TRANSGAZ THE NATIONAL GAS TRANSMISSION COMPANY FROM ROMANIA

TRANSGAZ TRANSGAZ THE NATIONAL GAS THE NATIONAL GAS TRANSMISSION COMPANY FROM TRANSMISSION COMPANY FROM ROMANIAROMANIA

SHARE CAPITAL 117,738,440 RON

ECONOMY AND

FINANCE MINISTRY

75%

PROPRIETY FUND

15%

FREEFLOAT

10%

Headquartes:Headquartes:Constantin I. Motaş Street; No 1 551018 Mediaş CitySibiu County,RomaniaTel +40/269/803333Fax +40/269/839031www.transgaz.ro

http://www.transgaz.ro/

SNTGN TRANSGAZ SAThe National Gas Transmission Company

General Information

Established in April 2000, as a result of the legal unbundling of the former vertically integrated national gas company “Romgaz”;

Operates the National Gas Transmission System, which is state owned, based on a long term Concession Agreement;

Main activities: Gas transmission International Gas Transit Dispatching Research and Design in the Field of Natural Gas

Transmission


Ownership:75% - The Romanian State represented by the

Ministry of Economy and Finance 15% - The “Proprietatea” Fund

10% - Free float traded on BSE

TRANSGAZ was firstly rated BB+ with positive perspectives by Standard & Poor’s on March 2007 and since February 2008 has been rated BBB- fact which places Transgaz within the category of companies with the “investment grade” .


Historic Landmarks

First gas pipeline was built in 1912 – 1914 in Transylvania;

1912 - Establishment of the first company in Europe specialized in gas transmission: “The First Transylvanian Company for the Transmission of Earth Gas”;

1928- The first gas compressor station in Europe, at Sarmasel (Mures County).

1956 –The basis of the National Gas Transmission System is set, having a radial shape, from the center to the extremities of the country.

TRANSGAZ’S MAIN ACTIVITIES

Domestic gas transmissionDomestic gas transmission – – regulated activityregulated activity TRANSGAZ operates NTS under a concession agreement valid until 2032, signed

with National Authority for mineral Resources and based on the licenses granted by the National Energy Regulatory Authority (“ANRE”).

For using the NTS, TRANSGAZ pays a 10 % royalty fee per year of the total income obtained from its transport (recognized in tariff) and transit activities.

ANRE sets the transmission tariffs according to “revenue cap” methodology.

International gas transit through dedicated pipelinesInternational gas transit through dedicated pipelines – – non-regulated non-regulated activityactivity

Prices set based on bilateral agreements

MISSION AND RESPONSIBILITY

Maintain the functionality of the National Transmission System; Provide gas transmission services under reliable and safe terms;

Securing transparent, non-discriminatory and fair access conditions to all market participants

FINANCIALFINANCIAL OVERVIEWOVERVIEW

PROFIT & LOSS ACCOUNT

Year ended at 31.dec.2006

Year ended at 31.dec.2007

2007/2006 30 June2008

SPECIFICATION-thousand RON RELATIVECHANGES

(%)

NET TURNOVER 909.017 1.038.867 +14,28 543,078

OPERATING REVENUES 941.200 1.051.657 +11,74 549,091

OPERATING EXPENSES 675.882 780.370 +15,46 385,964

GROSS OPERATING RESULT 265.318 271.287 +2,25 163,127

FINANCIAL REVENUES 41.096 12.580 - 69,39 14,970

FINANCIAL EXPENSES 20.124 14.537 - 27,77 8,192

GROSS FINANCIAL RESULT 20.972 (1.957) -109,34 6,778

CURRENT PROFIT 286.290 269.330 -5,93 169,905

TOTAL REVENUES 982.296 1.064.237 -8,35 564,061

TOTAL EXPENSES 696.006 794.907 +14,21 394,156

GROSS PROFIT 286.290 269.330 -5,93 169,905

TAX ON PROFIT 48.377 45.324 -6,32 26,305

NET PROFIT 237.913 224.006 -5,85 143,600

0

200.000

400.000

600.000

800.000

1.000.000

1.200.000

2006 2007 30 JUNE 2008

PROFIT & LOSS ACCOUNT - thousand RON

NET TURNOVER TOTAL EXPENSES TOTAL REVENUES NET PROFIT

SC. PETROM SA ~ 5,24 bcm

PRODUCTION TRANSPORTATION DISTRIBUTION

Natural gas flow

S.N.G.N. ROMGAZ S.A.

~ 6 bcm

OTHERSPRODUCERS

~ 1 bcm(areas in

concession)

NATURAL GASIMPORT

SUPPLIERS~ 6 bcm

TRANSGAZ S.A.NATURAL GAS

TRANSPORTATIONNATIONAL COMPANY(Transportation system

operator)

LICENSED AND AUTHORIZEDNATURAL GASDISTRIBUTORS

Cash flow

RESIDENTIALAND DOMESTIC

CONSUMERS(POPULATION)

INDUSTRIALCONSUMERS

Competitive Market

Regulated Market

Competitive Market

ROMANIAN GAS MARKET OVERVIEW

THE NATIONAL TRANSMISSION SYSTEM (NTS)THE NATIONAL TRANSMISSION SYSTEM (NTS)

0,00

2,00

4,00

6,00

8,00

10,00

12,00

14,00

16,00

18,00

2005 2006 2007Gas Consumption in Romania Volume of gas transported trough NTS

GAS CONSUMPTION VERSUS GAS CONSUMPTION VERSUS GAS TRANSPORTED (2005- 2007)- GAS TRANSPORTED (2005- 2007)- BCMBCM

INDICATOR- BCM 2006 2007 2008 from which: H 01/2008

Volume of gas transported trough NTS

15,2 14,6 14,7 7,6

Volume of gas circulated 18,3 17,0 17,3 8,9

Ordered transit capacities 23,7 23,8 23,8 11,9

Quantities of sold import gas 0,087 0,157 -

THE INFRASTRUCTURE OF THE NATIONAL NATURAL GAS TRANSMISSION SYSTEM (NTS)

13.110 km of transmission pipelines and gas supply joints, including over 560 km of international transit pipelines with diameters of 1000 and 1200 mm (42’’ and 48’’) and working pressure between 6 and 40 bars;

21 valve control stations and/or technological nodes; 961 regulating, metering- delivery stations of the gas

supplied; 2 import gas metering stations; 6 gas metering stations on the gas transit pipeline; 6 gas compressor stations located on the pipeline route; 857 cathodic protection stations of the gas transmission

pipelines; 575 gas odoration stations.

The NTS transport capacity is around 40 BCM per year;

Around 8,400 km of the network’s total length have useful life of more than 25 years

TRANSIT ACTIVITY – PIPELINES & CAPACITIESTRANSIT ACTIVITY – PIPELINES & CAPACITIESTRANSIT CAPACITY (bcm/year)TRANSIT CAPACITY (bcm/year)

0

5

10

15

20

25

30

2005 2006 2007

2005 2006 2007

• The transit activity is a non-regulated activity being carried out through dedicated pipelines

• Transgaz provides gas transit through 3 pipelines with total capacity of approximate 28 billion cubic meters as of 2005

• 2 contracts on transit were concluded with GAZPROM Export, one with maturity in 2011 and the other with maturity in 2023. Both contracts contain clauses which give the possibility to prolong their maturity with successive 5 year periods.

• 1 contract is concluded with BULGARGAZ with maturity in 2011

ExistingInterconnectio

ns

Interconnection Pipeline Interconnection Pipeline Szeged – AradSzeged – Arad

Russe – GiurgiuRusse – Giurgiu Pipeline Pipeline

Mediesu Aurit

Isaccea

NABUCCNABUCCOO

New ProjectsNew Projects

THE NATIONAL TRANSPORTATION SYSTEM – MAPTHE NATIONAL TRANSPORTATION SYSTEM – MAP


Implementation of European Energy Policies

Romania – EU member state - member of the Energy Community of South - East Europe

The implementation of the European energy regulations is mandatory for the achievement of the European internal energy market.

TRANSGAZ’ actions in this regard:

- restructuring process for the unbundling of the regulated activities from the non-regulated activities. - implementation of a network code ensuring the implementation of the transparency and non-discrimination provisions of regulation 1775/2005.

TRANSGAZ is a member of Gas Infrastructure Europe


Considering the background defined by the regulatory framework and the development tendencies at European level, TRANSGAZ envisages the following development priorities:

1. Rehabilitation and modernization of the national gas transmission system:

reconsidering the main pipelines system and replacement of old transmission pipelines;

modernization of gas metering and regulating stations; rehabilitation and modernization of gas compressor stations; implementation of a SCADA system reduce pollution and assure the environmental protection by

complying with the European environmental norms 2. Development of the transmission system in new

consumption areas;


3. Development of the transit activity and of new interconnections with the neighbouring systems:

The main condition for achieving the internal European energy market is to interconnect the national networks

TRANSGAZ is aiming to implement the following transit/interconnection projects:

- The NABUCCO project;- Interconnection between Hungary and Romania- Interconnection between Bulgaria and Romania- Interconnection between The Ukraine and Romania

Nabucco pipeline project, gas bridge between Asia and Europe

RWE


General Data about the NABUCCO Project

Expected off-take in Transit countries : 12.0 – 15.0 bcm/y

Total capacity to Austria-Baumgarten : 13.5 – 16.0 bcm/y

Main potential sources : Caspian basin, Iraq, Egypt (Arab Gas Pipeline), Iran

Total Investment (CAPEX) for plateau level (costs 2008): 7.9 billion EUR

Expected investment in Romania (costs 2008) : 1.32 billion EUR IRR target of the project: 13% after tax

Debt /Equity ratio: 70:30

FEED Design: 2008-2010

Expected construction start-up : 2010

Expected operations start-up : 2013

Technical data of the Nabucco project Pipeline length 2.841 km (main line without feeders)

223 km Georgian feeder (42 inch) 218 km Iranian feeder (56 inch) Turkey 1.558 km (main line without feeders)

Bulgaria 392 km Romania 457 km Hungary 388 km

Austria 46 km Main pipeline diameter 56 inch (1400mm) Steel grade X70 according API 5L MAOP 90 bar Compression 6 or 12 compressor stations (depending on

scenario) total installed power 266-529 MW

Transport capacity 25,5 bcm ( base case) - 31 bcm (high case), excluding fuel gas

Nabucco pipeline route description –Romanian section

Total length on Romanian territory: 457 km

A series of obstacles will have to be overcome namely: 59 rivers (including three majors: Danube, Jiu, Mureş), 8 national roads, 22 county roads, 29 dirt roads, 8 railways

The pipeline will be fitted with the following AGI-s:

one compressor station with installed power of 31-37 MW

two gas import stations (in Craiova & Arad-Nadlac areas)

one custody transfer metering station (in Arad-Nadlac area)

2 “pig” launching/receiving stations

Nabucco Project current status Concluding a contract with Penspen Ltd from Great Britain as

owner engineer – December 2007

Accesion of RWE Germany as a new shareholder in Nabucco Project – February 2008

Starting the tender procedure for selecting of the local engineers – April 2008

Cooperation with the new financial consultant- HSBC from Great Britain in order to elaborate a the new updated financial – economic model – in the view of obtaining financing for Nabucco Project

Actual market Survey which shows huge demand for Nabucco capacities – August 2008

Nabucco Project – activities in progress

To be concluded an Intergovernmental Agreement

The Regulatory Authorities have granted the Exemptions from EC Dir. 2003/55/EC and the next step is to submit them for EU approvals

The establishing of Nabucco National Companies

Open season Process for capacity allocation- will start after the legal framework (IGA and Exemptions) is finally established


Route of the NABUCCO Pipeline

Benefits of Nabucco project for the Romanian gas industry Diversification of gas supply sources;

Balancing of the Romanian gas transport system through the intakes performed via the two import points;

Stimulation of the competition on the internal gas market;

Enhancing of the supply security;

Access to low production cost gas reserves;

Strengthening the role of Romania as transit country for major energy corridors;

Important revenues for Transgaz from dividends & internal transportation tariff;

Stimulation of horizontal industries which will contribute to the realisation of the project.


Interconnection of the Hungarian - Romanian Transmission Systems;(The Szeged – Arad pipeline)

Main Features:

Designed capacity: 1.5 – 2.0 bcm/year Diameter: 700 mm Total length: 108 km

On July 2008 a joint development agreement have been concluded between the FGSZ Natural Gas Transmission Company, as the owner and operator of the Hungarian high pressure natural gas pipeline system and Transgaz, as the operator of the Romanian transmission system.


The Interconnection of the Ukrainian and Romanian Gas Transmission Systems;(The Cernăuţi – Siret Pipeline)

Main Features:

- Designed capacity: 1.5 bcm/year- Diameter: 600 mm- Total length: aprox. 30 km


The Interconnection between the Bulgarian and Romanian Transmission Systems;(The Russe – Giurgiu Pipeline)

Main Features:

- Designed capacity: 1.5 bcm/year- Diameter: 500 mm- Total length: aprox. 8 km

Conclusions The Romanian gas market generally follows the trend of the European gas

market;

The increase of domestic consumption is similar with the increase in the European markets and is registered in the same time with the decrease of domestic production and increase of imports;

Unlike the states of the EU which can project part of their gas consumption increase based on LNG imports, Romania will remain dependant of onshore pipelines imports;

This dependence, can be a medium and long term impediment for the durable development of the economy;

For Romania in particular and for the European Union in general, it seems obvious that a diversification of the gas supply sources would be beneficial;

The major gas reserves of the Caspian and Middle East can become accesible through the development of the Nabucco project.


Thank you for your kind attention !

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TRANSGAZ THE NATIONAL GAS TRANSMISSION COMPANY FROM ROMANIA