Milan - 29th September 2010

CASC ProjectItalian Working TableReport to CSE NRAs

CASC-CWE Harmonization of cross border capacity allocation

Memorandum of Understanding (MoU) signed the 19th of May 2010

Immediately after the signature of the MoU three working Groups have been set up

under the coordination of CASC:

• Corporate Governance - Tackles legal and financial issues in order to elaborate the new

AoA, the Shareholders Agreement , Internal Regulations, the Contribution Agreement to

CASC.

• Technical and Regulatory implementation of the explicit auctions on the Italian

Borders – implementation of auction procedures on the basis of current rules applied on

Italian Borders and Service Level Agreement (together with the support from the legal

persons of Italian borders TSO)

• Technical and Regulatory implementation of the explicit auctions on the North

Switzerland Borders – implementation of auction procedures on the basis of current

rules applied on North Switzerland borders and Service Level Agreement (together with

the support from the legal persons of North Switzerland borders TSO)

2

The three working groups started their activities on the first days of June

3

CASC-CWE Harmonization of cross border capacity allocation – Status of Activities

Participation in CASC by New Shareholders 10 November 2010 – Closing expected and signature of corporate

governance documents

Due Diligence Performed

Definition of Sharecapital in progress

Capacity Allocation process for 2011

Implementation phase delayed (Letter by CASC on 8th Sept)

New Planning for the Implementation Phase set in CTF and CASC meeting on 21st Sept

Confirmation to TSOs of the new planning for CSE Region in 2011 (Letter by CASC on 28th September)

CASC Go-live with the allocation process on 1 April 2011

Explicit Yearly/Monthly and Daily Auction for the first part of the year 2011 as in year 2010

Task - Definition of the legal/financial aspects of the participation of TSOs

operating on Italian Borders in CASC Capital Share

Main Achievements on Corporate Governance till 20 September 2010 Finalisation of AoA, Internal Regulation, Shareholders Agreement and

Contribution Agreement

Due Diligence of CASC by new Shareholders From 30 July till 13 September – Performance of Due Diligence on CASC

Open Issues to be agreed on Budget 2011 and Fee Structure 2011

Numbers of Shares and Share capital

Closing expected on 10 November 2010 by The signature of Corporate Governance Documents by new Shareholders

Acknowledgement of draft final Service Level Agreement between CASC and

Italian Border TSOs.

Corporate Governance WG – Status of art (1/2)

4

5

Corporate Governance WG – Status of art (2/2)

AoA and IR – Main Provisions: Decision Making Process and Voting Rights :

within the General Meeting (GM) of shareholders and the Board of Directors

(BoD), one vote/TSO.

Unanimity principle for the GM; within the BoD, if unanimity is not reached, a

second BoD is organised and the decision is submitted to a qualified majority of ¾.

Regional Groups (not inside the Governance but contact groups between CASC and

TSOs) outside the CASC governance

Contribution Agreement Improved draft to be provided by CASC (scheme proposed in the first draft for CASC’s

capital increase will remain).

Technical and Regulatory WG Italian Borders – Status of art

Six meetings have been held till now

Two CTF meeting before the first meeting with CASC and different call-conference in order to coordinate the answers to CASC questions

In order to allow CASC to perform explicit auctions by January 2011 a deep analysis on congestion management methods and procedures for capacity allocation between CASC and Italian borders have been done

CASC had bilateral meeting with TSOs and Austrian auction operator in order to have a deep vision of the auction business process managed by each TSO.

The Statement of Work (SoW) defined on the allocation process described in the following slides has been finalized the 24th of September.

6

Technical and Regulatory WG Italian Borders – Status of art

7

As CASC stated that it will not possible to have completed all tests needed before the ultimate deadline technically acceptable (19th of November) a new reliable planning has been agreed with a go-live fixed the 1st April 2011

Additionally, CASC provided to TSOs an estimated evaluation of costs for the implementation of IT changes (285 k€)

Auction Rules for 2011:

First set of Rules for the beginning of 2011 equivalent to the one in place for 2010 to be provided within October. The amended version will be available for NRAs the first week of October

New set of Rules with CASC as Auction Operator to be proposed to Users for consultation the first week of November.

It is necessary to clarify how to manage from the legal point of view the transition from first phase to the second one when CASC will enter into operation. The art. 10.7 of ARs 2010 sets that before making any amendments of the present AR, ten working days of consultation is required.

8

Allocation of PTRs for the year 2011

Jan

Registration of Users

CASC acts as Auction Operator

Dec Feb

TSOs act as Auction Operator as today

Mar Apr

First Yearly Auction

TSOs Integration Test

In order to be able to transfer all activities to CASC during year 2011 it’s necessary that AR for the second phase have to be put in consultation on1 November and approved by NRAs before the first auction performed by TSOs for the year 2011.

In this case the AR first phase 2011 (Mainly equals version AR 2010) no need any consultation and should contain the following changes:

• Cutting TAO projects references

• Settlement of Yearly PTRs to be transferred to CASC

First CASC Auction

Users Test

9

Auction Rules 2011 (first phase till CASC start date)

Minor Changes in AR 2011 for Yearly, Monthly and Daily Auctions

Preamble of AR will contain a reference that during the year 2011 the allocation process

will be managed by CASC

Start up of Market Coupling between Italy and Slovenia (in annex)

New Statement of Acceptance by market participants, to be signed from 1 January 2010,

including their undertaking that AR can be modified in the course of the year and their

acceptance that their bank guarantee could potentially turn into cash deposit.

In order to participate in the auctions, User has:

• to meet grid access requirements of one of two TSOs involved (yearly and monthly auctions) or exporter TSOs (daily auctions)

• to send to the Auction Operator the Statement of Acceptance

• to provide to the Auction Operator a Bank Guarantee (or a Cash Deposit) in order to cover all the outstanding debts

Part

icip

ati

on

req

uir

em

en

ts

10

In order to participate in the auctions, User has:

• to meet grid access requirements of one of two TSOs involved (yearly and monthly auctions) or exporter TSOs (daily auctions)

• to be registered in CASC sending the Declaration of Acceptance

• to sign the Participant’s Financial Agreement with CASC

• to open a dedicated Business Account at the bank selected by CASC (BNP Paribas Luxemburg)

Italian Borders as is Italian Borders with

CASC

CASC Project – Allocation process 1/4

Users provide a Bank Guarantee (or a Cash Deposit )

Amount of Bank Guarantee (or a Cash deposit) depends bu Auction Operator

When running auction no check of bidding Vs amount of BG (except for daily auctions in direction SLO-IT)

Invoicing time, deadlines for payment and reimburse compensation depend on the product and by Auction Operator

Users open a Business Account property of CASC

When running auctions, CASC auction tool (EXAU) checks the amount of money in the Business Account:

• at bidding, for daily auctions

• at clearing price, for long term auctions

- Monthly/Daily auctions the amount is blocked after the- auction

- Yearly auctions, 1/6 of the amount is blocked after the auction

Invoicing automatically debited in Bussiness Account at M+1

Harmonization on invoicing time, deadlines for payments and reimburse compensation

Reimburse compensations (curtailment, Resale/UIOSI) is made ina different Bank Account property of Users

Fin

an

cia

l I

ssu

es

11

Italian Borders as is Italian Borders with

CASC

CASC Project – Allocation process 2/4

Pro

du

cts

Yearly Base

Yearly Base without Maintenance period (*)

Monthly Base (0:00-24:00 Mo-Su)

Monthly peak (8:00-20:00 Mo-Fr)

Monthly off-peak (0:00-8:00 & 20:00-24:00 Mo-Fr - 0:00-24.00 Sa & Su)

Daily Hourly

12

Yearly Base

Yearly Base without Maintenance period (*)

Monthly Base ( 00:00-24:00 Mo-Su)

Monthly peak ( 8:00-20:00 Mo-Fr)

Monthly off-peak (0:00-8:00 & 20:00-24:00 Mo-Fr - 0:00-24.00 Sa & Su)

Daily Hourly

Fir

mn

ess

• 100% payback (except RTE – 110% for the direction FR=>IT)

• PTRs are guaranteed:

• Yearly and Monthly after 7:00 of D-1 (with exception of France in the direction FR=> IT, D-2 working days)

• Daily after the publication of Auction Results

Both of them will not change with CASC

Italian Borders as is Italian Borders with

CASC

CASC Project – Allocation process 3/4

UIOSI for long term PTRs non nominated

No reimbursement of Daily PTRs not nominated

In case of cancellation of the Daily auction, PTR holders are refunded for each non-nominated MW at the clearing price of the native Auction

In case the ATC of daily auction is lower than the Total not nominated capacity , the share of capacity successfully resold is refunded at daily auction price, the rest is refunded at the original price.

13

Tran

sfe

r Transfer deadline is at 12:00 D-2 (with exception of France in the direction FR=> IT, D-2 working days)

Transfers have to be confirmed by the Beneficiary

UIO

SI

& D

aily

C

om

pen

sati

on

It will not change with CASC

Transfer deadline is at 12:00 D-2 (with D-2 working days)

Transfers have to be confirmed by the Beneficiary

CASC Project – Allocation process 4/4

Italian Borders as is Italian Borders with

CASC

1. CASC - MP -TSOs (Traders): Updated and harmonized Auction Rules

2. TSOs: Cooperation agreement (define perimeter of the tasks for the first period of 2011 and for the second period with CASC as Auction Operator)

3. CASC – TSO: Service Level Agreement (3.1 for allocation with all TSOs and 3.2 for nomination with all TSOs excepted RTE)

4. CASC - IT provider: Update of existing IT tool used by TSO to perform auctions if needed

IT Tool Developed by Areva

PowerExchangesTradersCASC

Auction Operator

Auction Rules1

4 3.1 CA

1

CASC Project - Contractual Issues

14

Only 5 TSOs (APG, ELES, HTSO,swissgrid & Terna)

6 TSOs (APG, ELES, HTSO, RTE,

swissgrid & Terna,)

3.2

2

Service Level Agreement

for allocation tasks

Service Level Agreement

for nomination tasks

3

Content Sep Oct Nov Dec Jan+Feb Mar Apr

All TSOs

CTF

TTF

SC

Regulators

CASC +

TSOs

NTC Assessment and Definition of Maintanance Periods (fallback procedure in case of lack of information)

Consultation of CASC AR

CTF finalizes CASC AR

Approval AR, sending to NRA

CTF prepares 1. Phase AR and CASC AR for 2011

Product definition

Comments on CASC AR

Approval of NTC

Approval of CASC AR

Coop. Agreement

Publication of CASC AR

SoW final

First Feedback on CASC AR and 1. Phase AR

System update at ArevaTesting of Sytem and Integration with TSO systems

AoA, SHA

SLA

GO LIVE

MP Registration at CASC

Feedback on CASC

AR

Performing all Auctions according to 1. Phase AR 2011

CASC AUCTIONS

Signing and closing

Shareholder ship

CASC Explicit Auctions on Italian borders – Global Road map

16

Back up

<

17

Invoicing & Settlement of Yearly PTRs

Reimbursement for Curtailment, UIOSI and Resale

Management of Secondary Market

Capacity Curtailment

Pro

cess

CASC Project – Alternatives if approval of second set of AR is not approved in 2010

Co

ns

Invoicing & Settlement of Yearly PTRs

Reimbursement for Curtailment, UIOSI and Resale

Management of Secondary Market

Capacity Curtailment

Invoicing & Settlement of Yearly PTRs (TSOs)

Reimbursement for Curtailment, UIOSI and Resale (CASC)

Management of Secondary Market (CASC)

Capacity Curtailment (CASC)

Question to be solved for PTRs F>I due to periodic nomination: yearly+monthly

Market Participants keep in 2011 two different counterparts (like today)

Different timing for invoices depending on each TSO (like today)

TSOs obliged to maintain activities for invoicing

TSOs and MP would have to deal with two sets of AR during 2011 (AR for Yearly and AR for Daily and Monthly

YEARLY → TSOs YEARLY → CASC/ TSOsYEARLY → CASC

If AR with CASC not approved this year, we cannot include in first set of AR any provision with CASC and a fortiori force users to accept something not yet defined. Then we will have to deal with possible scenarii for management of yearly PTRs:

Legal and regulatory risks for transfer of activity (invoice, settlement, reimbursement, UIOSI) to CASC of PTRs allocated by TSOs

Pro

s

Legally irreproachable

Only one SPOC for all PTRs starting from 1st April 2011

Not totally legally irreproachable but in line with users interests

Analysis of impacts if we success to transfer yearly to CASC from 1st April 2011

The overlapping between Bank Guarantee provided to TSOs and the Bank Account given to CASC has not an huge impact on Users.

The full payment of Yearly PTRs for Jan, Feb and Mar in January (payment in advance)

CASC should invoice Yearly PTRS for April in May 2011 (payment ex-post)

Users can riduce the Bank Guarantee with TSOs before deposit money on CASC Bank Account

1st April 2011 Go Live CASC

expire of Bank Guarantee Live CASC