CBI Conference 22 nd October 2009 Long term supply contracts – Exeltium (France) Simon Cotterell UK, Ireland and South Africa Purchasing Director

Saint-Gobain, one of the world’s hundred leading industrial corporations Began operating in 1665 Now has operations in 59 countries worldwide 200,000+ employees 2008 Sales €43.8bn Supplies glass to over 50% of European cars Provided glass for the pyramid at the Louvre Insulates a 5 th of all homes in the US Manufactures crystals used in airport security detectors and for medical diagnosis Has supplied more than 1000 major cities with water supply pipes

Began operating in 1665

Now has operations in 59 countries worldwide

200,000+ employees

2008 Sales €43.8bn

Supplies glass to over 50% of European cars

Provided glass for the pyramid at the Louvre

Insulates a 5 th of all homes in the US

Manufactures crystals used in airport security detectors and for medical diagnosis

Has supplied more than 1000 major cities with water supply pipes

Example of Saint-Gobain Companies in the UK

What is Exeltium? Exeltium was founded in may 2006 by seven « electro-intensive » companies: Arkema, Air Liquide, Alcan, Arcelor, Rhodia, Solvay et UPM Kymmene. Initially, the foundation of Exeltium is related to specific measures taken by the French government for the electro intensive industry: a law defines which energy-intensive users are entitled to participate Close to 60 companies were eligible In the end, Exeltium will count between 30 and 40 industrial customers, representing more than 100 electro-intensive sites. Through its status, Exeltium negotiates and manages long term electricity contracts for its clients Membership requires purchasing shares of Exeltium

Exeltium was founded in may 2006 by seven « electro-intensive » companies: Arkema, Air Liquide, Alcan, Arcelor, Rhodia, Solvay et UPM Kymmene.

Initially, the foundation of Exeltium is related to specific measures taken by the French government for the electro intensive industry: a law defines which energy-intensive users are entitled to participate

Close to 60 companies were eligible

In the end, Exeltium will count between 30 and 40 industrial customers, representing more than 100 electro-intensive sites.

Through its status, Exeltium negotiates and manages long term electricity contracts for its clients

Membership requires purchasing shares of Exeltium

Who qualifies for Exeltium inclusion? Where a significant impact of a high electricity price effects the competitiveness of electro-intensive companies: By the law, to be customer of Exeltium, a company must have a ratio between its electricity consumption and its added value over 2.5. In practice, the average customer of Exeltium has a ratio of 13 kWh per € of added value. This means that, with an average electricity price of 50 €/MWh (which was the market price when the law was voted), the cost of electricity stands for close to 65% of the added value of the average customer of Exeltium Exeltium customers have a very stable consumption profile: Off peak consumption over 55% of the total consumption Consumption during at least 8000 hours per year (criteria mentioned in the law)

Where a significant impact of a high electricity price effects the competitiveness of electro-intensive companies:

By the law, to be customer of Exeltium, a company must have a ratio between its electricity consumption and its added value over 2.5. In practice, the average customer of Exeltium has a ratio of 13 kWh per € of added value.

This means that, with an average electricity price of 50 €/MWh (which was the market price when the law was voted), the cost of electricity stands for close to 65% of the added value of the average customer of Exeltium

Exeltium customers have a very stable consumption profile:

Off peak consumption over 55% of the total consumption

Consumption during at least 8000 hours per year (criteria mentioned in the law)

EXELTIUM: how it works? long-term partnerships with energy producers, and a call for tender was launched for the acquisition of drawing rights on electricity blocks for minimum 15 years General characteristics asked: A fixed portion, paid at the start of the contract to the producer, representing the investment cost of an electricity production plant A variable portion, paid over time in step with electricity deliveries, representing the operating costs (including fuel) of the same electricity plant. Objectives : Minimisation of financing costs as the fixed portion is mostly financed by debt Ensuring long term visibility on a significant part of the price, which is related to the fixed portion paid at the start of the contract Foreseeing and understanding the evolution of operating costs, with a lower volatility than on the market

long-term partnerships with energy producers, and a call for tender was launched for the acquisition of drawing rights on electricity blocks for minimum 15 years

General characteristics asked:

A fixed portion, paid at the start of the contract to the producer, representing the investment cost of an electricity production plant

A variable portion, paid over time in step with electricity deliveries, representing the operating costs (including fuel) of the same electricity plant.

Objectives :

Minimisation of financing costs as the fixed portion is mostly financed by debt

Ensuring long term visibility on a significant part of the price, which is related to the fixed portion paid at the start of the contract

Foreseeing and understanding the evolution of operating costs, with a lower volatility than on the market

Energy Partner for Exeltium The industrial partnership contract signed between Exeltium and EDF is related to the development of nuclear power production in France and particularly the EPR project of Flamanville: Costs are based on the foreseen costs of an EPR series : A fixed part, paid at the start of the contract, representing the investment cost of an EPR production plant. A variable part, in line with the operating costs of EPR plant (including fuel costs) and indexed on uranium price, taxes on nuclear production, workforce costs etc… Industrial risks sharing : Exeltium and EDF share industrial risks related to EDF nuclear power plants (present and future) Investment from Exeltium is around €4bn

The industrial partnership contract signed between Exeltium and EDF is related to the development of nuclear power production in France and particularly the EPR project of Flamanville:

Costs are based on the foreseen costs of an EPR series :

A fixed part, paid at the start of the contract, representing the investment cost of an EPR production plant.

A variable part, in line with the operating costs of EPR plant (including fuel costs) and indexed on uranium price, taxes on nuclear production, workforce costs etc…

Industrial risks sharing : Exeltium and EDF share industrial risks related to EDF nuclear power plants (present and future)

Investment from Exeltium is around €4bn

Principle of EXELTIUM Variable price Electricity delivery Resale price Banks Shareholders Clients Continuous financial flows Electricity flows Producer Reimbursement of the debt + interest Exeltium Capital investment Initial financial flows Electricity delivery Upfront payment Loans

Chronology of the project 2005 : « table ronde » of electro-intensive companies August 2005 : Seven companies create a specific working group December 2005 : Law n°1720-2005, article 43 allows the creation of Exeltium May 2006 : Tenders to European producers for electricity blocks based on the needs of 58 potential clients July 2006 : Reception and analysis of offers from producers July 2006 – April 2007 : Negotiations of both upstream and downstream contracts April 5 th 2007: Signature of an industrial partnership contract with EDF June 2007 : First position of the DG Comp regarding the upstream contract July 2007 – July 2008 : Modifications of both upstream and downstream contracts to fulfil DG Comp’s requests July 2008 : Official press release of the DG Comp giving its approval to Exeltium contracts August 2008 – negotiation of the financing conditions & final version of upstream & downstream contracts Early 2010 : First deliveries of electricity

2005 : « table ronde » of electro-intensive companies

August 2005 : Seven companies create a specific working group

December 2005 : Law n°1720-2005, article 43 allows the creation of Exeltium

May 2006 : Tenders to European producers for electricity blocks based on the needs of 58 potential clients

July 2006 : Reception and analysis of offers from producers

July 2006 – April 2007 : Negotiations of both upstream and downstream contracts

April 5 th 2007: Signature of an industrial partnership contract with EDF

June 2007 : First position of the DG Comp regarding the upstream contract

July 2007 – July 2008 : Modifications of both upstream and downstream contracts to fulfil DG Comp’s requests

July 2008 : Official press release of the DG Comp giving its approval to Exeltium contracts

August 2008 – negotiation of the financing conditions & final version of upstream & downstream contracts

Early 2010 : First deliveries of electricity

General characteristics of the contract between Exeltium and its customers Each initial client is a shareholder of Exeltium and must be electro-intensive as defined by the criteria of the law of December 2005. Each customer signs with Exeltium a « take-or-pay » block contract for a minimum duration of 15 years. The billed Downstream price to the Clients breaks down as follows : A proportional price indexed with the same indexation as the proportional price of the industrial partnership contract and including the same price add-ons relating to the risk sharing with EDF A fixed price, pre-established and not indexed, allowing Exeltium to cover its costs, primarily those linked to the financing The delivered electricity must be consumed on the clients’ eligible sites. If not, should a client have surpluses, this electricity must be given back to Exeltium, whose job it will be to sell it on the market. Yet, all of potential profits resulting from the resale of his electricity volumes are given back to the Client. A unilateral exit option allows each Client to exit from its contract without compensating Exeltium, for a period of five years starting in 2019 and on every five year anniversary thereafter .

Each initial client is a shareholder of Exeltium and must be electro-intensive as defined by the criteria of the law of December 2005.

Each customer signs with Exeltium a « take-or-pay » block contract for a minimum duration of 15 years.

The billed Downstream price to the Clients breaks down as follows :

A proportional price indexed with the same indexation as the proportional price of the industrial partnership contract and including the same price add-ons relating to the risk sharing with EDF

A fixed price, pre-established and not indexed, allowing Exeltium to cover its costs, primarily those linked to the financing

The delivered electricity must be consumed on the clients’ eligible sites. If not, should a client have surpluses, this electricity must be given back to Exeltium, whose job it will be to sell it on the market. Yet, all of potential profits resulting from the resale of his electricity volumes are given back to the Client.

A unilateral exit option allows each Client to exit from its contract without compensating Exeltium, for a period of five years starting in 2019 and on every five year anniversary thereafter .

Saint-Gobain & latest position Two sites In France qualified initially within the set out criteria Participation is likely to continue (subject to the terms of Electricity consumption compared to added value) Lower electricity prices, EU investigation and the global financial position have all impacted on the progress of Exeltium Exeltium will go ahead with first supplies under the agreement taking place in early 2010 EDF Flamanville Nuclear plant (Exeltium investment plant) – due for start of production in 2012 Price likely to be around €48 / MWh Subject to EC approval and financial stabilisation Saint-Gobain see no reason why the principal cannot be extended further within the EU

Two sites In France qualified initially within the set out criteria

Participation is likely to continue (subject to the terms of Electricity consumption compared to added value)

Lower electricity prices, EU investigation and the global financial position have all impacted on the progress of Exeltium

Exeltium will go ahead with first supplies under the agreement taking place in early 2010

EDF Flamanville Nuclear plant (Exeltium investment plant) – due for start of production in 2012

Price likely to be around €48 / MWh

Subject to EC approval and financial stabilisation Saint-Gobain see no reason why the principal cannot be extended further within the EU

end

Official position of the DG COMP