Energy Sector in Romania

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Energy Sector in  Romania Powered By Docstoc
Prepared by: Triglav – Carpati Business Club

1.The National Potential of Energy Resources
      1.1 Coal
      1.2 Oil
      1.3 Gas
      1.4 Hydroelectric Energy
      1.5 Nuclear Power Energy
      1.6 Resources Exhaustible Energy

2. Renewable Energy Resources
      2.1 Costs and Benefits
      2.2 Use of Energy Efficiency
      2.3. Production and Consumption

3. Energy Markets
      3.1 Electricity Market
      3.2 Natural Gas Market
      3.3 Coal Market
      3.4 Uranium Market

4. The Analysis of the Current Situation of the Energy Sector
      4.1 Competitive Advantages
      4.2 Impaired
      4.3 Opportunities
      4.4 Risks and Vulnerability

5. Promoting Use Of Renewable Energy
      5.1 Promoting Biofuels

6. Electricity And Heat Subsector
       6.1 Production Of Electricity And Activities Associate
       6.2 The Distribution and Transport of Electrical Energy
       6.3 Market Development Of Electricity And Related Infrastructure
       6.4 Heat And Centralized Heating
       6.5 Forecast Energy Sector
       6.6 Development Of Energy Markets
       6.7 Forecasting Energy Demand

7. Prices and Tariffs for Energy; Economic and Social Effects
      7.1 Electrical Energy
      7.2 Natural Gas

8. Major Energy Suppliers
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      7.3 Crude

The energy sector is one of the most developed and heavily invested sectors in Romania.
Large country’s oil reserves, largest in Eastern Europe and having considerable hydroelectric
potential, Romania are nowadays energy exporter. In last three years important international
players like General Electric and CEZ made large investments into renewable energy like wing
farms. Potentials for investments in geothermal, solar, wind, methane, and small
hydroelectric power plants are immense.

Romanian national energy sector has to face major challenges that have appeared at national
and global level: energy supply security, increase economic competitiveness and reducing the
impact on the environment. These challenges are particularly important given the fact that
Romania has to catch the economic performance of the better developed EU countries.

In developing the current draft we started to analyze the current situation of energy sector. It
has also been taken into account the existing provisions in the Government Program for 2005-
2008 in the National Development Plan 2007-2013, in 2003-2015 Roadmap, and commitments
made in negotiations for EU membership. There are taken also relevant internal policy
documents of the Union European in the field, defined, especially in the Lisbon Strategy and
Green Paper on a European Strategy for Sustainable, Competitive and Secure.

In this context, Romania's energy policy will be correlated with future European policy
developments, being able to offer efficient solutions in terms of growing import dependence
trends of consolidation and strengthening markets.


Romania has a wide range, but small quantities of primary energy resources: oil, natural gas,
coal, uranium ore, as well as potential renewable resource availabilities relatively modest.

1.1 Coal

Coal is seen as an energy resource with positive influences as well as negative:
- Is a positive contribution to ensuring food safety and as part of diversification of energy
- Is negative environmental impact. If the local impact on the environment can and will be
reduced by technological measures to reduce areas affected, the overall impact of the use of
coal on emissions of greenhouse gases still causes great concern.

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1.2 Oil

Environmental issues rose by the oil industry and its use for energy and transport refer to air,
water, and climate change and fuel quality.

Regarding the use of refined products, there are still significant differences between the
degree of refinement required by the market in S / M and the Central and Eastern European
countries. In acceding countries and candidate at EU countries, demand for petroleum
products with lower pollution potential is much lower than the EU. Demand for oil is and will
continue to be growing.

In the EU, forecasts indicate a 40% share of total energy consumption in 2020 of oil. Under
these conditions, imposed by environmental changes will lead to a pronounced orientation
towards clean petroleum products.

This will require development of complex inter-relationships between energy and
environmental policy, a comprehensive approach that takes into account the one hand, the
integrated science-based assessments, on the other hand, the environmental targets set in
the context sustainable development.

For example, reducing the potential pollutant transport fuels could lead to increased carbon
dioxide emissions by the refineries. Therefore, cooperation between all stakeholders appears
to be the most appropriate to treat the complexity of the problem.

1.3 Gas

On the environment, natural gas is considered "the gateway to sustainable development”.
Environmental impacts resulting from the use of natural gas is a local (particulates, smoke),
regional (acid rain) and a global (greenhouse gases). Negative impact on all dimensions may
be reduced by using clean gas with low sulfur and carbon, using oficien technologies 26
energy and reducing energy demand (thermo-insulating construction technologies, lifestyles
adapted). Gas technologies fit very well with the development of renewable resources. Fuel
oil is appropriate technologies to increase energy efficiency, e.g. condensing boilers. Burning
gas plants has the potential to reduce carbon dioxide emissions.

Using gas co-generation will double production of electricity produced from gas in the
European Union. This will cause disorder and disruption but in competition, the old plants
with low efficiency and new performances.

1.4 Hydro-Electric:

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Economic advantages: high efficiency and cost Redes months living and environmental
benefits - not pollute the environment, can sometimes lead to conflicts when they are
located in national parks or when the dam water level covers the towns.

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1.5 Energy Nuclear Power

Primary energy resource crisis has again put the current role of nuclear power. Before being
announced the strategies of developed countries on the "reactivation" of nuclear energy,
uranium prices began to rise dramatically on world markets. But in 2005 growth was 70%.

Production of uranium has become a national priority, Romania is committed to a reduction in
subsidies by 14.3% annually, so that by 2010 to be eliminated. The only solution for Romania
to further exploit their own resources of uranium, after total elimination of subsidies, is that
its price to raise so much that it fully covers the operating costs, which does not happen
anywhere in the world. Do not forget, however, that such a price increase would be found in
the final price of energy from nuclear power plants.

By burning a bundle of nuclear fuel, which contains on average 21.5 kilograms of natural
uranium, to produce a quantity of electricity of about 1115 MWh. Same amount of electricity
can be obtained in brown coal power plants by 2220 tones or 1110 tones of coal for power,
that 316 tons of fuel oil. Nuclear energy can cause balance of payments in terms of
improvement in the functioning of a single unit of the Cernavoda nuclear replaces
consumption of 1.3 million tons of oil and 1.3 billion cubic meters of natural gas.
Analyzing the production costs of electricity obtained from coal (23-58 USD / MWh), gas (38-
60 USD / MWh), nuclear (21-48 USD / MWh), wind (35-90 USD / MWh) and Water (7-12 U.S. $ /
MWh) indicates that none of the sources presented does not meet the quality of being
unanimously declared as optimal. Thus, there was a worldwide revival of nuclear energy
programs of major economic powers, as to the discovery of new sustainable energy sources,
which provide the electricity necessary to support development programs, nuclear energy
remains the only alternative, considering the competitive costs and lack of CO2.


Deposits of hydrocarbons are limited, amid a decline in domestic production and in conditions
which were not identified new deposits with high potential. Current oil reserves are
estimated at 73.7 million tones. Production of crude oil declined from 14.7 million tons in
1976 (the year with peak production) to 5 million tons in 2006.

Gas deposits are also limited, and after 1990, domestic production is in decline. Current gas
reserves are estimated at 184.9 mld.m3. Natural gas production was 12.3 mld.m3 in 2006,
which represented 69% of total annual national consumption of natural gas.

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              In terms of reducing oil and gas reserves should increase the role of indigenous coal and, in
              particular, of lignite, in the national energy balance.

              Known coal resources in Romania are 705 million tones of exploiting the perimeter leased 105
              million tones. Lignite resources in Romania are estimated at 1490 mil. tep of exploiting the
              perimeter leased 445 mil. tones. Resources located in premises in November, concessional are
              1.045 billion tones.

              Uranium resources available in Romania is of particular interest for national economy, given
              the functioning Unit 1, putting into operation of Cernavoda Unit 2 in 2007 and further
              development of nuclear power program. Uranium ore is used to manufacture nuclear fuel in
              Romania for the Cernavoda nuclear units.

              Evolution of national primary energy resources:

    Resources                                         Deposits                                            Estimates insurance period
                                                                                    Est im a te d
                                                                   Ne w                an nu a l    Geo lo gi c Ex p lo at a b le          Ne w
                            Reze rv e        Ex p lo at a b le
                                                                 pe r mi t s        p ro d u cti on res e rves   res e rves              pe r mi t s

                            Million tep        Million tep       Million tep        Million tone          Years          Years             Years
     1             2         3        4         5        6       7        8               9             10 = 3 / 7     11 = 3 / 7        12 = 3 / 7
Black Coal                   755      422       105     3 8 ,8   104           13             3 ,3            229                   32             33

Lignit                     1 .4 9 0   276       445     8 2 ,4       5          3              32                 47                14
Oil            Mill tone        74     72                                                      5,2                14
Natural Gas    Mld. Mc         185    159                                                     12,5                15

              From the deposits of 1045 billion tons of lignite reserves in the mining basin of Oltenia, 820
              million tons belonging to new perimeters there are located in leased showing the continuity
              perimeters favorable conditions for recovery by extending concessions.

              Because Oltenia lignite deposit consists of 1.8 layers of coal used, higher turning them
              urgently requires regulation to ensure rational exploitation (safe), total (minimal) and the
              The evolution is presented estimates of national reserves of oil and natural gas in period 2006
              to 2025.

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Evolution of national reserves of oil and natural gas:

                    Predicted National Reserves Behavior For Oil And Gas
                                            Natural During 2007 - 2025
                                                             Natural Gases (Billions Cubic
      Year                   Oil (Millioan Tones)
      2006                        80                                  170
      2007                        76                                  162
      2008                        72                                  155
      2009                        68                                  148
      2010                        64                                  141
      2011                        60                                  134
      2012                        56                                  127
      2013                        52                                  120
      2014                        48                                  114
      2015                        45                                  107
      2016                        41                                  101
      2017                        38                                   95
      2018                        34                                   89
      2019                        31                                   83
      2020                        28                                   77
      2021                        24                                   71
      2022                        21                                   66
      2023                        18                                   60
      2024                        15                                   55
      2025                        12                                   50
Premises          Because depletory deposits, oil Because       depletory   deposits,    gas
considered in the production can record annual production may register annual decline
estimation        decline of 2-4%.                  of 2-5%.
                  The degree of replacement of The degree of replacement of
                  exploitable reserves will not exploitable reserves will range between
                  exceed 15-20%.                    15-30%.

Renewable energy potential:

            Source                        Potential annual              Application
Solar Energy                                  1,2 TWh             Heat
Wind Energy                                   23 TWh              Electricity
Hydro Energy                                  36 TWh              Electricity
- from which under 10 MW                      3,6 TWh

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Biomass and biogas                        318 PJ               Electricity Heat
Geothermal energy                          7 PJ                Heat
The latest assessment (2007), technical hydraulic potential harnessed of Romania is of
36.000 GWh/year of which, relative to the current situation in energy market prices can

The map of renewable resurse potential:


in terms of economic efficiency, about 30.000 GWh/year (economic potential harnessed) in
central hydroelectric with a total installed capacity of 8.000 MW.

At the end of 2006 the installed power in hydraulic power was 6.346 MW power project
average water year is estimated at 17.340 GWh/year. Thus, the degree of recovery of
technical potential is now harnessed by 48% and the economic potential is harnessed of

Map Legend:

I. Delta (solar);
II. Dobrogea (solar and wind);
III. Moldova (plains and plateaus - microhidro, wind and biomass);
IV. Carpathian Mountains (IV1 - Eastern Carpathians, IV2 - South Carpathians, IV3 - Western
Carpathians (biomass microhidro);
V. Plateau of Transylvania (microhidro);
VI. Western Plain (geothermal energy);
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VII. Subcarpathians (VII1 - Subcarpathians Getici; VII2 - Subcarpathians of curvature; VII3 -
Subcarpathians Moldova);
VIII. South Plain (biomass, geothermal and solar).

2.1 Costs and benefits
Excluding large hydropower plants, the costs of producing electricity using renewable units
are now higher than those associated with fossil fuel use. Stimulating the use of these sources
and attracting investment in energy facilities using renewable sources is achieved through
support mechanisms, in accordance with European practice.

Investment costs, energy costs, the competitiveness of renewable

Production costs of electricity from RES Assumptions: 6,5% interest payment, 15 years
recovery period.

Impact on national power system:
Using renewable energy sources has a significant impact on system national electricity, as
- Studies on the impact of wind penetration in electricity transmission and distribution
network (110 kV and above) in different scenarios in networks of Dobrogea and Moldova;
- Development of transport networks and distributed smart grid concept;
- Market development capacity to counter and/or limit the negative effects of
uncontrollable variability of wind power;
- Estimating the needs of modernization and development of networks in generating
conditions distribution of electricity from wind, microhidro and cogeneration using biomass.

2.2 Use of energy efficiency

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One of the priorities of the strategy is to improve energy efficiency energy. Increasing energy
efficiency is a major contribution to achieving security of supply, sustainability and
Reducing energy demand through energy efficiency policy is a win, which besides saving
primary energy resources lead to greenhouse emissions.
Synthetic indicator representative of efficient energy use at national level is energy intensity,
that energy consumption for producing one unit of gross domestic product.
Structural adjustment of the economy, but more efficient use of resources, led to a reduction
in primary energy intensity from 0,605 tep/1000 Euro2005 in 2000 to 0,511 tep/1000 Euro2005
in 2005, the calculation is made at the exchange rate parity. This indicator still remains close
to about 3 times higher than EU average.

a. Primary energy intensity

Energy intensity was also favorable, falling by 6,4% during 2000-2004. The amount recorded in
2004 (0,658 MWh/1000 Euro2004) is about 2,5 times higher than EU average.

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b. Energy intensity

At the same time should be noted that a comparison with developed countries (mainly the EU
countries) is more favorable, if energy intensity is calculated using purchasing power parity

Primary and final energy intensity in Romania and other EU Member States in 2004:

                                                                  Final energy intensity
      Member                   Primary energy intensity
       states                    (toe/1000Euro2005)
     UE25                              0,166                              0,109
     UE15                              0,153                              0,101
     NM10                              0,419                              0,256
   Germania                            0,156                              0,103
     Grecia                            0,189                              0,124
   Portugalia                          0,178                              0,126
    Ungaria                            0,314                              0,212
 Republica Ceha                        0,458                              0,264
    Polonia                            0,434                              0,266
    Romania                            0,511                              0,358

In 2003 was developed the National Energy Efficiency Strategy which highlighted, among
others, the economic potential of energy efficiency in various sectors.

c. The economic potential (efficient cost) of saving:

                                       Average potential energy
                                                                   Maximum value of the
                                        savings, estimated as a
              Sector                                              potential energy savings
                                      percentage of consumption
                                                  [%]                   [ ktoe/an ]
Industry                                       13,0 (10 - 17)                   1.590
Residential                                   41,5 (35 – 50)                    3.600
Transport and
                                               31,5 (30 - 35)                     1.390
Third Sector                                   14,0 (13 - 19)                       243
TOTAL                                                    100                      6.823

Following this strategy, it was established as a strategic goal to improve energy efficiency in
Romania over the entire natural resources, production, transmission, distribution and end
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 use, by optimum use of the specific mechanisms of market economy is an estimated 3% per
 year reduction in energy intensity over the whole national economy by 2020, compared to

 d. Analysis of energy balance on components:

 Production of electricity by type of power:

Year                  1999      2000       2001       2002         2003     2004        2005
                                         Millions KWh
Thermoelectric      27.225     31.701     33.497     33.376       38.480    34.421     33.651
Hydroelectric       18.290     14.778     14.923     16.046       13.259    16.513     20.207
Nuclear              5.198      5.456      5.446      5.513       4.906     5.548      5.555
TOTAL:              50.713     51.935     53.866     54.935       56.645    56.482     59.413
 e. The share of energy production by types of power plants in total:

 Year 1999:     Thermo / Total = 53,68%
                Hydroelectric / Total = 36,06%
                Nuclearo-electrica/Total = 10,26%

 Year 2002:     Thermo / Total = 60,75%
                Hydroelectric / Total = 29,20%
                Nuclearo-electrica/Total = 10,05%

 Year 2005:     Thermo / Total = 56,63%
                Hydroelectric / Total = 34,02%
                Nuclearo-electrica/Total = 9,35%

 Note that although total production has an increasing trend from 1999 to 2005, mainly
 production, meaning that the stations centrals increased only until 2003, following a decline
 of 4.829 million KwH. The loss was offset by increased production of energy of hydroelectric
 plants and the nuclear power, which means a reorientation of producers towards the latter.

 Final energy consumption shows a slight increase in 2006 compared to 2005 (0,2%), due
 mainly to increases in the tertiary sector (31,6%) which holds a 11% share of final energy
 consumption. Consumption in industry decreased by 4,8% and public consumption fell by 2,1%.

  The Use Of Energy On Main Activities Of National Economy And Industry
                       In 2006 ,As A Comparison To 2005
                                                             Year 2006 In
                                            Year       Year
                          Year 2006                           Comparison
                                           2005        2006
                                                                  To 2005
                       Thousand        Thousand Structure
                       "Tep'           "Tep'          %           %

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 Used Energy -Total              45554      44466       100,0           102,4
 Consumption(With                39571      37932        86,9           104,3
 Export                              5983    6534        13,1            91,6
 Final Energetic Use-            25312      25271       100,0           100,2
 Agriculture And                     262      237         1,0           110,5
 Industry- Total                     9998   10505        39,5            95,2
 Metallurgy                          3568    3473        14,1           102,7

 Substances And                      2236    2673         8,8            83,7
 Products From
 Rubber And Plastic
 Metal Construction
 Industry, Cars And                  677      606         2,7           111,7
 Transportation                      4407    4279        17,4           100,6
 Other Fields Of The                 2756    2095        10,9           131,6
 Population                          7889    8055        31,2            97,9

Exports of energy, of 5.983 million tones, fell to the year 2005 by 8,4% during its petroleum
products having further decisive weight (92,2%). Among petroleum products, the highest
share is held by gasoline (50,3%). GDP per capita consumption in 2006 was 1.833 kg of oil
equivalent, 4,5% higher than in 2005.

Electricity during 1.I.-30.IX.2007

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2.3 Production and consumption

a. Primary Energy
In 2006, gross domestic product (GDP) was 42% higher than in 2000, represents 3973 Euro
2005/inhabitant. and is about 6,3 times lower than the average of European Union countries
and 1,9 times lower than the average of ten new countries joined the EU (NM 10). The
economic development resulted in an increase of only 11,3% of domestic consumption of
primary energy in 2005 compared to 2000; the value achieved in 2005 was about 41,4 mil.tep.
Due to lower economic development level, per capita primary energy consumption (1.85
tones/inhabitant.) In Romania is about two times lower than in EU countries EU-25.
On the other hand, GDP growth is remarkable decoupling of growth consume primary energy,
due to the economic restructuring and improve the use of energy. Analyzing the structure of
consumption, there is a distribution balanced between natural gas (36,4%), crude oil and
petroleum derivatives (25,1%) and coal (22,4%).

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b. Structure of primary energy consumption in 2005 (total 40,5 mil.tep)

Production of primary energy was maintained constant (about 28 million tep), offsetting the
decrease of coal production growth of oil and gas production. Amidst growing primary energy
consumption, import dependency has risen from 22,5% in 2000 to about 34% in 2005.

c. Electric
In late 2005, the power available on power system was 14,714 MW. In 2006, gross electricity
production was 51,9 TWh compared to 62,43 TWh in 2000.

In late 2005 the number of consumers of electricity was 8.600.000 of which 8.040.000

d. Thermal Energy

Heat supply centralized distribution is done by thermal central (TC) and thermal plants (TP),
which provides heat for a city, an area of the city, or district.

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In recent years, total consumption of heat decreased slowly, mainly due to the industrial
consumption decrease, total consumption in 2006 amounting to 9 million tones, of which
consumption provided by the centralized distribution system is 2,6 million tones-about 30%.
Number of homes connected to centralized systems of production and distribution of the heat
is around 2.350.000, representing 55% of the total urban housing and 29% of total housing,
according to population and housing census of March 2002. In 2006, the number of households
supplied with heat through centralized production and distribution systems was about

e. Natural Gas

In 2006, total natural gas consumption was 17.200 million m3, of which 2.650 million m3,
accounted for domestic consumption (15,4%). Production of natural gas in 2006 was 12.000
million m3, and import was 5.200 million m3 (30,2% of total consumption). In March 2007,
total natural gas consumption was 2.589.308, of which 2.462.566 households.

 The structure of domestic production and import of natural gas 1987 – 2006

Development of consumption, domestic production and import of natural gas:

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f. Oil
Romania's oil production has declined steadily, while imports increased. Evolution of domestic
production of oil:

g. Coal

In 2006 Romania's coal production was 34,1 million tones of which 31,2 million tones and 2,9
million tones lignite coal. This production was used in 99% to produce electricity and heat,
coal contributing 7,2% of total electricity generation and lignite with 32,2%.

Evolution of domestic production of coal:

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EU started the process of liberalization of electricity markets in 1996 by Directive 96/92/EC
and that of natural gas by Directive 98/30/EC of 1998. The EC Directive 1402/2002, were set
basis operation of coal mining sector, in free market conditions after 2011. In 2003, have
been adopted two new Directives which replace the old directives and accelerating the
liberalization process and the formation of a European internal energy market (Electricity
Directive 2003/54/EC and Directive 2003/55/EC for gas).

   In Romania, the creation of functioning markets in electricity and natural gas was based
    on: restructuring the power sector by unbundling generation, transmission, distribution
    and supply;

   creating the institutional framework governing the electricity and gas sectors natural;

   of open access (the regulated) in transmission and distribution related progressive opening
    of markets for electricity and natural gas, thereby encouraging competition in supply and
    production activities;

   training relevant secondary legislation (commercial code, technical codes, framework
    contracts, performance standards, etc..)

   transpose the provisions of Directive 2003/54/EC concerning common rules for domestic
    market electricity and Directive 2003/55/EC concerning common rules of the internal
    market Directive 1402/2002/CE gas and coal producers on the operation EU free market.

3.1 Internal market for electricity

Romania has opted for the model of decentralized electricity market in which participants are
free to conclude the sale and purchase transactions of electricity. Electricity market consists
of two sections:

   wholesale market where electricity is purchased for resale and transactions are place
    between producers and suppliers;

   retail market, where electricity is purchased for own consumption and transactions take
    place between suppliers and consumers of energy. Regulation of natural monopoly nature
    activities (transmission and distribution) was performed on principles of transparency,
    non-discriminatory access to network and recognize cost justified. Starting in 2005,
    regulated tariffs for network use are calculated based on ceiling type methodologies.

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Opening of the electricity market began in 2000 and since 2005 all consumers except
households became eligible, which corresponds to a degree of market opening in electricity
by 83,5%. Full liberalization of electricity market, including household takes place on
01/07/2007. Wholesale electricity market has expanded and improved by the introduction in
2005 of four new trading platforms:

- Day Ahead Market;

- Balancing Market;

- Centralized Market of Bilateral Contracts;

- Centralized Green Certificates Market.

Wholesale electricity market operator, SC OPCOM SA, to operate in 2007 Market Central to
bilateral contracts for electricity with Continuous Negotiation (Forward), the first step in the
development of energy related financial products.

The market model is adopted by all developed European countries. In 2007, Romania is
only country in the region organizer of a market for the next day and a functional balancing
market. Thus, besides trading in the contracts, participants in the wholesale electricity
market have the option of voluntary participation in an organized market energy physics in
the short term, with one days before the day of dispatch (Market for Next Day), operated by
SC OPCOM SA. Balancing Market is primarily intended to compensate for deviations from
programmed amounts of production and consumption of electricity, as is mandatory for all
available production capacity. Market centralized market forward Bilateral Contract type
ensure transparency of bilateral contracting, coming also to meet recommendations the
European Commission, European Council of European Regulators and the World Bank to
establish a regional stock exchange of contracts.

Support the production of electricity from renewable sources is made through the Green
Certificates traded in the competitive market for green certificates, and mandatory quotas
for suppliers. Each vendor is required to obtain annually a quantity of green certificates,
proportional to the quantity of electricity sold to consumers by that supplier.

3.2 Internal gas market consists in:

   competitive segment, which includes natural gas trade between suppliers and between
    suppliers and eligible customers. Competitive segment prices are formed freely on the
    demand and supply;

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   regulated segment, which includes character of natural monopoly activities and supply
    the regulated price and the framework contracts. In the regulated segment of the market,
    systems of prices and rates are established by ANRGN, based on their methodologies.

Activities segment covered include: natural gas supply at regulated price in the framework
contracts to customers, management of commercial contracts and contractual balance of the
internal market in natural gas transportation, underground storage of natural gas, natural gas
distribution, natural gas transit - except transit pipelines carried by dedicated (dedicated
transit through mains shall be subject to the regime established by international agreements
under which they were made).

In order to provide an organized framework for equal treatment and discrimination in the
allocation of natural gas from domestic production and imports has been established and is
functioning market players, organized within the national gas Bucharest dispatch, the
structure Transgaz SA Medias.

Gas market in Romania was opened gradually starting in 2001, when the initial degree of
opening of the domestic market was 10% of total consumption for the year 2000, coming in
2006 at a level of gas market opening 75% (as of 01.07.2006).

The process of liberalizing the gas market in Romania continued to January 1, 2007 the
degree of openness of the market being 100% for industrial consumers. For consumers
residential natural gas market will be fully liberalized by July 1, 2007, as stipulated in
Directive 2003/55/EC. Liberalization of gas will help create a real competitive environment,
the possibility for consumers to choose their supplier of natural gas and to increase
investment in the sector.

In order to ensure the consumption needs of all categories of consumers and eliminating
malfunctioning occurs in the domestic market for natural gas during the winter of 2005-2006
(due to low temperatures and to reduced natural gas imports in January and February 2006),
the Romanian Government approved the concept of consumer promotion interrupted in order
to achieve security of supply of natural gas in accordance with Directive 2004/67/EC and
allocation under indiscriminate amount of gas in November to all industrial consumers who
accept interruptible customer status. Interruptible consumer contribute decisively to
maintain secure operation of the gas national transmission systems and distribution systems,
by accepting reductions in consumption, to stop, in accordance with Directive 2004/67/EC, in
order to protect households supply.

3.3 Coal Market

Given the characteristics of coal extracted in Romania (energy coal with calorific value of
3650 kcal / kg calorific value lignite with between 1650-1950 kcal / kg) its use can be done
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only in power plants equipped for this type of fuel and placed as close supply and 12 power
plants for lignite and 2 power plants to coal. For these reasons both coal and lignite in
Romania are the primary energy carrier capture and may not be a market for coal in the true
sense of the word. Supply of coal producers in Romania is the current level of 33-34 million
tones by approx. 5 million tons less than demand for future years 2010-2020, and the degree
of assurance in production at this level is 14 years to 32 years for lignite and coal
Ensuring demand for lignite in the years 2013-2020 and after, is conditional on policy
Implementing Agency for Mineral Resources in the amount of existing perimeters and research
to highlight and exploit the new paddocks.

3.4 Uranium Market

Romania has a uranium market, the sole provider being the Uranium National Company. The
price of uranium used to manufacture nuclear fuel for Cernavoda NPP is negotiated between
suppliers and users, namely the National Company Nuclearelectrica SA. Starting with the 1st of
January 2007, clauses uranium procurement contracts, including price are subject to approval
by the European Commission by the Euratom Supply Agency (ESA).

The existing exploitable ore reserves and ensure the application of natural uranium up to the
year 2017 for operation of two nuclear units at the site of Cernavoda. November perimeters
potential deposits of uranium ore can not significantly change this situation, which requires
the adoption of measures to ensure specific natural uranium resources as necessary result of
nuclear power development program.

4. Analysis of current situation of the energy sector

4.1 Competitive Advantages

   Romania has a long tradition in the energy industry, with the experience both in oil and
    gas, and in the production of electricity and heat;

   Romania has significant energy resources, especially coal and uranium ore, but also
    significant reserves of oil and natural gas;

   infrastructure is complex and diverse: national network of electricity transmission,
    natural gas, crude oil, petroleum, refining capacity, and shipping capabilities important
    port on the Black Sea;

   diversified and balanced structure of production of electricity;

   nuclear power program in progress, based on reliable technology, recognized world and
    positively perceived by the public, the effective functioning Cernavoda Unit 1 and at

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    competitive prices and Cernavoda Unit 2 in the final samples of commissioning services for
    beginning of commercial exploitation in the second half of 2007.

   The existence of technical expertise and human resources prepared for the operation of
    two units the Cernavoda nuclear power, to be motivated to maintain it;

   The existence of a legislative and institutional framework adapted to the principles of the
    EU internal market European;

   moderate potential exploitable renewable resources, supported by a functional market
    Green Certificates;

   Romania meet their commitments under the Kyoto Protocol;

   relatively high capacity to interconnect the electricity transmission and natural gas with
    similar systems of neighboring countries;

   Romania offers a potential resource of lignite with a high degree of knowledge focused on
    a relatively small area of approx. 250 km 2 in 19 career high operating capacity.

   Romania offers a potential coal resources of energy put in value by 7 me groundwater;

   Quality of transport infrastructure, dispatch;

   operator of wholesale experienced electricity market, able to become the operator of
    regional market.

4.2 System flows

   A number of production facilities, transportation and energy distribution partially obsolete
    and outdated technology, with consumption and high operating costs;

   plant and equipment used for lignite exploitation and physical costs of obsolete operating
    large and poorly performing.

   Lack of equipment to implement technologies in mining sector of coal;

   An increasing dependence on imported gas, there is a single source for time;

   Energy efficiency reduced production-transmission-distribution chain-end consumer;

   organization's power generation sector on single-chain technology;

   Performances of the potential of mining and energy companies with state capital;

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   The existence of distortions of prices to final customers;

   reduced research and development capacity-release in the energy sector and mining;

   The lack of a clear strategy on the modernization of thermal power of centralized systems
    in terms of increasing the population for heating options individual housing in urban areas;

   A part of electricity production units do not meet the requirements for protection the EU
    environment, alignment of these requirements require significant funding;

   major financial effort to internalize environmental costs and decommissioning nuclear

   Not employing the coal production dissolution on medium and long term contracts based
    on to ensure the quantities and prices;

   relatively high time to develop new production capacity of coal and uranium.

4.3 Opportunities

   Romania has a favorable geographic position to actively participate in development
    projects the main pan-European oil and gas;

   The existence of physical and financial energy markets, and access to regional markets
    electricity and natural gas with opportunities to achieve system-wide services Regional;

   attractive investment climate for both foreign and domestic investors, including process
    privatization of various companies currently in state ownership;

   increased confidence in the functioning capital market in Romania, which allows listing of
    Scholarship successful energy companies;

   total liberalization of energy markets and natural gas in 2007;

   increased investment opportunities in energy efficiency and energy resources sources

   EU Structural Funds for energy projects;

   The existence of a large hydropower sector able to provide the necessary volume
    technological service system;

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   The existence of long experience and an important infrastructure for the operation
    domestic primary energy resources based on coal and uranium;

   The existence of new paddocks with considerable reserves of lignite and uranium.

4.4 Risks and vulnerabilities

   Economically exploitable reserves of oil, gas and uranium, limited to the values presented
    head. 3, in conditions which will not be discovered important new deposits;

   Volatility in oil prices in international markets;

   The trend of climate change and instability characteristics of hydrological regime;

   possibility of adverse effects on competition in energy level European industry through
    trends of concentration of power;

   A high rate of growth in energy demand in the context of economic recovery;

   The existence of arrears to the companies in the sector;

   high proportion of the population that presents a high degree of vulnerability in terms
    practicing energy prices close to the European average;

   Lack of effective fiscal instruments to support investments in efficiency programs
    energy, use renewable resources and energy development services;

   Lock lignite mining activities due to lack of specific regulations to ensure recovery of
    public interest lignite reserves with a right and fair compensation to owners of land,
    necessary to conduct business;

   Potential limited national resources of uranium;

   Selection, retention and motivation of market conditions free of human capital necessary
    Strategy implementation and safe operation of the national energy system;

   Potential limited national resources of uranium, which leads to not cover natural uranium
    requirements of internal resources for the operation of two units the Cernavoda nuclear
    power, since 2017.

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For supporting the production of electricity from renewable energy was established a
promotion mechanism based on green certificates, through which the suppliers purchase the
certificates in compulsory rate, proportional to the volume of electricity sold to consumers.
Were established following compulsory rate as a percentage of annual gross electricity
consumption: for 2006 - 2, 2%, for 2007 - 3, 74% for 2008 - 5, 26% for the year 2009 - 6, 78%
and since 2010 - 8, 4%. Measures taken into account, to promote renewable energy sources:

   Increase the recovery, in conditions of economic efficiency, energy resources
    renewable electricity and heat production by the stage of investment incentives, including
    easier access to the electric grid;

   Strengthening the role of the market for green certificates to promote private capital in
    investments the field of renewable sources;

   Promote mechanisms to support the use of renewable energy resources in production of
    heat and domestic hot water;

   Attracting the structural funds. For Romania, the most suitable renewable resources
    (depending on usage and costs volume of resources) are microhidro, wind and biomass.
    A possible distribution technologies, which together with large hydropower plants provide
    achieve the targets set for 2010, 2015 and 2020 should be:

    - Small hydro power plants with 1, 5 to 1, 7 TWh (about 600 MW installed);

    - Wind applications with 1, 3 to 1, 6 TWh (about 600 to 700 MW);

    - Groups of cogeneration using biomass, with 0, 5 to 1, 0 TWh (cca 150 to 300 MW).
    In accordance with the Strategy for the use of renewable energy investment requirements
    during 2006 - 2015 is estimated at 1.800 million Euros.

5.1 Promoting Biofuels

The main objective pursued in the promotion of biofuels or other fuels renewable
replacement petrol and diesel used in transport is to reduce air pollution. Targets set in
Romania in this field are:

   In 2007, the fuel market, will use biofuels and other renewable fuels by at least 2% of the
    total energy content of all petrol and diesel used in transport;

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   By the end of 2010, the percentage of biofuels will be at least 5,75% (target set by
    Directive 2003/30/EC);

   By 2020, the percentage of biofuels will be at least 10% in conditions the use of new
    generations of biofuels. Taking into account the amount of fuel used annually and
    obligations of Decision Nr.1844/2005 Government, a necessary result of biodiesel and
    bioethanol about. 300.000 tones for 2010. Romania has the potential to provide raw
    material for both biodiesel and bioethanol as well, so that targets set are achieved. For
    example, Romania's potential to provide the necessary raw material for biodiesel, that
    vegetable oil (sunflower, soybean, and rapeseed) is cca. 500-550 thousand tons/year,
    which allows a similar level of production of biodiesel. Thus, provided the premises are to
    achieve the 10% biofuels target for 2020, calculated on the energy content of all petrol
    and diesel for transport, the target contained in the package of measures approved by the
    Energy Committee (March 2007). Ministry of Economy and Finance has undertaken a series
    of actions to contribute to the promotion of biofuels and other renewable fuels. In this
    context referred to the introduction, in the Fiscal Code, the exemption from excise duty
    for energy products such as biofuels and other renewable fuels.


Electricity production will follow a process of restructuring and renewal of energy capacity
by rehabilitating existing units’ viable, closing non-viable units and building new production
units. Investment effort will be supported mainly through privatization.

To ensure a balanced energy mix, priority will be given to investment in units of
producing electricity using:

- Renewable energy;

- Clean coal technologies;

- Secure nuclear technologies and reduced environmental impact. The restructuring of the
electricity generation sector will be pursued:

- Maintaining concentration indicators        wholesale   electricity   market,   at   least   in
level just before the restructuring;

- Consolidation of manufacturing units mainly through natural aggregation due to
the privatization of thermoelectric and hydroelectric plants;

- Strengthening of private producers, competitive regionally by acquiring units
electricity production in several countries in the region. The restructuring of the electricity
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production subsector took place in 2006 technical consultations with representatives of the
European Union. Commission experts have recommended achieve restructuring through
privatization, any aggregation of thermo-hydro units having provided in naturally as a result
of market forces. The same view was played and responsible Bank World.

To remain safe functioning of the National power system is required
maintaining a state controlled power units installed in the power generation policy, which
will include the Cernavoda U1 and U2, Iron Gates 1 and 2, including Lotru Lower Olt. The
measures taken in the production, transmission and distribution of electricity and
heat are.

6.1 Electricity Production and Associated Activities

• Promotion of projects are "Green Field", by attracting capital and investors specialized in
the production of energy from coal, natural gas resources hydro, and cogeneration efficiency;

• Reorganization of the power generation sector using market mechanisms and privatization
on capital markets or strategic investors to ensure a climate real competition among entities
that balanced production structure;

• Recovery of coal with high efficiency in groups and new groups restored with
technologies, in compliance with environmental standards;

• Privatization of Energy complexes Turceni, Rovinari and Craiova;

• Development of joint ventures to build new capacity in power plants SC ELCEN SA and SC
Termoelectrica SA;

• Continuation of the privatization program and privatization of unit’s microhidrocentralelor
fluid medium power;

• Continue the program of refurbishment of hydro-power plants, program includes up to the
year 2010, rehabilitation of production capacities with a power total of 611.36 MW of surplus
power is 32.6 MW;

• the effective use of hydropower potential by building new capacity production, including by
attracting private capital;

• Completion of emergency by the Ministry of Transportation planning projects of Danube in
order to ensure the Cernavoda Nuclear Power Plant cooling water (or HPP Macin
Balathreshold) and beginning of work execution;

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• Continue the program of nuclear power by end 2015 (beginning of commercial exploitation)
of Units 3 and 4 of Cernavoda, by attracting capital private;

• Continued production of heavy water in RAAN Drobeta Turnu Severin, cost prices
competitive, to meet requirements Cernavoda Units 3 and 4;

• safe management of radioactive waste, including setting up resources financial resources
necessary for final disposal and decommissioning of nuclear units;

• safe management of radioactive waste, including setting up resources financial resources
necessary for final disposal and decommissioning of nuclear facilities;

• Implementation of emission trading permits as required European Union emissions of
greenhouse gases;

6.2 Transport and Electricity Distribution

• Further development, modernization and upgrading of transport networks and distribution
network in the concept of connecting intelligence with appropriate training to network of
renewable resources;

• Making HVDC submarine power cable between Romania and Turkey, in partnership with
private investors;

• Increasing the degree of interconnection with the countries of the European Union and the
Black Sea for the benefit of Romania's strategic position in the transit of electricity from
about 10% currently to 15-20% in the 2020 horizon;

• unbundling of distribution and supply electricity to July 1, 2007;

• Preparation and implementation of a national program of electrification of villages and
areas without electricity;

• The privatization of energy services activities.

• Complete privatization of electricity distribution companies and further the privatization of
companies producing electricity and heat competitive climate and the strengthening of
monitoring obligations of investments made;

6.3 Development Of The Electricity Market And Related Infrastructure

• The full opening of the electricity market from July 1, 2007;

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• Active participation in achieving regional electricity market in the center - East and
Southeastern Europe, in order to integrate it into the EU internal market and
support achievement of Regional Electricity Market Operator (Regional Stock Exchange
energy) in Bucharest and the Office of auctions coordinated allocation plan regional capacity
interconnection lines (Co-ordinate Auction Office);

• Improving the current framework, including the introduction of market effective capacity;

• Strengthening institutional capacity and independence ANRE;

• Improving market surveillance mechanisms and shorten the time for correcting their failure;

• Ensure regulatory predictability, transparency and non market energy;

• Implementation of mechanisms to allow the energy needs of the sector intensive industry,
according to European practices, without distorting the market competitive;

• Replacement of tariffs for electricity and energy subsidy to Heat the welfare for vulnerable
consumers only;

6.4 Heat and Centralized Heating

• Continue to heat sector restructuring so that needs to be ensured thermal energy to the
population in conditions of economic efficiency;

• Promoting efficient cogeneration projects and support them through specific mechanisms in
accordance with Directive 2004/8/EC;

• Carrying out the rehabilitation of thermal power plants, reducing production costs and
reducing heat loss in transport and distribution to reduce costs population with heating, with
up to 30%;

• Attracting private capital in the rehabilitation of units for energy production
electricity and heat cogeneration and the development of new projects related to
requirements heat of the villages; 67 Energy Strategy 2007-2020 / DRAFT 52

• Developing legal and institutional framework on the heat market and services public supply
heat produced in the centralized system;

• Diversification of primary energy resources used to produce heat;

• Generalization of heat metering at the building and delivered at flat. The restructuring of
the electricity generation sector will be pursued:

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- Maintaining concentration indicators wholesale electricity market at least in the existed
before the restructuring;

- Consolidation of manufacturing units by natural aggregation due process privatization of
thermoelectric and hydroelectric plants;

- Strengthening of private producers, competitive regionally, through the acquisition of units
electricity production in several countries in the region. The national strategy on supply heat
to the localities of production systems and centralized distribution assessed investment needs
in the period under review, systems centralized heating, about 340 million Euro / year.
Regarding the national electrification program, it must take into account the provisions in
force, namely:

• Electricity Law (Law 13/2007) which provides in Article 12. (1) Electrification localities is
done with funds from local budgets, the State budget or from other funds legally established.
(2) The local government and concerned ministries responsible for implementation
electrification projects and programs and expand them.

• HGR 328/2007 (published in MO no. 307/9.05.2007) approving the Program "Electrification
2007 - 2009 "on power supply and the establishment of settlements without electricity
Program Management Unit (PMU). PMU will be established within the Ministry
Interior and Administrative Reform and working under the coordination of executive
Secretary for local communities. So, construction of network programs will be funded from:

- Funding of local government authorities, through their own investment programs;

- Funds from the state budget;

- Fund distributors, which allow the degree of profitability;

- Joint funding of local authorities and distributors; Local councils, in consultation with the
operators of distribution in the region, will coordinate the appropriate investment program
for the purposes mentioned priority list drawn up by PMU with due regard, as a guiding
principle, the usefulness of economic development future of the area (specific investment
cost, number of people who will benefit from these services, etc..). Distribution operators
shall annually study the state of electrification rural areas and determine, based on priorities
identified by local councils, and needs work and investment. Also distribution operators shall,
at the request of local councils on a contractual basis, studies point to power supply. For
proper functioning of the electrical distribution network (RED), for rehabilitation and
modernization it necessary for new plants and power consumers in terms of quality and safety
is needed amount of EUR 1.7 billion in 2007-2020, (suitable only Electrica subsidiaries),
resulting in the table below.

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Investment necessary to develop distribution networks:

  Nr.                                Total                  DEPRETIATION OF THE INVESTMENT
                                     Value                                        2010-
                 BRANCH                             2007       2008     2009               2016-2020
                                     million €                                     2015
                                                    mil. €    mil. €    mil. €    mil. €     mil. €
  0              1                      2             3          4        5          6         7
  1.    MUNTENIA NORD                 374.621        52.545     31.273    15.180    51.273    224.350
  2.    TRANSILVANIA NORD             440.722        55.896     52.901    38.225 151.363      142.337
  3.    TRANSILVANIA SUD              625.248       150.091     94.477    61.348 169.370      149.962
  4.    MUNTENIA SUD                  254.639        62.688     37.696    23.355    74.909     55.991
  5.    TOTAL ELECTRICA              1695.230      321.220 216.347      138.108 446.915      572.640

6.7. Forecast Energy Sector

Forecasts of productions of different primary energy carriers in the period 2005-2015 indicate
a moderate increase in total domestic production. During this period it will double production
of energy Electric on nuclear fuel, the entry into operation of Unit No. 2 of the CNE
Cernavoda and will increase coal production. Evolution of domestic production of primary
energy resources in the period 2005-2009 is shown in evolution of production of domestic
primary energy resources:

                                     2005      2006 2007         2008     2009      05 [%] 2010        2015
                      Mil tep                             8,00                                  7,80
                                        6,19      7,29             7,12     7,62                         7,75
-Coal total:          Mil                                41,00
                                       31,64     36,60            35,20    38,20                        37,10
                      Mil tep                                                                   6,20
                                        5,10      5,79                      6,12                         6,25
   Lignit**)          Mil                                32,60    33,00
                                       28,69     32,60                     34,27                        35,00
                      Mil tep
                                        1,09      0,92    1.05     1,05     1,08                1,12     1,50
   Black Coal (Huila) Mil                                                            135,00
                                        2,95      2,59    3,00     3,01     3,10                3,20     4,00
                      Mil tep          10,05      9,82    9,40     9,08     8,90                8,80     8,50
-Gas                                                                                  88,60
                      Mld m3           12,48     12,00   11,68    11,28    11,00               10,90    10,60
-Oil                  Mil tep           5,53      5,50    5,40     5,40     5,20     100,00     5,20     5,10
-Hidro electricenergy Mil tep
                                        1,69      1,40    1,40     1,40     1,40                1,40     1,60
                      TWh              19,90     16,00   16,00    16,00    16,00               16,00    18,00
                      Mil tep           1,43      1,43    1,43     2,80     2,86     200,00     2,86     5,72
-Nuclear energy       TWh Mil           5,50      5,50    5,50    10,50    11,00     200,00    11,00    22,00
                      t/an             61,00     61,00   61,00   122,00   122,00     200,00   122,00   244,00
-Other fuels          Mil tep           2,90      2,92    2,97     3,00     3,10      106,9     3,30      4,0
PRODUCTION OF         Mil tep          27,37     28,36   28,60    28,80    29,08      106,2    30,35    32,67
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6.6. Development of Energy Markets

 a.      Electricity market

Government Program 2005-2008 and the Roadmap to Romania's energy require that Electricity
market operator to initiate the actions necessary for the expansion at regional trading on spot
market for electricity.

In 2007 it will design the institutional and regulatory framework necessary for the operator
electricity market to function as a regional stock exchange, within a consultancy project
funded by the World Bank. Successful completion of this project requires effort to obtain
Consensus regional partners. There will be development of necessary infrastructure and
logistics. Also, will determine the shape of OPCOM property that will ensure trust in the
entity to potential participants (TSO's in regional markets involved in regional electricity
market, following models European viable.

In 2007 the entities involved in regional projects - Ministry of Economy and Finance
Transelectrica, ANRE OPCOM to further support its efforts to take on the role of scholarship
Regional, started in 2005-2006. Institutional and regulatory framework is subject discussions /
negotiations with potential regional partners and regional institutions: the system operators
and regulators in countries signatory to the regional treaty. Experimental period, involving
participants in the transactions organized by the Regional OPCOM, will take place in the year
2008. The success of the initiative will give Romania the lead in creating a competitive
environment for electricity trading, contributing to establishing a climate of cooperation in
Southeast Europe.

In 2007-2010, the electricity market in Romania will strengthen the structural, increasing
on the basis of the degree of confidence of market participants. Legislation and the
procedures will be continuously adapted implementation EU directives and regulations and
rules developed by the European Regulators Group for Electricity and Gas (ERGEG). Further
liberalization of energy market and the total opening since 2007, require adoption and
implementation of new concepts to ANRE: universal service provider ultimately, consumer
profiles. These concepts will help both strengthen relations competitive, and protect the
interests of small consumers, without bargaining power.

To ensure long term security of electricity supply by stimulating investments amid power
shortage in Southeast Europe, ANRE completed first half of 2007 the legislative capacity to
implement mechanisms to implement them since 2007. It will avoid interference with market
mechanisms regional, which may create distortions. OPCOM as to strengthen national and
regional trading environment will diversify product portfolio trading. In addition to products
that require physical delivery of energy is will gradually launch derivative financial products

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aimed at reducing and transferring risk associated trading on the electricity market,
supported the establishment of a clearing house. Experience design and manage financial
products will facilitate and implement a framework trading of carbon emission permits, that
the certificates for stimulating investment in energy efficiency.

b. Natural gas market

The liberalization of gas market in Romania continues with full opening market to July 1,
2007, under the European Natural Gas Directive 2003/55/EC. The proposed market to be
developed provides the following:

• SNTGN TRANSGAZ SA to be financially neutral to costs balancing system national transport;

• National Transmission System will be operated under a concept of balancing residual daily
to ensure the safe operation of the system;

• operation of market activity, currently focused on monitoring the dosage import / total
consumption, will be held strictly to the elimination of gas import price and those in the

• Imbalance charges applicable network users will generally reflect the costs consequences of

• Wholesale prices vary throughout the year, according to the marginal cost and other
fundamental aspects of the market;

• Wholesale prices are not regulated and will reflect both long-term contracts, and market
value of the supplies flexible short term. Gas market development in the coming years has in
mind the following:

• development of competition to the gas suppliers;

• continue implementation of pricing methodologies of "ceiling";

• stimulate creation and / or rehabilitation of natural gas deposits, in order to increase
quantities of natural gas from domestic production and limiting imports;

• Licensing of new providers, which carry wholesale market transactions, in pursuing the
diversification of import sources. We continue to align the producer price of natural gas at
levels comparable with import prices, the annual price increase domestic production so that,
depending on gas import price developments, price convergence to be achieved as soon after
integration - based on a realistic timetable, subject to Community rules on subsidies and
state aid. From 2008, once the market is fully liberalized, prices will be determined on a

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  competitive and is influenced solely by alternative fuels quotes, Romanian market
  gas can be considered a relevant market in the region and even in Europe.

  6.7. Forecasting energy demand

  The baseline scenario for the evolution of energy demand forecasts during 2007-2020 has to
  forecast the evolution of key macroeconomic indicators during the period 2007-2020,
  compiled by the National Commission for Prognosis.

  In the period 2007-2020 is estimated the following values for indicators of development:

               UM                  Realized                             Estimated
                        2003     2004    2005 2006 2007       2008   2009   2010     2015      2020
 Populaţie      10
             locuitor 21,73      21,67   21,62 21,55 21,47 21,38 21,32      21,26    21,2      20,9
     PIB      109Euro 70,38      76,37   79,50 85,62 91,10 96,84 102,55 108,30 114,36 120,65
PIB/locuitor 10 Euro
             2005/loc 3,24       3,52    3,68   3,97   4,24   4,53   4,81    5,09    5,39      5,77
  Creştere        %
     PIB                52        85      45    77     64      63     59      56      56        55
Intensitate tep/10
  energie      Euro    0,55      0,51    0,48   0,47   0,44   0,42   0,39    0,37    0,35      0,33
  primară      2005
Intensitate tep/103
  energie      Euro    0,36      0,36    0,32   0,31   0,29   0,28   0,26    0,25    0,23      0,22
   finală      2005

  In these conditions are expected energy needs for the period 2007-2020 and how to achieve
  by using each primary energy sources. They used the following assumptions:

  • electricity market in Romania is integrated in the southeast European market and the
  market Central European cross-border trade is limited only by capacity interconnection;

  • national consumption will increase relatively steadily with about 3% per year throughout the
  period analyzed;

  • Export of electricity will increase substantially after 2015 with the arrival of nuclear
  facilities No.3 and No.4 of Cernavoda Nuclear Power Plant and upgrading of thermal units;

  • Encourage use of renewable sources, with the hitting of 33% of consumption GDP energy of
  2010 made from them;

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• Encourage the use of solid fuels with cleaner technologies;

• It will reduce the share of electricity production using liquid fuels and gaseous. These fuels
will be used mainly in cogeneration units required ensure the heat of the population;
Following the programs efficient use of energy resources and energy, and the sectored
restructuring, annual primary energy consumption growth will be half that of economic
growth, resulting in a significant decoupling of the two indicators. After 2012, export of
electricity will exceed production by using liquid and gaseous fuels derived from imports.
Energy balance of the country will become so surplus for the first time in history. In 2010 it
will meet the national target set for the use of renewable energy in electricity production.
The rate of use of renewable sources will continue to grow after 2010, so that electricity
production from these sources in 2015 represent 35% of gross consumption of energy and 2020
represent 38%. Making estimated electricity production in power stations is conditioned by:

-Development of coal mines, lignite and uranium.

-Insuring additional quantities of domestic production of imported coal.

-Ensuring the need for importing uranium program under development nuclear power;

Evaluation of heat demand is correlated with estimates of economic restructuring, raising
living standards, with annual growth rates around 1% lower than the evolution of electricity
demand. Total heat demand in the centralized heat distribution for 2010 is estimated at
about 3 million tep.

In accordance with a study on restructuring the electricity generation system in Romania –
Stage II-power system development, developed by DB POWER UK and ISPE, improving the
technology should be between 2008-2010 hydroelectric plants with an installed power of
approx. 1135 MW improved is possible in the period 2010 to 2020, hydro with an installed
power of approx. 2417 MW, in addition with our hydroelectric projects set for the period 2008
to 2020, with an installed capacity of 759 MW, and feasible projects in the same period, with
an installed capacity of 895 MW.

These projects add two more hydro projects to be undertaken during this period, namely
CHEAP Tarnita, with installed capacity of 1000 MW and the Tisza AHE, of 30 MW. In terms of
thermoelectric groups are expected to achieve between 2008-2020 groups with an installed
capacity of 3,000 MW and will be discarded, in the same period a group installed capacity of
about 2900 MW. Regarding consumption of natural gas is expected to grow marginally by year
2015. The balance between imports and domestic production will reverse, amid the gradual
exhaustion of reserves of natural gas. According to estimates by the regulatory authority in
the field, development natural gas consumption and its coverage structure is shown in.

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Estimated development of domestic production and import of natural gas 2007–2015.


Falling competitiveness induced by market opening prices should fall, since firms will want to
maintain market share will stimulate each other. To sustain such a strategy, maintaining or
increasing marginal profits, companies will be spurred on to reduce costs and become more
efficient. Also regulations and competitiveness ensure that the process cost reductions will
find at least partially in prices. So price evolution is a good indicator to measure the impact
of liberalization. But considering the complexity of the analysis sector should be mentioned
that the observed prices and other variables depend.

The chart below shows the rates of inflation observed in 6 industry networks in the last 10
years. I mentioned inflation rates measured by the harmonized index of consumer prices and
inflation rates for goods and services. From January 1996 until November 2006, CPI increased
by 27%, meaning 2,5% annually, while the price index for goods and services increased by 21%
and 34%. The first column of the table shows the influence of network industries in the CPI,
amounting to 7,5%. Therefore, prices of network industries have significant effects on
macroeconomic conditions, and evolution of economic policy.

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7.1 Electric Power

The electricity pricing system and charges has evolved from single tariff system regulated
to end consumers at a price system on activities and services, able to meet new liberalized
sector structure.
In the liberalized market prices are determined by using competitive mechanisms, including
for imbalances between the amount incurred and the actual consumption and prices
regulated network services (transmission and distribution) and ancillary services. Electricity
prices had an upward trend due to the need to practice some prices reflecting rationally
justifiable costs, increase fuel prices internationally, increase volume of investments in
networks and the phasing out of direct subsidies and cross.

Price evolution – electricity, 2000-2006:

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In nominal terms, electricity prices index remained constant between 1996 and 2000 but
increased by an annual rate of 4,2% then. The increase of January 2006 and November 2006
was very visible, 6,2%. This increase is obviously independent evolution of gas prices.

7.2 Natural gas

During the year 2005 were recorded substantial growth of international quotations of oil and
oil products, which resulted in price increases for imported gas well above expectations
envisaged for the completion of accession negotiations under Chapter 14 "Energy". This has
led, in consultation with European experts, the agreement with the European Commission to
extend the timetable for aligning the gas price by the end of 2008. Calendar of alignment
with EU experts agreed until 2008 was set considering overall impact of gas prices on the
prices of utilities and other macroeconomic indicators.

In accordance with the requirements of harmonizing the legislation, procedures and the
general economic community specifically the European Union, provided in the complementary
document of Position on Chapter 14 "Energy" (CONF-RO 06/04), an important objective is the
final pricing of supply natural gas to captive consumers in conditions of economic efficiency,
meaning cost recovery activities relating to production, storage, transport, distribution and

Need to implement a new pricing system for gas was contained in agreements concluded by
the Romanian Government with international financial institutions and was made public since
December 2003, when issued ANRGN methodology of calculation of prices and tariffs on
natural gas. In order to eliminate cross-subsidies between consumer categories, ANRGN
implemented since 01/04/2005, a new system of tariffs for distribution and final regulated

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prices, differentiated by each operator of gas distribution, supply licensee, and the categories
consumers, reflecting costs related to gas supply for each category.

Final price differentiation regulated categories of consumers is necessary to properly reflect
the costs that they generate each type of consumer, leading to elimination of subsidies
between consumers who consume different amounts of natural gas. Their definition was made
according to the average annual natural gas consumption in the economic substantiation
submitted by each operator of gas distribution, supply licensee - 5 categories of consumers
connected to national transmission systems and, respectively, 6 categories consumers in
distribution systems.

Background regulated prices and tariffs is based on the recognition of justified costs and
made reasonably gas distribution operators. Thus, the final prices are regulated to regulate
gas supply made covers all costs incurred to provide natural gas to final consumers.
In order to benefit without discrimination of natural gas from domestic production, all
consumers are forced to buy imported gas at a fixed percentage over the total consumption
of gas (if eligible customers through direct import of natural gas). Gas ratio of domestic
production and import of the established monthly by the market operator. Calculation of
weighted average price of imported natural gas purchased is carried out by the National
Regulatory Authority in Natural Gas.

7.3 Oil and oil products

In accordance with applicable legislation, the prices of crude oil and petroleum products are
formed freely on the relationship between demand and supply on the domestic market,
namely the international market. Prices of transport of the national crude oil transportation
are determined by the competence - National Agency for Mineral Resources (NAMR).

Unfavorable situation on world market of crude oil, characterized by a marked decline
production and stocks - particularly U.S. and Asian market - has increased without his
previous quotes on stock markets, prices registration the 60 ÷ 70 USD/barrel since 2005.
Increasing global oil prices has led to continuous increase prices of petroleum products and
thus to increase chain costs in the economy. The domestic price of crude oil and petroleum
products included a series of tax items, as defined in the currency (EUR or USD). Of course,
due to exchange rate movements, these elements are resized to the end of each month for
the next month, which calls for recalculation prices for those products (elements of taxation
is about. 70% of price of petroleum products).

The price of oil is determined by the cost of crude oil under processing, whose weight is up to
80% of total costs, and any variation involves appropriate adjustment costs and consequently
on prices. Crude oil is a publicly traded global market. On the oil market is a competitive
environment in the process of consolidation, change and variety of market prices is a positive
element in the development of free market. Fuel prices are fixed open, but taking into
account developments in external prices and purchasing power of the domestic market,
taking into account balanced policy on fuel prices.

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7.4. Coal

Coal price currently set free, through direct negotiations between producer and recipient.
For coal price is below production cost, the difference being covered by state aid under EC
Directive 1402/2002. To develop coal production under current conditions is necessary to
promote long-term contracts between suppliers and power plants based on pricing formulas
based on other carriers like stock quotations of primary energy to substantiate the results of
studies of feasibility (plans business) realistic. According to studies of prognosis, developed
world (WEC) 2030, all world markets is expected a slightly higher trend of coal prices, with
substantial increases in other energy resources (oil and gas). The forecasts confirm that this
energy resource, in addition to long insurance, is a guarantee of support in the future energy
needs at competitive prices with the prices of other primary energy carrier resources.

7.5. Thermal energy

The price of heat supplied to the population of centralized district heating systems is fully
covered by the system of local prices of Reference (PLR). Local costs production, distribution
and supply of thermal energy in the system were in 2005 for 160-230 USD, the difference of
the PLR is subsidized by the state budget (until 2007) and local budgets. Subsidizing
consumers’ heat was a method of providing social protection and maintenance in service of
inefficient producers, but with important social role. For heat produced in CHP support
schemes apply, so be assured these producers viability in the competitive market for

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8. Major Energy Suppliers

   A. Petrom- turnover 3, 7 billion euro

With activities in the business segments of Exploration and Production, Refining, Marketing as
well as Gas, Petrom has proved oil and gas reserves of 940 mn boe, a maximum refining
capacity of 8 million metric tons per year, approximately 550 filling stations in Romania and
269 filling stations in Moldova, Bulgaria and Serbia. In 2008, the turnover of the company was
EUR 4,552 mn and EBITDA was EUR 969 million. After its privatization in 2004, the company
recorded pozitive results. The modernization process initiated in 2005 is underway in

   B. Arcelor Mittal Galati- turnover 2,1 mil euro

ArcelorMittal is the world's number one steel company, present in more than 60 countries. It
has led the consolidation of the world steel industry and today ranks as the only truly global
steelmaker.ArcelorMittal is the leader in all major global markets, including automotive,
construction, household appliances and packaging. The Group leads in R&D and technology,
holds sizeable captive supplies of raw materials and operates extensive distribution networks.
Its industrial presence in Europe, Asia, Africa and America gives the Group exposure to all the
key steel markets, from emerging to mature. ArcelorMittal will be looking to develop
positions in the high-growth Chinese and Indian markets. ArcelorMittal key financials for 2008
show revenues of $124.9 billion and crude steel production of 103.3 million tonnes,
representing approximately 10% of world steel output.

   C. Rompetrol Rafinare- turnover 4 billion euro

Rompetrol Rafinare, a member company of Rompetrol Group, operates the most modern
refinery in Romania, combining the new oil processing technologies with the experience of a
professional team. The company processes a variety of crude oils with high sulfur and API
contents. The crude oil feeding is done through the Midia own port, which can harbor ships of
up to DWT 24,000 tons or through the larger Constanta port, to which it is connected through
a 40 kilometer pipe. The refinery has its own marshalling yard, with 40 loading and unloading
points and vehicle loading ramps.

   D. Lukoil Romania-turnover 1,225 Billion euro

LUKOIL Oil Company is the first private company from the Russian Federation that opened the
way for investments in Romania by purchasing, in 1998, the majority of shares of "Petrotel"
Refinery from Ploiesti, one of the Romanian refineries having the longest tradition.
The integrated system of crude oil processing and petroleum products distribution allows the
company to obtain motor fuels of exceptional quality. It is easy to recognize “LUKOIL” brand,

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as Romanian drivers associate it to a high quality of the petroleum products and with
reasonable prices.

   E. Rompetrol Downstream-turnover 1,220 billion euro

The Rompetrol Group N.V. is a multinational oil company headquartered in Amsterdam, The
Netherlands, operating in 13 countries, and with the majority of its assets and operations
based in France, Romania, Spain, and South-East Europe. The group is active primarily in
refining, marketing and trading, with additional operations in exploration and production, and
other oil industry services such as drilling, EPCM, and transportation. TRG aims to become one
of the largest independent oil companies in Europe and obtain a strong position in the Black
Sea and Mediterranean areas.

   F. Petrotel Lukoil-turnover1,069 billion euro

During 2002-2004 the first stage of a complex modernization and reconstruction process was
completed. The goal of this process was to carry out a technological upgrade in order to
ensure refined products that meet the EURO 3 and EURO 4 quality standards now in effect in

   G. Distrigaz Sud- turnover 992,4 million euro

Company with major positions in the gas market in Romania, accounting for over 30 years
experience in marketing natural gas, GDF Suez Energy Romania aims to soon become a
competitive company Suez European.GDF present level throughout the energy chain in
electricity and gas: the acquisition, production and marketing of natural gas and electricity,
transport, distribution, management and development of large gas and electricity
infrastructure, creation and marketing of energy services and the services dedicated to
environmental protection. GDF

Suez Energy Romania has holdings in the following companies:
• Mehedinti Gas - 15%
• Congaz - 28.59%
• Tulcea Gas - 30%
• Wirom Gas - 48.8%
• Vital Gas - 100%
• South Distrigaz Network - 100

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  H. EonGaz- turnover 818 milioane euro

E.ON Gaz România operates in the natural gas industry and is specialized in natural gas supply
services.With a tradition of over 30 years in the natural gas industry, E.ON Gaz România
supplies natural gas in more than 20 counties from the north of the country, in Transilvania,
Moldova, Maramureş and Banat.

Gas Volume Sold 2008: app. 2,8 billion m³
Customers: app. 1,4 million
Employees: app. 500

   I. Transelectrica-turnover 452 million euro

Transelectrica is the Romanian Transmission and System Operator (TSO) which plays a key
role in the Romanian electricity market.
It manages and operates the electricity transmission system and provides electricity
exchanges among Central and South - Eastern countries, as a member of UCTE (Union for
Coordination of Transmission of Electricity) and ETSO (Association of European Transmission
and System Operators).
Transelectrica is responsible for electricity transmission, system and market operation, grid
and market infrastructure development ensuring the security of the Romanian power system.
It also serves as the main link between electricity supply and demand, matching all the times
power generation with demand.

        J. Hidroelectrica- turnover 680 million euro

The leader in power generation and the main supplier of Romania ancillary services; provider
of complex utilization(mitigations of floods, regulation of water streams, irrigation, shipping,
supply of both industrial and drinking water):
-able to contact loans with great facility for financing refurbishment works;
-able to finance project of national interest;
-is trustworthy in front of the investors and foreign banks for continuing the uncompleted
works and getting external funds.
-produces renewable energy, of which about 4% within the small hydropower plants.

       K. Energy Holding-328 million euro

Energy Holding is one of the most important private electricity suppliers in Romania and, at
the same time, an active supplier in South East Europe. Energy Holding is actively pursuing to
consolidate its leading position on the Romanian energy market; as well as to expand
internationally by penetrating the South Eastern European markets. We are looking to ensure
the company's long term stability through an integrated development strategy, which entails
the build-up of our own power generation base.

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C.Herbst, I.Letea, “Resursele energetice ale Pământului”, Editura Ştiinţifică, Bucureşti, 1974

Niculescu, « Finantarea in Domeniul Energetic »,1996

Corneliu Stan »Electrica-Oportunitati in Romania »,2003

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