European Power Markets: Performance and Prospects

1. European Power Markets: Performance and Prospects Trevor SikorskiSenior Principal, Global Power Services 7 October 2004

2. European Power Markets • Spot Power Markets Converge? • Volatility in Italy and Spain • The CO2 Penalty Hurts Great Britain • How Much are Your CO2 Credits Worth? • The CO2 Factor in the Cost of New Entry Headlines 2004

3. The European Power Price Service The European Power Price Service (EPPS) brings all of this market intelligence together, providing detailed forecasts and analysis of the key factors and events shaping the industry. • Understand and predict emerging price trends • Test assumptions about the market • Plan future investments strategies • Make more informed decisions regarding long-term financing and the restructuring of power assets

4. The Power Price Forecasting Model

5. Prices Come Together 2004 European Spot Power Prices Some European power markets continue to move together, with the exception of Italy.

6. Some Markets Track Closely… 2004 Spot Market Correlations

7. …While Others Remain Quite Volatile 2004 Day-ahead / Daily Volatility

8. The Cost of Power in Great Britain is on the Rise June 2004 — Great Britain Forward Power Curves Power prices are up 10 euros/MWh due to higher fuel costs and the inclusion of C02.

9. …And is Likely to Remain High September 2004 — Gas Spark Spread Great Britain is the only country where prices are high enough to encourage new power plant construction.

10. But If You Take Out the Cost of CO2 September 2004 — Green Spark Spreads Great Britain power prices fall below the point that would encourage new entry.

11. What About the Rest of Europe? Great Britain is the only market that is taking into account the opportunity costs of carbon.

12. How Much Are Your Carbon Credits Worth? Global Insight’s CO2 Price Forecasts

13. And How Will They Impact Prices Across Europe? Forecast Prices Across Europe

14. New Entry Costs Special Topic Nuclear and wind are by far the most expensive to build

15. Special Topic CO2 Is Influencing New Build Decisions New Entry Costs With CO2 = 8 €/MWh Gas is still the most competitive when you consider the cost of CO2.

16. Special Topic CO2 Price Would Have to Jump Dramatically to Shift to Nuclear… New Build Costs With CO2 = 64 €/MWh

17. The European Power Price Service Tracking the Events Shaping the Industry • The influence of the EU Emissions Trading Scheme on prices and plant operations • Emerging trends in the traded markets • The evolution of spark spreads • Country analysis for United Kingdom, Spain, Netherlands, Germany, and Italy • Converging prices across power markets • Market analysis • Price movements • Volatilities • Correlations

18. The European Power Price Service Service Deliverables • An annual forecast report including: • A detailed review of market prices in the preceding year • Forecasts of plant mix, plant margins, and electricity prices out to 2020 • Comprehensive country reports focusing on market developments • Quarterly updates including: • Revised, near-term forecasts going out three years • Insight into recent developments affecting the sector • Analysis of recent price behaviour in traded markets

19. Global Insight Energy • Premier economic analysis and consulting organization • Most comprehensive coverage of countries, regions, and industries available from any single source • Multi-fuel, quantitative consultancy • Emphasis on European and North American energy markets • Broad range of subscription, data, and consulting capabilities Power, Gas, Oil, Coal, and Emissions

20. Contact Us More information regarding Global Insight’s European Power Price Service is available at: www.globalinsight.com/eupower For additional questions regarding our European energy services, please contact: Trevor Sikorski +44 (0) 20 8544 7866 trevor.sikorski@globalinsight.com