Development and Perspectives of Hydropower in Romania 2

Development and Perspectives of Hydropower in Romania 2 nd IAHR International Meeting of the Work. Group on Cavitation and Dynamic Problems in Hydraulic Machinery and Systems 1 Timisoara - October 24 -26, 2007

COMPANY STRENGTHS VIEWED AT THE LEVEL OF YEAR 2006 HIDROELECTRICA - Romania’s main power generator and supplier on the regulated market (about 34% out of the total system consumption) - the main ancillary system services supplier in Romania (about 88% out of the total services) - the main energy producer on the free market (the market opened 83%) Manages 304 hydropower plants, including 5 pumping stations. Total installed capacity 6325. 66 MW In 2006, the energy supplied in the National Power System (SEN) was 18, 235 GWh. 2

PRODUCERS OF ELECTRIC POWER IN ROMANIA (average) 3

HIDROELECTRICA SUBSIDIARIES Cluj Bistrita Hateg Sebes Curtea Sibiu de. Arges Tg. Jiu Caransebes Rm. Valcea Portile de. Fier Slatina Buzau Bucuresti From the administrative viewpoint the diversified fleet of hydropower plants strategically located throughout Romania is grouped in 12 secondary headquarters having a subsidiary - non legal person status. (Buzau, Bistrita, Curtea de Arges, Caransebes, Cluj, Hateg, Portile de Fier, Ramnicu Valcea, Sebes, Slatina, Sibiu, Tirgu Jiu). 4

HIDROSERV SUBSIDIARIES Cluj Bistrita Hateg Sebes Curtea Sibiu de. Arges Tg. Jiu Caransebes Rm. Valcea Portile de. Fier Slatina Buzau Bucuresti Starting year 2002 a number of 8 legal person type branches were created for repairs and maintenance scope, named HIDROSERV’s, where Hidroelectrica is 100% shareholder (Hidroserv Bistrita, Cluj, Curtea de Arges, Hateg, Portile de Fier, Ramnicu Valcea, Sebes, Slatina) 5

THE BALANCE OF THE SUBSIDIARIES IN THE COMPANY’S POWER GENERATION 6

EVOLUTION OF INSTALLED CAPACITY AND ANNUAL POWER OUTPUT BETWEEN 1989 -2007 Forecast 7

HIDROELECTRICA’S STRATEGY UNDER HYDROLOGIC SHORTAGE CIRCUMSTANCES Electricity generated in specific hydrology year 13218 GWh 16230 Gwh 21460 GWh 8

THE DEVELOPMENT OF HYDROPOWER POTENTIAL The strategy general objectives: q Increase of the country hydropower potential usage by building new production capacities, from about 48% in 2005 to about 62% at year 2025 level; q Bringing the operational production units in line with efficiency figures of the world, increased operation safety; q Private capital attraction into the development and refurbishment projects. 9

Hidroelectrica’s Development Strategy within 2005 -2025 is oriented towards two large schedules: I. Investment objectives started before 1989, scheduled for commissioning until 2011 and Refurbishment/Modernization works of hydropower plants in operation – own sources; II. Investment objectives to be finalized by attracting other financing sources. III. In the fourth trimester, the study regarding the privatization alternatives for the projects started before 1989 and selected foreign investors, will be completed. 10

Ia. Investment objectives started before 1989, scheduled for commissioning until 2011 The projects were structured in 2 sub-periods associated to the completion of some investment objectives under different execution stages, depending on the priorities set for the completion of such objectives, based on the economic efficiency of investment. 2006 -2008 period: to be completed 16 prioritary investment objectives § 2009 -2011 period: to be completed other 10 investment objectives § These 26 investment objectives amount to an installed capacity of 392 MW and will bring in SEN by the end of 2011 an energy contribution of 1400 GWh/year. A total investment of EUR 957 mln (EUR 267 mln, by 2008) is necessary for completing this objective. 11

Ib. Refurbishment/Modernization works of hydropower plants in operation A wide refurbishment program is ongoing, as for a sustainable development of the Romanian hydropower system the long run operation of the existent hydropower plants is a must. After evaluations, 3417 MW shall be refurbished by 2016, with an additional energy of 333 Gwh/year and expenditures in amount of about EUR 1000 mln (own sources and loans). The main refurbishment projects which have started or are the priorities: Iron Gates II HPP, 10 units of 27 MW (by power increase) – The Contract started in 2001(2 units have been refurbished another one is ongoing) p Olt Inferior HPP, 20 units of 13, 25 MW – the first 3 units are under refurbishment p Lotru HPP, 3 units of 175 MW – The Contract was started on January 15, 2007, and will be financed by IBRD Bank - the works are ongoing q Rehabilitation of the Romanian lock within the Iron Gates I – the works are ongoing p Stejaru-Bicaz HPP, 200 MW – The feasibility study is completed p Mariselu HPP, 3 units of 73, 5 MW p 12

II. Investment objectives to be finalized by attracting other financing sources This program comprises the following categories: q Investment objectives started before 1989 – a small number of projects for which the works were temporarily suspended, with an installed capacity of 184. 7 MW and an investment need of EUR 550 mln; q Investment objectives of national interest – include a series of projects for which temporarily the investment needs exceed the financing possibilities from own sources (Tarnita-Lapustesti hydropower pumping storage plant – 500 MW, Islaz HPP – 28. 8 MW, Tisa HPP – 30 MW). An investment of EUR 1082 mln is necessary for completing these important projects which would bring into SEN an energy contribution of 1407. 5 GWh/year and an increase in power of 1058. 8 MW. 13

IMPORTANT GREEN FIELD PROJECTS TARNITA-LAPUSTESTI hydropower pumping storage plant Location: Cluj County – Tarnita Accumulation area Project overview: Installed Capacity = 500 MW (2 x 250 MW) Elaborated studies for project support: Pre-feasibility study elaborated by SC ISCE SA in 2004; Feasibility study currently being prepared by the consortium of IPA, VERBUND and VERBUNDPLAN (PŐYRY ENERGY) Estimated duration for project implementation: 5 years Romanian participation: 10 % - own sources Foreign participation: 90 % - cash or credit Estimated project value: 474 mil. Euro Investment recovery: 12 -15 years 14

IMPORTANT GREEN FIELD PROJECTS ISLAZ HYDROPOWER PLANT Project overview: Installed Capacity= 28. 8 MW; Em = 100 GWh/year Green-field project – last reversible HPP on Olt cascade Elaborated studies for project support: Feasibility study, technical project and project files elaborated by ISPH (Institute of Hydroelectric Studies and Design) Estimated duration for project implementation: 7 years Romanian participation: 100 % - own sources Estimated project value (mil. Euro): 224 (without VAT) Credit return period: 7 years 15

IMPORTANT GREEN FIELD PROJECTS TISA HYDROPOWER PLANT Project overview: Installed Capacity= 30 MW; Em = 107. 5 GWh/year (Romanian side) Elaborated studies for project support: Feasibility study Estimated duration for project implementation: 4 years Estimated project value: 145 mil. Euro of which 75 mil. Euro - Romanian side Specific investment on installed k. W: 1070 Euro Specific investment on k. Wh/year: 0. 3 Euro Credit return period: 10 years 16

PRIVATIZATION Hidroelectrica’s strategy comprises the following programs: q Privatization of unfinished projects with/without operating plants, the partnership formula had in view consisting in the creation of a joint venture type structure – IPP (“Independent Power Producer”) - The selection of alternatives for hydropower development with potential involvement of private sector, study which will be completed by the selected consultant in 4 months. q Privatization of micro-hydropower plants, so that regional development is encouraged. 17

PRIVATIZATION OF MHPP (generation capacities in Micro-Hydropower Plants) The company privatization strategy has provided according to the governmental acts GD no. 635/2003, GD no. 881/2004 and chapter 14 - Energy, negotiations with EU – sale of 150 micro-hydro power plants until 2007, with the purpose of their rehabilitation and modernization. During year 2004, 145 MHPPs were evaluated in preparing the bidding sale framework. The privatization process of micro-hydropower plants is: sale by open bidding of the flow/cascade located plants. During 2004 -2006, 48 MHPPs were sold within four open tenders. 102 MHPPs will be sold in the next two years, of which 16 from Suceava, Dambovita, Alba and Mures counties in the first stage. 18

ALL HYDRO IS RENEWABLE If classic energy is an exhaustible resource => water, an unexhaustible resource and the cheapest fuel, must be exploited completely q q Romania’s commitment to the European Union is to reach the target of 33% consume of renewable energy by 2010 q Hidroelectrica is committed to increase the installed capacity by 6% until 2011, by commissioning 400 MW and additionally by rehabilitations and the transfer of some unfinished objectives to private property. 19

SMALL PROJECTS HIDROELECTRICA q intends to start the activity diversification through new renewable energy projects developments as wind power projects q focuses on small hydropower plants’ commissioning as the green certificate market is functional in Romania. 2006 was the second year of operation of the Romanian green certificates market. In 2006, out of the total guarantees of origin issued by ANRE, 85. 7% were for Hidroelectrica. For 2007, it is forecasted that out of the country’s entire renewable energy generation, 1% will be wind energy and 99% hydro energy. q concentrates on the rehabilitation and full automation of unsold microhydropower plants (currently there are still 102 MHPP to be sold). 20

S. C. HIDROELECTRICA S. A. 3, Constantin Nacu street, sector 2, BUCHAREST, ROMANIA, RO - 020995 Tel. : + 40 (0)21 30. 32. 578 Fax : + 40 (0)21 30. 32. 564 email: office@hidroelectrica. ro 21