globalCOAL - Country & Industry Forecasting: IHS Global Insight

Traded Markets – Trends
in Alternatives and
Prospects
Global Insight
Fuel Price Conference
9 th Dec 2004
globalCOAL
shareholders
*TXU-Europe shares currently being sold by the
Administrator
*

Agenda
Evolution of markets
Standard Contracts
Growth in trading activity
Indices

globalCOAL Offers
Confidentiality
NO commercially sensitive information released to 3 rd parties
Openness
Systems are available to all industry participants
Independence
Separate legal entity with independent management
Neutrality
Favours neither consumer, producers or traders
Fast, Effective & Transparent Route to Market
Subject to counterparty clearance, provides ALL players access
to markets such as RBCT, Newcastle etc.
Real-time market intelligence
Price discovery and market transparency e.g. forward curve, deals done etc

globalCOAL Product Offerings
Includes globalCOAL’ s
forward curves &
other commodity
information from the
power, gas, and liquids
markets
Standard Coal System
(SCS)
Screen based, electronic trading
for physical and financial coal
Direct & Reverse
auction system with
real-time quality
evaluation
State-of-the-Globe
(SOG)
Custom Coal System
(CCS)
globalCOAL TM
Proprietary Indices
(RB & NEWC Index)
SSY Freight Products
(FFA)
Other services
includes SMS
price alerts and
Trade/Position data
McCloskey Coal News
Freight Forward
Agreements for both
Dry & Wet Freight

globalCOAL Market Members
1. AEP Energy Services Ltd
2. Anglo Coal Marketing Ltd
3. Anker Coal Company B.V.
4. Barclays Bank Plc
5. BHP-Billiton Marketing AG
6. Bulk Trading S.A.
7. Cargill International SA
8. Coal Marketing Company Limited
9. Coal and Allied Operations
10. Coeclerici Carbometal SPA
11. Constellation Power Source, Inc
12. Delta Energy B.V.
13. Deutsche Bank AG
14. EDF Trading Ltd
15. E.ON Kraftwerke GmbH
16. E.ON UK plc
17. Electrabel S.A.
17. Electric Power Development Co.
18. ENEL Trade S.p.A
19. EnBW Trading GmbH
20. Essent Trading
21. Glencore International AG
23. Grosskraftwerk Mannheim AG
24. Hidrocantabrico Generacion S.A.
25. Hokkaido Electric Power Co.
26. International Power plc
27. Koch Carbon (UK) Ltd.
28. LE Group
29. Mitsubishi Corporation
30. Morgan Stanley & Co. International Limited
31. Noble Energy Inc.
32. N.V. Nuon Energy Trade & Wholesale
33. Peabody Coal Trade Australia
34. RWE Trading GmbH
35. Sasol Mining (Pty) Ltd
36. Scottish Power Energy Management Ltd
37. Sempra Energy Europe Limited
38. Standard Bank London Limited
39. TOTALFINAELF Coal SA
40. The National Coal Supply Corp.
41. Vattenfall Europe Trading GmbH
42. Wambo Coal Pty Ltd
43. Xstrata Coal Australia Pty Limited
PRODUCER CONSUMER
FINANCIAL INSTITUTION TRADER

Development of globalCOAL
“From Inevitability to Reality”
• Established on April 18, 2001; live for trading from May 16, 2001
• Over 36.5 MT physical coal and nearly 7 MT financial coal traded to
date
• 43 Market Members and growing
• SCoTA accepted as standard coal contract
• globalCOAL indices now well established
• Acceptance of screen trading of steam coal
• Early 2003 signed joint co-operation agreement with SSY, developing
screen traded FFA’s
• September 2003 – opened Asian office in Singapore
to service growing Asian demand
NEXT DEVELOPMENTS:
• FOB Indonesia contract being evaluated with potential market players
• CIF Japan index being considered for introduction of swaps trading
• Clearing?
• Entry into US market??

Change in the coal market
Factors / history through the 1990’s:
PAST
FUTURE
E-trade
Typically coal bought on long term contract
Annual pricing
Deregulation of the power sector led to competition
Tenure of contracts became shorter
Increased spot purchasing
Paper coal contracts (API2) started 1998
Asia still well behind but deregulation is coming
Approximate annual volumes:
SPOT
MARKETS
LONG
TERM
CONTRACT
SPOT
MARKETS
TENDER
CONTRACT
LONG
TERM
CONTRACT
but short term
pricing
Atlantic seaborne steam coal:
Atlantic (ARA + RBCT, SA) swaps:
Asia-Pacific steam coal:
Pacific swaps (Newcastle):
180 MT p.a.
600 MT p.a.?
250 MT p.a
10 MT p.a.?

THE EVOLUTION OF A MARKET
Deregulation of
electricity sector
Increased Consumer
Competition
Increased Consumer Risk
Leads to Greater Need for
FLEXIBILITY and Greater
Need to Manage Short Term
GENERATION MARGIN
Spark Spread (US$/MWh)
Integrated energy markets
(power, gas, oil & coal)
allow easier comparisons
= Spot Market Power Price
- Spot Market Generation
Cost (converted into US$ /
MWh for the fuel type used to
generate that power)
LEADS TO:
•Separation of PRICE RISK from VOLUME RISK
•Reduction in dependency on security of supply
Increased Producer Risk
Less certainty of demand
STANDARDISATION
INDEX LINKED DEALS

REQUIREMENTS FOR A TRADED COAL MARKET
• Competitive electricity market
• Critical mass of players in the market
• Active & liquid spot market (move away from long term fixed prices)
• Standard contract for representative commoditised product
• Desire / need for risk management among buyers and sellers
• Greater degree of flexibility among coal buyers / power stations
• Reliable index
• Newcomers with appetite for coal price risk
• Some form of broker (electronic or voice)
Financial Institutions / Speculators
RISK
Consumers Producers

SCoTA TM - Standard Coal Trading Agreement
• All physical SCS transactions governed by SCoTA TM - a single set of legal
terms and conditions and standard quality specifications.
• SCoTA TM is a “Master Agreement”, governing each and every SCS
transaction. It is implemented once and acts as an umbrella contract for all
future transactions.
• Continuously developed with industry feedback.
• SCoTA TM now in Version 4a, features level of detail including
• Performance assurance
• Netting/setting off agreements
• Liquidated damages
• Circles and Cross default provisions (except Australian companies)
• Four delivery locations traded under SCoTA TM : ARA, RB, NEWC, BOL
• Main feature of SCoTA TM Version 4 compared with 3b
• Introduction of new, improved ARA contract
• Next versions of SCoTA TM will update ARA contract (again) and introduce
Indonesian contracts

SCoTA TM Standard Specifications
Calorific Value
(NCV min, but
basis 6000
Volatile
Matter
Total Moisture
(max)
Ash
(m ax)
Sulphur
(max)
IDT
(deg. min)
CaO
(max)
kcal/kg)
ARA (RB) 5,850 22% (m in) 12.0% 15.0% 1.00% 1,250 12%
ARA (AUS) 5,850 24%-35% 15.0% 15.0% 0.75% 1,250 7%
ARA (COL) 5,850 31%-37% 14.0% 11.0% 0.85% 1,250
ARA (RUS) 5,850 26%- 35% 14.0% 15.0% 0.75% 1,250
BOL 5,850 31%-37% 14.0% 11.0% 0.85% 1,250
NEWC 5,850 27%-35% 15.0% 14.0% 0.75% 7%
NEWCF 5,850 27%-35% 15.0% 14.0% 0.75% 7%
RB 1 5,850 22% (m in) 12.0% 15.0% 1.00% 1,250 12%
All specifications are on an “as received” basis (and ISO standard)
All transactions are basis 6,000 kcal/kg net as received with price adjustments as per SCoTA
In all cases, a maximum top-size of 50mm and a Hardgrove Index range of 45-70 is specified
NOTE: this table is a summary only and should be used in conjunction with SCoTA

globalCOAL – INDO A Product
• Proposed Quality Specifications as listed below:
• Calorific Value (GAR, kcal/kg): Basis 6,200; Min 5,900 GAR
• Total Moisture (as received): Max 18.0%; Typical 13.0%
• Volatile Matter (air dried): Min 38.0%; Max 45.0%
• Ash (as received): Max 16.0%
• Sulphur (as received): Max 1.0%; Typical 0.80%
• Selenium (ppm, dry basis)*: Max 2; Typical < 1.0
• Boron (ppm, dry basis)*: 100
• Calcium Oxide in ash (dry basis): Max 7.0%
• Nitrogen (ash free): Max 1.8%
• Hardgrove Grindability Index*: 40 - 50
• Nominal Topsize (mm): 50
• A.F.T. (initial deformation, deg C): Min 1,150
• Size Restriction*: no more than 30% (by weight) shall pass 2 mm square
mesh screen.
* Typical – not used for determining whether or not a Shipment complies with the specification.

globalCOAL – INDO B Product
• Proposed Quality Specifications as listed below:
• Calorific Value (GAR, kcal/kg): Basis 5,400; Min 5,000 GAR
• Total Moisture (as received): Max 30.0%; Typical 22.0%
• Volatile Matter (air dried): Min 38.0%; Max 43.0%
• Ash (as received): [Max 10.0%; Typical 4.0%]
• Sulphur (as received): [Max 1.0%; Typical 0.30%]
• Selenium (ppm, dry basis)*: Max 2; Typical < 1.0
• Boron (ppm, dry basis)*: 170
• [Calcium Oxide in ash (dry basis): Max 15.0%]
• Nitrogen (ash free): Max 1.7%
• Hardgrove Grindability Index*: 40 - 55
• Nominal Topsize (mm): 50
• A.F.T. (initial deformation, deg C)*: Typical 1,150
• Size Restriction*: no more than 30% (by weight) shall pass 2 mm square
mesh screen.
* Typical – not used for determining whether or not a Shipment complies with the specification.

globalCOAL – Clause 13.3 Proposed Quality
Adjustments
• Ash Adjustments:
• INDO A Product: US$ 0.35/mt per 1.0% Ash < 5.0% & pro-rata
• INDO B Product: US$ 0.35/mt per 1.0% Ash < 4.0% & pro-rata
• Sulphur Adjustments:
• INDO A Product: Premium: US$ 0.35/mt per 0.1% TS < 0.4% & pro-rata
• INDO B Product: Premium: US$ 0.35/mt per 0.1% TS < 0.4% & pro-rata
• Moisture Adjustments:
• INDO A Product: Penalty: >16% 27%

globalCOAL – Clause 13.3 Proposed Quality
Adjustments
• CV Adjustments:
• INDO A Product:
5,900

Indonesia Proposed Logistics
• FOB contract
• Shipping to be performed by conventional panamax vessels
• FOB Price based upon single ‘reference’ loadport
• Sellers option to nominate actual loadport
• FOB price adjusted after screen trade according to published
freight differentials between reference port and actual port, based
upon shipping by conventional panamax
• Published differentials to be reviewed on regular basis by
independent shipbroker

Indonesia Proposed Logistics - Example
Possible Origin Locations
Delivery Point A
Published
Freight Differential =
USD 0.25/mt
Reference Point
Published
Freight Differential =
USD 0.35/mt
Delivery Point B
** Assume Conventional Panamax Shipment
FOB Price (Reference Point) = 51.50/mt
The differential from the Reference Point to Delivery
Point A is USD -0.25/mt (closer to consumer)
The differential from the Reference Point to Delivery
Point B is USD 0.35/mt (further away from consumer)
Therefore, the following FOB Prices are possible from
the three delivery locations:
Reference Point: USD 51.50/mt
Delivery Point A: USD 51.50/mt – USD 0.25/mt =
USD 51.25/mt
Delivery Point B: USD 51.50/mt + USD 0.35/mt =
USD 51.85/mt
** Local Port Terms Apply based on Origin of Supply

Development of globalCOAL
TONNAGE TRADED PER QUARTER TO END NOVEMBER 2004
Total Since Launch (May’01 to date): 43.5 MT (physical and financial)
7,000,000
6,000,000
Total Financial
Total Physical
Total
Linear (Total)
5,000,000
4,000,000
3,000,000
2,000,000
1,000,000
0
Q201 Q301 Q401 Q102 Q202 Q302 Q402 Q103 Q203 Q303 Q403 Q104 Q204 Q304 Q404

Development of globalCOAL
TONNAGE TRADED PER QUARTER TO END NOVEMBER 2004
Total Since Launch (May’01 to date): 43.5 MT (physical and financial)
7,000,000
6,000,000
5,000,000
TFS API
Phys ARA
SWAP RB
Phys RB
SWAP NEWC
Phys NEWCF
Phys NEWC
Total
Linear (Total)
4,000,000
3,000,000
2,000,000
1,000,000
0
Q201 Q301 Q401 Q102 Q202 Q302 Q402 Q103 Q203 Q303 Q403 Q104 Q204 Q304 Q404

globalCOAL NEWC index (USD/mt RHS) and volumes
traded physical and financial (LHS)
gC NEWC index and volumes November 02 - November 04
Physical NEWC traded (mt, LHS) Swap NEWC traded (mt, LHS) globalCOAL NEWC index (US$/mt, RHS)
2,000,000
65
1,800,000
60
1,600,000
55
1,400,000
1,200,000
1,000,000
800,000
600,000
400,000
200,000
0
Nov-02
Dec-02
Jan-03
Feb-03
Mar-03
Apr-03
May-03
Jun-03
Jul-03
Aug-03
Sep-03
Oct-03
Nov-03
Dec-03
Jan-04
Feb-04
Mar-04
Apr-04
ACCC
allows
allocation
system
Growth in
swaps
trading
despite lack
of physical
tonnes
May-04
Jun-04
Jul-04
Aug-04
Sep-04
Oct-04
Nov-04
50
45
40
35
30
25
20

globalCOAL NEWC index (USD/mt RHS) and %age of
volume traded physical and financial (LHS)
100%
80%
60%
40%
20%
globalCOAL NEWC trades (physical and financial)
as %age of total
Swap NEWC volumes (%)
Physical NEWC volume (%)
globalCOAL NEWC index US$/mt
65
60
55
50
45
40
35
30
25
0%
No
v-
02
De
c-
02
Ja
n-
03
Fe
b-
03
Ma
r-
03
Ap
r-
03
Ma
y-
03
Ju
n-
03
Ju
l-
03
Au
g-
03
Se
p-
03
Oc
t-
03
No
v-
03
De
c-
03
Ja
n-
04
Fe
b-
04
Ma
r-
04
Ap
r-
04
Ma
y-
04
Ju
n-
04
Ju
l-
04
Au
g-
04
Se
p-
04
Oc
t-
04
No
v-
04
20

Coal Indices: Sustainability
An index should be:
– Based on verifiable data
– Transparent
– Difficult to manipulate
What distinguishes different indices?
– Quality and source of underlying data – verifiable trades
or “reported” trades?
– Method of calculation – transparent methodology or “black box”?
– Frequency of calculation – real time or once a week?
Coal Indices Should be Representative of the Marketplace

RB Index TM , NEWC Index TM
• Created by the coal industry, for the coal industry
• Free of any interpretation or judgment
• The most accurate reflection of actual market prices
• Measures price of standard specification of thermal coal (Phys
RB1 TM or Phys NEWC TM specs) for delivery in forward three months
• Underlying data: firm bids/offers and trades in Phys RB1 TM or Phys
NEWC TM instrument on globalCOAL’s Standard Coal System
• Published method of calculation, rigidly applied in real time, using
data from transparent source:
• Weighted average of trade prices and bids/offers
• Several mechanisms/filters in place to prevent manipulation
• Calculated daily, weekly and monthly
• Note:- All bids/offers/trades used to calculate the Index are based on the same
terms, conditions, specs etc i.e. compares “apples with apples”.
• Standardisation takes place before, not after the deals

Index Calculator Example

Newcastle Physical/Financial Market Evolution
• Pre July 2002 – The concept of developing a marker price for the Newcastle
market to help provide more transparency for buyers and sellers. The concept of
the Newcastle Marker Price Initiative (NMPI) is developed whereby a marker price
will be published once per month.
NMPI Concept - A sponsor would offer up a cape per month to be sold on
globalCOAL’s platform
• July 2002 – The first NMPI took place on globalCOAL
• September 2002 – Work commences on the development of a NEWC Index
• October 2002 – The NEWC methodology is approved by the market (note - the
timeframes of the NMPI straddle both Asian/European timezones)
• November 2002 – The first NEWC Swap trade takes place on gC’s platform
• September 2004 – Approx. 17.50 MM tonnes of Physical and 2.7 MM tonnes of
NEWC Swaps transacted on globalCOAL; however, this does not account for
what has been transacted via voice brokers in the OTC market

Market Transparency
All Phys NEWC Prices from December 2001 to August 2003
30.00
US$/mt
29.00
BIDS
OFFERS
28.00
27.00
Pre NMPI
Post NMPI
26.00
25.00
24.00
23.00
22.00
21.00
20.00
1-Jan-02 2-Mar-02 1-May-02 30-Jun-02 29-Aug-02 28-Oct-02 27-Dec-02 25-Feb-03 26-Apr-03 25-Jun-03 24-Aug-03
Could This Concept Be Applied to Indonesia, thereby
creating liquidity in another market ?

Other Indices in the market
TFS API#2® – spot thermal coal for CIF ARA, basis 6000 Kcal/kg NCV
TFS API#3® – spot thermal coal for FOB Newcastle, basis 6700 Kcal/kg GAD
TFS API#4® – spot thermal coal for FOB RBCT, basis 6000 Kcal/kg NCV
Argus/McCloskey - spot thermal coal FOB Newcastle
Underlying data: Journalists survey the participants in the industry
Method of calculation: Average of journalists price reports.
Calculated weekly and monthly.
Relies on knowledge and experience of journalists to ask right questions of right people
and understand if answers are true! Arguably very vulnerable to variety of risks.
Audited?
CoalinQ – spot thermal coal FOB Newcastle, within 3 months, basis 6700 GAD
Underlying data: Panel of 6 producers (of which 1 anthracite, 3 Queensland); 12 Japanese
& 1 Korean consumers; 6 “traders” of which 3 Japanese Trading Houses
Method of calculation: Average of panellists price assessments.
Calculated fortnightly.

60.00
55.00
50.00
45.00
40.00
35.00
30.00
25.00
20.00
globalCOAL NEWC Index TM vs. Other Indices
globalCOAL NEWC Index
BJI
CoalinQ (CV Adj)
API#3
5-Aug-02
5-Sep-02
5-Oct-02
5-Nov-02
5-Dec-02
5-Jan-03
5-Feb-03
5-Mar-03
5-Apr-03
5-May-03
5-Jun-03
5-Jul-03
5-Aug-03
5-Sep-03
5-Oct-03
5-Nov-03
5-Dec-03
5-Jan-04
5-Feb-04
5-Mar-04
5-Apr-04
5-May-04
Note how the NEWC index usually leads the others. As it is real time also note the larger price
swings on the NEWC index whereas weekly prices are “smoothed” with the other indices.
5-Jul-02

INDICES
The importance of a good index
globalCOAL
globalCOAL
Commoditised
Commoditised
Physical Physical
Market
Market
Published, Auditable and FSA Regulated
globalCOAL Index Methodology
globalCOAL Indices
(RB & NEWC)
globalCOAL
globalCOAL
Commoditised
Commoditised
Financial Financial
Market
Market
OTC OTC
Broker
Broker
Financial Financial
Market
Market
Tender Tender
Contracts
Contracts
Haze of coal quality
conversions and price
interpretations
Other Indices
WARNING:
Even in the lack of physical trading
activity, the financial market must
NEVER be used to price indices.
Physical Physical
Market
Market
Settlement
Spot Spot
& Longer
Longer
Term Term
Physical
Physical
Market
Market
(index based)
(index based)
Calculation

Questions and Answers
Thank you