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EFETnet Overview

Hugh Brunswick, MD, EFETNet BV EFETNet B.V. Keizersgracht 62-64 1015 CS Amsterdam h.brunswick@efetnet.org www.efetnet.org Phone: 0031(0)20 - 301 13 98 Mob: +44 (0) 7767 27 27 26 Fax: 0031(0)20 - 520 75 10. EFETnet Overview. Prepared by: Hugh Brunswick, MD, EFETnet BV. Contents/Agenda.

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EFETnet Overview

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  1. Hugh Brunswick, MD, EFETNet BV EFETNet B.V. Keizersgracht 62-64 1015 CS Amsterdam h.brunswick@efetnet.org www.efetnet.org Phone: 0031(0)20 - 301 13 98 Mob: +44 (0) 7767 27 27 26 Fax: 0031(0)20 - 520 75 10 EFETnet Overview Prepared by: Hugh Brunswick, MD, EFETnet BV

  2. Contents/Agenda • What is EFET? • How are the standards developed by EFET? • What is EFETnet’s role? • The electronic confirmation matching standard • Business drivers/case • Legal and commercial • Implementation and testing • Technical

  3. WHO ARE EFET? “We foresee energy markets throughout Europe, in which traders efficiently intermediate in the value chain on the basis of clear wholesale price signals, thereby optimising supply and demand and enhancing security of supply, to the overall long term benefit of the economy and of society” • The European Federation of Energy Traders (EFET) is an industry association which represents over 80 trading companies operating in about 20 countries • EFET promotes pan-European energy trading in open, transparent and liquid wholesale markets. • EFET mainactivities include: • Advocacy • Promote energy trading in Europe • Standardisation of contracts

  4. EFET Organisational Structure

  5. EFET organisation How business processes are standardised by EFET EFET BPOC Steering committee releases standards and test cases for certification Project Group eCMS Creates new standards releases covering BO Business Processes Workgroups staffed by business people from the industry

  6. The role of EFETnet EFETnet is not-for-profit, self financing and 100% controlled by EFET but with opportunity to bring in other industry stakeholders: Brokers, TSO’s etc. EFET Standards Development BPOC Steering committee releases standards and test cases for certification • Benefits Delivered • Distribute IT solution • Manages commercials Project Group eCMS Creates new standards releases covering BO Business Processes (Supported by HB) EFETnet Shares costs and makes investments Certification Service provider IT Infrastructure provider EFETnet’s mission is to invest in the development of standardised market services for the benefit of all EFET members and the industry

  7. EFET and EFETnet Members own EFET EFET owns 100% of EFETnet. EFET EFETnet invests in solutions and services EFETnet EFETnet shares costs of standardised non competitive solutions Company 1 Supplier 1

  8. EFETnet Users & expected Users (as of June 2006) 19 companies live or with projects started 14 following developments More than 15,000 trades have already been confirmed by live organisations

  9. Broker 1 Deal negotiated by phone or arranged by broker Trader Trader Deal data is transfered to ETRM Systems 2 ETRM System (Electronic Trade & Risk Management) ETRM System (Electronic Trade & Risk Management) Back-office Staff Checks & approves 3 Classic solution: Trade Confirmations are exchanged by fax XML XML 4 5 Faxed data is matched against ETRM data EFET Box EFET Box ebMS 2.0 ebMS 2.0 New solution: Standardised exchange of XML documents using ebXML Manual work, media breaks, typos, high risk  COST Where does eCM fit in to the trade lifecycle?

  10. Electronic matching with both traders and brokers is supported

  11. Example of a EFETnet confirmation • Extremely fast • Electronic confirmations sent and matched within 2 minutes • Typical • Electronic confirmations sent and matched within one day

  12. Confirmation including the Broker dialogue

  13. Scope of the EFET ECM Standards • Products that are covered • EFET Gas & Power • UK Power • NBP & ZBT Gas • Base, peak, off peak, day a-heads, intraday, shape trades and options • Broker confirmations • The EFET eCM Standard is document centric and describes : • Document content • Document structure • Document flow • Matching logic • Standard 3.2 is in live operation • Enhancements to 3.1 included • Emissions confirmation matching • Input from work group in preparation for certification • Published on http://www.efet.org and on http://www.efetnet.org/efetnet/content/e12/e25/index_en.html

  14. Some Further Development of ECM and Other EFET Standards • Standard eCM 3.3 is under development • Energy swaps • Fuels (Oil & Coal) • Standard Electronic EUA Title Transfer (eETT) 1.0 is under consideration • Pending decision by DEFRA/CdC

  15. Status of EFETnet Cooperation with other industry stakeholders • Brokers • Highly important part of the eCM community (major driver in volumes) • Spectron doing a lot for developing eCM benefits for energy traders (SAT/Index naming) • ETSO • ESS 3.0 • Nominations • EASEE-gas • EDIg@s, AS/2 • Nominations • CDC/DEFRA • Registry transfer requests • Registry reports • ENDEX/Powernext • Data deilvery channel • EFET Legal Committee • Standardised confirmation formats

  16. Next steps in standardisation • Next Steps: • Swaps (including oil & coal etc) • Electronic Position Matching • European Nominations • EUA Registry related process • Settlement • OTC Clearing

  17. Business Case - Motivation • Mitigation of operational risk • reducing human error • avoiding incorrect position reports – know what your position is with a counterpart • eliminating the use of non-standard terms in the confirmation • Operational cost savings • Weakness of current industry practise for confirmations • Repetitive labour work (processing oriented) • Frequent inconsistencies and difficulties and time consuming to manage them • Scalability of processing capabilities • Change Back Office tasks (problem solving oriented) • Evolve to paperless environment • Electronic confirmations can be seen as the first step to a fully standardised electronic data exchange with standards for scheduling, invoicing, clearing…

  18. Business case approach • Assume an error value – for eCM typically set to Eur 1,000,000 per event • Assume error rate (per trade) of 0.01% • Benefit = Error Value x Error Rate per Trade x # Trades

  19. Business Case - Criteria • Risk - refers to the value in mitigating or limiting risk that automation of this process might have in your (or your organisations) opinion • Savings - refers to the monetary savings that automation of this process (ignoring the additional cost of automation itself) might deliver in your (or your organisations) opinion • Process Quality - refers to the increase in quality, compared with your current process that, automation of this process might deliver in your (or your organisations) opinion • Effort Reduction - refers to the man days of effort saved, compared with your current process that, automation of this process might deliver in your (or your organisations) opinion - if you can actually estimate the number of days saved per year please enter this • Overall Business Impact - is an approximation of the net benefit you (or your organisation) would hope to gain from automation of this process including difficult to quantify benefits such as reduces operational risk or error rates, improved auditability, enhanced reputation from improved processes or new benefits delivered through Straight Through Processing (STP) etc. • Estimated Value - is an estimate in money (EUR) terms of the hard benefits such as reductions in man days, increased productivity from reassigning people to higher value tasks, better use of capital (i.e. optimal collateral use, shorter payment periods) etc

  20. EFETnet commercial terms & benefits EFETnet has developed a standard contract with the collaboration of the ‘Early Movers’. This contract is designed to address the needs of the trading & broking community. Key benefits include: • Liability cover of up to Eur 10m in aggregate • European helpdesk • Contractual Service Level Agreement with penalties • Cost sharing model (Fee reduction in line with community growth) • Simple price structure, one monthly fee for all commodities/products/dialogues • Free access to other Ponton XP features including AS/2 – the newly selected interim protocol for EDIg@s messages • Second site is an incremental cost of Eur 2k, or Eur 1k for the messaging component only

  21. Commercial Issues – Standard T&Cs • Accession agreement • Organisation specific details: • Number and identity of ‘sites’ (‘site’ includes testing and DR) • Trader or Broker • Contact details • Fee Schedule • General T&Cs published on the website • Transparency & simplicity • Existing members reassured • New members stream line commercial process • Back to back • Sublicence agreement • Maintenance agreement • FAQs to help and explain the General Terms and Condition

  22. Commercial Issues - Standard T&Cs

  23. Contractual framework explained • Rights • A non-perpetual, non-exclusive, non-transferable sublicense to use the EFETnet Software • Provision of Maintenance Services to Licensed User • Sub licence (including AS/2 and ebMS) • Maintenance, support & help desk (Service level with penalties) • Liability cover ~ EUR 1,000,000/user in aggregate annually, capped ~ EUR10m • Obligations • Fees (one-off and monthly recurring) • Deposit of 10kE • Term ends end Dec 2007 • Skills, resource, access etc. • Abide to limitations on sub licence • Testing requirements - certification

  24. Trader fee schedule 2006 High sensitivity to # members Euro 2,000 is the target monthly fee EUR 3,500 Now EUR 2,750 Sep 06

  25. Costs • Initial Fees: • One-time entrance fee for new users Eur 15,000 • Roll Out fee Eur 6,000 • Refundable security deposit Eur 10,000 • Monthly support fee • Function of number of live users -> Eur 2,000 per Month • Non EFET members pay additional 10%

  26. A phased approach works best for roll-out of Ponton X/P and EFET Box+ (source : Ponton Consulting)

  27. A tight cooperation is crucial (source : Ponton Consulting)

  28. Generic timeplan in detail

  29. Counterparty mentoring • Learn from experience • E-mail document exchange • Help desk “Certified” • Generic plan • DR Architecture • Production system Support Bilateral Testing Parallel Testing Multilateral /Community Testing Plan External Integration Internal Integration • Automated • Test systems • Non functional i.e. volume • Central test status & scheduling • Production system with Test flag • ETRM adaptor reuse • “Ping” • DB 2 DB 3 Months duration Entry/Exit Criteria Entry/Exit Criteria Approach – initial proposition

  30. Approach, revised proposition for bilateral and parallel testing to go-live • Test or production system • Test with one already certified counterparty (and optional a broker) • Conducted with each ‘new’ counterparty • ‘New’ c/ps should be live or at least completed Bilateral testing with a reference c/p • Phased by counterparty/commodity • Bilaterally agreed quantity of trades Bilateral Testing Integration ETRM: - Process Test- Document Creation Parallel Testing Historic Data Historic Data To be agreed bilaterally but should cover each commodity/product Stress Test / Load Test “Certified” • Go Live • Switch off of fax machines • Move to Production System Each C/Ps 1 ‘Reference’ Counterparty Entry/Exit Criteria Entry/Exit Criteria Entry/Exit Criteria Phase 2 - Counterparty Testing Phase 1 - Bilateral Testing Phase 3 - Parallel Testing

  31. Status of EFETnet Update on KEMA Certification • Product AND End-User certification • Functions as a centralised Integration and Acceptance tesing service • Major benefits: • Assuring compliancy with standards • Minimising costs & complexity of testing • Coordinating changes in a peer-to-peer community (i.e. Upgrades) • Eur 1,500/user/certification test run • Matrix based i.e. ‚pick & mix‘ certification • Always ask for proof of certification before agreeing to go live • Service available in Oct 06

  32. ETRM System ETRM System efetNet Infrastructure EFET Box EFET Box Central Matching Service ETRM System ETRM System Application EFET Box EFET Box ECM ebXML Messaging EFET Box Software Technical overview The ebXML Messaging Infrastructure is used as a reliable Platform to perform Business Processes

  33. . . . . . . Trading Organisation Trading Organisation Trading Organisation Trading Organisation . . . . . . Same Communication Infrastructure Everywhere Borderline of the system under development Internet Trading Organisation Trading Organisation ETRM System ETRM System EFET Box EFET Box In Out Out In Audit Trail CNFs Audit Trail CNFs Archive Archive

  34. EFET Box+ in Detail HotFolder Adapter ETRM System EFET Box + Process Viewer Message Monitor Admin, Config Reporting Vali- dator Protocol Engine In Out ETRM Interface WebService Interface Internet Matching Engine XML Processing EFET Doc. Database Adapter ebXML 2.0 Database Mapping . . . Trade Confirmations / Matching Status / Admin Messenger Audit / Log Information

  35. Ponton X – Product InformationPonton X/P – the ebXML message service XP Configuration Message Monitor Message Monitor XP Configuration ebXML Message Generic Adapter Test Adapter Test Adapter Generic Adapter Messenger Listener Messenger . . . . . . Internet Listener Generic Adapter Hot Folder Adapter Hot Folder Adapter Generic Adapter ERP ERP ebXML Acknowledgement Log Archive Log Archive

  36. Security Aspects for Integration Sender Organisation Receiver Organisation Appl. System Messenger Listener Messenger Appl. System Firewall Firewall Adapter Adapter Sign Encrypt SSL channel encryption / authentication Decrypt Verify Secure Zone DMZ DMZ Secure Zone Transmission Flow Channel-auth Channel-encr Doc-auth Doc-encr Doc-auth Doc-encr Doc-auth Doc-encr doc doc doc doc doc Archive / Log Archive / Log

  37. Contacts for EFET and EFETnet EFETnet Hugh Brunswick Managing Director h.brunswick@efetnet.org Phone: + 31 20 301 13 98 Mob: +44 7767 27 27 26 Fax: + 31 20 520 75 10 User Feedback RWEGaselys Malte Möller Arnaud Cruiziat Back Office Manager Chief Operating Officer Phone: +49 201 12 17566 Phone: +33 1 41 66 04 41 Email: malte.moeller@rwe.com Email : arnaud.cruiziat@gaselys.com ElectrabelEDF Filip Sleeuwagen Saeed Patel Head of Back-Office Chief Technology Officer Phone: +32 2 5195099 Phone: +44 20 7061 4055 Email : filip.sleeuwagen@electrabel.com Email : saeed.patel@edftrading.com TotalSempra Philippe Chauvain Eric Thornes General Manager – Risk Control Head of Operations Phone: +44 (20) 76 59 38 18 Phone: +44 (0)20 7847 1310Email : philippe.chauvain@total.com Email : ethornes@sempratrading.com EFET Legal Committee Jan Haizman Secretary Legal Committee Supervisory Board EFETnet Phone: +44 (0) 7774. 269.819 Email : jan.haizmann@efet.org EFET Back Office Group Solveig Mestern Back Office Manager, E-on Sales & Trading Phone: +49 Email : solveig.mestern@eon-energie.com EFET ECM WG Malte Möller Back Office Manager Phone: +49 201 12 17566 Email: malte.moeller@rwe.com Ponton Consulting. Michael Merz Tilo Zimmerman Managing Director Project Manager EFETnet Phone: +49 40 69 213 341 Phone : +49 40 69 213 342 Email: merz@ponton-consulting.de Email: zimmermann@ponton-consulting.de

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