OPENING NATURAL GAS MARKET:

Haroldas Nausėda – Member of the Board, Director for B2B Clients and Expansion

Developments and Opportunities

OPENING NATURAL GAS MARKET:

Haroldas Nausėda – Member of the Board, Director for B2B Clients and Expansion

Developments and Opportunities

GENERATION RENEWABLES SERVICES DISTRIBUTION

Business

Household

Balancing Reserves Solar & Community

Exchange Import

EV Charging

Lighting

SS LNGBoilers

14 thousand customers

1,6 million customers

Why are we changing?

EfficiencyBrand consolidationUse funds more effectivelyEasier International expansion

Customer convenienceAll services from one companySynergy of competencesGrowth

Market changeThe energy business is changing dramaticallyThe image of a state-owned monopoly does not help

Why are we changing?

Generation Transmition Distribution Consumers

Market: How we've understood it so far

Power generation

Transmition Distribution ConsumptionExchange

Network maintenance

Network maintenance

Energystoragefacilities

Supply EV Charging

Renewables

Power savingsolutions

Market: how we understand it from now on

Micro generation

How „Ignitis Group“ is changing?

„Ignitis group“ -international energy group making the world energy smart.

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NATURAL GAS FACTS AND FIGURESMARKET STRUCTUREPRICE DEVELOPMENT

39

32

25

20

12

3533,2

24,9

19,5

8,7

Russia Iran Quatar Turkmenistan USA

Gas reserves TCM

2018

2017

832

670

240176 162

735

636

224176 149

USA Russia Iran Quatar China

Production of natural gas BCM

2018

2017

817

455

283226

116

740

425

214 241

117

USA Russia Iran China Japan

Gas consumption BCM

2018

2017

1

4

1

8

18

18

23

55

-24

-6

6

13

6

10

35

35

3

-13

-6

6

4

11

12

76

-50 0 50 100 150

Japan

Russia

Europe

Africa

India

USA

Middle East

China

Increase of consumption 2018-2024, BCM

Other

Energy

Industry

10,00

12,00

14,00

16,00

18,00

20,00

22,00

24,00

26,00

28,00

30,00

Average of Average daily gas price in Finnish gas Exchange, €/MWh (HHV) Average of Natural gas Gaspool front month index €/MWh (HHV)

NATURAL GAS PRICES

NATURAL GAS PRICE IMPACTING ELEMENTS

0102030405060708090

100

Gas production in GroningenMCM/day

0

200

400

600

800

1000

1200

Reserves in European Storages, TWh

201820172019

0123456789

10

LNG inports to China, BCM per month.

0102030405060708090

Brent price on ICE exchange, $/bbl

0

10

20

30

40

50

60

70

Electricity price, Eur/MWh

0

5

10

15

20

25

30

35

Emission price, EUR/t

0,000

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

Gas price on GASPOOL,Eur/MWh

Jan Feb Mar Apr May Jun Jul Aug Sep

NATURAL GAS IMPORT STRUCTURE TO LITHUANIA

57/43 49/51 40/60

2016 2017 2018 2019P

61/39

100%

80%

60%

40%

20%

0%

SGD

18

Flow from Russia to Estonia:2018 (Jan-Nov) – 3 350 GWh2019 (Jan-Nov) – 2 211 GWh

Flow from Russia to Latvia:2018 (Jan-Nov) – 14 275 GWh2019 (Jan-Nov) – 17 975 GWh

Flow from Lithuania to Latvia:2018 (Jan-Nov) – 2 205 GWh2019 (Jan-Nov) – 4 496 GWh

Flow from Russia to Lithuania (excl. Transit):2018 (Jan-Nov) – 10 123 GWh2019 (Jan-Nov) – 8 206 GWh

Flow from FSRU to Lithuania:2018 (Jan-Nov) – 7 458 GWh2019 (Jan-Nov) – 14 689 GWh

Flow from Latvia to Lithuania :2018 (Jan-Nov) – 1 847 GWh2019 (Jan-Nov) – 488 GWh

Flow from Latvia to Estonia:2018 (Jan-Nov) – 916 GWh2019 (Jan-Nov) – 1 557 GWh

IMPORT FLOWSFlow from Russia to Finland:2018 (Jan-Nov) – 22 179 GWh2019 (Jan-Nov) – 20 957 GWh

Increase Drop

2019

2017

2016

2015

2014

2013

• FSRU Independence arrived to Klaipeda

• Distribution and Supply services were unbundled

• First commercial LNG cargo arrived to Klaipeda FSRU

• First gas auction by Gazprom Export

• Klaipedos FSRU as import point reached record high

• Liquidity of GET Baltic

natural gas exchange increased after DHC started to obtain 50% of their total natural gas portfolio

• The model of FINESTLAT agreed and being implemented

• TSO AB

Ambergrid was unbundled from integrated company

• GET Baltic

natural gas exchange started its operations

• Entry/exit model was implemented

• First gas flow to the Estonian market - ~20% of the wholesale market

• First small scale LNG reloads in the Klaipeda FSRU

• 2 LNG cargoes obtained from USA

• First gas flows to Latvia -10% of the market

• Onshore SSLNG station in Klaipeda commisioned

• First off-grid LNG-using Town

• Implicit capacity model introduced on GET Baltic

INDEPENDENCE

REGIONAL GAS MARKET DEVELOPMENT

VALUES GAINED• Competition increased from the first day of the

liberalised market

• The bigger the competition in the supply chain,the lower margins for the services.

• Variety of products (diversity in the periods ofthe contracts, diferent pricing methods and etc.)

• Better client service

• Liquidity in the exchange (single paltform allowsparticipants to trade NG contracts in theLithuanian, Latvian and Estonian market areas.

• Sourcing diversification changed the approach ofGazprom

• Open dialog with regulators gave good result

SPOTS FOR IMPROVEMENTS• Reasonable entry/exit interconnection tariffs

• Too strict balancing rules and better Cooperationbetween TSOs in balancing procedures

• TSO‘s Shareholders interests (LV – Gazprom stillshareholder of TSO and Supply company)

• Separate invoicing for the supply andinfrastructure services (at least at the beginning)

• Strained barriers entering the market(complicated licensing, bureaucracy and etc.)

• The lack of long-term capacity booking productson the Balticonnector Point

LESSONS LEARNED

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