Perspectives of the Greek and Italian gas markets and the role of the IGI project as a Trans-European project ECSEE Workshop October 2005 Belgrade J. Florentin.

Perspectives of the Greek and Italian gas markets Perspectives of the Greek and Italian gas markets and the role of the IGI project as a and the role of the IGI project as a

Trans-European projectTrans-European project

ECSEE WorkshopECSEE WorkshopOctober 2005October 2005

BelgradeBelgrade

J. Florentin DEPA S.A.

Projects Director

E. Ruggeri EDISON S.p.A

Business Development Manager

2

Plan of presentationPlan of presentation

PART 1 – GREECE (by Mr J. Florentin)

• DEPA S.A.• The Greek Gas Market• The Interconnection Turkey-Greece (ITG)

PART 2 – ITALY (by Mr E. Ruggeri)

• EDISON S.p.A.• The Italian Gas Market• The Interconnection Greece-Italy (IGI)

3

PART 1 – GREECE and the ITG Project PART 1 – GREECE and the ITG Project

by Mr J. Florentin

4

Greek gas market - HistoricGreek gas market - Historic

One of the last European countries to introduce natural gas

Gas supply contracts signed in 1987 (Gazexport) and 1988 (Sonatrach)

Establishment of DEPA in 1988

Start of commercial operation: November 1996

Completion of the LNG terminal in 1999

Market dominated by power generation

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Greek gas market – Main infrastructureGreek gas market – Main infrastructure

• HP (70 bar) mainline

– 511 km, 36” and 30”

• HP branches

– 450 km, 10” to 30”

• LNG terminal

– 2 tanks 65.000 m3 each

– Send out rate 220.000 Nm3/h (2007: 600.000)

• 4 Operation & Maintenance Centres

• 24 M/R stations

6

Gas distribution companies of Attiki, Thessaloniki and

Thessaly(ownership of fixed assets)

Greek gas industry corporate structureGreek gas industry corporate structure

49 %

Greek State Private investors(Athens & London

S.E.)

Hellenic Petroleum

65 %

DEPALocal Authorities

35 %

32 %

35 %

Thessaloniki EPA

Thessaly EPA

ItalgasItalgas

Attiki EPA

Attiki Denmark(60% Cinergy – 40% Shell Gas)

3 Prospective EPAs

• East Macedonia & Thace• Central Macedonia• Sterea & Evia

Investors

51 %

49 %

51 % 49 % 51 %

51 %49 % 100%Flow of dividents (10%)

EPA : Regional Gas Supply Company

PanEuropean Holdings S.A.

33 %

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Market - DemandMarket - Demand

0

1

2

3

4

5

6

7

8

9

bcm

NGVs

Industry + CHP

Chemical

RGDCs

Power

8

Market - SupplyMarket - Supply

0

1

2

3

4

5

6

7

8

9

bcm

3rd Party

Additional Pipe

Additional LNG

BOTAS

SONATRACH

GAZEXPORT

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Market – Growth drivers (1/2)Market – Growth drivers (1/2)

• Power generation

– Regulator: all new capacity should come from either RES or gas fired units.

– Increase of electricity demand forecast: 3,1% p.a. up to 2015

•One new power plant (400 MW) p.a.

•Nat.Gas accounted for 15,0% of electricity generation in 2002 It is expected to account for 36,7% by 2015

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

10000

Po

wer

su

pp

ly (

MW

)

0

5000

10000

15000

20000

25000

30000

35000

40000

45000

50000

En

erg

y su

pp

ly (

GW

h)

Power CAGR 1997-2002: 5,9%

Energy CAGR 1997-2002: 4,2%

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Market – Growth drivers (2/2)Market – Growth drivers (2/2)

• Residential and commercial sector

– Three EPAs (RGDCs) with obligation, in their licenses, to expand the distribution networks in four major cities (length to be reached in the first 7 years).

– Three additional EPAs might be created to wholly cover the areas crossed by the gas infrastructure.

– According to the EU Dir. 2003/55 Art 28 § 8, the existing EPAs have a 30 year monopoly for consumers up to 9 bcm/y.

– According to the EU Dir. 2003/55 Art 28 § 5b, the future EPAs may have a conditional monopoly for up to 20 years.

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Interconnection Turkey-Greece (ITG project)

Greek part– 86 km, 36”– Funding:

• Studies: TEN 50%• Construction

– CSF III (EU): 29%

– CSF III (Greek State) 29%

– Equity & loans 42%

Turkish part– 200 km, 36”(17 km off-shore, max. depth

70m)– Funding:

• Studies: TEN 50%

Maximum capacity (with 2 compressors): 11 bcm/y

On stream: 1Q2007

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Interconnection Turkey-Greece (ITG project)Interconnection Turkey-Greece (ITG project)

Progress to date:

• Interstate agreement signed in Feb. 2003

• Gas sales agreement signed in Dec. 2003 - (0,75 bcm for 15 years)

• Construction of Greek part: Phase 1 approaching completion, Phase 2 to start 1Q2006

• Construction of Turkish part: awarded

• Construction of Border metering station: awarded

• Tender package for HDD under Evros/Meric river under preparation

• Mechanical completion forecast: 1Q2007

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PART 2 – ITALY and the IGI Project PART 2 – ITALY and the IGI Project

by Mr E. Ruggeri

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EdisonEdison Shareholder Structure Shareholder Structure

Market

34,2%34,2%

EDISONEDISON

63,3% 63,3%

Transalpina di Energia

EDFEDF DELMIDELMI

50% 50% 50% 50%

2,5% 2,5%

AEM AEM MilanoMilano

Dolomiti Dolomiti Energia TrentoEnergia Trento

51% 51% 10% 10% 10% 10% 6% 6%

BPMBPM

3%3%

CrtCrt

5%5%

ENIAENIA

15%15%

SELSELMedioBancaMedioBanca

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EdisonEdison Positioning in the Italian Energy Market Positioning in the Italian Energy Market

Enel Edison Endesa Enipower Others AEM Milano

126.048.0

20.8 13.9 9.5

58.1

Major power producers in Italy in 2004 (TWh)

(a) Net of losses and settlements with National Grid Operator (GRTN)

Major gas suppliers in Italy in 2004 (Bcm)

ENI ENEL Edison Others

purchases from ENI

9.0

54.1

18.013.1

9.4 7.7

8,6 3,4

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Edison Development Plan (1/2)Edison Development Plan (1/2)Power availability mix (TWh) (a)

(a) Net of losses and settlements with National Grid Operator (GRTN)

Import and domestic purchases

Edison hydroelectric and wind production

Edison thermoelectric production

51.5

2004

44,3

3,73,5

0

5

10

15

20

25

30

35

40

45

50

55

54

2009

60

65

70

75

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Edison Development Plan (2/2)Edison Development Plan (2/2)

Gas availability mix (bcm) Domestic purchases

Domestic production

Direct gas supplies to power plants Imports

Changes in stock

Foreign production

2004

13.4

-0,3-2

0

2

4

6

8

10

12

14

3,7

6,7

1,00,3

2,0

2012

16

18

2019,5

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Italian Gas MarketItalian Gas Market

Italian Capacity vs Demand (2003-2015)

-

20,0

40,0

60,0

80,0

100,0

120,0

140,0

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Bcm

Domestic Production ex-USSR Algeria Netherlands/Norway

Libya Rovigo LNG IGI Other Project

Demand-Base Demand-High

The Italian market is structurally short in capacity compared with most other EU countries.New ongoing projects - already sanctioned (Rovigo LNG, Transmed and TAG repowering)

and under development - will be able to satisfy demand growth (driven by power generation) and increase availability and security of supply.

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RussiaNetherlands

Norway

LibyaAlgeria

Algeria LNG

Qatar LNG

Algeria

Caspian + LNG

AlgeriaLibya

Algeria LNG

AUSTRIA, SLOVENIA CROATIA HUNGARY

FRANCEGERMANY

HUB

The diminishing gas production of the UK and the NL coupled with the increasing gas demand in the French and German markets will call for more use of alternative gas supplies.

Significant natural gas reserves (approx. 20-25% of global gas reserves) are situated in N. Africa and in the Caspian region.

Italy is in a geographical strategic position and, through the necessary contractual, infrastructure and technical developments, could become a Transit Country for African and Caspian gas to N. European markets.

A Reverse Flow, virtual first and physical eventually, is expected to occur in the north Italian border, once new infrastructures are developed.

The European contextThe European context

The creation of an interconnected European gas system will support the creation of a Hub

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Interconnection Greece-Italy (IGI): Project Description

The Interconnection Greece-Italy (IGI Project) is developed, since 2002, by Edison and Depa in cooperation with Botas (Turkish natural gas state company), with the aim to connect the huge Caspian and Middle East gas resources to the European market.

IGI CAPACITY: 8 – 10 bcm/y ITG CAPACITY: approx. 12 bcm/y

IGI

ITG

IRAN

AZERBAIJAN

RU

SS

IA

IRA

Q

EG

YP

T

The Interconnection Turkey-Greece (ITG) has been developed by Depa and Botas with the aim to connect the two countries, creating a corridor for gas supplies to Greece and Europe. The project, currently under construction, will start operations in 1Q 2007.

ExistingUnder DevelopmentUnder Construction

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IGI onshore section

Total length : 595 Km

Pipeline diameter : 36“

Capex: 600 M€

 IGI offshore section

Total length : 212 Km

Pipeline diameter : 32“

Max. water depth: 1450 m

Capex: 350 M€

 Compressor stations

Kipi CS: 39 MW

Komotini CS: 26 MW

Nea Mesimvria CS: 39 MW

Stavrolimenas CS: 75 MW

Interconnection Greece-Italy (IGI): Project Description

Nea Messimvria

Kipi

ITG

IGI offshore section

IGI onshore section

Comp. station

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Status of the IGI Project

Edison and Depa have finalised the IGI Project feasibility study, which has benefited of an EU financing of approx. 1 M€.

The Feasibility Study included the following activities:

Part 1: Technical Feasibility Gas flow simulation study for the entire system (from Turkey to Italy)

Project Design Basis

Definition of system routing

Pre-Basic Engineering of IGI system

Capex and Opex assessment

Preliminary environmental impact assessment

Project impact on the Italian Gas Grid

Part 2: Economic and Financial Feasibility Definition of the project business plan (unlevered version)

Finalisation of the net-back analysis and assessment of the project economic viability

Definition of the optimum corporate, commercial and financial structures

Development of the project financial plan

Confirmation of project financial feasibility

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The Commercial Structure of the IGI ProjectThe IGI project is divided into two sections: offshore and onshore, to be developed via two separate companies: Poseidon Co. (or Neptune Co) and Demeter Co. respectively. These Companies will act exclusively as transportation companies. Edison, Depa and Botas respective role in the development of the IGI Project will be as follows:

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The Commercial Structure of the IGI Project

Edison: Principal shipper within the IGI system (securing at least 80% of the Long

term capacity) Shareholder in Poseidon Co.

Depa: Shipper within the IGI system for 20% of the capacity Shareholder in Poseidon Co Carrier through the Greek grid and 100% owner of the onshore section of the

IGI project (Demeter Co)

Botas: Carrier through the Turkish grid Possible bridge supplier to IGI project shippers Possible shareholder in Poseidon

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Time Schedule

Expected start-up date: 2010Expected start-up date: 2010