1

Singapore Market Developments

APEx 2007

Presented by Dave Carlson

Chief Executive Officer

15 October 2007

2

Quick recap of NEMS

• NEMS commenced on 1 January 2003

• Mandatory “real-time” pool based model

• Thermal system (predominately gas & fuel oil)

• Small, compact, well-engineered system

• Offer only market (i.e. no demand side bidding)

• Simple ½ hour trading periods with 65 minute gate-

closure for energy, reserve and regulation

• Very sophisticated nodal price system which models

power flows, loses, constraints, co-optimising energy and

reserves

3

Quick recap of NEMS

• Market settled daily (20 days in arrears)

• Small and concentrated market with a high degree of

vertical integration

• Larger consumers can chose to purchase from a retailer

(five active retailers)

• Smaller consumers (e.g. households) have a regulated

tariff, supplied by Market Support Services Licencee, SP

Services

• No formal forward/financial derivative market

• Vesting contracts in place to mitigate market power

4

Location Map of NEMS Generators Electricity interconnectionwith Malaysia

Natural gas pipelinefrom Malaysia

Tuas Power

PowerSeraya

SembCorpRepresents incineration plants operatedby the National Environment Agency

Note: The Locations indicated on this map have been approximated and stylised. They do not accurately represent the actual physical location of individual facilitiesNatural gas pipeline from

West Natuna

Natural gas pipeline fromSumatra (Asamera)

Keppel Cogen

Senoko Power

5

Industry players

• Regulator: Energy Market Authority

• Market operator: EMC

• Power System Operator: PSO/EMA

• Reliable supply/secure operation

• Transmission licensee: SP PowerGrid (SP PowerAssets)

• Operates & maintains transmission system

• Active generation companies: 6

• Market support services licensee (MSSL): SP Services

• Meter reading & electricity supply to non-contestable consumers

• Active electricity retailers: 5

• Sell electricity directly to contestable consumers.

• Wholesale Market Traders: 2

• Providing interruptible load

6

Market governance

• The day-to-day functioning of the market is governed by

the market rules

• Rules Change Panel oversees development of the

market rules

• Market Surveillance and Compliance Panel monitors

rules compliance, market efficiency and fairness

• Disputes Resolution Counsellor facilitates the resolution

of disputes

• The Regulator (Energy Market Authority) licences all

market participants

7

Registered Capacity, Peak Demand and Reserve Margin 1997/2006

12,000

10,000

8,000

6,000

4,000

2,000

0

Registered Capacity Peak Demand Reserve Margin (%)

1997

1998

1999

2000

2001

2002

2003

2004

2006

MW

0

20

40

60

80

%

100

2005

• As of 2006, Singapore has a reserve margin of about 88%

8

Reliability of electricity supply

Transmission

• Transmission system consists of network of 400 kV,

230 kV and 66 kV substations interconnected by

approximately 5,000 km of underground cables

• Intertie connection with Malaysia assists to ensure stable

and reliable power system

• Load shedding plan in place to ensure that industrial/

critical needs are met first in contingency/emergency

situations

• Lowest System Average Interruption Duration Index with

0.5 mins outages/ per customer/ per year based on latest

KEMA study among 26 global market places

9

Registered Capacity 2006

3,500

3,000

2,500

2,000

1,500

1,000

500

0

CCGT ST GT

MW

Licensed Capacity

Senoko

Power

PowerSeraya Tuas

Power

SembCorp

Cogen

National Environment

Agency

Keppel Merlimau

Cogen

10

Market Share by Plant Type 2003/06

100

60

40

20

0

2003 2004 2005

%

CCGT ST ST Incineration

2006

80

11

Monthly Average Demand 2003/mid 2007

3500

3700

3900

4100

4300

4500

4700

4900

Jan-03

Mar-03

May-03

Jul-03

Sep-03

Nov-03

Jan-04

Mar-04

May-04

Jul-04

Sep-04

Nov-04

Jan-05

Mar-05

May-05

Jul-05

Sep-05

Nov-05

Jan-06

Mar-06

May-06

Jul-06

Sep-06

Nov-06

Jan-07

Mar-07

May-07

Jul-07

MW

12

USEP, System Demand and Offered Capacity 2006

100

60

Daily Average USEP Forecast Daily System Demand Offered Capacity

$/MWh

Jan

160

200

240

Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

1 2 3 4

1,000

0

2,000

3,000

4,000

5,000

6,000

7,000

MW

Note: Prices above $240/MWh are not displayed

80

140

180

220

120

13

USEP, System Demand and Offered Capacity for Jan-July 2007

60

80

100

120

140

160

180

200

220

240

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

$/MWh

0

1000

2000

3000

4000

5000

6000

7000

MWOffered Capacity Forecast Daily System Demand Daily Average USEP

14

Oil Prices and USEP 2006

20

WTIUSEP 180-CST HSFO

Oil Prices

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

25

30

40

50

55

60

65

70

75

80

US$/barrel

20

40

60

80

100

120

140

160

USEP

S$/MWh

35

45

180

15

Wholesale Electricity Price vs Oil Price 2003/06

WEP 180-CST HSFO

200

150

100

0

%

50

2003 is the reference year

2003 2004 2005 2006

Since 2003, the wholesale electricity price (WEP) has increased at only about half the rate of the fuel oil price. WEP is the net purchase price paid by retailers inclusive of all administrative costs incurred in the wholesale market.

16

Market performance

• Electricity prices respond to fundamentals of demand and

supply

• Competition has cushioned impact of oil prices on

electricity prices (2003 to 2006)

• Savings in reserve costs

• Structural shift from oil to gas-fired generation with over 2

million tons of CO2 emissions savings

• Evidence of retail competition e.g. active switching

17

Trends and Outlook

• Steady demand growth• New generation investment has entered the market e.g. Keppel and

further planned e.g. Island Power• New cogen and trigen facilities announced or under construction• Greater competition in the reserve market with demand side

participation (interruptible load)• Vesting contract quantity reducing• Pilot announced for household contestability• First MSCP Investigation into market power• Shift to gas as dominant fuel source• Concerns expressed over long term piped gas supply; ormulsion supply

disrupted• LNG terminal planned• ASEAN discussions recommenced over interconnected grid• Divestment of 3 government owned generators taking place