for x-border co-operation are to be adressed specifically by RCC in accordance to analysis RCC workshop of 3.11.08  Opportunity for other stakeholders to use principles and other consultation outcomes as starting point for their actions (!)

13. 13 London workshops: 13 and 14 november 2008 Thank you for your attention !