GAS SUPPLY SITUATION AND TRANSMISSION SYSTEM IN FINLAND Baltic Utilities Forum, Tallinn

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1 GAS SUPPLY SITUATION AND TRANSMISSION SYSTEM IN FINLAND Baltic Utilities Forum, Tallinn Antero Jännes, CEO Ari Suomilammi, Vice President, TSO

2 CONTENTS Gasum in general Natural gas consumption and gas transmission grid in Finland Development plans Balticconnector FinngulfLNG Security of supply Tariff regulation

3 ADDED VALUE TO FINLAND 2010 Home-market net sales 1,240 million Operating profit 98.4 million Number of employees 236 Gasum is vertically integrated company (gas sales and transmission) Gasum supplied natural gas 44.6 TWh, covering 10% of Finland s total demand for energy. Gasum invested nearly 40 million to transmission networks, a new natural gas liquefaction plant and new natural gas vehicle filling stations. Gasum paid salaries and commisions 14.7 million. GASUM IS OWNED BY: Fortum 31% OAO Gazprom 25% Finnish State 24% E.ON Ruhrgas International GmbH 20% Our business areas ENERGY TRADING SERVICES TRANSMISSION SERVICES ENERGY SOLUTION SERVICES TRANSPORT AND LNG SERVICES

4 NATURAL GAS CONSUMPTION IN FINLAND

5 GASUM S GAS NETWORK REACHES HALF OF THE POPULATION IN FINLAND Natural gas imported from Russia Length of transmission pipelines: 1,314 km Length of distribution pipelines: 512 km (total in Finland:1800 km) Finland

6 BALTICCONNECTOR, G122-4 EU-TEN STUDY PROJECT Final report material accepted by The Finnish Ministry and submitted to DG Energy Final content: Technical concept design Seabottom survey and analysis Environmental impact study Key conclusions: Pipeline route Inkoo Paldiski the only feasible alternative Seabottom survey results as conventional Preliminary CAPEX MEUR (pipeline only) No show stopping environmental obstacles founded; however EIA to be done Pipeline diameter 80 bars Capacity 2 BCM/a Project put on hold until BEMIP situation clears out Balticconnector EU TEN G122 /04

7 FinngulfLNG Gasum started engineering (including environmental impact assessment) of LNG import terminal in Inkoo and Porvoo LNG import for injection into gas transmission grid possibility for marine bunkering and industry markets SoS reasons Annual LNG import volume about TWh Injection capacity into gas transmission grid MW (12 14 million m 3 /day) Storage capacity m 3, (180 million m 3 gaseous) Targeted completion year Balticconnector and Baltic markets are currently not included in the scope, terminal plans are based on national needs, including: Increased need for peak shaving due to gas market profile changes Security of supply requirements Access to alternative sources of supply Stepwise development via Marine-LNG market FINLAND Porvoo Inkoo Helsinki Tallinna ESTONIA Area in Porvoo

8 SECURITY OF SUPPLY Infrastructure standard according to regulation (EU) No 994/2010 Largest gas infrastructure to Finland is DN1000 pipeline. Largest impact when Komsomolskoje Imatra (29 km) pipeline is not in use. Impact to capacity is 10,5 Mm 3 n/d (I m ). Highest gas demand (D max ) is 22,1 Mm 3 n/d. Demand side measures (D eff ) are 1,3 Mm 3 n/d. N-1 [%] = 102,4 %

9 [MW] m3n SECURITY OF SUPPLY Supply standard according to regulation (EU) No 994/2010 Gas supply to protected customers for 30 days Scenario Assumption is gas consumption at 9444 MW load in 2014 Gas supply is completely shut down Load is changed in to other fuels After 35 hours only protected customers are using gas at 200 MW load Air-propane plant is started up when pipeline pressure is below 7 bars, pressure / line-pack is reduced to that level after 105 hours air-propane supply to protected customers LOAD hours LINE-PACK Hours

10 REGULATION OF GAS TRANSMISSION FOR THE PERIOD Allowed return is calculated based on the WACC and the net present value of the assets From the allowed return: Cost efficiency (max 5%) and quality penalty (max 2%) is deducted Cost efficiency (max 5%) bonus is added Total impact of the cost efficiency and quality target can be ±5% of the allowed return per annum

11 REGULATION OF GAS TRANSMISSION FOR THE PERIOD The following table shows the parameters used for calculating the reasonable return for the transmission network operations Parameter Regulation Regulation Asset value Present going value = replacement value./. Technical life time depreciation Present going value = replacement value./. Technical life time depreciation Up-date of asset value Annually Annually based on indices Risk free rate of return Interest rate for 10 years bonds in Finland Risk premium 5 % 5 % Beta 0,3 0,3 Additional risk premium 3 % 3 % Premium for non-liquidity of shares 0,20 % 0,20 % Interest rate for 10 years bonds in Finland Capital structure debt/equity 20 / / 80 Cost of debt Risk free rate + 0,6 % Risk free rate + 1,8 %

12 Penalty/ Bonus/ Penalty/ Bonus/ REGULATION OF GAS TRANSMISSION FOR THE PERIOD Operating costs target based on those costs that can be controlled by the company: Max 5% of allowed return Target Target level with ±5% margin is negotiated annually with EMA Budged as a basis Costs of previous years as a comparison Cost efficiency target includes a bonus or a penalty ± 5% margin Controllable operational costs Maximum of 5% of allowed return Max 5% of allowed return Quality target concerning gas supply takes into account all undelivered gas even it is planned or unplanned A target level is set to 20 GWh per annum If the amount of undelivered gas exceeds the target level, exceeding amount is converted to Euros by using the cost difference between light fuel oil and natural gas Quality target includes a penalty Maximum of 2% of allowed return, Target 20 GWh/a Undelivered gas Max 2% of allowed return

13 Thank you for your interest