1

Leading companies to

Cost-Effective & Sustainable Energy

STRATEGIC SOURCING IN A LIBERALIZED MARKET 13 – 14 October 2011, ESS-Lund, Sweden

2 Quick Facts

3

Summit Service Offering

Energy Management and Procurement Services (“EMPS”)

●  Strategic sourcing ●  Utility rates analysis/budgeting ●  Risk management services ●  Market intelligence reporting ●  Data management services

Sustainability Services

●  Environmental strategic development ●  Energy efficiency workshops ●  Environmental reporting ●  Clean-tech services ●  Metering/monitoring services

4

Different phases:

Ø  UK and Norway: beginning 1990 – mature markets

Ø  EU Directives

96/92/EC on electricity – date of effect 19/02/1997 98/30/EC on natural gas – date of effect 10/08/1998

Main obstacles :

•  access of the network •  different degrees of market opening between Member States

Ø  Full market opening for all consumers: July 1st, 2007

•  All markets are becoming more mature with spot markets and future markets

•  Still markets in transition, mainly in Central and Eastern Europe

Liberalization of European power and natural gas markets

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Calendar deregulation European electricity market

1999 2000 2001 2002 2003 2004 ≥ 2007Austria > 40 GWh > 20 GWh October- All

Belgium Federal law Flanders region Walloon region Brussels region

> 100 GWh > 40 GWh > 20 GWh> 20 GWh (11/08)

> 20 GWh (25/10)> 10 GWh

1 GWh> 10 GWh

> 56 kVA (01/01)all (01/07)10 GWh all HV clients

(31/12/2004)

All consumers

all

Denmark > 10 GWh(April) 1 GWh All

France > 100 GWh > 16 GWh 7 GWh(19/02/03)

All consumers(except domestic

sector)

Finland 100%

Germany All consumers

Greece 30% 35%

Ireland 4 GWh(30%)

1 GWh(40%)

Italy > 20 GWh(1 GWh)

> 9 GWh(1 GWh)

50 000 kWh

Luxembourg > 100 GWh > 20 GWh > 9 GWh > 1 GWh(2005)

Netherlands > 2 MW > 3 * 80 A All consumers

Portugal > 9 GWh

Spain > 1 GWh 1 kV All consumers

Sweden All consumers

United Kingdom All consumers

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Exchange markets

Liberalization of European power and natural gas markets

PRAGUE ENERGY EXCHANGE ENERGETICKÁ BURZA PRAHA

7

Average power prices in industry (€/MWh)

0

20

40

60

80

100

120

140

160

180

Standard customer 20 GWh/year – 4 MW demand Source: Eurostat – June 2011

8

Average natural gas prices in industry (€/MWh)

0

10

20

30

40

50

60

70

Standard customer : 5 GWh/year Source: Eurostat – June 2011

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Cost optimization by a combination of Competences

ENERGY COSTS ENERGY MARKETS

ENERGY TECHNOLOGY - DEMAND RESPONSE

ENERGY LEGISLATION ENERGY REGULATION ENERGY INCENTIVES ENERGY TAXATION

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Energy Cost Components

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§  Price volatility of energy is significantly higher than other market exposures.

§  Most companies are negatively correlated to energy prices (energy ↑ = margins ↓)

§  The price of oil, electricity and gas is an important driver for the value of many companies.

0%

10%

20%

30%

40%

50%

60%

70%

Euro / USD Euribor

1y S&P500 Brent IPE NBP

FY EEX FY

Annualised %

Price volatility of energy

12

25

35

45

55

65

75

85

95

105

30

50

70

90

110

130

150

01-2

006

03-2

006

05-2

006

07-2

006

09-2

006

11-2

006

01-2

007

03-2

007

05-2

007

07-2

007

09-2

007

11-2

007

01-2

008

03-2

008

05-2

008

07-2

008

09-2

008

11-2

008

01-2

009

03-2

009

05-2

009

07-2

009

09-2

009

11-2

009

01-2

010

03-2

010

05-2

010

07-2

010

09-2

010

11-2

010

01-2

011

03-2

011

05-2

011

07-2

011

09-2

011

11-2

011

EUR

/ bb

l

$ / b

bl

Brent ($/bbl and €/bbl)

Brent($/bbl)

2006 2007 2008 2009 2010 2011

Update: 02/10/2011

13

25

35

45

55

65

75

85

95

105

01-2

008

02-2

008

03-2

008

04-2

008

05-2

008

06-2

008

07-2

008

08-2

008

09-2

008

10-2

008

11-2

008

12-2

008

01-2

009

02-2

009

03-2

009

04-2

009

05-2

009

06-2

009

07-2

009

08-2

009

09-2

009

10-2

009

11-2

009

12-2

009

01-2

010

02-2

010

03-2

010

04-2

010

05-2

010

06-2

010

07-2

010

08-2

010

09-2

010

10-2

010

11-2

010

12-2

010

01-2

011

02-2

011

03-2

011

04-2

011

05-2

011

06-2

011

07-2

011

08-2

011

09-2

011

10-2

011

11-2

011

12-2

011

EUR

/ M

Wh

European electricity : Year +1

Belgian Base Y+1 Dutch Base Y+1 French Base Y+1 German Base Y+1 Spain Base Y+1 NordPool Y+1

2008 2009 2010 2011

Update: 02/10/2011

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European power markets

German power

Czech, Hungarian,

Slovakian power

Nordpool (Finland, Sweden, Denmark,

Norway)

French power

Belgian power

Dutch power

UK power

15

20

30

40

50

60

70

80

90

100

5

10

15

20

25

30

35

40

45

50

01-2

006

03-2

006

05-2

006

07-2

006

09-2

006

11-2

006

01-2

007

03-2

007

05-2

007

07-2

007

09-2

007

11-2

007

01-2

008

03-2

008

05-2

008

07-2

008

09-2

008

11-2

008

01-2

009

03-2

009

05-2

009

07-2

009

09-2

009

11-2

009

01-2

010

03-2

010

05-2

010

07-2

010

09-2

010

11-2

010

01-2

011

03-2

011

05-2

011

07-2

011

09-2

011

11-2

011

EUR

/ bb

l

EUR

/ M

Wh

NBP Month Ahead (€/MWh) and Brent (€/bbl)

NBP Month Ahead (€/MWh) Brent (€/bbl)

2006 2007 2008 2009 2010 2011

Update: 04/10/2011

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European gas

Brent Crude

GOL, HFO

Gas Demand

Oil-indexed Gas Arbitrage

Premium

Natural Gas NBP, Zee, TTF

•  Domestic & Commercial •  Electricity Generation •  Energy Industry •  Heat Generation •  Iron & Steel

Gas Supply •  Indigenous Production •  Supplies To/From Stocks •  LNG Inports

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Strategic Sourcing

Risk profile Price Forecasts (Banks,IEA,…)

STRATEGIC ENERGY SOURCING PLAN

Risk management

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Risk Profiler – Principle

AGRESSIVE

More on how to beat the market

MODERATE

More focus on how to get the lowest budget possible by taking some risks

CONSERVATIVE

More focus on achieving cost certainty (no risk)

Meeting budget is of utmost importance

Hig

h pr

iorit

y M

AR

KET

Lo

w p

riorit

y

High priority BUDGET Low priority

19 19

BRENT oil forecast

455565758595

105115125135145

okt jan apr jul okt jan apr jul okt jan apr jul okt

$/barrel

BRENT Fundamental LOW Fundamental HIGH AVERAGE FUNDAMENTAL

2010 2011 2012

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The Risk Profiler combined with the price forecasts gives the following orientations :

1.   the duration of the supply contract(s) 2.   fixed price or flexible pricing 3.   the price structure (spot,months, quarters, seasons,..;) and

the type of indexation 4.   take profit and stop losses in case of flexible contracts 5.   number of possible price fixations and volume 6.   timing for price fixation

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Strategic Sourcing Process

Strategic Tactical

Market Opinion created from constantly monitoring all relevant market dynamics & regulatory trends

Buying Recommendation created by identifying market opportunity and quantifying potential impact

Know supplier strengths & weaknesses

Utilize efficient & flexible RFP and bid tools

Analyze and determine most strategic solution

Validate pricing, negotiate and execute deal

Define pricing benchmarks and product structures

Analyze bids against sourcing & risk strategy

Secure refreshed pricing from preferred supplier

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Interval Data Analysis

How you use power is more important than how much you use

ATC block On-peak block Hourly usage

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Importance of good data

How you use power is more important than how much you use

ATC block On-peak block Hourly usage

•  The more detailed the load profile, the better offered prices

•  Better analysis of suppliers proposals

•  e.g.: Germany – it is possible that a new tax is introduced if no EMS

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Risk Monitoring : Value at Risk Report

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Negotiations Aggressively advocate for best option

Timing Be prepared to act when the time is right

Suppliers Choose the most competitive and reliable supplier

Reductions Leverage programs to spend and use less

Capture Opportunity

Negotiations Aggressively advocate for best option

Timing Strategically procure energy versus tactically

Regulations Identify market shifts and eliminate surprises

Suppliers Choose the most competitive and reliable supplier

Other Options:

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Cost optimization by a combination of Competences

ENERGY COSTS ENERGY MARKETS

DEMAND RESPONSE/

INTERRUPTIBILITY ENERGY LEGISLATION ENERGY REGULATION ENERGY INCENTIVES ENERGY TAXATION

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Optimization of transport / distribution contracts

* Optimal power demand subscription or hourly/daily capacity for natural gas subscription in the different rate periods

P1 - …. – P6 for Spain F1 - … - F3 for Italy P1 - … - P5 for France Peak/ Off peak for some other countries

Winter/ Summer for natural gas * Load shedding or switching to an alternative fuel

* Peak shaving by partial own generation at moments of high demand

Transport/Distribution costs

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v  Electrical storage remaining a technological and economical challenge, grid operators have to balance supply with demand at any moment

v  Demand Response enables electricity users to actively help the grid operators to

- meet peak demand - limit peak demand to allow generators to operate the most efficient power stations

v  Participating customers are compensated in function of

- importance of interruptible load, - Maximum allowed duration of the interruption - notice to give to the consumer

v  Possible savings: 3 to 5 % of electricity costs

Demand Response

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Cost optimization by a combination of Competences

ENERGY COSTS ENERGY MARKETS

ENERGY TECHNOLOGY -

DEMAND RESPONSE

ENERGY LEGISLATION ENERGY REGULATION ENERGY INCENTIVES ENERGY TAXATION

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Sustainability Pressures

Societal / Citizenship Customer / Competitive Market

Regulatory Investor / Shareholder

31

Supplier Sustainability Assessment

"  On-line survey to assess performance of suppliers on sustainability initiatives

"  CO2 emissions factor for the supplied power – CO2 footprint

"  Supplier support for energy reduction initiatives

32

SUSTAINABILITY WATCH tracking of opportunities and threats in both European and National energy and climate policies standards / regulation / finance

20 % 13 % 14 % 18 % 23 %

 

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Green Energy

v Suppliers offers renewable energy as a selling point

v Prices: 0 to 8 €/MWh

v Germany: 1 to 2 €/MWh

v Sweden: 0 to 1 €/MWh (Bra Miljoval – good Energy) – Very prestigous

v France: different options – RECS are delivered by the Observer – part of the premium is often transferred to the Nature Option Energy fundation.

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v  Climate Change Levy in UK

Climate change Agreements give energy intensive business a discount on the CCL as long as they meet specific energy efficiency or carbon savings

v  Renewable obligation in UK v  EEG in Germany v  Federal taxes in Belgium (audit convenants) v  Certificates of origin in Belgium

v  Czech Republic: green energy is free of energy tax (1.32 €/MWh)

Tax reductions for sustainable efforts