1. THE TICKING BOMB - A FEW BASIC FACTS ABOUT THE POLISH ENERGY SECTOR Aleksander Stawicki Partner Barcelona, 9 May 2008

2. PRICE GROWTH – JUST THE BEGINNING

3. MARKET LIBERALISATION Change of supplier: –7.6% in 2006; –7.8% in 2008; Financial benefit from the change of supplier is estimated at the level of +/- PLN 5 per MWh; The increase of prices for industrial consumers – up to PLN 80 per MWh; Price increase by electricity traders – 20-23% in January 2008; another increase by 18-20% planned for this year.

4. LIMITED CROSS-BORDER CAPACITIES Source: PSE-Operator S.A.

5. POLAND IS AN ISOLATED MARKET Source: PSE-Operator S.A.

6. NEW COST STRUCTURE Source: K. Żmijewski

7. NEED FOR INVESTMENT IN THE ENERGY SECTOR  Within the next 20 years the amount of energy consumed in Poland is expected to increase by ca. 93%  Polish energy sector requires large investment worth in total ca. PLN 70 billion (35 billion – new power plants, 25 billion – costs of restoring power, 10 billion – costs related to transmission and distribution)  According to government plans, new power plants are to increase the existing capacities by 8,000 MW over the next ten years (800 – 1000 yearly)

8. CONCLUSIONS?  Energy sector is a ticking bomb  Can structural changes solve the problems?  Need for very efficient regulation and competition protection  Need for careful but courageous political decisions  Infrastructure!  cross-border connections  new power sources – can competition exist on the market with product deficit?