After the entry into force of the Law of Ukraine On Electricity Market dated 11 June 2017

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1 ELECTRICITY PRICES IN THE FRAMEWORK OF THE CONTRACTUAL BASIS FOR PROVIDING/RECEIVING EMERGENCY SUPPLY BETWEEN THE SYSTEM OPERATORS OF NEIGHBOURING COUNTRIES After the entry into force of the Law of Ukraine On Electricity Market dated 11 June 2017

2 Technical possibilities of electricity transmission under the agreements on emergency supply Poland/PSE SA providing/receiving up to 235 MW/80 MW Hungary/MAVIR providing/receiving up to 200 MW Slovakia/SEPS providing/receiving up to 150 MW Romania/Transelectrica providing/receiving up to 150 MW / up to 50 MW Belarus/Belenergo providing/receiving up to 200 MW Installed capacity MW Moldova/Moldelectrica providing/receiving up to 300 MW / up to 200 MW

3 What an emergency means and why emergency supply is required An emergency power reserve of the power system (emergency reserve) is a reserve of power required to compensate for the emergency decrease in generating capacities of the power system. If the internal reserves of the country facing the emergency are exhausted, the dispatcher on duty of that country may request emergency electricity supply from the system operator of the neighboring country. The situations requiring the emergency electricity supply from the power system of one country to the power system of another country cover the emergence or a threat of emergence of the electricity regime of the country s power system, which may cause or have already caused the need to reduce consumption or temporarily stop the supply of electricity to consumers on the territory of the country as a result of the switching off of the generating and (or) power equipment of the grid. Receiving / providing emergency supply from / to the system operator of the neighbouring country serves as a mechanism for keeping its (or neighboring) power system afloat and preventing the outage of its own consumers from the energy supply or a significant reduction in the number of such outages.

4 Our guidance (laws and regulations) Law of Ukraine dated No VІІІ On Electricity Market Prior to entry into force of the Law, the maintenance of agreements on emergency electricity supply was performed by SE Energorynok. Starting from mid 2017, the validity of agreements on emergency electricity supply was suspended. As of today, SE NPC Ukrenergo developed draft agreements and discussed them with neighbouring system operators. Terms and conditions were submitted to the NEURC for approval. NEURC Resolution No. 97 dated On approving the resolution of the Council of the Wholesale electricity market of Ukraine dated (subparagraph 3.1 of Minutes No. 30) on approving the Amendments to Annex 2 to the Agreement between the members of the Wholesale electricity market of Ukraine (Rules of the Wholesale electricity market of Ukraine approved by NERC Resolution No dated ) regarding the purchase/sale of electricity with the purpose of emergency electricity supply between the IPS of Ukraine and the power systems of other countries. Functions regarding the sale and purchase of electricity to ensure the performance of agreements on emergency electricity supply were transferred to SE NPC Ukrenergo. Draft agreements between SE NPC Ukrenergo and SE Energorynok regarding the sale and purchase of electricity to ensure the performance of agreements on emergency electricity supply were developed. Proposals regarding the prices of electricity in the framework of agreements on emergency electricity supply were submitted to the NEURC for approval. The Procedure for holding an open discussion of draft NEURC decisions, approved by Resolution No. 866 dated The open discussion of draft prices of electricity in the framework of agreements on emergency electricity supply has been announced.

5 Importance of agreements on emergency electricity supply The current contractual basis of emergency electricity supply means: Introduction of European principles of operation and increase in the level of the country s energy security An additional step towards the establishment of a full-fledged balancing electricity market in Ukraine and, as a result, promotion of competition in the field of rendering balancing services An additional mechanism for preventing emergency outages of own consumers or reducing the number of such outages Reliable and transparent relations with neighbouring system operators No additional financial burden on the final electricity consumer. Improvement of the image of Ukrenergo and Ukraine within the European energy space and among key stakeholders

6 Prices for emergency electricity supply in neighbouring countries Formation mechanism Price indicators, /MWh Poland Slovakia Hungary local balancing electricity market Romania local balancing electricity market + fixed rate established by the Regulator ( ) ( ) Belarus Moldova Ukraine calculated and established by the Regulator established by the Regulator calculated and established by the Regulator $/MWh absent $/MWh

7 Share of the received emergency supply in the total amount of electricity purchased at WEM Year The amount of electricity purchased at WEM, MWh Amount of emergency supply, MWh Share of emergency supply in the total amount of electricity purchased at WEM, % % % % % % Total % Moreover, in , the average annual wholesale electricity market price approved by the Regulator was higher than the prices of the electricity received as emergency supply from the UES of Russia and PS of Romania and decreased starting from 2014 due to the depreciation of hryvnia compared to foreign currencies.

8 euro/kwh UAH/100 EURO Changes in the value of electricity on the markets of neighboring countries 0, ,00 0, ,00 0, , ,00 0, ,00 0, ,00 0,02 500, Hungary 0, , , ,0763 0, ,0631 Poland 0, , ,056 0, , ,0507 Romania 0,0588 0,0647 0, , , ,05165 Slovakia 0,0946 0, , ,0719 0,0806 0,0546 PJSC Inter RAO 0, , ,059 0, , ,06914 Ukraine, wholesale prices 0, ,0688 0, , , ,04512 Average annual exchange rate for euro 1 027, , , , , ,42 -

9 Impact on Ukrenergo tariff The selling price of electricity at the wholesale electricity market includes: expenses for dispatch control expenses for electricity transmission through trunk and interstate grids electricity losses in trunk and interstate grids Expenses for emergency supply did not affect the tariff of SE NPC Ukrenergo, euro/1 kwh Average price of electricity at the markets of neighbouring countries Ukraine, wholesale prices Average value by years Deviation Deviation, % 15.6% 9.4% 27.5% 44.3% 37.5% 28.2% 25.1% Starting from , the price of electricity at the markets of neighbouring countries exceeded the prices at the wholesale market of Ukraine by 25.1%. The amount of electricity received by the IPS of Ukraine as emergency supply in % of the total sales of electricity at the wholesale electricity market. There will be no impact on the price of the consumed electricity (per kwh) for a final consumer in the cases of electricity supply to the IPS of Ukraine within the emergency supply if the amount of supplied emergency electricity remains the same. *The analysis of the impact was performed based on the information from open sources

10 THANK YOU FOR ATTENTION!