1. 1 www.greenstream.net Managing risk and utilizing opportunities in phase 2 of EU ETS Harri Roto, phone +358 40 840 8007, email harri.roto@greenstream.net November 20th 2007

2. 2 www.greenstream.net GreenStream in brief GreenStream is a leading Northern European company in the carbon markets and renewable energy markets focusing on: -Renewable energy projects -Greenhouse gas offset projects -Brokerage and portfolio management of carbon units and renewable energy certificates Offices in Helsinki, Hamburg, Oslo, Stockholm, Vilnius and Beijing

3. Services including -Brokerage of carbon credits and green certificates -Portfolio management services Green Certificates, Broker of the Year 2004, 2005, 2006 Intermediary Services including -Strategies, market analysis, project financing -CDM/JI/GIS project services Advisory 3 www.greenstream.net Core competenceServices offered Green Investment Fund management (carbon and renewable energy); current investment vehicles include -Multilateral Carbon Credit Fund (EBRD and EIB) -Fine Carbon Fund -Blåfall Core competencies of GreenStream

4. 4 www.greenstream.net European Union Emissions Trading Scheme OverviewMarket developmentEU ETS trading Price development of EUAs Source: State and Trends of the Carbon Market 2007, World Bank Figures converted from USD to EUR using ECB´s average annual exchange rates Source: Reuters 1) Source: State and Trends of the Carbon Market 2007, World Bank 2) Based on estimates by UBS, JP Morgan, Société General, Deutsche Bank and Citigroup 3) Source: Communication "Limiting Global Climate Change to 2° Celsius: The way ahead for 2020 and beyond, EU The largest emissions trading market -Market value EUR 19.4 billion in 2006 (1) -Covers some 12,000 installations in the EU Linking Directive allows CERs and ERUs -Emission reduction credits from CDM/JI projects can be imported into the EU ETS Second phase 2008-2012 -More stringent allocations and higher prices expected -Estimated average shortfall of 1.25 billion tonnes of carbon dioxide equivalent (1) -Analysts forecast EUA prices between EUR 20-40 per allowance (2) Third phase 2013-2017 (expected) -GHG emission reduction target 20 % of 1990 baseline by 2020 (3)

5. Portfolio Management

6. Why Manage the EUA portfolio? Not just a bureaucratical burden but valuable assets EUA allowances are a raw material for production, similar to fuels & other costs of production Not doing anything = taking a view on the price development 2005-2007 period has shown extreme volatility in price The lesson learned: manage the price risk

7. © GreenStream Network Oy Portfolio Management Estimates/ data regarding emissions and allocated allowances Creating trading and risk management policy Implementing the strategy

8. © GreenStream Network Oy Portfolio Management - example Company A has an estimated under allocation The hedging of the deficit of a specific year (or month) will start well in time There is an agreed ”pipeline” in which the hedge level must be at any moment of time Emission estimates important

9. © GreenStream Network Oy Portfolio Management -example

10. © GreenStream Network Oy Portfolio Management - example

11. Portfolio Management Strategy depends on the nature of business of each company Some have a real option to not produce and to sell the EUA’s instead – some do not Leads into different strategies CER/ ERU use an integral part

12. 12 www.greenstream.net CERs – a great opportunity

13. Secondary CERs CER with guaranteed delivery (vs. Primary CER which includes project risk) CERs have importance to all companies with installations under EU ETS Cap for CER (and ERU) use per installation defined in NAPs as % of allocation for 2008-2012 OTC market at the moment most liquid (Forward, later also SPOT)

14. SCER08, EUA08 (Point Carbon)

15. EUA-CER SWAP Secondary CERs valued today at ~80% of EUAs A company with EUAs can create positive cash flow and/ or more credits for compliance by exchanging EUAs for CERs EVERY COMPANY UNDER EU ETS SHOULD DO IT! Project markets (primary CERs) not as easily accessible and managing project risks is an issue Example 1 (figures only exemplary, not an offer): –Company A delivers 80kt EUAs and receives 100kt CERs (forward deliveries) Example 2 (figures only exemplary, not an offer): –Company A delivers 100kt EUAs and receives 100kt CERs + 400000€ cash (forward deliveries & payment)

16. 16 www.greenstream.net