Introduction of Power Exchange Market in Bulgaria. Dry-run launch of the Power Exchange market for electricity

Introduction of Power Exchange Market in Bulgaria Dry-run launch of the Power Exchange market for electricity Panel I Panel II - Panel III - Trading principles, Power Exchange Rules and capabilities of the electronic exchange trading system. Demonstration dry-run auction session Dry-run results presentation and discussion Sofia 11.12.2015

Introduction of Power Exchange Market in Bulgaria Independent Bulgarian Energy Exchange EAD and the way to the start Establishing and licensing of the company A. The beginning 10.01.2014 B. Obtaining a license for Organizing a power exchange for electricity for a period of 10 years 31.03.2014 IBEX, NPS and preparation for the launch A. Concluding an agreement with NPS and start of preparation 21.04.2015 B. Changes in EMR and preparation of the Power Exchange Rules. IBEX Integration and membership in PCR A. Launching the process of accession to European Energy market structures 06.2015 B. Associated membership in PCR and MRC - 23.11.2015 Dry-run and launch of the market A. Registration process launch 23.11.2015 B. Dry-run launch with real market participants 11.12.2015 Sofia-11.12.2015

Dry-run of the power exchange market Panel I Trading principles, Power Exchange Rules and capabilities of the electronic exchange trading system. General features of the power exchange market for electricity; Power exchange trading rules; Functionalities of the electronic system for power exchange trading(da WEB)

Panel I. General features of the power exchange (1) The role of the power exchange operator The power exchange operator is a counterparty to all transactions concluded on the day ahead market(ccp) The power exchange operator organizes a market for electricity, on which a reference price is formed for each delivery hour The power exchange operator bears all the risk under financial relationships between TP The power exchange operator monitors the market and notifies in case of market abuse or acts of market power GENERATORS TRADERS CONSUMERS

Panel I. General features of the power exchange (2) The role of the power exchange market Setting a clearing price for the market area Conditions for a competitive and transparent market environment Minimal risk of acts of market power Power exchange market Organized electricity market on which trading is done day ahead (D-1) Encouraging entry of new market participants Conditions for a greater transparency of the market Options for optimization of the TP portfolio

Panel I. General features of the power exchange (3) Power exchange set-up Participation in auctions is done by submission of offers in the electronic trading system Every Monday the auctions for the following two weeks are opened in the trading system Auction sessions take place every day of the calendar year Auction sessions Deadlines for setting and announcing the results- in compliance with PCR coupling rules During the auction sessions transactions are concluded for each individual delivery period Auction sessions are conducted during the day prior to the delivery day

Panel I. General features of the power exchange (4) Products traded on the power exchange market Each participant registered on the power exchange for electricity submits an offer for purchase and/or sale; The Bulgarian power exchange market will start with hourly products. Hourly offers for purchase and/or sale of electricity are for each individual delivery period; Only the products listed in Rules for operation of an organized power exchange can be traded on the power exchange market. Hourly products Offers for purchase or sale are submitted for each individual delivery period Block products Offers are submitted for purchase or sale for a particular number of delivery periods Flexible products Offers are submitted which are active only upon conditions set by the participant

Panel I. General features of the power exchange (5) EUPHEMIA calculation of prices and quantities A B EUPHEMIA (Pan-European Hybrid Electricity Market Integration Algorithm) Hybrid algorithm EUPHEMIA is an algorithm whose input is the cross-border transmission capacity calculated through the flow-based method EUPHEMIA Компенсиране на изоставането C EUPHEMIA main purpose EUPHEMIA calculates, based on allocated daily transmission capacity, electricity prices for coupled European markets D Other EUPHEMIA purpose Maximizes general well-being and increases transparency when setting prices and flows E Unlimited capabilities The algorithm has no limit on the number of markets, offers or network limitations to be serviced

Panel I. Power exchange rules (1) Power exchange market rules

Panel I. Power exchange rules (2) How to participate in the power exchange market? Registration process 1. Submitting registration applications 2. Receiving an agreement 3. Training and certification 4. Agreement signing 5. Security and fee payment

Panel I. Power exchange rules(3) Why register on the power exchange market now? December 2015 Founding Member status! Lower barrier for market entry 20% discount on the participation fee Why now? 10% discount on the Training fee Participation in the Dry Run sessions. 15% discount on the annual fee for Tariff 1 Sofia 11.12.2015

Panel I. Power exchange rules (4) Main trading rules Trading days are every day of the calendar year; Trading is conducted as per Central European Time (CET) Trading is conducted through submission of offers during auction sessions in the electronic trading system (ETS); The initial period for submission of offers is two weeks before the trading day (D-1), and the deadline is 12:00 CET on the trading day (D-1); Each offer may contain up to 64 price-quantity pairs; Each price-quantity pair defines the maximum/minimum price at which the trading particiant would purchase/sell a particular elelctricity quantitiy; All transactions concluded on the power exchange market are a firm commitment for delivery or purchase of electricity; Offers submitted may contain at least two price-quantitiy pairs containing the minimum and maximum price set; All offers may be submitted, changed or cancelled before the deadline set for submission of offers 12:00 СЕТ.

Panel I. Power exchange rules (5) Main stages of trading CET trading Up to 2 weeks in advance Until 12:00 Until 12:42 Until 12:52 Until 12:55 Until 13:05 Until 14:30 Stages of trading 1. Initial period for submission of offers- up to two weeks before the deadline for submission of offers for the respective auction 2. Deadline for submission of offers- offers are submitted, changed or cancelled until the deadline set (GCT) 3. Initial results calculation and publishing 4. Publishing official results from the respective auction session on the Power Exchange operator web page 5. Sending reports to trading participants containing information on transactions concluded on their part 6. Sending nominations (notification schedules) to the Independent transmission operator (ESO) 7. Deadline for registration of internal nominations valid as of 08.12.2015.

Panel I. Power exchange rules (6) Settlement- collaterals Bank guarantee PX Operator accepts bank guarantees in BGN/EUR and IBEX publishes the text of its bank guarantee on its website Settlement rules Settlement rules- settle financial relationships arising from transactions concluded on the power exchange market Collateral calculation The amount of the security required by IBEX equals the value of net electricity quantities purchased from the power exchange market VAT incl. within the previous six days. For new TP For new trading participants IBEX sets the security amount based on the expected prospective net purchase. Security Obligations The power exchange operator performs the activities of setting the obligations arising as a result of power exchange trading. Settlement fee Settlement services performed by the Power Exchange operator are charged as per IBEX Tariff

Payments Invoicing Panel I. Power exchange rules (7) Settlement-payments and invoicing Payments Invoicing Payment on a daily basis Trading participants that have realized net purchase transfer the amount due, fees due included, by 10:30 CET (11:30 ЕЕТ) on the first financial day following B the trading day (D-1). Payment on a weekly basis For securing net purchase on a weekly basis the respective TP shall have to pay an amount which covers its net purchase for a period of seven days. A B & A С No net invoicing is admitted. Two separate invoices for purchase and sale are issued. B The power exchange operator issues invoices to TP every financial day Net sellers issue invoices to IBEX either daily or by the fifth day of the month for the previous month

Panel I. Power exchange rules (8) Settlement deadlines (banking days only) Bidding Market results Collateral call Collateral adjustment The ETS allows offering up to 2 weeks prior to D day Trading quantities and MCP information Deadline for report generation Collateral adjustment according to the collateral call D - 1 D D + 1 D-14 12:00 CET 12:55 CET 15:00 CET 16:00 CET 10:30 CET 10:30 CET 13:00 CET GCT Bidding process gate closure time and auctioning Invoicing Invoices issuing towards the net buyers Net buyers payment Deadline for payment for the net buyers Net seller obligation settlement Deadline for payments towards the net sellers.

Panel I. Power exchange trading rules (9) Market conduct Prohibition of trading with inside information Use of Inside information when acquiring or attempting to acquire a product to which this information relates is prohibited Disclosing Inside information to a third party is prohibited Prohibition of market manipulation Concluding a transaction, submitting an offer or undertaking any other action aimed at submitting false or misleading signals regarding demand, supply or price of products is prohibited Setting the price of one or more products at an artificial level is prohibited Distributing information with the intention to provide false or misleading signals is prohibited

Panel I. Power exchange trading rules(9) Market conduct Outage, limitation, expansion or dismantling of capacity of one unit of 50 MW min. capacity INFORMATION All the information is disclosed as soon as possible and not later than 60 minutes after the event occurs Information which is likely to significantly impact prices on the power exchange market if it is to become public Information: Affected single unit Moment of occurrence Installed capacity Available capacity on the market Cause of the event

Panel I. ETS Functionalities - DA WEB (1) Advantages DA WEB and system log-in Online-based application DAWeb Access security- DigiPass device URL: www.dayahead.preprod.ibex.bg Automatic monotony check Graphic representation of offers Market conduct filters Online help DIGIPASS Username Key (password) PERSONAL Username Password Sofia 11.12.2015

Panel I. ETS Functionalities - DA WEB (2) Main screen СЕТ System time Delivery day Registered participant Graphic representation of quantities offered

Panel I. ETS Functionalities - DA WEB (3) Bidding principles on the power exchange market Supply offer for certain hourly interval Demand offer for certain hourly interval Price -100 BGN 40 BGN 50 BGN 100 BGN 250 BGN Price -100 BGN 40 BGN 50 BGN 100 BGN 250 BGN Volume -00 MW -40 40 MW -80 MW -90 MW -250 MW Volume 130 MW 90 MW 80 MW 40 MW 0 MW 300 лв. 250 лв. 200 лв. 150 лв. 100 лв. 50 лв. -100 лв. Supply curve Стратегическо партньорство за БЕХ ЕАД 0 лв. 0 MW -50 лв. 20 MW 40 MW 60 MW 80 MW 100 MW 120 MW Demand curve 300 лв. 250 лв. 200 лв. 150 лв. 100 лв. 50 лв. 0 лв. 0 MW -50 лв. 20 MW 40 MW 60 MW 80 MW 100 MW 120 MW -100 лв.

Panel I. ETS Functionalities - DA WEB (4) Offers screen Minimum and maximum price for all market areas operated by PCR. Delivery hours for which the participant has to submit an offer.

Panel I. ETS Functionalities - DA WEB (5) Principles of setting market clearing price (MCP) and market clearing volume (MCV) Setting MCP and MCV Price in BGN -100 BGN 40 BGN 50 BGN 100 BGN 250 BGN Supply volume Demand volume -00 MW -40 MW -80 MW -90 90 MW -250 250 MW MW 130 MW 90 MW 80 MW 40 MW 0 MW 300 лв. 250 лв. 200 лв. 150 лв. 100 лв. MCP 50 лв. 0 лв. 0 MW 20 MW 40 MW 60 MW 80 MW 100 MW 120 MW -50 лв. -100 лв. MCV

Panel I. ETS Functionalities - DA WEB (4) Results screen MCP MCV

IBEX EAD www.ibex.bg E-mail: dam@ibex.bg