How to get connected to our natural gas transmission system LNG terminals and underground storage facilities
Page 2 of 10 Contents 1 INTRODUCTION... 3 2 COMMERCIAL AND CONTRACTUAL PROCEDURE FOR CONNECTING YOUR INFRASTRUCTURE TO THE NETWORK... 4 2.1 NON-DISCLOSURE AGREEMENT... 5 2.2 BASIC INFORMATION... 5 2.3 COORDINATION COMMITTEE... 5 2.4 PRE-FEASIBILITY STUDY AGREEMENT... 5 2.5 INTERFACE AGREEMENT... 6 2.6 DEFINITION STUDY AGREEMENT... 6 2.7 PROJECT CONTINUATION AGREEMENT... 6 2.8 COMMERCIAL AGREEMENT... 7 2.9 INTERCONNECTION AGREEMENT... 7 3 TARIFF PRINCIPLES AND CONSEQUENCES IN TERMS OF COSTS... 8 3.1 YOUR UNDERTAKING... 8 3.2 BANK GUARANTEE... 8 4 REGULATORY PRINCIPLES AND CONTEXT APPLICABLE TO GRTGAZ... 9 4.1 CONNECTION OBLIGATION... 9 4.2 CONFIDENTIALITY, TRANSPARENCY AND NON-DISCRIMINATION... 9 4.3 PUBLIC SERVICE OBLIGATION... 9 4.4 OWNERSHIP, CONSTRUCTION AND OPERATING REGIME GOVERNING ASSETS... 9 4.5 METERING OF NATURAL GAS... 10 4.6 AGREEMENTS NECESSARY FOR GRTGAZ TO CARRY OUT ITS MISSIONS... 10 4.7 10-YEAR DEVELOPMENT PLAN... 10 4.8 REGULATED ACTIVITY SUBJECT TO THE CONTROL OF CRE... 10
Page 3 of 10 1 INTRODUCTION Are you an adjacent operator who wishes to develop a new LNG terminal or underground storage facility? In order to best meet your requirement and support you in your development project, GRTgaz offers you a tailor made service to connect your infrastructure to the network. This service breaks down as follows: Physical connection to the network through link infrastructure; Delivery or take-off conditions at the interface with your installations; Provision of entry/exit capacity to shippers from/to the interface; This version 1.2 applies as from September 1, 2012.
Page 4 of 10 2 COMMERCIAL AND CONTRACTUAL PROCEDURE FOR CONNECTING YOUR INFRASTRUCTURE TO THE NETWORK The connection of your infrastructure to the network resulting in entry/exit capacity being made available on a balancing zone of the network is a long process that extends over a minimum period of six years. Connecting your infrastructure entails the following steps: Design phase o Preliminary studies o Determining the technical conditions at the interface o Feasibility studies This phase lasts 2 to 4 years Respective investment decision phase This phase lasts 1 ½ to 2 years Building and commissioning of entry/exit capacities phase This phase lasts 2 ½ to 4 ½ years The overall process of connecting a LNG terminal or an underground storage facility can be summed up as follows: The contracting conditions described below are common to all projects and apply in a non-discriminatory manner. All agreements required to be entered into by GRTgaz and yourself will be adjusted to suit your individual project.
Page 5 of 10 2.1 NON-DISCLOSURE AGREEMENT Our first contract defines the scope and outline of your project. Right from our initial discussions, a nondisclosure agreement is signed. It covers the confidential information exchanged throughout the overall project made up of two individual sub-projects respectively called the Adjacent Operator Project and the GRTgaz Project. 2.2 BASIC INFORMATION The initial information required by GRTgaz is: precise location of your site; planned date of commissioning; basic design(s) of the LNG terminal/underground storage facility, and entry/exit capacity requirement at the interface. This information allows GRTgaz to launch an initial chamber study, at its own expense to determine the structures to be built, i.e.: link infrastructure for the connection to the network; and any structures required in order to develop the core network. 2.3 COORDINATION COMMITTEE Coordination of our respective projects is carried out in the framework of a coordination committee set up right from the start of the projects and is embodied in a dedicated agreement or in the agreements described below. The mission of the committee is to: establish a forum to discuss the progress of our projects and, in particular, inform each other of any delays and/or implementation difficulties encountered; guarantee the consistency of each one s undertakings and initiatives; monitor the contractual stage of completion of the agreements; follow up on subscriptions. 2.4 PRE-FEASIBILITY STUDY AGREEMENT Assessing the conditions of connection to the network may entail additional pre-feasibility studies depending on site location, which will give rise to a pre-feasibility study agreement. Under this agreement, you must contractually undertake to bear the costs relating to the link infrastructure, up to the amount of actual costs, incurred by GRTgaz in the event of interruption of the GRTgaz Project resulting from its abandonment or a failure attributable to you.
Page 6 of 10 2.5 INTERFACE AGREEMENT Further definition studies for the link infrastructure to be built requires specifying technical design and operational conditions at the interface between your planned infrastructure and the network. To this end, a design agreement called interface agreement shall be signed. In particular, it will aim at: designing the structures to be built in order to meet your requirements; defining in particular the flow rate, pressure, gas quality and temperature conditions at the interface; identifying the operator in charge of the metering and pressure-regulating operations; providing specific information about the measurement devices used. 2.6 DEFINITION STUDY AGREEMENT The feasibility studies for connection to the network will then lead to the signing of a definition study agreement. This covers all the needed studies to build the application required for the administrative permit to realise the link infrastructure within the framework of the GRTgaz Project. This agreement has a duration of from one to three years. Under this agreement, you must contractually undertake to bear the costs relating to the link infrastructure, up to the amount of actual costs, incurred by GRTgaz in the event of interruption of the GRTgaz Project resulting from its abandonment or a failure attributable to you. The agreement will end with the inception of the project continuation agreement, defined here under, or in the event of the abandonment of projects where this is attributable to you. The feasibility studies for the development of the core network will be undertaken by GRTgaz in parallel at its own expense. 2.7 PROJECT CONTINUATION AGREEMENT The continuation of the GRTgaz Project until GRTgaz final investment decision requires a new commitment, formalised under a project continuation agreement. This agreement defines the conditions for GRTgaz to lodge the administrative applications necessary for the realisation of the GRTgaz Project. Under this agreement, you must contractually undertake to bear the costs relating to the link infrastructure, up to the amount of actual costs, incurred by GRTgaz in the event of interruption of the GRTgaz Project resulting from its abandonment or a failure attributable to you. This agreement covers: the investigation and follow-up of the administrative and state property applications; the negotiation of any easement agreement; additional technical studies (relating to soil, hydraulics, topography, etc.); preparation of the purchase of works and materials and any early orders. Except in the event of early cancellation, this agreement will end on realisation of the necessary conditions for GRTgaz final investment decision.
Page 7 of 10 2.8 COMMERCIAL AGREEMENT The conditions to allow our respective final investment decision are set out in an agreement called the commercial agreement. The commercial agreement relates to the coordination of the development, marketing and provision of capacity as regards the interface between the LNG terminal or planned underground storage facility and the network. It includes in particular: The terms of development, marketing and provision of entry and/or exit capacity from/to the interface; The conditions required by GRTgaz to invest as follow but not limited to: long-term commitments; CRE approval of the investments; acquisition of administrative permits; decision of the board of directors of GRTgaz in favour of the global long-term investments, including the connection of your project; your own final investment decision to build the LNG terminal or underground storage facility. The management of any delays in the respective projects and the abandonment or suspension of your own project and the respective responsibilities; The management of the tests to be performed on your installations, if necessary. The decision to realise the link infrastructure, as the GRTgaz Project, is only taken if a minimum level of undertaking is achieved by the market. This level is defined as the threshold at which the investments are triggered. If the threshold is not reached, you undertake to financially compensate GRTgaz for the difference between the total entry and/or exit capacity on the network developed by GRTgaz and the capacity actually subscribed or allocated in accordance with the applicable mechanism. Long-term commitments for entry/exit capacity on the network developed by GRTgaz correspond to: a pre-booking undertaken by the shippers, or a pre-allocation in favour of the shippers. These are formalised in agreements to book capacity signed with GRTgaz. These agreements specify in particular the conditions for the shipper for the pre-booking or pre-allocation of entry/exit capacity on a balancing zone at the interface until the commissioning of this entry/exit capacity developed by GRTgaz. The shipper undertakes in the agreement to sign a transmission contract at the time of provision of the capacity and to pay the price of this capacity or the current tariff for such capacity. As soon as the entry/exit capacity is available, the transmission service will be governed by the transmission contract signed with GRTgaz. 2.9 INTERCONNECTION AGREEMENT One final agreement is necessary before the commissioning of the link infrastructure. This operational agreement defines the principles and practical terms at the interface for the operational management of the quantities of natural gas passing through under the adjacent operator-shipper contracts and the GRTgaz-shipper transmission contracts.
Page 8 of 10 3 TARIFF PRINCIPLES AND CONSEQUENCES IN TERMS OF COSTS The costs incurred for connection reflect the capital costs. The Ministerial Order of March 3, 2011, approving the tariffs for use of natural gas transmission systems defines the tariff structure of GRTgaz. These tariffs are based on European Regulation 715/2009 of July 13, 2009, which in particular sets out in Article 13 that: Tariffs, or the methodologies used to calculate them, applied by the transmission system operators and approved by the regulatory authorities pursuant to Article 41(6) of Directive 2009/73/EC, as well as tariffs published pursuant to Article 32(1) of that Directive, shall be transparent, take into account the need for system integrity and its improvement and reflect the actual costs incurred, insofar as such costs correspond to those of an efficient and structurally comparable network operator and are transparent, whilst including an appropriate return on investments, and, where appropriate, taking account of the benchmarking of tariffs by the regulatory authorities. Tariffs, or the methodologies used to calculate them, shall be applied in a non-discriminatory manner. 3.1 YOUR UNDERTAKING Should your project be implemented, the costs of the link infrastructure will be integrated into the investment costs relating to the main network. Should the LNG terminal or underground storage facility not be implemented, under the tariff principles GRTgaz will require you to assume liability for the costs incurred by GRTgaz for the link infrastructure up until the GRTgaz investment decision of the link infrastructure required by your project. 3.2 BANK GUARANTEE The financial policy of GRTgaz requires you to provide a guarantee relating to the undertaking to pay for the duration of the agreements defined in paragraph 2 above according to the following terms and conditions: exemption from guarantee if you have a rating at least equal to those in the table below; failing this, you will be asked to provide an independent financial guarantee on first demand which must be issued by a guarantor, banking establishment or parent company with a rating at least equal to those in the table below; the amount of the guarantee corresponds to the estimated total costs of the studies defined in paragraph 2 above, plus the relevant interim interest; the provision of the financial guarantee is required for the inception of the agreement concerned as defined in paragraph 2 above. Moody s Standard & Poor s Fitch Your rating A3 A- A- Guarantors rating A3 A- A-
Page 9 of 10 4 REGULATORY PRINCIPLES AND CONTEXT APPLICABLE TO GRTGAZ The procedures for connecting any infrastructure to the network are set out in laws and regulatory texts, in particular in the Energy Code (the Code) and the Environmental Code. GRTgaz is a company that is certified, pursuant to Articles L 111-2 and 3 of the Code, by means of a ruling of the French Energy Regulation Commission (CRE) of January 26, 2012. GRTgaz is subject to obligations (i) as regards its status as a certified transmission operator, (ii) related to its public service obligations and (iii) more generally to its obligations related to the provisions relating to gas (Article L 400-1 et seq. of the Code). Finally, GRTgaz is based on the ITO regime, pursuant to Articles L 111-9 of the Code. The Vertically Integrated Company (VIE) to which GRTgaz belongs includes GDF Suez SA, as well as the companies controlled by GDF Suez SA (both solely controlled and jointly controlled) that carry on the activities of gas production and supply within the European Economic Area. Some legal acts are thus subject to a specific regime. Articles L111-17 and L111-18 of the Code in particular strictly set out the relations that must be maintained by GRTgaz and the other companies in the VIE. In this context, without the following being in any way exhaustive, it is specified that: 4.1 CONNECTION OBLIGATION Under Article L 111-97, the conditions for access to the network must be defined in an agreement. In accordance with Articles L.111-102 to L.111-108 of the Code, GRTgaz must ensure access without discrimination. Connection may be refused in the event of: a lack of capacity or technical reasons relating to the integrity or safety of the network; an order of priority for access to the network prescribed by the Minister of Energy in order to ensure that the public service obligations as mentioned in Article 16 are met; criteria set out by a temporary exemption previously granted by CRE. 4.2 CONFIDENTIALITY, TRANSPARENCY AND NON-DISCRIMINATION In accordance with Article L.111-77 of the Energy Code, GRTgaz must ensure the confidentiality of all information the disclosure of which might prejudice free, fair and non-discriminatory competition. 4.3 PUBLIC SERVICE OBLIGATION GRTgaz is subject to public service obligations under the provisions of Article L 121-32 and Decree no. 2004-251 of March 19, 2004. These obligations may affect the constraints applicable to GRTgaz as regards connection. As a complement, GRTgaz will ensure the odorisation of natural gas so that any leaks are recognisable. This odour must dissipate on the complete combustion of the natural gas. 4.4 OWNERSHIP, CONSTRUCTION AND OPERATING REGIME GOVERNING ASSETS For the purposes of connection, GRTgaz must be the owner of the assets required for carrying on its transmission activity (L 111-19) as well as of the rights and permits necessary for carrying on this activity (L111-48).
Page 10 of 10 It must observe the provisions as regards the design, construction, operation and temporary or permanent interruption of the network as contained in Book V, Part V, Chapter V ( Pipelines for the transmission of gas, hydrocarbons and chemical products ) of the Environmental Code and the Ministerial Order of August 4, 2006, as amended, introducing safety regulations applicable to pipelines for the transmission of combustible gases, liquid or liquefied hydrocarbons and chemical products. 4.5 METERING OF NATURAL GAS Article L.431-3 of the Energy Code specifies that GRTgaz must at all times ensure not only the safety and efficiency of the network, but also the balance of the natural gas flows by taking into account the relevant technical constraints. GRTgaz will carry out the necessary metering to fulfil this mission. The metering devices for taking off or delivering natural gas will thus be introduced and operated according to current standards and regulations. 4.6 AGREEMENTS NECESSARY FOR GRTGAZ TO CARRY OUT ITS MISSIONS In accordance with Article L 431-3, the transmission operator is free to negotiate agreements with the operators of LNG installations or natural gas storage facilities that are required for carrying out its missions through competitive, non-discriminatory and transparent procedures. 4.7 10-YEAR DEVELOPMENT PLAN GRTgaz must produce a 10-year development plan for its network based on existing supply and demand and on reasonable medium-term forecasts for the development of gas infrastructures, gas consumption and international exchanges. This plan must state clearly the assumptions and needs identified in the report regarding investment planning (L431-6). Your project may in this perspective have an impact on the above-mentioned plan: GRTgaz may wish to question you to fulfil the above obligation. 4.8 REGULATED ACTIVITY SUBJECT TO THE CONTROL OF CRE GRTgaz is subject to the control of CRE which includes in particular the monitoring of the proper operation of the gas market. It thus takes especial care that the access conditions to the transmission systems do not hinder the development of competition. It specifies the rules concerning the conditions of use governing the transmission systems, including the methodology for establishing the usage tariffs for such networks. Pursuant to Article L 453-6, CRE must approve the technical and commercial conditions for the connection of storage facilities or LNG infrastructure. The principles of financial participation required by the project, with regard to the expenses noted by CRE, are subject to prior approval by CRE.