BLACK SEA ENERGY CONFERENCE ROMANIAN GAS SECTOR

1. BLACK SEA ENERGY CONFERENCE ROMANIAN GAS SECTOR BUCHAREST 3-5th of April 2006

2. GENERAL PRINCIPLES AND OBJECTIVS • LEGAL FRAMWORK REFORM • INDUSTRY RESTRUCTURING • MARKET OVERVIEW

3. GENERAL PRINCIPLES AND OBJECTIVS

4. COMMON OVERALL OBJECTIVES GENERAL FRAMEWORK REFORM • IMPROVE SECTOR EFFICENCY • INCREASE QUALITY OF SERVICES • ASSURE THE SECURITY OF SUPPLY • BETTER PRICES FOR COSTUMERS COMPANIES PRIVATISATION

5. GENERAL FRAMEWORK REFORM LEGAL FRAMEWORK REFORM INDUSTRY RESTRUCTURING

6. LEGAL FRAMEWORK • legal ground for entering into the market – faire, transparent and non-discriminatory rules • assets ownership and regime – concessions, public-private partnership, rental, private, etc. • technical and commercial set of norms and regulations, including licensing and • authorization procedure • TPA regime to the networks – regulated or negotiated • prices and tariffs methodologies • investment protection – cost recovery including the cost of capital, long term commitment, etc.

7. INDUSTRY STRUCTURE • companies unbundling • production and/or wholesale supply • transport • underground storage • distribution • retail supply • establishing the SSO, TSO and DSO • establishing the supplier of last resort • establishing the market operator, HUB operator, etc.

8. COMPANIES PRIVATISATION • changes in management and economical behavior • profit orientated and cost saving incentives • competitive market knowledge and mechanism • know how transfer – technology, organization, professional competences • financing power and access to international capital markets • European technical background and “best practice”

9. LEGAL FRAMWORK REFORM

10. LEGAL FRAMEWORK • Romanian primary legislation • establishment of the Gas Regulatory Authority in 2000 responsible for : • granting and withdrawal of licenses and authorizations • issuing the TPA rules and framework contract for regulated activities • market liberalization and improvement of competition • tariffs and prices methodologies and approval • define market structure : • regulated regime for natural monopolies - transport, distribution, UGS, regulated supply (for captive costumers) • competitive market for wholesale and eligible costumer supply

11. LEGAL FRAMEWORK • secondary legislation issue by NRANG • standard framework contract for transport, UGS and distribution services and for regulated supply • rules for TPA • performance standards • tariffs and prices methodology – a PRICE CAP approach • regulated asset base and regulatory accounting procedures • rules for market monitoring • Network Code • Supplier of last Resort appointment (under way)

12. INDUSTRY RESTRUCTURING

13. EVOLUTION OF THE ROMANIAN GAS INDUSTRY DISTRIBUTION AND SUPPLY LEGAL UNBUNDLING ACCOUNTING UNBUNDLING PRIVATE OWNERSHIP ½ PRODUCTION • VERTICAL • INTEGRATED • COMPANY • Production and UGS • Transport • Distribution and Supply DISTRIBUTION AND SUPPLY PUBLIC OWNERSHIP TRANSPORT AND TRANZIT TRANSPORT AND TRANZIT PRODUCTION AND UGS ½ PRODUCTION AND UGS VERTICAL INTEGRATED MONOPOLISTIC COMPANY STATE OWNERSHIP 1990 1998 2000 2004

14. ROMANIAN COMPANIES PRIVATIZATION • SNP PETROM S.A., one of the two great natural gas internal producers, was privatized in 2004. OMV bought a 33.34% share package of PETROM and, in December 2004, its participation reached 51% as a result of increased equity. • The same privatization method was used for the two major natural gas distribution companies. Gas de France has bought a 30% share package of DISTRIGAZ SUD and Ruhrgas has bought a 30% share package of DISTRIGAZNORD and their participation reached 51% as a result of increased equity. The cumulated market share of these two distribution companies will decrease to about 90% up to the year 2007, in the same time with licensing of new private distribution operators; • The market share of other producers, entirely private owned, holders of oil agreements, will increase to 3% (in the year 2007), respectively, up to 10% in the year 2015;

15. OMV - PETROM DISTRIGAZ NORD DISTRIGAZ SUD Note EBRD is expected to take share of Distrigas Sud

16. ROMANIAN COMPANIES PRIVATIZATION- futures steps - • Privatization projects in the year 2006: • SNGN ROMGAZ SA Medias, main gas producer with a market share of about 35% - the privatization process is already initiated : • sale of a majority stake towards a strategic investor, by selecting an international financial consultant that will establish the privatization strategy • sale on the Stock Exchange Market of a share stake of minimum 5% of share capital • current status : 14 investment banks/consulting firms submit “Expressions of Interest” forfinancial advisory services for the privatization of ROMGAZ SA until the June 20, 2005. • SNTGN TRANSGAZ SA Medias (TSO) sale on the Stock Exchage Market of a share stake up to 15% of share capital

17. MARKET OVERVIEW

18. COMPETITIVE FREE MARKET PRODUCERS (4) FOREIGN SUPPLIERS (3) REGULATET MARKET DISTRIBUTION COMPANIES (29) CAPTIV COSTUMERS WHOLESALE SUPPLIERS (48) ELIGIBLE COSTUMERS (200)

19. DOMESTIC COMSUMPTION AND SOURCES history and forecast

20. UCRAINA RUSIA ROMANIA MOLDOVA HUNGARY SERBIA TRANZIT BULGARIA

21. DEVELOPMENT OF THE MARKET OPENING • 1st of July 2006 all non-household costumers will became eligible • 1st of July 2007all costumers will became eligible