italy’s power exchange in a european context

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ITALY’S POWER EXCHANGE IN A EUROPEAN CONTEXT

Salvatore Zecchini

PresidentIPEX - GESTORE DEL MERCATO

ELETTRICO (GME)

2

Advanced1 liberalization

Average2 liberalization

Limited3 liberalization

Indicators of liberalization degree by TSO independent from electricity producers Independent authority with wide-ranging powers Market share of leading producer < 50%

Source: Enel

1 Advanced liberalization: all criteria are satisfied.2 Average liberalization 2 criteria over 3 are satisfied.3 Limited liberalization only 1 criterion is satisfied (or none).

3

Indipendence from executive power

Setting of selling tariffs

Setting of network entry tariffs

Power to impose fines on market operators

Promotion of competition

Control over storage gas access

Definition of public utility service obligations and quality standards

Source: Enel

Powers Attributed to Regulatory Authorities

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Day Ahead Electricity Markets Data

Liquidity (in %)MARKET COUNTRY YEAR JAN-SEPT

2005 2006IPEX Italy 62,8 59,8EEX Germany 17,0 naPowernext France 4,1(e) 6,0(e)

Nord Pool Scandinavia 45,0 60,0(e) = estimated using RTE (National systemoperator consumption data)

Trading Volumes (TWh)MARKET COUNTRY YEAR JAN-SEPT

2005 2006IPEX Italy 203,0 146,9EEX Germany 85,7 64,6Powernext France 19,7 21,2Nord Pool Scandinavia 175,0 175,0

Turnover (bln. euros)MARKET COUNTRY YEAR JAN-SEPT

2005 2006IPEX Italy 12,9 11,9EEX Germany 4,2 3,5(e)

Powernext France 0,9 1,2Nord Pool Scandinavia 5,4 11,2(e)

(e) = estimated

5

0,0

50,0

100,0

150,0

200,0

250,0

IPEX EEX Powernext Nord Pool

Spot Market Trading Volumes (TWh)

2005 Jan-Sept 2006

6

0,0

10,0

20,0

30,0

40,0

50,0

60,0

70,0

IPEX EEX Powernext Nord Pool

Spot Market Liquidity (in %)

2005

7

0,0

2,0

4,0

6,0

8,0

10,0

12,0

14,0

IPEX EEX Powernext Nord Pool

Spot Market Turnover (bln. euro)

2005 Jan-Sept 2006

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Standard Member Fees Schedule Day Ahead Market

Market Country Admission Annual Technical Fee TradingFee (€) Fee (€/year) (€/year Web Access) Fee (€/MWh)

IPEX Italy 7.500 10.000 0 0,04EEX Germany 0 12.500 7.800 0,05Powernext France 25.000 30.000 0 0,08

10.000 25.000 0 0,11Nord Pool Scandinavia 0 12.500 0 0,03

0 0 0 0,13

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Profitability Indicators (year 2005)

MARKET Ebitda/ ROI ROE Payroll Exp.Revenues /Revenues

GME 59,1% 16,4% 49,4% 21,5%EEX 32,3% na 11,7% 15,5% (A)

Powernext na na 9,2% 47,2% (A)

Nord Pool Group 25,2% 7,7% 8,4% 23,8%OMEL 18,3% 18,6% 10,4% 50,9%(A) = estimated on year 2004 dataSource: elaborations based on financial statements data

10

0,0%

10,0%

20,0%

30,0%

40,0%

50,0%

60,0%

GME EEX Powernext Nord Pool Group OMEL

Profitability Indicators (Year 2005)

Ebitda/Rev ROI ROE Payroll Exp/Rev.

Source: elaborations based on financial statements dataNotice: for Powernext and EEX ROI not available and Payroll Exp/Rev. estimated on 2004 data;Ebitda/Rev. not available for Powernext

11

34

32

89

72

32 19%45%

2%

7%

7%

6%

5%5%4%

EU-25 Electricity generation market (year 2005)

Others

Market Share (%) of the leading producer over domestic consumption, net of exports (year 2005)

Incumbent Position in National European Markets

Source: Enel

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Electricity Average Monthly Prices

Average Monthly Price Baseload Profile (€/MWh)MARKET COUNTRY YEAR JAN-SEPT JAN-SEPT ∆ (in %)

2005 (A) 2005 (B) 2006 ( C ) (C/B)IPEX Italy 58,58 57,00 75,09 31,7EEX Germany 45,98 41,33 52,91 28,0Powernext France 46,66 41,34 52,00 25,8Nord Pool* Scandinavia 29,30 28,30 49,90 76,3APX The Netherlands 52,36 44,60 59,98 34,5OMEL Spain 54,73 52,91 54,56 3,1* System Price

13

0,00

10,00

20,00

30,00

40,00

50,00

60,00

70,00

80,00

IPEX EEX Powernext Nord Pool APX OMEL

Average Monthly Price (Baseload euro/MWh)

2005 Jan-Sept 2005 Jan-Sept 2006

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Oil and Electricity Monthly Average Price

Jan-

05

Mar

-05

May

-05

Jul-0

5

Sep

-05

Nov

-05

Jan-

06

Mar

-06

May

-06

Jul-0

6

Sep

-06

30,00

40,00

50,00

60,00

70,00

80,00

90,00

IPEX baseload (euro/MWh) Brent (euro/bbl) WTI (euro/bbl)

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Electricity Exchange Flows: Exports (TWh)

COUNTRY YEAR JAN-JUN JAN-JUN ∆ (in %)2005 (A) 2005 (B) 2006 ( C ) (C/B)

Italy 1,1 0,4 0,8 100,0Germany 61,9 32,7 34,4 5,2France 66,2 32,1 30,9 -3,7The Netherlands 5,4 3,2 4,2 31,3Spain 11,1 4,9 6,0 22,4Source: UCTE (Union for the Co-ordination of Transmission of Electricity)

16

0,0

10,0

20,0

30,0

40,0

50,0

60,0

70,0

Italy Germany France The Netherlands Spain

Electricity Exchange Flows (Exports Twh)

2005 Jan-Jun 2005 Jan-Jun 2006

17

0,00

2,00

4,00

6,00

8,00

10,00

12,00

14,00

16,00

18,00

IPEX EEX Powernext Nord Pool APX OMEL

Average Monthly Price St. Dev. (euro/MWh)

2005 Jan-Sept 2005 Jan-Sept 2006

18

0,0%

5,0%

10,0%

15,0%

20,0%

25,0%

30,0%

35,0%

IPEX EEX Powernext Nord Pool APX OMEL

Average Monthly Price Var. Coeff.

2005 Jan-Sept 2005 Jan-Sept 2006

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Market Country Electricity Green Certificates *

White Certificates

Emission Trading (CO2)

Futures Forwards Options CfDs Futures Forwards

EEX Germany X X X X XIPEX Italy X X XNord Pool Scandinavia X X X X X X XOMEL Spain XPowernext France X X X

APX Netherlands Spot Market X

ENDEX

Netherlands and Belgium Derivatives Market X X

* There is an OTC European System called RECS (Renewable Energy Certificates System).

SPOT AND DERIVATIVES PRODUCTS TRADED ON THE MAIN EUROPEAN ELECTRICITY MARKETSSPOT DERIVATIVES

ELECTRICITY CO2 EMISSION