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Experience of RWE in the Hungarian Energy Sector

Experience of RWE in the Hungarian Energy Sector. 10th anniversary of the Hungarian Energy Office Budapest, 16th September 2004. Since 1992 RWE plays an active role in the Hungar ian Energy Market (I). RWE. MEH. 1992. Hungarian RWE Representative Office founded.

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Experience of RWE in the Hungarian Energy Sector

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  1. Experience of RWE in theHungarian Energy Sector 10th anniversary of the Hungarian Energy Office Budapest, 16th September 2004

  2. Since 1992 RWE plays an active role in the Hungarian Energy Market (I) RWE MEH 1992 • Hungarian RWE Representative Office founded • Transformation of Hungarian Energy Trusts into corporates 1993 • Co-operation aggreements with Hungarian electricity companies • Approval of the new Hungarian Energy Policy by the Parliament • Participation in the first privatization attempt – declared unsuccessful 1994 • Parliament passes Electricity and Gas Act foundation of MEH 1995 • Decrees on the execution of Electricity and Gas Acts • Privatization of the Hungarian energy market – RWE acquires stakes in ELMŰ, ÉMÁSZ and PP Mátra • Price regulation system accomplished 1997 • RWE becomes minority shareholder of TIGÁZ • Price Cap regulation takes effect 1998 • RWE becomes majority shareholder of ELMŰ, ÉMÁSZ and PP Mátra • District Heating Act approved 1999 • Foundation of Sinergy, a project company of ELMŰ and ÉMÁSZ • Business Model of the energy industry

  3. New Electricity Act approved Since 1992 RWE plays an active role in the Hungarian Energy Market (II) RWE MEH • Through the merger with VEW, RWE increases its stake in TIGÁZ and becomes shareholder of FŐGÁZ and DDGÁZ 2000 • Cost revision and preparation of next price regulation contract • Reconstruction of PP Mátra (FDA) 2001 • Construction of PP BorsodChem, co- and trigeneration plants (i.e. MOM Park) and District Heating Plant in Sárospatak • „Challange 2001” Project 2002 • MÁSZfounded, comissioning District Heating Cogeneration Plants in Kazincbarcika, Tiszújváros and Rózsakert • Preparation for electricity and gas market liberalization 2003 • PP TVKconstruction • New Gas Act approved • Partial opening of electricity market 2004 • RWE Energy Hungária management company established • Partial opening of gas market for non-household customers

  4. RWE came to Hungary with many hopes, with most of them now fulfilled Our expectations in 1994-95 • Political stability • Quickly improving economic situation • Fast market growth • Gate towards Eastern Europe • Professional workforce • Stable and fair regulatory environment • Satisfactory political/economic stability • Improving commercial culture • High level technical standards • Highly motivated and qualified workforce • Reduced overemployment • Decreasing influence of politics on regulation Where we stand ten years later

  5. RWE is contributing to Hungary´s advancement with it´s investments Generation • Refit and upgraded PP Mátra with flue gas desulphurisation equipment • Investments in Industrial cogeneration Plants (Borsodchem, TVK, MOM Park) • Modernization of district heating plants in Kazincbarcika, Tiszaújváros, Sárospatak & Rózsakert Distribution & Retail • Opened modern Call Center for 2 million household customers of ELMÜ/ÉMÁSZ • Automated Billing and other back office processes by introducing latest SAP R3 technology • Investments in networks over 7 years to increase security and comply with MEH Quality Index requirements Corporate Citizenship • Reconstructed historical FŐGÁZ Headquater • Carried out necessary workforce reduction with social plan and permanently increased real wages of employees • Supports of Budapest Autumn Festival, Miskolc Opera Festival, Hungarian Olympic Committee and Hungarian Children’s Safety Service

  6. Key success factors for energy markets - major tasks for Hungarian Energy Office • Synchronize steps towards market liberalisation with other CEE regulators • Create transparent and predictable processes for regulatory decisions • Regulate only markets with natural monopolies • Incentivize long-term investments by offering adequate returns on invested capital

  7. We want the Hungarian Energy Office to be a strong,independent partner • To succeed on in the long run, investors need a predictable and transparent regulatory framework for natural monopolies • Therefore we encourage and support MEH’s independence • We believe, that a good professional relationship between Energy Officeand investors will benefitall customers • In this relationsship the Energy Office can be a tough partner, but it needs to be reliable and predictable • Our experiences with the Hungarian and CEE regulators are of great value and importance in our home market Germany

  8. We hope to be the one to illuminate Budapest and cooperate with the Hungarian Energy Office even in100 years time!

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