ELECTRICITY GENERATION IN ROMANIA

Sistemul energetic al Romaniei la rascruce7 Noiembrie, 2012

ADRIAN BOROTEADirector Afaceri Corporatiste

CEZ ROMANIA

CURRENT SITUATION OF GENERATION IN ROMANIABALANCED PORTFOLIO WITH RENEWABLES EARNING THEIR RESPECTED PLACE LATELY

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WITHOUT NEW INVESTMENTS, ROMANIA TURNS FROM NET EXPORTER OF ELECTRICITY INTO NET IMPORTER, ENDANGERING ITS SECURITY OF SUPPLY AND EXPOSING TO HIGHER PRICES

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MARKET SHARES IN GENERATION – 6 MONTHS 2012WIND COMPENSATED MISSING HYDRO (DRY YEAR AGAIN)

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ON COMPETITIVE MARKETS, PRODUCERS (ESPECIALLY THERMAL ONES) BENEFIT OUT OF VERY HIGH PRICES

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Additional income from support scheme

Producers’ revenues

Bonus payment Electricity sales Heat sales

Regulated Power market price

Electricity regulated price

Heat regulated price

High Efficiency Cogeneration - support mechanism

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EXCEPTIONAL POTENTIALS FOR RENEWABLES IN ROMANIA

WIND

SOLAR

BIOMASS

Zone Recorded solar energy potential

0 Over 1250 kWh/m2-year

I 1250 kWh/m2-year – 1150 kWh/m2-year

II 1150 kWh/m2-year – 1050 kWh/m2-year

III 1050 kWh/m2-year – 950 kWh/m2-year

IV Under 950 kWh/m2-year

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ANALYSTS SAY THAT ELECTRICITY CONSUMPTION WILL STEADILY INCREASE OVER NEXT YEARS, SO NEEDED INSTALLED CAPACITY

EXISTING CLASIC POWER PLANTS HAVE LOT OF ISSUESREGULATED END-USER TARIFFS SHOULD INCREASE TO MAKE ROOM FOR URGENTLY NEEDED NEW INVESTMENTSCOMPETITIVE MARKET WORKS FINE

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Where to invest?•Distributed generation•Efficient cogeneration•Renewables•High efficiency•Rehabilitation •Nuclear•Hydro•Pump storage Revenues

•Market prices for electricity•Regulated prices for electricity •Revenues from ancillary services•Revenues from network losses T&D•Supporting scheme for renewables•Bonus for efficient cogeneration•Export

Reality - new investmentsWindPhotovoltaicCCGTBiomass

Reality - hydro•Lack of investments•Clogged lakes•Dry years lately•Insolvency

Reality – nuclear•Approaching 20-25 years (lifetime)•Decommissioning costs•New units very expensive

FinancingTougher conditions – more equity, higher interest, PPA

Law makersStabilityPredictability

ANREFair in-time regulations

Reality - Thermal power plants •Depreciated technologies (‘60s)•Oversized inefficient cogeneration units•Expired lifetime•High operational costs•Expensive maintenance•Low availability•Low efficiency•Environmental allowances/costs•High prices for offered electricity

Construction

Operation

DistributorsNetwork congestionsConnections to networksLosses InvestmentsFrozen distribution tariffs/high postponed revenues

ConsumersLow end user prices – not much room for new investmentsQuality of services required

Regulated suppliersSqueezed between regulated end user fixed prices and continuously increased costs (generation,aso)

TransmissionNetwork congestionsConnections to networksLosses Investment

EU directives20-20-20

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Stability

Predictability

Gov strategy -Sound,Stable

Investment recovery

Remuneration

of investment

International crisis

More prudent investors

Consumption drop

Directives

RegionalCompetition

For

new investments

Poverty

CSR

……

Old, not efficient capacities

Regional markets Constraints

More demanding

consumers

Fossil fuels

scarcity

Tariff liberalization

Interconnectors

R&D

Free market

Cash-flow

Competition

Bureaucracy

11Source: CEZ

CEZ GROUP IS BENEFITING FROM LOW COST GENERATION FLEET

CEZ Group installed capacity and generation (2011)

CEZ has a long-term competitive advantage of low and relatively

stable generation costs

2,472

3,97028.3

5,81329.8

2,8677.7

3.4

Installedcapacity

Generation,gross

Hydro and others

Lignite / Brown coal (baseload and midmerit)

Nuclear (baseload)

15,122 MW 69.2 TWh

Share on generation

41%

5%

43%

Black coal (baseload and midmerit)

11% Coal power plants are using mostly

lignite from CEZ’s own mine(60% of lignite needs sourced internally, remaining volume through medium-term supply contracts)

Nuclear plants have very low operational costs

CEZ GROUP ALREADY INVESTED OVER 2 BILLION EUROS IN ROMANIA

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CEZ Distributie continues to invest every year about 50 mil.euro into distribution networks for its 1,4 million customers

CEZ wind parks at Fantanele & Cogealac-biggest on-shore from Europe, with its 600 MW installed, with an investment of over 1,1 billion Euro;

About 590 MW are already up and running;

Remaining capacity up to 600 MW to be commissioned by end 2012

At end 2010, CEZ bought 4 small micro-hydropower plants close to Resita, with an installed power of 18 MW, spending 20 mil.Euro; during 2012-2013, units are to be fully rehabilitated

CEZ Vanzare supplies electricity for 1,4 million customers, not only in our region, but all over Romania

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Total projected size: 240 WTGs of GE 2.5 MW – installed capacity of 600MW in three wind farms

Total investment: 1.1 billion EURO

Expected end of construction for entire projects by the end of 2012

Estimated wind speed was confirmed during almost 2 years in operation;

First turbine was connected to Transelectrica in June 2010;

1st GC was received starting August 2010 production - Fantanele;

2nd GC was received starting November 2011 production - Fantanele;

Supporting scheme, consisting of 2 GC until 2017 and 1 GC starting 2018 for a total period of 15 years

WIND FARMS IN FANTANELE, COGEALAC AND GRADINA

Basic information about CEZ Wind Farms

82,5 MW

Construction has started in October 2008

Connected to the transmission grid in June 2010

Total production in 2011 - 138 GWh

Fully accredited for 15 years supporting scheme

Fantanele Est Cogealac

255 MW, 245 MW in operation/testing

Construction works restarted in February 2011

1 GC received for testing period;

As new project over 125 MW, it has to be notified to EC within 3 months after accreditation

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262,5 MW

Construction has started in October 2008

Connected to the transmission grid in June 2010

Total production in 2011 - 480 GWh

Temporary accredited to receive 2 GC for 2 years; meanwhile it was notified to EC and based on its individual endorsement, we estimate that full scheme will be confirmed, in terms of number of GC and 15 years period;

Fantanele Vest

WIND IS THE CHEAPEST GREEN ENERGY FORROMANIAN ELECTRICITY CONSUMERS

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2010 2013 2016 2019 2022 2025

Wind

Hydro

Biomass

Biomass using efficient cogeneration

Solar

Numb

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tifica

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uppli

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netw

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CONNECTION TO NETWORKS OF RENEWABLES (MW)

Thank you very much for your kind attention!