Meeting Minutes Industrial Wood Pellet Buyers Meeting

1. Meeting Details

Meeting date, time and venue, September 23 2010, 09H30, DONG Energy, Copenhagen.

2. List of attendees:

Partcipant Company Brodie Govan Argus Media Niels Bojer Jørgensen DONG Caroline Guldmann DONG Tonny Sørensen DONG Manuel Araujo DONG Jeppe Bjerg DONG Matthew Girffin Drax Power Graham Backhouse Drax Power Rudy Bruninx Electrabel Johan Mertens Electrabel Alf Van Weereld EON Dirk Klingen EON Yves Ryckmans Laborelec Evert-Jan Tiktak Peterson Control Union Ger Ostermeijer Peterson Control Union Koen Jongste Peterson Control Union Irina Howes RWE Remco Frenken RWE Johan Lous Vattenfall Rob Marcus Vattenfall Tore Karlsson Vattenfall

3. Distribution List: All attendees per section 2 above and to include:

Partcipant Company Ton Jacobs Delta Nicholas Tsirigotis EDF Dean Scanlan EDF Rudy Willemse Electrabel Sam Cross Eurelectric Kjell Nilsson Fortum Roger Mertens Inspectorate Phill Jones Scottish & Southern Energy Helle Herk Nielsen Vattenfall

4. Documentation

All presentations and minutes are publicly accessible via the following web link: http://www.laborelec.com/content/EN/Renewables-and-biomass_p83

5. Minutes

Please note the minutes of this meeting should be read in conjunction with the presentation material and the minutes of the previous biomass buyers meeting hosted by Electrabel.

All relevant documentation is available on the above web link.

5.1 Legal Guidelines and Argus Clarification

Manuel Araujo (DONG Energy) reiterated the framework of legal guidelines within which information exchange during - and after - the meeting should be kept to comply at all times with applicable competition law. For further information please review the previous minutes and Julien Raymakers’s presentation.

In addition, Manuel advised the group that in the Argus media article reporting on the previous buyers meeting, published in Argus Biomass Markets, Issue 10-25 Wednesday 23 June 2010, Argus reported that EUBIONET was working in conjunction with the European Committee for standardization on three domestic pellet standard specifications. It was brought to our attention that in fact, EUBIONETT is not working on the specification but is the medium that disseminates the standard once they have been finalized by the official CEN Workgroup.

This clarification was provided by Mrs. Eija Alankangas – Convenor of WG2 of CEN/TC 335 – Solid biofuels Senior research scientist.

5.2 Standard Product Specification Update Yves Ryckmans (Laborelec) provided an overview of the key analysis parameters based on the standard specifications from Vattenfall, Electrabel, RWE and Drax. These were then compared to each other, the retail grade wood pellet specifications in accordance with EN14961 and DINplus. This comparison provided the base for two proposed standard wood pellet specifications (C1 & C2 Industrial) put forward to the group for consideration.

Yves then proceeded to run through each parameter and discuss whether it should be included in the standard specifications and if so, what a reasonable limit for each variable should be. Particular attention was given to the following parameters:

Variable Comment

Additives To be declared by seller. Tracing of additives is difficult and may affect subsidies (country specific).

Water Content Concerns were raised regarding shipping in relation to combustion, limits set by Inco Terms and potential Insurance restrictions.

Bulk Temperature Concerns were raised regarding measurement method. Acceptable maximum level to be used in contract was suggested at 55°C.

Calorific Value Suggested measured method was constant pressure.

Elementary Composition Limits for N and S were heavily discussed due to plant specific technology. Consensus was reached and the proposed limits updated in the latest spreadsheet.

Trace Elements As, Cd and Cr proposed to be included as these elements are lead indicators of potential wood contamination.

Fines Limits were heavily discussed as these present combustions concerns during transport and discharge.

Particle Size Issues surrounding combustion and dust problems at discharge.

Please note the spreadsheet has been distributed along with minutes of the meeting.

Yves has made preliminary adjustments to the initial spreadsheet as agreed by the group. In addition, he has include DONG Energy's specifications and a third Category of wood pellets primarily for 100% Bio-CHP plants without flue gas treatment. This is in order to broaden the scope of specifications, which are later to be adopted within the broader biomass trading agreement.

Actions:

 Utilities are all requested to review the proposed standard specifications and raise areas of concern directly to Yves Ryckmans ([email protected]) by October 22nd 2010. Yves will then document the information collected and propose updated standard specifications at the next meeting.

5.3 Standard Contract

Remco Frenken (RWE) provided an update from the initial Legal representatives meeting held in Geneva. In addition to the participants in attendance a representative from Cargill was present.

The proposed contract structure is to remain in 3 parts: 1) a relatively static main contract part (or master agreement) requiring minimal input or customization; 2) a ‘term sheet’ grouping all contract variables and contract specific elements referencing the annexes where necessary; and 3) the annexes comprising standard procedures and products specifications.

Remco highlighted that the group consider using the structure of LNG contracts given its similarities to the wood pellet market i.e. based on long term contracts with the potential for 'spot' trades. In addition, grain contracts should be considered as a base. It was decided that the base of the contract remain English law given freight agreements are primarily based on these laws and a viable alternative does not exist.

The remainder of the presentation took the form of a question and answer session with consensus from the group regarding the following issues:

1) What do you want for a standard contract?

A spot or short term (1 year) contract only with minimal force majeure clauses.

2) What contract base e.g. FOB/CIF ARA?

FOB and CIF base contract terms with no geographic specification to be included in the main contract body with pricing to form part of the term sheet.

3) What are the ramifications if the cargo does not meet full specifications?

It was decided by the group that the standard specifications noted in 5.2 were refusal/rejectable specifications at the option of the buyer. Given this, the specifications will need to be broad and reasonable to include what is generally acceptable in the market from both a buyer and seller perspective. It was also discussed how to handle discrepancies between seller and buyers analysis. The group proposed to have an umpire sample be taken at the discharge facility and be used if arbitration is sought. This final sample analysis will be binding for both parties.

Liability from rejection of a cargo was discussed and cannot include: 1) lost ROC's or other subsidies and 2) lost revenues from production. This is in line with legal guidance and will be discussed further with the legal group. In addition, the legal group is to provide guidance on Arbitration proceedings between seller and buyer.

Penalty for default/non delivery of cargo was decided to be the monthly average of the three currently published Indexes (ENDEX, Argus and FOEX) plus and 'additional amount'. The reason is to discourage suppliers defaulting on cargo delivery in order to take advantage of any arbitrage in the market. This 'additional amount' is to be considered further and finalized at the next meeting.

4) Is the group interested in joining the EFET contract working group?

General consensus was in agreement to join the group however, it was decided that sustainability was to remain outside the scope of those meetings.

5) Legal Group Representatives?

The group was asked if anyone would be prepared to take part in the legal meetings in order to provide input. The following candidates confirmed their interest:

Tonny Sorensen - DONG Energy

Remco Frenken - RWE

Alf van Weereld - EON

Dirk Klingen - EON

Johan Mertens - Electrabel

Rob Marcus - Vattenfall

Actions:

 RWE is to arrange the next legal meeting where Remco Frenken will update the legal group of the above.

 Utilities to nominate further individuals for participation in the legal meetings via email directly to Remco Frenken ( [email protected]).

 RWE will provide a further update on progress of the above at the next meeting.

5.4 Standard Sampling & Analysis Techniques Johan Mertens (Electrabel) initiated a group discussion by advising that he had drafted some wording around key areas of sampling and analysis. He added he would prefer to work further on this topic in conjunction with other attendees before presenting a draft. Peterson Control Union offered to assist with this task. In addition, together they would review the specification spreadsheet (See 5.2) to ensure the sampling standards were all updated and correct.

Actions:

 Electrabel and Peterson Control Union agreed to review the wording and specification spreadsheet, see 5.2 above, to ensure all relevant sampling standards were correct. Their findings will be presented at the next meeting. In addition, the proposed wording should be sent to RWE ([email protected]) to be reviewed by the legal work group for inclusion in the final biomass trading agreement.

5.5 Certification System Update

Jeppe Bjerg (DONG Energy) provided an update to the group on the current status of sustainability at an EU level. It was clear from the presentation that there are a number of difference certification systems currently ongoing. Harmonisation is necessary for progression of these systems to a common standard. Presently, solid biomass only presents a small amount of final energy consumption. The commission is presently not considering sustainability for solid biomass until end 2011. It was noted that DONG in conjunction with Eurelectric has submitted a position paper to the commission suggesting the decision be reconsidered and action be taken as soon as possible. The full position paper can be found on the Eurelectric website www.eurelectric.org.

Laborelec added that the commission has made it clear that it will only review sustainability for solid biomass earlier if 1) there is a market distortion and/or 2) there is a biodiversity concern as a result of increase use of solid biomass. However, Laborelec wanted to highlight that initiatives like this one aid in progressing an eventual EU standard on sustainability and should be continually pursued.

5.6 Biomass Sustainability

Tonny Sørensen (DONG Energy) opened the forum up to discuss the best way forward in order to consider and agree on minimum criteria for sustainability. The group suggested a way forward would be to decide a method for 'track and trace' of fibre and a means of calculating Green House Gas emissions. Laborelec added a starting point could be to collate and compare the current utility sustainability certification systems used by Laborelec, RWE and Drax. Group consensus was to allow for this analysis to be performed as a starting point. Drax advised that their sustainability certification system was managed by another department and approval would need to be obtained before committing this information.

Actions: Laborelec is to collect and compare Laborelec, Green Gold Label (RWE) and Drax (if/when approval is obtained) certification systems and propose an initial system for discussion and approval moving forward. Utilities to suggest individuals to assist Laborelec in establishing a working group to follow up on this initiative. Please forward the names to Yves Ryckmans ([email protected]).

Next Meeting

EON offered to organize the next meeting in Germany in the Cologne area. The meeting date was fixed on Thursday, November 18th, 2010.