Madrid, 7th May 2010

12th SG Meeting South Gas Regional Initiative

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12th SG meeting S-GRI- Agenda

I. Opening

I.1 Welcome

I.2 Approval of the agenda and last meeting minutes (for approval)

II. Launching of the Open Season 2015 (for information by regulators and TSOs)

II.1 Capacities to be offered

II.2 Allocation rules

II.3 Application forms

II.4 Economic test and tariff visibility

II.5 Calendar

III. AOB

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II. Open Season 2015: history

• The second phase of the OS 2015 is the final part of the project developed in the framework of the SGRI to build new interconnection capacities between Spain and France and inside France after 2012

• The second phase of the OS 2015 includes:

Construction of a new interconnection point, called MIDCAT (Eastern corridor), reaching GRTgaz North

Increasing existing capacity at the Western corridor (Irún/Biriatou). It corresponds to capacity offered and not decided due to lack of demand in the first phase of the OS.

Larrau

MidCat

Irún/Biriatou

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II. Open Season 2015: history

Results of the non-binding phase

The OS 2015 comprises two phases:

Non-binding phase: launched in September 2009, at the same time that the OS 2013

Binding phase: to be launched before summer 2010

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Economic tests to validate capacity allocations in France

In order to guarantee a minimum cost recovery for the capacities potentially developed following the OS 2015, 2 economic tests will be used to validate capacity allocations in France:

One test to validate allocations at the Spanish- French border and at TIFG-GRTgaz South interconnection points (IPs 1, 2, 5 and 6)

One test to validate allocations at GRTgaz North-GRTgaz South interconnection point (IPs 3 and 4)

Capacity allocations in France will be validated if the revenues generated by these allocations cover 70% or more of the costs of the infrastructures associated with these allocations

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• The 2 economic tests will be applied to the aggregated capacity allocation as communicated by TSOs to regulators after the first run of the allocation rules

• The 2 economic tests will be performed independently

• Possible interactions with the minimum capacity requests and the coordinated capacity requests

Economic tests to validate capacity allocations in France

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Economic test for investments at the Spanish-French border

1. The test will be applied in this order to :

• MIDCAT + Irún/Biriatou (MC2+B1, MC2+B0, MC1+B0, and MC0+B0)

• MIDCAT (M2, M1, M0)

• Irún/Biriatou (B1, B0)

2. Solutions based first on capacity maximisation and then on investments optimisation (reduction of the capacity offered from France to Spain to minimise investments) are tested for the three alternatives

3. If 2 or more investments scenarios can equally satisfy the aggregated capacity demand communicated by TSOs, then the economic test will validate the scenario which minimises the price at IP 1. In any case, the scenario validated is the one allocating the highest amount of capacity

Economic tests to validate capacity allocations in France

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Economic test for capacity allocation at the Spanish-French border

Economic tests to validate capacity allocations in France

Allocated Demand

Priority 1 : Test for MidCat + Biriatou

Priority 2 : Test for MidCat

Priority 3 : Test for Biriatou

6 possible price steps at IP 1:1. Equalised entry tariff2. Eq. entry tariff +10 €/MWh/d3. Eq. entry tariff +20 €/MWh/d4. Eq. entry tariff +30 €/MWh/d5. Eq. entry tariff +40 €/MWh/d6. Eq. entry tariff +50 €/MWh/d

For each step, 4 sub-steps of investments optimization upon demand:a. Full Investmentb. Investment w/out Montpellier CS c. Investment w/out Midi pipelined. Investment w/out Midi pipeline

and Montpellier CS

6 possible stepsFor each step, 3 sub-steps of investments optimization upon demand:a. Midcat + Midi pipelineb. Midcat + Montpellier CS c. Midcat

6 possible stepsFor each step, 2 sub-steps of investments optimization upon demand:

Economic Test Perimeter

If 2 or more scenarios which pass the economic test can equally satisfy the provisional aggregated capacity allocations communicated by TSOs, then the economic test will validate the scenario which minimises the price at IP 1.

No Investment

a. Biriatou + Montpellier CSb. BiriatouNegative Results

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Economic test examples:• If capacity requested are the same as in the Non-binding phase, the

economic test provides M1+B0 as solution at 90 €/MWh/day at IP1

• If shippers request 100% of  maximum capacity offered in the direction S-N, both at IP1 and IP2, and no capacity in the direction N-S, the economic test provides M0+B0 as solution at 90 €/MWh/day at IP1

• If capacity requested in the direction S-N is the same as in the non binding phase, both at IP1 and IP2, and no capacity is requested in the direction N-S, the economic test provide B0 as solution at 90 €/MWh/day at IP1

Economic tests to validate capacity allocations in France

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The OS 2015 is launched in the current transmission tariff structure, in force since the 1st January 2009

Tariff visibility is the same as for the OS 2013. There are 2 options, depending on the outcome of the network study currently undertaken by GRTgaz and TIGF:

Continuation of the current tariff structure

A tariff for capacity between TIGF and GRTgaz South of 0 €/MWh/day/year

If, as a result of the OS, the entry tariff in France from Spain is increased at IP 1 following the application of the economic test:The price of the capacity allocated in the OS 2013 would not be

affected by this tariff increaseEvery other S F capacity from 2015 would be marketed at

the same price as for the OS 2015 (including short term capacities)

Tariff visibility in France 

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Since 2008 tariffs are proposed by the CNE and approved by the

Ministry of Industry. Principles governing tariff design are defined

in the Law 34/1998. TPA tariffs are based in costs in order to

assure investment recovery and a reasonable profit. These

principles are developed in the Royal Decree 949/2001, which is

published in the Official Gazette. TPA tariffs will be defined under

the principles of objectivity, transparency and non-

discrimination.

Tariff visibility in Spain 

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Calendar 

Date Milestone7th May 2010 SG meeting for information on the OS 201511th May 2010 Publication of final documents regarding 2015 capacities:

• Information Memorandum including: General Information on the Open Season Allocation Rules. Application Form Letter of Commitment. Non-Disclosure Agreements between each TSO and interested subscribers (to be

signed only by new participants). • Capacity booking contracts between each TSO in and subscribers interested in

capacities between GRTgaz South-TIGF and/or TIGF-Spain• Transmission contracts between each TSO in and interested subscribers

May 2010 (TBC) Information meetings for stakeholders organised by TSOs in Spain-Madrid (20th) and France-Paris (26th)

1st June 2010 Signature of Confidentiality Agreements (NDA) between each TSO and interested subscribers not participating in the First Phase to be signed before the referred date

7th June 2010 Starting date for capacity requests reception.

25th June 2010 Closing date for capacity requests reception.

9th July 2010 Publication of results of the OS and communication of individual allocations.

31st July 2010 Deadline for the signing of contracts

31st January 2011 Deadline for approval of GRTgaz and TIGF global investment programs by their respective Boards of Directors and by CRE.