1. APEx Conference – 11-13 Oct. 2004 1 Powernext SA, the French Power Exchange: Three Years Later… Jean-François Conil-Lacoste Chief Executive Officer Leipzig, 11 October 2004

2. APEx Conference – 11-13 Oct. 2004 2 Overview Part 1. Goals and implementation of the liberalization process Part 2. Overview of the wholesale electricity markets Part 3. The structure of the French power market Part 4. Powernext SA : Products and results  Powernext organisation  Powernext Day-Ahead™  Powernext Futures™ Part 5. Major challenges for the future

3. APEx Conference – 11-13 Oct. 2004 3 Part 1. Goals and implementation of the liberalization process ACCOUNTABILITY [actors] REGULATION [market] LIBERALISATION(supplies) DEREGULATION SERVICE [public]

4. APEx Conference – 11-13 Oct. 2004 4 Key dates in France February 2000: French electricity law, transposition of the 1996 electricity directive April 2000: creation of CRE, Commission de Régulation de l’Energie July 2000: creation of RTE, the French grid operator July 2001: creation of Powernext SA, the French power exchange November 2001: launch of Powernext Day-ahead January 2003: modification of the French electricity law, last obstacle to trading are waived July 2004: opening to non household customers Part 1. Goals and implementation of the liberalization process

5. APEx Conference – 11-13 Oct. 2004 5 Part 2. Overview of the wholesale electricity markets The power value chain in a deregulated environment Wholesale market TSO RTE Distribution EDF + 170 distributors Final sale retail Powernext and brokers Trading Domestic clients (30 millions, 300TWh) Eligible customers (3 millions) Eligible customers (3 millions) Final sale industry Integrated production EDF Independen t production Deregulation introduces new economic functions and the structuring of organized and bilateral wholesale markets CNR : 3000 MW SNET : 2500 MW VPP : 6000 MW Shem : 770 MW

6. APEx Conference – 11-13 Oct. 2004 6 Part 2. Overview of the wholesale electricity markets Size of the physical market (TWh) Legal market opening (%) Switching estimates for the calendar year 2002 (large industrial users) Size of the wholesale market (estimation, in TWh) Scandinavia390100%More than 50%1900 Germany490100%20%2500 France44068%15%250 to 500 UK335100%15%2000 Netherlands105100%20%300 Spain205100%20%150 to 200 Italy30078%15%na Source : European Commission

7. APEx Conference – 11-13 Oct. 2004 7 Over the counter direct wholesale market Producers Traders … Part 2. Overview of the wholesale electricity markets Organised wholesale markets Eligible customers Retail market Suppliers  Producers  Traders Over the counter intermediated wholesale market Brokers …

8. APEx Conference – 11-13 Oct. 2004 8 Part 3. Structure of the French power market D-xD-1 D=delivery « Day-ahead »: exchange and bilateral market Powernext Day-Ahead™ Launched on 26 Nov. 2001 Forwards, futures, options, and swaps: exchange and bilateral market Powernext Futures™ Launched on 18 June 2004 Hour-ahead : Intraday (3-hour delivery) Balancing market (real time) : exchange and bilateral market Delivery on RTE grid for both Powernext Day- ahead and Powernext Futures

9. APEx Conference – 11-13 Oct. 2004 9 Powernext is a non obligatory exchange which results of a private initiative Powernext is a financial institution  stable and neutral shareholding with a capital of 10 M€  solid market model and IT systems Powernext brings a price reference  Short-term: adjustment and/or volume risk management - Powernext Day-Ahead TM  Long-term: price risk management – Powernext Futures TM Part 4. Powernext: corporate organisation and objectives 51,0 % 24,5 % HGRT

10. APEx Conference – 11-13 Oct. 2004 10 Powernext manages a market  centralized and transparent insuring liquidity and non-discriminatory access  supervised by a structuring regulation resting on market rules and a strong presence of regulation authorities (AMF, CRE)  and insures the safety of transactions.  LCH.Clearnet guarantees the financial commitments and systematic risks  RTE (French TSO) insures physical engagements Part 4. Powernext: market model LawSphere of activityRegulatory Bodies Financial Law Trading Clearing Product specifications CECEI: Comité des Etablissements de Crédit et des Entreprises d'Investissement AMF: Autorité des Marchés Financiers French Electricity Law (2000 and 2003) Membership Delivery CRE: Commission de Régulation de l'Energie DIDEME: Direction de la Demande et des Marchés Energétiques

11. APEx Conference – 11-13 Oct. 2004 11 Powernext® counts 47 members among producers, suppliers, industrials, distributors and traders. However, the individual market share of the most active member stays below 11% Part 4. Powernext Day-Ahead TM : members

12. APEx Conference – 11-13 Oct. 2004 12 More than 9 000 000 MWh in 2004 (already higher than 2003 volumes) Part 4. Powernext Day-Ahead TM : volumes

13. APEx Conference – 11-13 Oct. 2004 13 Part 4. Powernext Day-Ahead TM : a reference Outside and unpredictable factors create a need for adjustment the following day amounting to 10% of the total consumption. Powernext Day-Ahead™ is a tool to manage this risk. Powernext Day-Ahead™ is considered as a short-term reference in France with :  a strong correlation between Powernext prices and power consumption on the French hub

14. APEx Conference – 11-13 Oct. 2004 14  a strong correlation between Powernext prices and the weather Part 4. Powernext Day-Ahead TM : prices

15. APEx Conference – 11-13 Oct. 2004 15 Part 4. Powernext Day-Ahead TM : market resilience Powernext Day Ahead™ strongly improved market resilience since the beginning NB : The resiliency index is defined as the average of absolute market clearing price variations caused by an additional price-inelastic bid on each of the hours of the period. The resiliency index is calculated on the aggregated bid & ask curves composed of single bids and accepted block orders.

16. APEx Conference – 11-13 Oct. 2004 16 A future contract is a standardized agreement to sell or buy on an exchange a specific amount of electricity at a particular price on a stipulated period The aims of Powernext Futures™ are the following :  Proposing to members the appropriate contracts to manage their risk exposure to French electricity price fluctuations.  Creating indisputable reference prices on the forward curve Part 4. Powernext Futures TM : overview Powernext offers the following futures with physical delivery : 3 monthly contracts 4 quarterly contracts 2 yearly contracts

17. APEx Conference – 11-13 Oct. 2004 17 300 400 500 200 100 Time Consumption 600 Consumption forecast J F M A M J J A S O N D Visibility: purchase Calendar 2004 Flexibility: purchase monthly and quarterly contracts Daily balancing Part 4. Powernext Futures TM : dynamic management of the consumption

18. APEx Conference – 11-13 Oct. 2004 18 Part 4. Powernext Futures TM : market model NOMINATION TRADING NOVATION TRANSFORMATION POSTING POSITION MANAGEMENT CLEARER BALANCE RESPONSIBLE TRADING MEMBER DELIVERY   Continuous trading Internet access: Trayport system LCH.Clearnet is the CCP (central counter- party) of all trades Secures the market through a system of margins and deposits Delivery in compliance with RTE requirements

19. APEx Conference – 11-13 Oct. 2004 19 Part 5. Major challenges for the future Consolidate the launch of Powernext Futures™ market with physical delivery (potential transition towards a cash settlement market) Contribute to the market opening to all professionals in July 2004 making them more price-sensitive will make Powernext’s role as generator of short, medium and long term reference indexes even more crucial Interconnections: a crucial first step towards a single market  Feasibility study for the implementation of market-based mechanisms in order to manage congestions on the Belgian, Spanish and Italian borders in close coordination with national TSOs and regulators Other energies and products are considered such as natural gas, greenhouse gas emissions and weather derivatives

20. APEx Conference – 11-13 Oct. 2004 20 Contacts Website : www.powernext.fr Telephone : +33 1 73 03 96 00 Fax : +33 1 73 03 96 01 E-mail : information@powernext.fr