1. Market liberalization in Moldova -main challenges- Chisinau, May 16, 2013 Veronica Muruziuc Seventh Partnership Activity

2. MOLDOVAN POWER MARKET -SPECIFICS- Power market opening: - From 1 January 2013, all non-household customers were declared eligible (Electricity Act); - The power market for households will be opened from 1 January 2015 (Electricity Act); - Only one active eligible customer. Lack of generation capacity: -70% of electricity imported from Ukraine and Transnistrian Power plant;

3. MOLDOVAN POWER MARKET -SPECIFICS- - 30% covered by producers from the right side of Dniestr. Moldovan TSO, Moldelectrica, is a state company and is functionally and legally unbundled; The 3 DSOs performing their activity on a given area carry out both activities of distribution and supply of electricity at regulated tariffs;

4. Gas Natural Fenosa Distribution and supply at regulated tariffs RED Nord RED Nord Vest Cross-border exchanges from Ukraine Cross-border exchanges from Ukraine Independent power producers Transnistria Independent power producers Transnistria 8 licensees for supply at non-regulated tariffs Legend: Electricity flows Contractual, financial flows (billing and payment) Tariff customers 1292719 TSO Moldelectrica TSO Moldelectrica 1 1 Regulated Producer HPP Costesti Regulated Producer HPP Costesti 1 1 Eligible customers all non-households Eligible customers all non-households Only one active CHP-North Regulated Producers CHP-1 CHP-2 Cross-border exchanges to Romania in island mode Cross-border exchanges to Romania in island mode Non-regulated CHPs of Sugar Refineries Only one active Picador-Grup Picador-Grup MOLDOVAN POWER MARKET -SPECIFICS-

5. MOLDOVAN NATURAL GAS MARKET - SPECIFICS - Natural gas market is fully opened; No active supplier at non-regulated tariffs; No active alternative suppliers: natural gas is imported from Russia.

6. MOLDOVAN NATURAL GAS MARKET - SPECIFICS - Moldovan TSO, Moldovatransgaz, a daughter company of Moldovagaz, is functionally and legally unbundled; The 25 DSOs performing their activity on a given area carry out both activities of distribution and supply of natural at regulated tariffs.

7. Moldovagaz Moldovatransgaz TSO Distribution Company 12 S&PS O DSO Import Tiraspoltransgaz TSO Final Customer (all customers are eligible but no one have the possibility to buy) 1 Producer DSO S&PS O Import flows from Russian Federation (via Ukraine) Cross-border flows to Romania (natural gas from Russian Federation to Romania) „Darnic-gaz“ JSC Technical LinkCommercial Link 12 Distribution Companies (DC) To DCs connected to Moldovatransgaz network To DCs connected to the neworks of Moldovagaz- daughter DCs 1 Supplier at non-regulated tarfiis MOLDOVAN NATURAL GAS MARKET - SPECIFICS -

8. COMMITMENTS UNDER TCE In march 2010 Moldova signed the Energy Community Accession Protocol: - Under the treaty Moldova had to transpose the so-called “second energy package”. According to the Ministerial Council Decision from 6 October 2011, by 1-st January 2015, the Energy Community Contracting parties should transpose the so-called “third energy package”: -Directive No. 2009/72/EC; -Directive No. 2009/73/EC;

9. COMMITMENTS UNDER TCE -Regulation No. 714/2009; -Regulation No. 715/2009. The scope of the “second energy package” and of the “third energy package” - ensure liberalization of energy markets.

10. TCE Contracting parties

11. MAIN CHALLENGES Given specifics of the natural gas and power markets in Moldova, the main challenges regarding liberalization of energy markets are: -To ensure effective unbundling of TSO from producers and suppliers in the natural gas sector; -To establish procedure for switching suppliers by customers, in maximum 3 weeks (in both electricity and natural gas sectors);

12. MAIN CHALLENGES -To encourage the entrance of new suppliers on the energy markets: -introduction of obligation for non-household customers to buy electricity from the market (could be an option?); -To establish a day-ahead market: -At the level of Energy Community a SEE WMO Report was developed. One of the conclusions was that until Moldova joins ENTSO-E (in about 8 years according to the Report), the possibility to create a common market with Ukraine should be considered. -To establish a balancing market, an ancillary services market.

13. THANK YOU. Veronica Muruziuc Legal consultant National Agency for Energy Regulation Tel. +373 22 852 934 E-mail: vmuruziuc@anre.mdvmuruziuc@anre.md 90, Columna str., 2012, Chisinau, Republic of Moldova