OS 2015: next steps

Proposals and agreements by TSOs

12th IG meeting

Paris

14th December 2009

2

Index

1. Proposal on Calendar for the Second Phase

2. Proposal on Documentation for the Second Phase

3. Proposal on Capacities at the border to be included in the Second Phase

4. Proposal on the Test by Regulators to validate capacity allocation for the Second Phase

5. Issues subject to further consideration

3

Proposal on calendar for the Second Phase1

4

Indicative schedule for the Second Phase

FEBRUARY 2010

Starting date of the Second Phase of the OS.

JUNE 2010

Publication of results of the Second Phase of the OS.

JULY 2010

Signing of capacity booking contract or transmission contract between each TSO and interested subscribers (2015 capacities).

JANUARY 2011 Approval of GRTgaz (December 2010) and TIGF global investment programs

by their respective Boards of Directors (2015 capacities).

Approval of GRTgaz and TIGF global investment programs by CRE (2015 capacities).

TSOs are following the calendar agreed in the Information Memorandum:

5

Proposal on Documentation for the Second Phase2

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Documentation

OS document Action foreseenInformation Memorandum (main body)

A short-version/amendment should be produced for the Second Phase.

TSOs: Description of physical capacities and commercial capacity products offered* (including specific reference to units/measuring temperature)

(*) Including, the description of split of capacity between

two products:

Spain GRTgaz South

Spain TIGF GRTgaz South Calendar

NRAs: Potential further information on tariff visibility and/or market structure (Threshold/economic) test to validate capacity allocation

Allocation Rules Same rules, adapted to the capacity products offered for 2015.

Letter of Commitment Similar to the Letter of Commitment for 2013 capacities, adapted to the capacity products offered for 2015.

Application form Similar to the Application form for 2013 capacities, adapted to the capacity products offered for 2015

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Documentation

OS document Action foreseenNon-Disclosure Agreement between the TSO and the shipper

No changes required.

Only shippers that have not signed it during the First Phase will be required to sign the NDA.

Capacity booking contracts and/or transmission contracts

Similar to the Capacity booking contracts and/or transmission contracts for 2013 capacities, to be approved by NRAs adapted to the capacity products offered for 2015.

Private contracts between TSOs

Action foreseen

Non-Disclosure Agreement between TSOs

No changes required. No need to sign a new document.

Memorandum of Understanding between TSOs

Amendment required to launch the Second Phase.

“The Parties undertake to complete and update the indicative lists of infrastructure developments for the 2015 Project before the launch of the second phase including the binding requests of the 2015 Project. The final list will be contractualised by way of an amendment to the present MoU. The Parties shall execute this amendment no later than March 31st, 2010.”

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Proposal on Capacities at the border to be included in the Second Phase3

9

2015 Capacities – Non-sold 2013 Capacities

“In the second phase, the sale of capacities not sold during the first phase could be possibly* provided NRAs’ prior approval and subject to the frame required by the NRAs if any.”

The Information Memorandum states:

(*) Note that due to a typo the original document reads “possible” instead of “possibly

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NORTH

SPAIN

SOUTH

TIGF

MIDCAT capacities

Annual capacities (*)

230 GWh/d

7.2 bcm/y180 GWh/d

5.6 bcm/y N S S N

Technical 180 GWh/d

5.6 bcm/y

230 GWh/d

7.2 bcm/y

Offered 144 GWh/d

4.5 bcm/y

184 GWh/d

5.8 bcm/y

(*) Note that technical and offered capacities are defined in GWh/d. The conversion to bcm/y is merely informative.

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NORTH

SPAIN

SOUTH

TIGF

Biriatou capacities

60 GWh/d

1.9 bcm/y60 GWh/d

1.9 bcm/y

N S S NTechnical 60 GWh/d

1.9 bcm/y

60 GWh/d

1.9 bcm/a

Δ Biriatou 60 GWh/d

1.9 bcm/y

55 GWh/d

1.7 bcm/y

Offered 48 GWh/d

1.5 bcm/y

48 GWh/d

1.5 bcm/y

Annual capacities (*)

(*) Note that technical and offered capacities are defined in GWh/d. The conversion to bcm/y is merely informative.

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Having taken into consideration the results from the First Phase and comments received by stakeholders after the announcement of the First Phase results, TSOs have agreed on the general principle of maximising capacity allocation in order to attend as much market demand as possible.

This implies that:

MIDCAT should be analysed or built if there is enough capacity to proceed; and

The Biriatou project should be included in the capacity offering of the Second Phase, and it must be analysed both in case of insufficient or excess demand for validating MIDCAT. The timing for Biriatou capacities would

need to be reconsidered, according to the new dates for the FID.

The agreement has been reached considering both proposals together (capacities to be included + maximisation of capacity allocation), as well as the agreement to attach to the calendar included in the Information Memorandum.

General principles agreed by TSOs

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NORTH

SPAIN

SOUTH

TIGF

Biriatou and MIDCAT capacities

290 GWh/d

9.1 bcm/y240 GWh/d

7.5 bcm/y

N S S NTechnical 240 GWh/d

7.5 bcm/y

290 GWh/d

9.1 bcm/a

Offered 192 GWh/d

6.0 bcm/y

232 GWh/d

7.3 bcm/y

Annual capacities MIDCAT + Biriatou

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The Information Memorandum states:

“Remaining capacity not sold via the current procedure at the Spanish-French border will be sold through coordinated procedures between French and Spanish TSOs to be defined.

In France, the detailed rules for marketing this capacity will be submitted to CRE for approval.

In Spain, capacity allocation will comply with regulation in force.”

Non-sold 2013 Capacities not corresponding to Biriatou

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Non-sold 2013 Capacities not corresponding to Biriatou

GWh/d

Offered S – N at Larrau* 132.00

Allocated S – N 132.00

Non-allocated S – N 0.00

Offered N – S at Larrau* 69.98

Allocated N – S 69.00

Non-allocated N – S 0.98

1

5

Open Subscription Period for Short-Term Capacities (OSP STC) until 2015

NORTH

SPAIN

SOUTH

TI GF

South → North

1

2

North → South

5 5 1

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3 3

4

At the points 2, 4 and 3 capacity will be allocated under the current French‘s allocation rules.(*) Total capacities showed in the Information Memorandum included Larrau and Biriatou

TSOs proposal

Potential inclusion in the Second Phase: to be discussed

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Proposal on the Test by Regulators to validate capacity allocation for the Second Phase4

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It would be recommendable for the Second Phase to announce a Test commonly agreed by Regulators (CRE and CNE).

The validation mechanism of such Test should guarantee that if a project enjoys 100% of demand for the capacity offered on a long-term basis in only one direction, the validation by Regulators should be automatic. The threshold for studying the project could be placed around 50%.

Demand during the First Phase for both 2013 capacities (binding requests) and 2015 capacities (indicative requests) has revealed a clear preference for capacity at the border from South to North (Spain-France). The Test should be primarily performed on demand for such (forward flow) capacity.

If a project enjoys less than 100% of demand from South to North, a validation by regulators may also be granted taking into account other conditions, e.g:

(Certain level of) demand from North to South (backhaul flow).

SoS criteria (e.g. in line with future SoS Regulation).

…

Proposals on the Test agreed by TSOs

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In practice the proposal to build MIDCAT if there is enough capacity to proceed could be articulated in two different manners:

1. MIDCAT should be considered first, and regardless the result of the analysis, Biriatou should be considered after MIDCAT. A threshold test for each project could be established independently.

2. Demand thresholds could be predefined, in order for regulators to provide visibility on the validation of the allocation. Under this proposal, the practical result should be similar to the one of the previous proposal.

Proposals on the Test agreed by TSOs

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Validation

Non-validation

? Ex-post analysisMIDCAT + Biriatou: S N

MIDCAT Biriatou

MIDCAT? Biriatou

? MIDCAT

MIDCAT? Biriatou

MIDCAT Biriatou

92 GWh/d

24 GWh/d

184 GWh/d

208 GWh/d

The thresholds for analysis should be established guaranteeing that below them, it is not possible to build the referred infrastructure, i.e., they should not be unduly high.

MIDCAT Biriatou

Analysis

MIDCAT

MIDCAT

MIDCAT Biriatou

48 GWh/d

0 GWh/d

100% of offered capacity

Sample threshold test*Capacity

reserved for short-term232 GWh/d

Biriatou

Biriatou

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S-N demand threshold Calculation

232 GWh/d 100% MIDCAT + 100% Biriatou

208 GWh/d 100% MIDCAT + 50% Biriatou

184 GWh/d 100% MIDCAT

92 GWh/d 50% MIDCAT

48 GWh/d 100% Biriatou

24 GWh/d 50% Biriatou

0 GWh/d -

Sample threshold test*

(*) Notwithstanding the fact that a validation by regulators may also be granted taking into account other conditions, e.g:: (Certain level of) demand from North to South (backhaul flow). SoS criteria (e.g. in line with future SoS Regulation).…

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Issues subject to further consideration5

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NORTH

SPAIN

SOUTH

TIGF

Technical capacities provided by MIDCAT

South-North

230 GWh/d

7.2 bcm/yNorth-South

180 GWh/d

5.6 bcm/y

2015 capacities (long-term capacities = 80% of technical capacity at the border)

Summer Winter

0.00 0.00

16.00 0.00

0.00 0.00

16.00 0.00

2015 CAPACITIES (GWh/d)(starting from December 2015)

Interconnection points and flow direction

Interconnection Point

MultiannualCapacities

MultiseasonalCapacities

184.00

144.00

80.00 - 264.00

160.00 - 281.98

184.00

144.00F

A C

B D

E

G

H

NORTH

SPAIN

SOUTH

TI GF

South → North

C

G

North → South

D D C

GH H

B A

F E EF

H

B A

G

2015 Capacities – First Phase offering

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2015 Capacities – First Phase Results

Interconnection Point

MWh/day A + C B + D E F G H

Capacity requested 157,523 99,520 88,352 62,520 82,632 225,512

Capacity offered 184,000 144,000 184,000 144,00080,000

264,000160,000281,980

% Requested/Offered 85.6% 69.1% 48.0% 43.4%103.3%

31.3%141.0%

80.0%

2015 Capacities offered and requested – figures aggregated at the border

NORTH

SPAIN

SOUTH

TIGF

South → North

C

G

North → South

D D C

GH H

B A

F E EF

H

B A

G

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2015 Capacities offered and requested per point

NORTH

SPAIN

SOUTH

TIGF

South → North

C

G

North → South

D D C

GH H

B A

F E EF

H

B A

G

2015 Capacities – First Phase Results

Interconnection Point

MWh/day A C B D E F G H

Capacity requested 55,992 101,531 38,000 61,520 88,352 62,520 82,632 225,512

Capacity offered 184,000 144,000 184,000 144,00080,000

264,000160,000281,980

% Requested/Offered 30.4% 55.1% 26.4% 42.7% 48.0% 43.4%103.3%

31.3%141.0%

80.0%

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2015 Capacities – capacity splitting

Two options were proposed at the cross border point between Spain and France :

Option 1: Three-step entry-exit system Spain ↔ TIGF ↔ GRTgaz South (Points C & D)

Option 2: Entry-exit system with direct interconnection Enagas ↔ GRTgaz South (Points A & B)

Aggregating the options presented, demand for 2015 capacities at the cross border point between Spain and France equals 85.6% of the capacities offered from South to North, and 69.1% from North to South.

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“Shippers will be asked in the non-binding phase which capacity product they want. This input will be used to define a split between the 3 components* in the France – Spain products.”

The Information Memorandum states:

Capacity splitting

(*) GRTgaz South Spain, GRTgaz South-TIGF and TIGF-Spain, the three of them in both directions.

Thank you for your attention!