Romanian Energy Market

Anca Moruz European Relationship Manager

A Unique Perspective

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Agenda

1. 2.

European context Power & Gas Markets - Market size - Market opening - Market players - Future considerations Opportunities Q&A

3. 4.

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European Background
POWER

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Market Size and Generation Mix

POWER
19.5 2.2 1.1 Coal [%] Gas [%] Hydro [%] Nuclear [%] Wind [%] Other [%]

Population: 19 million; Electricity consumption in 2011: 54 TWh;

24.6

40.4

Size of the B2B market in 2011: 63%.

50

12.2

45
40 35 30 25 20 15 10 5 0 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Coal [%] Gas [%] Hydro [%] Nuclear [%] Wind [%] Other [%]
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Market Opening
POWER
On the 16th of July 2012 the new version of the Electricity and Natural gas Law has been published; Transposing Directives 72/2009 and 73/2009, the law includes procedures for the extinction of the regulated tariffs; In the power sector the process will start on the 1st of September 2012 and the transitory tariffs will be no longer applied after 31st of December 2013.

Source: ANRE - http://www.anre.ro/

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Market Players
POWER
ANRE the national Regulatory Authority in Romania - an independent organization responsible for both electricity and gas markets Transelectrica Romania's only TSO was created in 2000 following the unbundling of CONEL - the former national electricity company. DSOs 8 main distribution companies

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Supplier Landscape
POWER
During Q1-12, approximately 83 players responsible for the power supply were active on the Romanian energy market;
Of them, up to 40 are registered on the wholesale market as well;
27.4% 8.4%

13.6%

6.4% 0.7% 1.1% 1.6% 1.8% 1.9% 2.0% 2.0% 2.4% 2.8% 3.3% 3.6% 2.8% Alpiq Tinmar Ind OMV Petrom CEZ Vanzare ENEL Energie Energy Holding Petprod Electrica Furnizare EGL Gas&Power Romania Others 3.9% 5.9% 4.4% 4.0%

Alro Electrica Transilvania Sud CE Craiova E.on Enegie Romania Electromagnetica Renovatio Trading Hidroelectrica ENEL Energie Muntenia Repower Furnizare Romania
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Price structure
POWER
100%

The electricity price applicable on the free market to industrial consumers includes 5 components:

0% 9%

1% 12% 15%

1% 14% 6% 9%

80% 37% 60% 6% 40%

8%

Energy only price;

Transport changes; Distribution charges;

64% 20% 48%

71%

Green taxes; Other taxes.

0% Low Voltage Energy Only Transport Medium Voltage Distribution Green Taxes High Voltage Taxes (accize)

Note: The energy prices considered are in line with the current market level November 2012

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Product availability
POWER
The majority of the contracted products are fixed price products.

Indexations are not that common and imply significant consumption levels.

Flexible products are not available.

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Recent evolution
POWER
The graph below follows the DA price evolution since January 2011.
100 90

80
70 60 50 40

30
20 10 0

RO Power DA Prices [EUR/MWh]

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Future considerations
POWER
OPCOM, along with ANRE and Transelectrica, are currently under negotiations with similar parties from the Czech Republic, Slovakia and Hungary for a possible integration of the two markets OPCOM and PXE.
By the end of 2013, the transitory regulated tariffs for power currently applied to industrial consumers should be extinct. Nuclearelectrica S.A. (20% of the power production in Romania), is planning to extend their facilities; investors have been invited to participate to the development of 2 additional reactors (besides the 2 active ones).

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Case Study Owens Corning Romania

POWER
Company: Owens Corning Service Provided: Procurement, Energy Management and Reporting The challenge: Their Romanian plant relied on a power supply agreement negotiated in 2009 which had been automatically renewed in various occasions. The solution: Our analysts have negotiated a new fixed price agreement. The result: - Highly competitive price - Extended payment terms - Cash-flow improvement - No volume tolerance band imposed; Further improvements

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European Background
NATURAL GAS

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Market Size & Sources

NATURAL GAS

Natural Gas consumption in 2011: 150,810 TWh; Size of the B2B market in 2011: 79%.

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Market Players
NATURAL GAS
ANRE Market regulator

Transgaz TSO

8 major gas producers (95% of production owned by Romgaz and OMV Petrom)

DSOs 40 distribution companies (2 major ones Distrigaz Sud Retele and E.on Gaz Distributie)

40 active Suppliers
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Price structure
NATURAL GAS
Published by ANRE on a monthly basis; 2 types of mix (Romanian Gas/Imports): Domestic consumers (typically 92% domestic, 8% imports); Industrial consumers;

Mix structure - Industrial consumers

100%

90%
80% 70%

60%
50% 40%

30%
20% 10%

0%
Jan-11 Apr-11 Jul-11 Oct-11 Domestic Jan-12 Imports
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Apr-12

Jul-12

Oct-12

Product availability Industrial consumers

NATURAL GAS
Regulated Tariff: - includes all regulated components, except for taxes (accize); - published by ANRE and can be revised on a quarterly basis; - 11 categories of consumers depending on the annual consumption and connection type;

Liberalized Tariff:

includes the natural gas price calculated according to the mix established for each month; influenced by exchange rate Lei/$; transport and Distribution tariffs are added depending on the supply point address; supplier margin;

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Future considerations
NATURAL GAS
The new Electricity and Natural Gas law published by ANRE in Jun-12 has established a calendar for a gradual elimination of the regulated tariffs; For industrial consumers, the process will start on the 1st of December 2012 and should be complete by the end of 2014 (2015 at the latest); After having negotiated a contract on the free market, clients can no longer return to the regulated tariffs; Shale Gas: Chevron has won the right to explore various regions close to the Black Sea (decision taken by the Romanian Government in March 2012); Resources might be also found in the Carpathian Mountains; Nabucco Project Bulgaria has announced that the pipeline construction will begin in early 2013.

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Thank you

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Questions and Answers

For additional information please contact

Anca Moruz European Relationship Manager a.moruz@energyquote.com

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