1. IFIEC EUROPE 1 Energy markets liberalisation in the EU Industrial consumers’ expextations Peter Claes President - IFIEC Europe SVSE – 6 September 2006

2. IFIEC EUROPE 2 Why does energy cost matters for industry ? IFIEC Europe represents energy-intensive industry throughout Europe Energy cost amounts up to 60-80% of variable production costs in some applications Energy is not only vital for running processes, but in some applications also as a raw material Industry has fully supported liberalisation of European markets for electricity and natural gas looking for  competitive energy prices  increased security of supply Energy prices in the EU have risen to a level where development and even survival of industry is threatened

3. IFIEC EUROPE 3 IFIEC EUROPE – International Federation of Industrial Energy Consumers

4. IFIEC EUROPE 4 Situation for large industrial consumers Sense of URGENCY: Investment (or divestment) decisions taken today but with effect only in 5-15 years Common interest producers & industry for base load or interruptible supply No competition - European companies need multiple « local » solutions or « bridge » between them No integrated regional markets Balancing and back-up often only « affordable » with the incumbent Only solution coming from imports … but cross-border congestion and limited infrastructure

5. IFIEC EUROPE 5 The road ahead – IFIEC proposals cfr. DG Comp Sector Inquiry and High Level Group !cfr. DG Comp Sector Inquiry and High Level Group ! Improve market functioning:Improve market functioning: Reduce dominanceReduce dominance Full ownership unbundlingFull ownership unbundling Integrate markets : EUROGRID - European RegulatorIntegrate markets : EUROGRID - European Regulator Increase market transparencyIncrease market transparency Improve pricing mechanismsImprove pricing mechanisms Limit impact of ETS on electricity prices (windfall profits)Limit impact of ETS on electricity prices (windfall profits)  Assure survival of energy-intensive industry

6. IFIEC EUROPE 6 Industrial Intensive Energy Users : NEEDS Long-term vision (15-20y) - security of supply Internationally competitive electricity & gas prices Transparent price formation mechanisms “Stable and predictable” prices Long-term CO 2 solution (real costs, no windfall profits) No reference to current spot/forward “market“ prices Covering all / most base load needs Resale possibilities Export possibilities Gas : Access to new infrastructure ?

7. IFIEC EUROPE 7 Solutions: Industrial partnership for long term base load energy and appropriate financing mechanism Strong commitment Upfront payment for new infrastructure Groups of customers / negotiation power Criteria : intensive energy users, global competition, delocalisation threat Correct financial conditions « Bridge solutions » Long-term reservation of cross-border capacity Interruptibility rewards ?

8. IFIEC EUROPE 8 Thank you for your attention