Swiss Energy Trading

SET

SET Swiss Energy Trading AG

Annual Report 2012

Foreword by the Chairman oF the board

During the past year SET became an independent provider for several services associated with energy trading and hedging. In 2012 the entire range of services was managed by SET without permanent external support.

Turnover increased significantly in 2012 compared to 2011. The financial results of SET showed a gratifying improve-ment in the EBITDA and EBIT levels over the last year. Taking advantage of opportunities while nonetheless keeping an eye on risks and customer focus resulted in small but well-deserved profit. We are confident that this trend will continue in 2013 and we are convinced that our business model will be ever more successful in the future.

Currently, front desk and back office are both located en-tirely in Zurich, and the SET crew handles all essential trans-actions on its own. A risk committee has been established which is securing compliance with trading guidelines.

At the end of 2012, the Swiss gas industry decided to buy the shares of VNG. This step was one of several options agreed upon between VNG and Swissgas to bring SET to the level of a fully autonomous operating gas trading company. The partners decided to establish SET as a purely Swiss company so that it could continue to develop without restrictions. I would like to take this opportunity to thank VNG for its advice and support during the start-up of SET. VNG was represented on our board by Dr. Klaus-Dieter Barbknecht and Oliver Hill.

For 2013 I am confident that SET will succeed in ensuring a successful position in the gas trading and hedging sectors.I would like to thank my colleagues on the board of direc-tors. Special thanks, as well, to René Bautz, former delegate of the board. He retired from that role at the end of 2012, when Ruedi Rohrbach took over his position as delegate of the board. Also I recognize the performance of Nicolai von Kistowski, head of trading, and his crew on their efforts in 2012, which led us to satisfying results and an optimistic outlook for the current year.

Hansruedi MüllerChairman of the Board

Swissgas and its shareholders GVM, EGO, Gaznat and EGZ founded SET together with German VNG at the beginning of 2009. Since 2009 until the end of September 2011, SET has operated through the VNG trading platform. On October 1st, 2011, SET has opened its own trading platform and since then all trading is managed solely by SET. End of 2012, Swissgas bought the remaining shares of SET from VNG and is now SET’s sole parent company.

PurPose

– Provide market access and state of the art hedging services, i.e. manage portfolio price risks on behalf of clients in order to add value to the industries inside and outside Switzerland. – Purchase and sales of gas volumes for the Swiss Gas Industry involved on the European spot markets (presently NCG, TTF and Wallbach).

struCture

SET is structured traditionally as a trading floor. It is divided into smaller departments – Front Office, Middle Office and Back Office. The segregation of duties enables to work efficiently and accurately. SET is also closely cooperating with Swissgas and its shareholders, which formed several advisory organs, such as Advisory Board or Risk Committee. Some of the services such as operations or accounting are outsourced.

main FaCts

Headquarters: ZurichFoundation: March 2009Shareholder: Swissgas AG Share capital: 40 mill. CHF

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Volume traded in GWh

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Trade volume in mill. EUR

The overall traded volume and turnover have significantly increased in 2012 in comparison with 2011. SET reached in 2011 the volume of approximately 4.5 TWh, whereas in 2012 the notional volume traded over SET equalled to 21 TWh. Concerning the overall turnover, the increase is similar. In 2011, SET reached the overall turnover of 97.4 mill. EUR and in 2012 turnover of 346 mill. EUR. The factthat SET was operating in 2011 with the help of its share-holder’s trading floor (VNG) has affected the final results substantially. SET’s own trading platform went “live” on October 1st, 2011. In 2012, SET was independently per-forming all trading activities.

As visible in the charts, the increase in traded volume and turnover throughout the years 2011 and 2012 is enormous. It shows that SET has gained its role on the market and its widely recognized by its partners.

EditoRiAl SEt – StRuctuRE And ovERviEw

SEt – mAin tRAding figuRES

overall results in 2012

Volume traded: 21 twhturnover: 157 mill. ChFebitda: 0.9 mill. ChF

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dEvElopmEnt in 2012 ShAREholdER StRuctuRE,BoARd of diREctoRS And mAnAgEmEnt

viSion And StRAtEgY

After the acquisition of the shares of VNG, Swissgas is now holding 100 % of the shares of SET. Together with its shareholders and co-founders EGO, Gaznat, GVM and EGZ, this group of companies forms a strong partnership providing SET with knowledge and experience about the Swiss markets. Swissgas was established in 1971. The purpose of the com-pany – working in partnership with regional companies – is to procure natural gas for Switzerland in all its forms, to transport it to the regional companies and to safeguard natural gas related interests in Switzerland and abroad.

Swissgas is owned by following shareholders – Gaznat SA (26 %), Erdgas Ostschweiz AG (26 %), Gasverbund Mittel-land AG (26 %), Erdgas Zentralschweiz AG (6 %) and Ver-band der Schweizerischen Gasindustrie (16 %).

SET does not have any participation in any other company.

The Board of Directors of SET is constituted by the dele-gates of the Regional Companies. The president of SET was Dr. Christoph Stutz who left his office in June 2012 andMr. Hansruedi Müller overtook the office of President of SET. Four Board of Directors meetings were held in the year 2012. After the purchase of shares by Swissgas, 2 mem-bers of the Board of Directors representing VNG have been replaced.

SET’s Management consists of “Delegierter des VR” and Head of Trading. Mr. René Bautz (CEO of Regional Compa-ny Gaznat) held the office of “Delegierter des VR” in 2012. Since January 1st, 2013, the company is headed by Ruedi Rohrbach as “Delegierter des VR”, who at the same time is CEO of Swissgas. Mr. Nicolai von Kistowski was Head of Trading.

Swiss Energy Trading

SET

main shareholders of swissgas

shareholders structure

In a framework where deregulating the energy markets is an objective to be achieved, short-term markets dramatically changed over the past years. These changes were charac-terized in the gas sector by a progressive decoupling of oil-indexed long-term contract prices and spot market prices.

In this current ever-evolving environment, the Swiss gas companies had to rethink and reshape their supply strate-gies, and consequently decided to setup a Trading company. Swiss Energy Trading (SET) mission aims at enabling Switzer-land to access gas market places more easily, supporting thetrading activities of the Swiss gas utilities in an ever more challenging and competitive environment, and helping the gas industry to continue to develop and implement custom-made services for the sectors of large consumers and power generation using natural gas.

SET’s mission is to develop and secure short-term supply through physical products, hedging products and other products such as virtual storages.

After the relocation of its headquarters in Zurich, SET be-came fully operational on October 1st, 2011. SET shall turn into a diversified trading entity, fully integrated into the European market by 2013, and whose core business will include a large portfolio of services and products.

The services to business partners will be diversified and will especially encompass the following areas:• Commodities such as oil, power and emissions• Market analysis• Portfolio management• Buying and selling gas volumes on spot markets• Hedging products, structured products• Arbitration services between the markets

SET is committed to the highest standards of services for its customers and will develop the largest possible synergies within the Swiss gas industry.

The Natural Gas markets have been moving in the past few years slowly from the long-term contracts to the short-term contracts. Whereas 20 years ago long-term contracts were covering almost 100 % of the market, in today’s world they represent probably around 50 % and the remaining half is purchased on the spot markets, often linked to a gas price-indices. The situation has changed and nowadays even the smallest players are looking to hedge their supply contract price in order to reduce the market price risks. The market participants are afraid of price spikes and they are looking to reduce/fix their costs in order to protect their revenue. The result is that they are moving from price taking to risk- adjusted portfolio management.

SET has broadened its business plan and is offering wide- ranging products in order to provide exceptionel services in the market. While fulfilling SET’s original purpose of provid-ing the shareholders of Swissgas (the regional suppliers of natural gas for Switzerland) with the access to the spot markets and with state of the art hedging tools, SET has realized that these services can be marketed also outside Switzerland and thus expanded its business into the EU. While concentrating its activities on Switzerland and its stakeholders, SET also won customers and counterparties with registered offices in Germany, UK, France, Austria, Denmark etc. All in all SET has been actively trading in 2012 with approximately 30 counterparties and has expanded its customer base steadily.

SET has set up new locations for trading natural gas and since July 2012 trading on TTF and since November 2012 trading on Wallbach has been activated. SET has been working successfully on setting up an oil trading platform. The trading will be concentrated on the ICE (Intercontinental Exchange) and the project shall be finished in the early be-ginning of 2013 and SET’s next focus will be implementation of other energy commodities.

UK 0.8 TWh 3.7%

France 0.2 TWh 0.9%

Germany 10.9 TWh 50.7%

Switzerland 8.4 TWh 39.1%

Others 1.2 TWh 5.6%

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Activities of SET in 2012

AnnuAl AccountS of dEcEmBER 31, 2012

ASSEtS

current assets Liquid assets 19.053.364 17.615.673 Accounts receivable (close companies and shareholders) 14.080.989 8.720.096 Other accounts receivable 12.690.627 2.055.654 Advance payments 167.982 209.973 Market assessment derivative instruments 192.878 0 Prepaid expenses 63.940 30.184total current assets 46.249.780 28.631.580

fixed assets Activated flotation costs 78.000 156.000 Furnishings, telecommunication, software 419.780 635.125 Non paid-in share capital 20.000.000 20.000.000total fixed assets 20.497.780 20.791.125

total assets 66.747.560 49.422.705

liABilitiES And EQuitY

current liabilities Accounts payable (close companies and shareholders) 53.522 4.229.670 Other accounts payable 27.918.120 6.961.910 Accounts received in advance 354.089 227.916 Provisions 15.000 15.000total outside capital 28.340.731 11.434.496

Equity 40.000 registered shares at a nominal value of CHF 1.000 each 40.000.000 40.000.000 Loss carried forward from previous year –2.011.791 –738.862 Annual profit/loss 418.620 –1.272.929total equity 38.406.829 37.988.209

total liabilities and equity 66.747.560 49.422.705

31.12.2012 CHF

31.12.2011CHF

BAlAncE ShEEt

Sales of gasproducts 155.436.451 50.963.071Purchase of gasproducts –153.860.612 50.911.580Market to market assessment 192.878 0trading income 1.768.716 51.491Fees 1.277.829 1.321.408Various earnings 10.972 15.752total revenues 3.057.517 1.388.651

Operating expenses 2.078.411 1.444.452Services 0 825.635Insurance/fees 71.954 36.308operating costs 2.150.365 2.306.395

EBitdA 907.152 –917.744Depreciations 451.208 328.952EBit 455.944 –1.246.697

Financial earnings 11.157 22.122Financial expenses –15.481 –15.354financial results –4.325 6.768

EBt 451.620 –1.239.929Taxes 33.000 33.000

Annual profit/loss 418.620 –1.272.929

incomE StAtEmEnt

2012 1.1.2012 – 31.12.2012

CHF

20111.1.2011 – 31.12.2011

CHF

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SET Swiss Energy Trading AGGrütlistrasse 44P.O. Box 205CH-8002 Zürich Phone +41 (0)44 250 42 90Fax +41 (0)44 250 42 99info@setrading.chwww.swiss-energy-trading.ch

SET

Swiss Energy Trading

SET