4th Commercial Workshop 2018

San Donato Milanese, 26th July 2018

Agenda

1. Settlement

2. Storage Injection & Export Credit limit

3. Balancing update

4. Reverse flow

5. Ministerial Decree 18th May 2018

6. Entry Points Renominations with hourly detail

7. Storage booking capacity & Injection season

8. Regasification

Settlement

Agenda

1.

SettlementResolutions about Adjustment Sessions previous Years

4

• Consultationdocuments proposingnew calculationmethodologies for the adjustment session

DCO 570/2016/R/gas and

DCO 590/2017/R/gas

• Resolution defining the methodology to be applied for the adjustment sessions for years 2013-2017

670/2017/R/gas

• Resolution defining:

• 𝐴,𝑃𝑑𝑅,𝑟𝑖𝑐• 𝐶𝑅𝑉𝑆𝑇 starting from

July 2018

782/2017/R/gas

• Network Code approval

220/2018/R/gas

5

Dec 2017, 5th

Communication to DSOs and UdDabout the track

record to use for adjustment

sessions

Dec 2017, 31st

670/2017/R/gas 7.4

From Nov 2017, 27th, availability of

data already communicated by DSOs in previous

time windows

Feb 2018, 28th

670/2017/R/gas 4.2

Communication of data from

reference DSOs

Mar 2018, 20th

670/2017/R/gas 4.4

Correction and / or integration of

provided data

May 2018, 5th

Transmission of Summary

Document with reports available in Logistica Gas

to UdB

Jun 2018, 18th

670/2017/R/gas 7.2

Publication of results of the Adjustment

Session

SettlementMulti-annual adjustment session 2018 deadline (Years 2013-2016)

6

Requests Year2013

Requests Year2014

Requests Year2015

Requests Year2016

Requests Delta IO

386 293 612 617 3

Number of UdB that sent requestsof corrections: 22

Total amount of requests of corrections received: 1911

SettlementRecap of requests of corrections due to clear errors made by Snam

7

Jun 2018, 22nd

Extension of deadline for requests of

correction to July 2018, 2nd

Jul 2018, 6th

Extension of deadline for requests of

correction to July 2018, 24th

Jul 2018, 10th

Communication to DSOs about

the extension of deadline to

July 2018, 31st

Jul 2018, 24th

UdB deadline for requests of correction

Jul 2018, 31st

DSOs deadline for correction of

data

Jun 2018, 29th

Answer to requests received

within June 2018, 25th

Jul 2018, 10th

Availability of Citygate report

grouped for kind of data (G,M,Y)

Jul 2018, 31st

Snam deadline for answer to requests of correction

SettlementMulti-annual adjustment session 2018 (Years 2013-2016) - Chronicle

8

𝑫𝒔𝒌𝒂𝒈𝒈

𝜟𝒌𝑰𝑶

Determination of the physical daily items of adjustment withdrawn as per Attachment 9/C of the Network Code

𝛾𝐴,𝑃𝑑𝑅 =σ𝐺=1𝑛𝑎 𝐼𝑁𝐺−𝑄𝐺σ𝐺=1𝑛𝑎 𝑄𝐺

; ∀ PdR

∆𝑘,𝑃𝑑𝑅,𝐴𝐼𝑂 =

𝛾𝐴,𝑃𝑑𝑅,𝑟𝑖𝑐1 + 𝛾𝐴,𝑃𝑑𝑅

∙

𝐺=1

𝑛𝑎

𝑃𝑘,𝑃𝑑𝑅,𝐺𝐴

𝐴,𝑃𝑑𝑅,𝑟𝑖𝑐 = ൞

ҧ𝛾𝑃𝑑𝑅,𝑠 − 𝑚𝑎𝑥 ҧ𝛾𝑃𝑑𝑅,𝑠 > 𝑚𝑎𝑥

0 0 ≤ ҧ𝛾𝑃𝑑𝑅,𝑠 ≤ 𝑚𝑎𝑥

ҧ𝛾𝑃𝑑𝑅,𝑠 ҧ𝛾𝑃𝑑𝑅,𝑠 < 0

ҧ𝛾𝑃𝑑𝑅,𝑠 =σ𝐺=𝑡0,𝑠

𝑡𝑓𝐼𝑁𝐺−𝑄𝐺

σ𝐺=𝑡0,𝑠

𝑡𝑓𝑄𝐺

; ∀ PdR

𝑷𝑨

Imbalance of the k-th Shipper as a result of the AdjustmentSession

SettlementDetermination of physical terms related to the Adjustment Sessions

• 𝛾𝐴,𝑃𝑑𝑅 =100−80

80= 0,25

9

100

8020

• 𝐺𝑅 = 𝐺 ∗ 1 + 𝛾𝐴,𝑃𝑑𝑅 = 20 ∙ 1,25 = 25

G=20

IN

OUT

100P GR=25

SettlementExample of request #1 – Application of 𝛾𝐴,𝑃𝑑𝑅 to G data

10

DEF results ID Time windows Adjustment Session Year 2013

Client Profile #1 #3 #5 #7

UdD_1 C2X1 100 170 200 1120

C3D1 100 361 2659

UdD_2 C2X1 100 147 1253

T2D3 100 1051

UdD_3 C2X1 100 1452

C3D1 1582 1970

NPA 100

UdD_4 C3D1 100 2663

T2D3 100 106 405

Best Data

1120

2659

1253

1452

1970

405

SettlementExample of request #2 – Determination of Best Adjustment Data

11

Y1=50IN

OUT

Y2=70 Y3=60 Y4=100

Y2=30 Y3=58 Y4=8048

ҧ𝛾𝑃𝑑𝑅,𝑠 =σ𝐺=𝑡0,𝑠

𝑡𝑓 𝐼𝑁𝐺 − 𝑄𝐺

σ𝐺=𝑡0,𝑠

𝑡𝑓 𝑄𝐺=(280 − 233)

233= 0,20172

∆𝑘,𝑃𝑑𝑅,𝑌1𝐼𝑂 =

0,19772

1 + (−0,23077)∙ 50 = 12,85181

𝐴,𝑃𝑑𝑅,𝑟𝑖𝑐 = ҧ𝛾𝑃𝑑𝑅,𝑠 − 𝑚𝑎𝑥 = 0,19772ҧ𝛾𝑃𝑑𝑅,𝑠 > 𝑚𝑎𝑥

SettlementExample of request #3 – Calculation of Delta IO

Y1=65

12

100

100

INyear

OUTyear

50

60

INmonth

OUTmonth

50

40

50Pmonth 50

Even if 𝛾𝐴,𝑃𝑑𝑅 = 0 , monthly reconciliation is applied

SettlementExample of request #4 – Monthly allocation in case of 𝛾𝐴,𝑃𝑑𝑅 = 0

13

Lo

gis

tica

Ga

s • Allocations detailed per UdB, PdR, UdD

• Report Scada

• Entry/Exit Commercial and Custom Allocations

• LNG and Storage allocationreport

• 𝐷𝑆𝑘 Report

• Δ𝐼𝑂 Report detailed per UdD

M-G

as • “Best" adjustment measures

report (for AD and UdDusers)

• Allocation report with daily details (for UdD users)

SR

G W

eb

Sit

e • 𝐼𝑁𝑘 index

• 𝛾𝐴,𝑃𝑑𝑅 parameter

• 𝛾𝐴,𝑃𝑑𝑅,𝑟𝑖𝑐 parameter

• Citygate report grouped for kind of data (G,M,Y)

SettlementInformation set available to users

14

July 2018, 15th

670/2017/R/gas 4.1

Communication of data from underlying DSOs to

reference DSOs

July 2018, 31st

670/2017/R/gas 4.2

Communication of data from reference DSOs

August 2018, 20th

670/2017/R/gas 4.4

Correction and / or integration of provided

data

October 2018, 31st

670/2017/R/gas 3.1

Publication of results of the Adjustment Session

SettlementAnnual adjustment session 2018 deadline (Year 2017)

15

2013 2014 2015 2016

SettlementDistribution of 𝛾𝐴,𝑃𝑑𝑅

16

∆Dsk and ∆IO economic values

publication on PORTALE CAPACITA’

EPSuk/MEPSuk *

Update

SRG issue the invoices and give

Shippers the information (via

excel files) needed to issue their invoices

* Not less than 10 working days after the economic values publication

31st August

(provisional)

14th September

(provisional)21st September

(provisional)

PDet will be increased by the total net amount of the ∆Dsk and ∆IO if at credit for SRG

PDet will be decreased by a quota of the total net amount of the ∆Dsk and ∆IO if at debit for SRG

The above quota is determined from time to time according to the SRG coverage (ARERA-CSEA)

SettlementInvoicing timeline

17

SettlementInvoicing process

The 2013-2016 settlement is similar to the balancing regime.

• «Reverse Charge» regime for passive subjects resellers

• 10% ordinary VAT for all other subjects that do not fall under the previous point

• Invoice payment within 15 days

• «Reverse Charge» regime

• Invoice payment within 30 days (subject to SRG availability ARERA-CSEA)

Invoices issued by SRG

Invoices issued by the Shippers

Agenda

Storage Injection & Export Credit limit

2.

Storage Injection & Export Credit limit checkOverview

19

The Network Code Update proposal n° 52 foresees the introduction of a credit limit check on

the Shippers’ nominations as follows:

• Injection into the Storage;

• Export vs foreign interconnected systems (Austria, Switzerland, Slovenia).

Storage Injection & Export Credit limit checkEpsuk - Mepsuk report – A numerical example

20

D

D+1

D+2

• Storage Injection nomination = 60

• Export nomination = 40

• Epsuk (Patt) = 0

• Daily Credit Limit = -100 (Storage Injection & Export nominations of Gas Day D)

• Storage Injection nomination = 0

• Export nomination = 0

• Epsuk (Patt) = -100 (Storage Injection & Export nominations of Gas Day D)

• Daily Credit Limit = +100 (Restoration of Storage Injection & Export nominations of Gas Day Daccounted to PAtt)

• Storage Injection nomination = 0

• Export nomination = 0

• Epsuk (Patt) = +100 (Restoration of Storage Injection & Export nominations of Gas Day D)

• Daily Credit Limit = 0

Agenda

Balancing update3.

Agenda

Reverse flow4.

Implementation of bidirectional flows with other European countries(historically directed from North to South) in accordance with theEuropean Commission's objective of creating an integrated gas market

Development opportunities for the Italian market thanks to theconnection with other more liquid and mature markets such as Germanyand the Netherlands

New important flexibility source for balancing actions during excess gasevents in the system

Increase of flows in transit for the benefit of: Italy Strategic role Market liquidity Security of Supply Spread reduction

Reverse FlowOverview

Reverse FlowAs is

518*

4,4

Data in MSm3/g

* Interruptible capacity subject to a forward physical flow or a null physical flow at the entry point of Passo Gries

Actually the reverse flow capacity is equal to:

• 5 MSm3/g towards Switzerland

• 18 MSm3/g towards Austria

• 4,4 MSm3/g towards Slovenia

Source: Transparency Platform ENTSOG

≈9≈2

Reverse FlowTo be

40*18*

4,4

* Includes the 18 MSm3/g of competing capacity

Starting from next Thermal Year (2018/2019)the reverse flow capacity will be equal to:

• 40 MSm3/g towards Switzerland (thanks tothe entry into service of the newcompression stations of Sergnano andMinerbio)

• 18 MSm3/g towards Austria

• 4,4 MSm3/g towards Slovenia

Source: Transparency Platform ENTSOG

Data in MSm3/g

≈9≈18

* In March 2018, interruptible capacity was booked

Reverse FlowAnalisi sulle capacità

8

18

28

38

48

58

68

0

1

2

3

4

5

6

€/M

Wh

MSm

c/g

Passo Gries Export - AT 1718

Volume Tecnhical PSV DA TTF DA SAP

Source: ICIS-Heren

Agenda

Ministerial Decree 18th May 20185.

Ministerial Decree 18th May 2018Physical Chemical Characteristics

28

Parameters Acceptable valueMinisterial Decree

Acceptable valueNetwork Code

Measurementunit

Carbon dioxide ≤ 2,5 ≤ 3 % mol

Hydrogen sulphide ≤ 5 ≤ 6,6 mg/Sm3

Sulphur from mercaptan

≤ 6 ≤ 15,5 mg/Sm3

Total sulphur ≤ 20 ≤ 150 mg/Sm3

Relative density 0,555 ÷ 0,7 0,5548 ÷ 0,8 mg/Sm3

The Ministerial Decree has defined new parameters related to the monitoring of gas quality.

The parameters shown below replace those defined in Chapter 11, Attachment 11/A.

Ministerial Decree 18th May 2018Odorisation and safe use of natural gas

29

Field of application: customers directly connected to the transport network.

Mandatory obligations for the end customer:

• within 60 days from the date of publication of the Decree in the Gazzetta Ufficiale (7th August2018), a declaration regarding the use’s category of the delivered gas;

• within 6 months from the same date of publication (7th December 2018), in case of declaration ofdomestic or similar use - also combined with technological uses - a certificate that such use is safehaving adopted the technical solutions foreseen by the Decree.

Forms necessary to fulfill the obligations are available on Snam website, in a dedicated area ofTransportation/ On-line Services section, available at the following link.

In case the end customer do not send to the TSO the declarations within the aforementioneddeadlines, the TSO will cut-off the redelivery point.

30

Ministerial Decree 18th May 2018Odorisation and safe use of natural gas

N. of PDR to be recorded:

3.135

N. of declarationsreceived:

1.415

N. of declarationsto be received:

1.720

N. of compliantdeclarations:

1.230

N. of incompletedeclarations:

185

Use categorydeclared T1:

729

Use categorydeclared ≠ T1:

501

Situation updated to July 24, 2018

Agenda

Entry Points Renominations with

hourly detail

6.

6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 0 1 2 3 4 5

Gas Day D-1 Gas Day D

6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 0 1 2 3 4 5

Gas Day D-1 Gas Day D

Entry Points Renominations with hourly detailNomination cycle to be

32

e.g. Input of a new renomination at 8 AM

Starting from 9 PM

Entry Points Renominations with hourly detailNomination cycle to be

33

Flexibility and renomination constraints in accordance with BAL NC

Opportunity to send Entry Points’ Renomination with an hourly detail on a trial basis.

Balancing on daily basis

Compliance with booked capacities

In order to accept it, User’s transportation programme it’s verified considering

• the amounts already flown (confirmed hours cannot be changed)

• the transportation capacity booked on Prisma

Entry Points Renominations with hourly detailLogistica Gas to be – Functionalities involved

34

NOMINATION RECEIPT

MATCHINGCAPACITY CHECK

NOMINATION UPLOAD

Update GUI Nomination: • Opportunity of inputs with hourly details

• Change of logics for day-aheadand withinday cycles

Update of section Upload Nomination:

New algorithm thatcompares nomination with capacity:

• New matching algorithm (change of comparison logics)

In case of matching of hourly nom:

• New functionality of Upload Data from interconnected TSOs

• New template with hourly details

• Change of logics for day-aheadand withinday cycles

• after User’s input• After the end of each cycle

Entry Points Renominations with hourly detailEdig@s at present and to be

35

Entry Points Renominations with hourly detailNomination upload at present and to be

36

Agenda

Storage booking capacity &

Injection season

7.

April2018

May2018

June2018

July2018

August2018

AVAILABLE CAPACITY 12.350 12.350 12.350 12.350 12.350

BOOKED CAPACITY

Hydrocarbon Storage 0 0 0 0 0

Shipper Balancing Service 221 221 221 221 221

Peak Modulation 5.825 5.870 6.760 6.760 6.760

Flat Multi-Annual 1.324 1.324 1.324 1.324 1.324

Flat Modulation 2.608 2.776 3.016 3.325 3.603

Fast Cycle 300 300 300 300 300

TOTAL BOOKED CAPACITY 10.278 10.491 11.621 11.930 12.208 99%

UNASSIGNED CAPACITY 2.072 1.859 729 420 142 1%

Storage booking capacity & Injection seasonLong Term Auctions

38

Thermal Year 2018/2019

Mln of Scm Pcs 39,3

Storage booking capacity & Injection seasonStorage System Filling 2015-2018

39

0

1

2

3

4

5

6

7

8

9

10

11

12

13

14

apr mag giu lug ago set ott

(BCM at 10,57275 kWh/Sm3)

2015 2016 2017 2018

Stock updated to July 24, 2018

9,455 BCM

Storage booking capacity & Injection seasonSTOGIT Injection season

40

0

200

400

600

800

1.000

1.200daily flow

Daily flow

Pre Auction

Pre Auction + TSO

Post Auction

Mwh

0

20.000

40.000

60.000

80.000

100.000

120.000

140.000stock trend

Offered

Booked

Stock - Actual

Stock - Forecast

July*12.947

April17.542

May26.202

June21.691

Mwh

(*) updated to July 24, 2018

Storage booking capacity & Injection seasonTax Bills & Digital Signature

41

Agenda

Regasification8.

RegasificationPricing

43

• Increase of East Asia price index during the summer;

• Iberian price index premium to the Mediterranean price index;

• Increasing of prices compared to the last Thermal Year

2

4

6

8

10

12

[$/M

Mb

tu]

LNG Front Month

Henry Hub Mediterranean East Asia Iberian NW Europe

RegasificationCargo received by LNG terminal

44

0

2

4

6

8

10

Number of cargo received by GNL Italia

0

2

4

6

8

10

Number of cargo received by Adriatic LNG

0

2

4

6

8

10

Number of cargo received by OLT

7

217

Spot Integrated Service Long term

1

96

Spot Long term

1

8

2

Peak shaving Integrated Service Spot

RegasificationLNG avarage day volume injected into the network

45

Adriatic LNG: 65.216.015 MWh

OLT: 9.437.910 MWh

GNL Italia: 3.554.107 MWh

Adriatic LNG: 67.682.239 MWh

OLT: 4.029.618 MWh

GNL Italia: 8.140.173 MWh

0

50.000

100.000

150.000

200.000

250.000

300.000

350.000

MW

h/d

Adriatic LNG OLT GNL Italia

0

50.000

100.000

150.000

200.000

250.000

300.000

350.000

MW

h/d

Adriatic LNG OLT GNL Italia

-5 WD(before auction)

Regasification

Contract

Presentation

Mo

nth

M+

1

Subject of the booking: Binding slots for M+1+2+3; not binding slots for M+4 M12

Booking Tipology: During the Thermal Year Assignment algorithm: Pay as bid – maximization of the #slots (PAR)

Bank Guarantee

Presentation

(by 14:00)

-2 WD(before auction)

Auction by PAR (*)

-10 WDM (M+4 M12)

Prog_Proposal

M+1+2+3

(by 13:00)

Program

schedulation

M +1 +2 +3

-7 WDM

-6 WDM

De

liv

ery

Da

te

(*) The auctions of the months M + 1, M + 2, M + 3, M+4M12 are carried out in 4 separate days, the opening of each single auction isnormally posted at 09:00 on the day of assignment. At the of M+4M12 auction the Shipper have to allocate slots booked to calendar

dates

-12 WDM (M+2)

-13 WDM (M+1)

-11 WDM (M+3)

(Month M)

RegasificationDuring the Thermal Year

50

THANK YOU

48

48

SettlementPayment in installments

In order to require the payment in installments the following requirements must be met:

• Invoice amount bigger then 100.000 €

• Invoice amount bigger than 20% of the highest monthly amount of the fees invoiced forthe transportation and balancing services towards the same shipper during the previous12 months before the multiannual settlement invoicing issuing date

The Shipper can required the payment in installments within the 12th working day after the Dskand ∆IO economic values publication date.

The payment in installments are allowed up to a maximum of 12 months but no further then thepenultimate month before the guarantees expiration date.

RegasificationFocus on GNL ITALIA new Regasification Code

With Resolution 376/2018/ R/gas of 05.07.2018, ARERA approved the proposal to update theRegasification Code of GNL Italia:

New market mechanisms based on auction procedures for regasification capacity booking Flexibility services

Snam publishes on its own web site the main information useful to participate to the auctions

Contracts/Bank guarantee forms Brief explanations of the different products offered (Yearly, Monthly, Spots) Calendar of the auctions Key points for the calculation of the starting price

For the auction Snam will use the PAR Web Platform (Piattaforma di Assegnazione dellacapacità di Rigassificazione), managed by Gestore Mercati Energetici (GME)

------------------------------------------------------------------For more info please click on http://www.snam.it/it/rigassificazione/Processi_Online/Capacita/procedure-moduli/conferimento-transazioni-capacita/index.html

48

-2 WD(before auction)

-5 WD(before auction)

Slots allocationto calendardates (**)

Bank Guarantee

Presentation(by 14:00)

Regasification

ContractPresentation

26.07.2018

AuctionsPAR (*)

Prog_ProposalM+1+2+3(by 13:00)

-7 WD -6 WD

Program approval

M +1 +2 +3

July 2018

Mo

nth

M+

1

Subject of the booking: Not Binding slots Booking Tipology: Start of the Thermal Year Assignment algorithm: Ascending Clock

De

liv

ery

Da

te

September 2018(Month M)

(*) The opening of the auction to allow Shippers to enter bids is placed on 23.07.2018(**) During the month of September, in accordance with the provisions of the GME

RegasificationStart of the Thermal Year

49