www.bdew.deBDEW Bundesverband der Energie- und Wasserwirtschaft e. V.

„From Virtual (test) case to implementation“Panel on way forward with Recommendations 1 & 4 and Panel on way forward with Recommendation 2

Gas Regional Initiative North-WestHague, 4 June 2010

Eric AhlersHead of Commercial Asset Management DepartmentGerman Association of Energy and Water Industries

BDEW Bundesverband der Energie- und Wasserwirtschaft e. V. 2

Agenda

Status quo in Germany

Recommendation „Rate of interest and useful life“

Recommendation „ Planning certainty and good regulatory practice“

Recommendation „Transparency in terms of investment requirements“

BDEW Bundesverband der Energie- und Wasserwirtschaft e. V. 3

Gas Region North West

GASPOOL

NetConnectGermany (NCG)

ThyssengasH-Gas

ThyssengasL-Gas

Aequamus

EGTL-Gas

Central infrastructure platform for the European gas market

The German gas market is remodelled into a European gas market platform. To this end, considerable investments will have to be made during the next few years (e.g. integration of market areas, transit, security of supply)!

BDEW Bundesverband der Energie- und Wasserwirtschaft e. V. 4

Recommendation 1: Depreciation and WACC

● BDEW considers that GRI addressed with its Recommendation 1 the most important question for an improvement of investment conditions.

● BDEW advocates that the following issues be particularly addressed in Germany:

1. Fair return on equity with an adequate risk add-on.

2.It must be possible to effectively realize a fair return also over the investments‘ duration (service life).

● In Germany, improvements of the investment climate can be made by the national regulatory authority without requiring an amendment of law. BDEW has identified 7 points which need to be solved on a national level.

It must be possible to effectively realize the statutory return on equity over the Investment‘s service life.

This task must be solved on a national level by the legislator and regulatory authorities.

BDEW Bundesverband der Energie- und Wasserwirtschaft e. V. 5

Recommendation 1; - 7 Implementation measures adopted in Germany

1. Compensation for delay in investments

2. Acceptance of risk add-on for interest-rate on borrowings

3. Acceptance of risk add-on for return on equity > 40 %

4. Unrestricted application of extension factor

Consideration of planned values

Consideration of dispersed feed-in

5. Swift approval of investment budgets

No fixed-amount deductions

No limitation of authorization period

6. Application of adequate index series

7. Correct trade tax assessment

BDEW Bundesverband der Energie- und Wasserwirtschaft e. V. 6

Recommendation 4: Transparency for investments

● Capacity reservation and planning of a new network connection are currently evaluated and re-organized in Germany against the background of the implementation of the third Internal Market Package.

● Particular rules for power generation and storage plants are discussed on the basis of a new regulation on gas grid access in Germany.

● Open Season procedures applied to date in Germany were carried out according to European guidelines. The development of capacities to cover firm requests could not be implemented by network operators in time.

Transparency requirements concerning investments should be reviewed on a national level with regard to the implementation of the third Internal Market Package.

BDEW Bundesverband der Energie- und Wasserwirtschaft e. V. 7

Recommendation 2: „Good regulatory practice“

● Infrastructure investments must be based on long-term planning certainty in regulatory terms.

● Network operators must have confidence in the regulatory framework enabling them to realize a fair return (see recommendation 1).

● The provisions of the legislator and of regulatory authorities initiating infrastructure investments („market integration“, „network connection“, „security of supply“) must be economically reasonable for network operators, too.

Important prerequisites for infrastructure investments are the legal and regulatory framework conditions existing on the national level. An exchange of experience between the regulatory authorities is reasonable. The results obtained should be documented and published.

www.bdew.deBDEW Bundesverband der Energie- und Wasserwirtschaft e. V.

Thank you for your attention!

BDEW Bundesverband der Energie- und Wasserwirtschaft e. V. 9

Eric Ahlers

Head of Department

Commercial Asset Management

eric.ahlers@bdew.de

phone: (0049)-(0)30 28041 508

fax: 030 28041 408