1. European gas markets and Gas- Power integration APEX conference Paris, 15 October 2007

2. Page 2 Contents nAPX Group: Gas and Electricity Exchanges nNatural Gas in Europe –Gas Demand –Gas Supply nGas trading –European Gas hubs –Vision on gas market intgration –Vision on gas and power integration

3. Page 3 APX Gas UK APX Gas NL APX Gas Zee APX Gas in Europe

4. Page 4 Current markets Power NLPower UKGas UKGas NLZEE Continuously traded spot Day ahead auction planned Forwards planned OTC Clearing Volume (2007LF) 19 TWh10 TWh133 TWh0.6 TWh0.2 TWh Legal counterparty APX BVAPX Commodities Ltd APX BV System EL2.1 (EL4 Q1 2008) EL2.1 (EL4 Q4 2007) EL4

5. Page 5 European Gas Consumption Total 2005 = 6028.2 TWh Total 2006 = 5992.8 TWh Overall change in European Consumption: - 0.6% year on year

6. Page 6 European Gas Production Total 2005 = 3274.3 TWh Total 2006 = 3172.1 TWh Overall change in European Production: - 3.1% year on year

7. Page 7 Changing demand and supply Demand of gas in Europe today –Power Generation –Industrial fuel –Commercial and domestic space heating –Petrochemical feedstock nAnd in the future … –Increased demand –Fuel switching, with new power plants mostly gas-fired –Natural Gas vehicles Supply nProduction –Continuing depletion of Dutch gas fields, UK and Dutch Continental Shelf –New supplies from Norway nRising importance of Imports to balance supply/demand mismatch –Increased imports from FSU –LNG

8. Page 8 By 2015, bringing: nChoice nDiversification nArbitrage Supplying gas to Europe LNG 150 – 200 bcm/yr Russia < 200 bcm/yr Norway < 125 bcm/yr > 300 bcm/yr > 250 bcm/yr > 150 bcm/yr

9. Page 9 European Gas Hubs NBP PEG ZEE TTF BEB PSV CEGH

10. Page 10 Hub Concentration Ref. Source: European Commission DG Competition (2007), p. 41

11. Page 11 European Gas Hub volumes (TWh) MarketLocationType20052006change NBPUKVirtual hub5768705822% TTFNLVirtual hub12220164% ZEEBRUGGEBEPhysical hub4635008% MS-ATRSpainVirtual hub*2602818% CEGHAustriaPhysical hub8991061% PSVItalyVirtual hub2978170% BEBGermanyVirtual hub513170% PEGsFranceVirtual hub x 5457773% * = inc. LNG Ref. European Gas Trading 2007. Prospex Research Ltd. October 2007

12. Page 12 TTF Hub Volumes Monthly traded and net volume (GWh/mth) Ref. Gas Transport Services 27.02.07

13. Page 13 TTF Developments nAPX Position Paper Accelerating TTF Development –Desired end state TTF: full sourcing alternative –BUT a long way to go: More investments to increase accessibility of the TTF Making better use of existing cross border transport capacity Delivery at the TTF (or at least re-entry) to enhance re-tradability Creating ONE liquid market despite differences in gas quality Reducing dominance in flexibility market Removing barriers that prevent large end users becoming active Two different gas qualities: H gas and L gas

14. Page 14 Zeebrugge Hub Volumes Daily average net traded vs physical throughput GWh/month Ref. Huberator 27.02.07

15. Page 15 UK NBP Hub Volumes Monthly average net traded vs physical throughput GWh/month Ref. National Grid 27.02.07

16. Page 16 Hub Developments TTF: Ref. DTe Draft Position Paper Accelerating TTF Development nDesired end state TTF: full sourcing alternative. Needs: –More investments to increase accessibility ( gas roundabout) –Making better use of existing cross border transport capacity –Delivery at the TTF (or re-entry from GOS) to enhance re-tradability –Creating ONE liquid market despite differences in gas quality –Reducing dominance in flexibility market Zeebrugge nZee Platform improving hub access, boost for arbitrage. –All transit or transport capacities to or from the 3 terminals (Interconnector, Zeepipe, LNG) give bundled hub access nPossible secondary market, infrastructure developments Germany nEEX initiative on two German hubs nNew alternative for TTF, Zeebrugge, NBP

17. Page 17 APX Gas UK APX Gas NL APX Gas ZEE Hub Development - Requirements nTransmission interconnectionInfrastructure nMultiple buyers & sellers& nDeliverability back-up/downMarkets nStandard trading contract Systems& nTitle transfers & matching system Commercial nPrice reporting Arrangements nForward trading Ref. Requirements for gas Trading Places C.Lyle EFET, E-World 6-8/02/07 Leading to: nLiquidity nHub services nLow transaction cost nIndependent hub operator nFirmness nPrice Transparency

18. Page 18 APX Developments for gas&power markets Trayport GV 8.5 viewEuroLight 4.0 View Marketing package nCashback deals for traded volume nQuote request periods, Voice broking Summer 2007 Trading system package: nOne screen for all gas (NBP,ZEE, TTF) nUK power and gas on one counterpart nTrayport connection To come soon: nUK power and UK gas on one screen nDutch power and gas on one screen

19. Page 19 New products possible nHub-to-hub –Spreads/swaps, Basis Trading (e.g. UK NBP Dutch TTF –Auctioning and re-trading of pipeline capacity, storage, entry/exit nBetween gas and power –Spark spreads nThose products already definable on Trayport nSeparate products on exchange Hub-to-hub is important for integration of the gas markets Gas-to-power (spark spread): important for rising role of gas-fired generation in Europe UK and Netherlands are the best countries for spark spreads, due to the large role of gas-fired generation APX UK NBP ZEE TTF

20. Page 20 Conclusions nGas market on UK National Balancing Point is the most liquid market today nNW European hubs now established and already acting as price setting agents nFurther work required on hub construct and improvement of market rules, but some encouraging signals nGas Roundabout effort from Dutch gas parties (Gasunie grid company) in order to develop transport, transit, TTF role nHub-to-hub trading may set the pace in the near future nSpark spread trading: integration between gas and power trading is an exciting prospect

21. Page 21 A VITAL LINK IN ENERGY TRADING