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Central European Gas Hub 16.10.2009

Central European Gas Hub 16.10.2009. OTC DEVELOPMENT. Number of daily Nominations. CEGH – Monthly Title Tracking Volumes. Number of Customers. CEGH – Churn Rate. 2600 nominations / day including intraday operations. Volumes Traded in July 2009: 1.78 bcm.

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Central European Gas Hub 16.10.2009

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  1. Central European Gas Hub 16.10.2009

  2. OTC DEVELOPMENT Number of daily Nominations CEGH – Monthly Title Tracking Volumes Number of Customers CEGH – Churn Rate 2600 nominations / day including intraday operations Volumes Traded in July 2009: 1.78 bcm Churn rate in 2009 at 2.91 on average 92 customers registered with July 2009, 71 members active 1475 nominations per day necessary to complete matching (stated July 2009) Development of spreads Adaption of existing IT systems 2009 Deals brokered via ICAP Billing functionalities for exchange trades Enhancement of BUBD functionalities Technical implementation of ITAB Allocation process prepared for OBA Interface to Exchange systems

  3. Price quotations in Baumgarten are reflecting the market environment

  4. Exchange: contribution to trade Globalizing trading activities Across regions Across industries and businesses Standardizing trading activities Anonymous trade Price quotation (anonymous) Standardized contracts ( interchangeable with other exchanges) No risk exposure for traders Traders not utilizing EFET term sheets can easily participate trade OTC - clearing

  5. Helpdesk European Federation of Energy Traders • Premium Access -Combined Access -iAccess -Brokernet CEGH Agreement Connectivity Agreement Trading Systems Interconnection Agreement Clearing Agreement General Clearing Agreement Membership- agreement Trading License European Regulators Group for Electricity and Gas Trade Report Exchange Participant Trading Workshop Member Database Billing Margining Billing Trade Report Co-operation Contract Co-operation Contract Co-operation Contract Federal Ministry of Economy, Family and Youth ID, Name, GCM Trade Report Trading Rules Quantitiy Report Federal Financial Supervisory Authority Germany Austrian Federal Competition Authority Market Maker Contract Fee Matrix Nomination Clearing-&Settlement Rules BackUp/BackDown-Services Market Participation Rules CEGH Dispatching Financial Market Authority Austria Matching Nomination Matching Nomination Service Level Agreement General Clearing Member Operating Balancing Agreement EUStream OMV Gas GmbH TAG GmbH BOG GmbH EXCHANGE STRUCTURE Authorities Contractual Operational CEGH Market Operations & Analysis Premium Combined iAccess Brokernet General Clearing Member

  6. Frankfurt any where any where Vienna Leipzig Vienna any where Rough concept IT data flows 4 TSOs Anywhere 85 traders Vienna

  7. c c c c c c HUB as trading point between many transportation and storage systems eustream TAG WAG Regulatory Zone Austria Storage HAG MAB

  8. CEGH Activities 2009/09 2600 Nominations per day

  9. Partner

  10. Clearing volumes ( energy) in € 2008

  11. ECC Clearing across products and across exchanges Power Natural Gas Spot Spot Derivatives Derivatives Emissions Spot Derivatives

  12. Benefits of integrated clearing Netting of cash flows Daily Cash Flows / Variation Margin [€] Sample Portfolio 25 MW SellPowernext Base load Contract 25 MW BuyEEX Base load Contract Separated Clearing Integrated Clearing Jul Jan Feb Mar Apr May Jun Source: ECC 12

  13. Clearing Members pledge margins in cash or securities. Clearing Members are obliged to call margins from Non-Clearing Members in at least the same amount. Margin system to cover counterparty risks • ECC bears the counterparty risk for all cleared exchange and OTC-transactions. • To cover the potential insolvency of one or more Non-Clearing Members, ECC calculates and calls margins from the Clearing Members. ECC ECC14 Mio. € Clearing Member Clearing Fond 117 Mio. €â Clearing Member3…28 Bn. € Margin 3…657 Mio. € Clearing Member/ NCM Variation Margin 0…145 Mio. € 13 Source: ECC

  14. 2 3 Non-Clearing Members 5 3 24 207 Non-Clearing Members 19 Countries 18 3 7 73 1 5 7 3 23 13 2 4 7 1 as of January 2009 Source: ECC

  15. 14 3 10 9 2 1 4 1 1 4 2 25 CEGH Customers 1 … CEGH Customers 1 88 Customers 16 Countries 9 as of January 2009 / June 2009 Source: ECC / CEGH

  16. Clearing volumes in € 2008

  17. Clearing volumes in € including ICE Brent 2008

  18. Clearing volumes in € including LCH 2008

  19. Result

  20. Correlation long term – short term

  21. Correlation long term – short term

  22. Back UP

  23. Physical Trade - OTC € t € t OTC TRADING EXCHANGE TRADING Day of Delivery -1 Supply & Demand Exchange Trader 1 Exchange Trader 2 CLEARING & SETTLEMENT (RISK MANAGEMENT) Remote Member Clearing Agent (Bank) General Clearing Member (GCM) Direct Clearing Member (DCM) Non Clearing Member (NCM) Non Clearing Member (NCM) Non Clearing Member (NCM) Non Clearing Member (NCM)

  24. GasExchange

  25. Physical Trade - OTC € t OTC Transfers EXCHANGE TRADING Day of Delivery -1 Supply & Demand Exchange Trader 1 Exchange Trader 2 CLEARING & SETTLEMENT (RISK MANAGEMENT) Remote Member Clearing Agent € (Bank) General Clearing t Member (GCM) Direct Clearing Member (DCM) Non Clearing Member (NCM) Non Clearing Member (NCM) Non Clearing Member (NCM) Non Clearing Member (NCM)

  26. What to clear is what to trade Geographical spread Seasonal spread Commodity spread

  27. Gas price development

  28. RE-CONCILIATION PROCESS? t + 1 t + 2 t 09:00 am 05:00 pm 06:00 am 07:00pm 06:00 am End of exchange trading Start ofexchangetrading Scheduling Start physical delivery Final allocation Physical interruption 1. Re-Nomination Lines of Defense 2. Backup / Back down ? 3. Re-conciliation or cashadjustments?

  29. Price quotations in Baumgarten are reflecting the market environment

  30. Trading Day Gas Spot Market Pre- trading MAIN TRADING PHASE Post-trading Continuous Trading 09:00 until 17:00 Opening auction Closing auction Call Call 8:00 until 8:59 1 min max. 15 sec 1 min max. 15 sec 17:01 until 17:45 … random end Source:WBAG

  31. Frankfurt any where any where Vienna Leipzig Vienna any where Rough concept IT data flows 4 TSOs Anywhere 85 traders Vienna

  32. SCHEDULING OF PHYSICAL DELIVERIES t + 1 t + 2 t 06:00 am 09:00 am 05:00 pm 06:00 am End of exchange trading Start ofexchangetrading Start physical Delivery 05:30 pm Final matching run≤06:00 pm Final confirmation 12:30 pm First matching run≤01:00 pm Confirmation ( Deliveries to Italy!)

  33. Trading Day Gas Spot Market Pre- trading MAIN TRADING PHASE Post-trading Continuous Trading 09:00 until 17:00 Opening auction Closing auction Call Call 8:00 until 8:59 1 min max. 15 sec 1 min max. 15 sec 17:01 until 17:45 … random end Source:WBAG

  34. MARKET MAKERS • OBLIGATIONS:“ … during 50% of trading hours providing simultaneously buy and sell quotes for Spot Day-Ahead products with a minimum size of 30 MWh and a maximum spread of 0.5 €/MWh …” • 50% of trading hours? • But at least 2 hours in the morning • 30 MWh minimum size? • Maximum spread: • Threshold value = 5.0 € • If last price < 5.0 €  absolute spread = 0.5 €/MWh • If last price >= 5.0 €/MWh  relative spread = 2 - 5%? • INCENTIVES: • x% rebate on trading fees

  35. FINALMAIN CONTRACT SPECIFICATIONS - SPOT • SPOT MARKET: • Spot Exchange start withDay Ahead ProductONLY! • Physical delivery: delivery on 06:00 am (t+1) to 06:00 am (t+2) • Gas product type: Base load • 2 Delivery points: Virtual point Baumgarten + Oberkappel • continuous trading from 09:00 am to 05:00 pm • Price units: EUR/MWh • Minimum price increment: 0.025 EUR / MWh • Minimum trade size: 10 MW • single sided nomination – initial nomination by CEGH for customers and no re-nomination by customers

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