1. 1 Warsaw, 16 October 2012 the system, that connects New Gas Market Model in TNC

2. 1.Easier entrance on the gas market for new entities. 2.Gas trading no longer associated with a physical location on the network. 2 3.Separation of physical entry and exit points, i.e. enabling gas transport from physical entry points to virtual point and from virtual point to physical exit points. 4.Gas system use rules simplified. the system, that connects Premises of the new TNC 2

3. 3 the system, that connects Virtual Point 1.The TNC introduces a 'virtual point' – without a concrete location that makes gas trade possible between customers inside the transmission network. 2.Gaseous fuel is the product on offer at the virtual point – E high methane gas. 3.Nitrified natural gas (Lw) will not be available at the virtual point. 3

4. 4 1.The TNC regulates cooperation between the TSO and the Polish Power Exchange (POLPX). 2.Possibilities of selling and purchasing gaseous fuel on the exchange at market driven prices and in complete observance of anonymity of transactions. TSO Cooperation with POLPX 3.A sales agreement concluded on the Gas Exchange is valid, effective between the Parties that concluded it and is performed by the TSO. 4.In the event of no physical possibilities of performing the agreements, the TSO executes agreements using balancing instruments. the system, that connects 4

5. 5 1.Change in the duration of the gas year in order to adapt to EU solutions and consequently to facilitate commercial transactions (Gas Year = Oct. – Sept. instead of Jan. – Dec. calendar year). 2.The gas day effective as of 1 July 2012 lasts from 6:00 am until 6:00 am the next day. The Gas Year 5 the system, that connects 5

6. 1.Supported by a series of gas facility and equipment tests, a change in the admissible gas quality parameters (WI) to adapt to the amended Polish Standards and to enable import of new, more calorific gas via the LNG terminal. Wobbe Index 2.The scope of WI variables for the E group gaseous fuel introduced by the new draft TNC is 45.0 – 56.9 MJ/m3. 6 the system, that connects 6

7. Implementation Schedule for the TNC, DNC and the TSO and DSO Tariff 15/10 15/08 Storage Service Rules Update 02/11 01/12/2012 Implementation of TNC, DNC/SSR and Tariffs of TSO/ DSO/SSO 01/12/2012 Implementation of TNC, DNC/SSR and Tariffs of TSO/ DSO/SSO 24/07/2012 Approval of TNC and publishing in ERO Bulletin 24/07/2012 Approval of TNC and publishing in ERO Bulletin 15/09 1) Start of works on the DNC 2) publishing the DNC for consultation 3) submission of remarks & comments to the DNC 4) Works on final draft of DNC after end of consultation process 01/10 Approval DNC TSO and DSO and TSO and SSO contain ITC, and order contracted capacity allocation for the terms: 01.12.2012-31.12.2012 TSO/Shipper: Change in existing transmission contracts into Framework Contracts with CCA/CA Contracted Capacity Allocation PP for DSO and SSO for the terms: 01.12.2012-31.12.2012 Application for Capacity Allocation CA Works on TSO Tariff Application Verification Submission of application in TSO capacity allocation procedure Capacity allocation for term of 01.01.2013-30.09.2013 Capacity allocation for WPWY GG, WPWY OTC, WPWY OSP, WPWY OSD, WPWY OSM 24/09 1. Calculation of Tariff rates for TSO, 2. Works on the Tariff and calculation of Tariff rates of DSO/SSO 30/08 14/11 Approval Tariffs of TSO/ DSO/SSO 04/09 30/09 77 the system, that connects 7

8. the system that connects 8 Trading Company Customer Domestic Extraction Import LNG Gas Sources Transmission Storage Distribution Polish Gas Market Model

9. the system that connects 9 Trading Company Customer Domestic Extraction Import LNG Gas Sources Transmission Storage Distribution Polish Gas Market Model

10. the system that connects 10 1.Trading company is currently responsible for the entire gas transport process from the entry point to the customer, including to the final customer that receives the gaseous fuel. a)Agreeing Transport Routes b)Ordering contracted capacity at entry and exit points at the TSO; DSO and SSO, including ordering contracted capacity at interconnectors. 2.Problem with establishing the quantity of gaseous fuel off-taken by the customers of a given trading company in a given distribution zone. Polish Gas Market Model

11. the system that connects 11 Cooperation with SSO SSO TSO Pumping capacity Off-take capacity Storage capacity PWYPWE 1.At present, in order to use the storage service a market participant has to:  conclude a transmission contract and reserve contracted capacity a the exit and entry point with the TSO;  conclude a storage services contract specifying the pumping capacity and the off-take capacity. 2.No certainty available that the capacity at PWY/PWE at the TSO and the capacity at the SSO will be the same. 3.The TSO suggests that the SSO who will determine the capacity at PWY and PWE through the connection agreement to the storage facilities, to order capacity at the connection of both systems and make it available within storage services.

12. the system that connects 1.The change in the conditions for cooperation with the distribution system operators and storage system operators will make it easier for customers to perform gas transmission between transmission systems and distribution and storage systems. 2.Only the DSO and SSO will purchase capacity at physical point connecting their systems with the GAZ-SYSTEM S.A. transmission system. 3.Simplification of the rules for purchasing capacity at TSO/ DSO and SSO connections, simplified allocation rules for quantities of gaseous fuel. Change in Principles for Cooperation with the DSO and SSO DSO TSO Virtual Point SSO DSO 1 DSO 2 TSO Entry Exit to DSO 1 Exit to DSO 2 Exit 12

13. the system that connects DSO TSO Virtual Point 3.The gas transport route to the final customer will be agreed between the SSO, DSO and TSO. The DSO and SSO will reserve at the TSO contracted capacity (capacity) at the connection to both systems. The DSO will be responsible for exceeded capacity. Change in Principles for Cooperation with the DSO and SSO 13 1.According to EP, the operators are responsible for the development of the transmission, distribution and storage system infrastructure – TSO, DSO, and SSO, respectively. 2.The DSO and SSO determine the size of the demand for capacity at interconnectors concluding connection agreement, and then the ITC.

14. the system that connects 14 Ordering contracted capacity takes place at physical entry points to the transmission systems and at the physical exit points to the final customer from the distribution (or transmission) system. DSO TSO FPWE TSO Virtual Point

15. the system that connects 15 DSO TSO FPWE TSO WPWY Virtual Point The transport of gaseous fuel to the Virtual Point (Gas Exchange, OTC Market)

16. the system that connects 16 DSO TSO FPWE TSO WPWE FPWY FC PWY SSO Virtual Point The transport of gaseous fuel from the Virtual Point to the final customer of the the storage system facility.

17. the system that connects 17 DSO TSO FPWE TSO FPWY FC PWY SSO WPWE WPWY DSO Virtual Point The transport of gaseous fuel from the Virtual Point to the distributoin zone (via the Virtual Exit Point to the distribution zone), which customers are connected with.

18. the system that connects 18 FPWE TSO (Import, Mine) FPWY FC (Final Customer) Shipper 1 Shipper 2 Sold -100 Bought +100 Virtual Point Shipper 1: +100 Shipper 2: -100 Balance: 0 18 Trading on the Gas Exchange

19. the system that connects 19 Trading on the Gas Exchange GAZ-SYSTEM S.A.: +100 FPWE TSO (Import, Mine) FPWY FC (Final Customer) Shipper 1 Shipper 2 Sold -100 Bought +100 Virtual Point Shipper 1: 0Shipper 2: -100 Balance: -100Balance: 0

20. the system that connects 20 Trading on the Gas Exchange GAZ-SYSTEM S.A.: -100 FPWE TSO (Import, Mine) FPWY FC (Final Customer) Shipper 1 Shipper 2 Sold -100 Bought +100 Virtual Point Shipper 1: +100 Shipper 2: 0 Balance: 0Balance: +100

21. the system that connects Settlements 21 DSO TSO PW PWE Transmission fee Entry Transmission fee Exit Distribution fee PWY/PWE PWY TSO TSO DSO Shipper (trading company) Shipper (trading company/ final customer) DSO Transmission fee PWY FC TSO Shipper (trading company)

22. the system that connects 22 Settlements SSO TSO WPW PWE Transmission fee Exit Storage services fee Storage Services Package PWE/PWY TSO SSO SSO Shipper (trading company/ final customer) PWY/PWE

23. the system, that connects Thank you for your attention 23 piotr.bujalski@gaz-system.pl