**TXU-Europe shares currently being sold by the Administrator

globalglobalCOALCOALshareholdersshareholders

Traded Markets Traded Markets –– Trends Trends in Alternatives and in Alternatives and

ProspectsProspectsGlobal Insight

Fuel Price Conference9th Dec 2004

Evolution of markets

Standard Contracts

Growth in trading activity

Indices

Agenda

ConfidentialityNO commercially sensitive information released to 3rd parties

OpennessSystems are available to all industry participants

IndependenceSeparate legal entity with independent management

NeutralityFavours neither consumer, producers or traders

Fast, Effective & Transparent Route to MarketSubject to counterparty clearance, provides ALL players access to markets such as RBCT, Newcastle etc.

Real-time market intelligencePrice discovery and market transparency e.g. forward curve, deals done etc

globalCOAL Offers

globalCOAL Product Offerings

globalCOALTM

McCloskey Coal News

Standard Coal System(SCS)

Screen based, electronic tradingfor physical and financial coal

Custom Coal System(CCS)

Direct & Reverse auction system withreal-time qualityevaluation

State-of-the-Globe(SOG)

Includes globalCOAL’ s forward curves &other commodity information from thepower, gas, and liquids markets

SSY Freight Products(FFA)

Freight Forward Agreements for bothDry & Wet Freight

Proprietary Indices(RB & NEWC Index)

Other servicesincludes SMS price alerts and Trade/Position data

globalCOAL Market Members1. AEP Energy Services Ltd2. Anglo Coal Marketing Ltd3. Anker Coal Company B.V.4. Barclays Bank Plc5. BHP-Billiton Marketing AG6. Bulk Trading S.A. 7. Cargill International SA8. Coal Marketing Company Limited9. Coal and Allied Operations 10. Coeclerici Carbometal SPA11. Constellation Power Source, Inc12. Delta Energy B.V.13. Deutsche Bank AG14. EDF Trading Ltd15. E.ON Kraftwerke GmbH16. E.ON UK plc17. Electrabel S.A.17. Electric Power Development Co.18. ENEL Trade S.p.A19. EnBW Trading GmbH20. Essent Trading21. Glencore International AG

23. Grosskraftwerk Mannheim AG24. Hidrocantabrico Generacion S.A.25. Hokkaido Electric Power Co.26. International Power plc27. Koch Carbon (UK) Ltd.28. LE Group29. Mitsubishi Corporation30. Morgan Stanley & Co. International Limited31. Noble Energy Inc.32. N.V. Nuon Energy Trade & Wholesale33. Peabody Coal Trade Australia34. RWE Trading GmbH35. Sasol Mining (Pty) Ltd36. Scottish Power Energy Management Ltd37. Sempra Energy Europe Limited38. Standard Bank London Limited39. TOTALFINAELF Coal SA40. The National Coal Supply Corp.41. Vattenfall Europe Trading GmbH42. Wambo Coal Pty Ltd43. Xstrata Coal Australia Pty Limited

PRODUCER CONSUMER FINANCIAL INSTITUTION TRADER

• 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??

Development of globalCOAL“From Inevitability to Reality”

Change in the coal market

SPOTMARKETS

LONGTERMCONTRACT

TENDERCONTRACT

LONGTERMCONTRACTbut short term pricing

SPOTMARKETS

PAST FUTUREFactors / history through the 1990’s:

Typically coal bought on long term contract Annual pricingDeregulation of the power sector led to competitionTenure of contracts became shorter Increased spot purchasingPaper coal contracts (API2) started 1998Asia still well behind but deregulation is coming

Approximate annual volumes:

Atlantic seaborne steam coal: 180 MT p.a.Atlantic (ARA + RBCT, SA) swaps: 600 MT p.a.?

Asia-Pacific steam coal: 250 MT p.aPacific swaps (Newcastle): 10 MT p.a.?

E-trade

THE EVOLUTION OF A MARKETDeregulation of electricity sector

Increased Consumer Competition

Increased Consumer Risk Leads to Greater Need for FLEXIBILITY and Greater Need to Manage Short Term GENERATION MARGIN

LEADS TO:•Separation of PRICE RISK from VOLUME RISK•Reduction in dependency on security of supply

STANDARDISATIONSTANDARDISATIONSTANDARDISATION INDEX LINKED DEALSINDEX LINKED DEALSINDEX LINKED DEALS

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)

Increased Producer RiskLess certainty of demand

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)

RISK

Consumers Producers

Financial Institutions / Speculators

SCoTATM - Standard Coal Trading Agreement

• All physical SCS transactions governed by SCoTATM - a single set of legal terms and conditions and standard quality specifications.

• SCoTATM 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.

• SCoTATM 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 SCoTATM: ARA, RB, NEWC, BOL

• Main feature of SCoTATM Version 4 compared with 3b• Introduction of new, improved ARA contract

• Next versions of SCoTATM will update ARA contract (again) and introduce Indonesian contracts

SCoTATM Standard Specifications

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 SCoTAIn all cases, a maximum top-size of 50mm and a Hardgrove Index range of 45-70 is specifiedNOTE: this table is a summary only and should be used in conjunction with SCoTA

Calorific Value (NCV m in, but

basis 6000 kcal/kg)

Volatile Matter

Total Moisture (m ax)

Ash (m ax)

Sulphur (m ax)

IDT (deg. m in)

CaO (m ax)

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% 1,250ARA (RUS) 5,850 26%- 35% 14.0% 15.0% 0.75% 1,250

BOL 5,850 31%-37% 14.0% 11.0% 0.85% 1,250NEWC 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%

• 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 A Product

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% <=18% TM to be deducted from B/L weight

• INDO B Product: Penalty: >27% <=30% TM to be deducted from B/L weight

globalCOAL – Clause 13.3 Proposed Quality Adjustments

• CV Adjustments:• INDO A Product:

5,900<GAR<6,000 ((6200-200+(2*(GAR-6000)))/6200)*(Base Price)

6000>=GAR<6,500 (GAR/6200)*(Base Price)

GAR>=6,500 (2*(GAR- 6500)*(BasePrice))/6200 +(GAR/6200)*(Base Price)

• INDO B Product:

5,000<GAR<5,200 ((5400-200+(2*(GAR-5200)))/5400)*(Base Price)

GAR >= 5,200 (GAR/5400)*(Base Price)

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

Reference Point

Delivery Point A

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

PublishedFreight Differential =

USD 0.25/mt

PublishedFreight Differential =

USD 0.35/mt

Total Since Launch (May’01 to date): 43.5 MT (physical and financial)

Development of globalCOALTONNAGE TRADED PER QUARTER TO END NOVEMBER 2004

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Total Since Launch (May’01 to date): 43.5 MT (physical and financial)

Development of globalCOALTONNAGE TRADED PER QUARTER TO END NOVEMBER 2004

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TFS APIPhys ARASWAP RBPhys RBSWAP NEWCPhys NEWCFPhys NEWCTotalLinear (Total)

globalCOAL NEWC index (USD/mt RHS) and volumes traded physical and financial (LHS)

gC NEWC index and volumes November 02 - November 04

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Physical NEWC traded (mt, LHS) Swap NEWC traded (mt, LHS) globalCOAL NEWC index (US$/mt, RHS)

ACCC allows allocation system

Growth in swaps trading despite lack of physical tonnes

globalCOAL NEWC index (USD/mt RHS) and %age of volume traded physical and financial (LHS)

globalCOAL NEWC trades (physical and financial) as %age of total

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globalCOAL NEWC index US$/mt

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 IndexTM, NEWC IndexTM

• 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

RB1TM or Phys NEWCTM specs) for delivery in forward three months

• Underlying data: firm bids/offers and trades in Phys RB1TM or Phys NEWCTM 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 TransparencyAll Phys NEWC Prices from DecemberAll Phys NEWC Prices from December 2001 to August 2003

Could This Concept Be Applied to Indonesia, therebycreating liquidity in another market ?

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BIDSOFFERS

Post NMPIPre NMPI

Other Indices in the market

TFS API#2® – spot thermal coal for CIF ARA, basis 6000 Kcal/kg NCVTFS API#3® – spot thermal coal for FOB Newcastle, basis 6700 Kcal/kg GADTFS API#4® – spot thermal coal for FOB RBCT, basis 6000 Kcal/kg NCV

Argus/McCloskey - spot thermal coal FOB NewcastleUnderlying data: Journalists survey the participants in the industryMethod 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 HousesMethod of calculation: Average of panellists price assessments. Calculated fortnightly.

globalCOAL NEWC IndexTM vs. Other Indices

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.

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globalCOAL NEWC IndexBJICoalinQ (CV Adj)API#3

Physical MarketPhysical MarketPhysical Market

Tender ContractsTender ContractsTender Contracts

globalCOAL Indices (RB & NEWC)

Other Indices

OTC Broker Financial Market

OTC Broker OTC Broker Financial MarketFinancial Market

Haze of coal quality conversions and price interpretations

SettlementSettlement

CalculationCalculation

Spot & Longer Term Physical

Market(index based)

Spot & Longer Spot & Longer Term Physical Term Physical

MarketMarket(index based)(index based)

WARNING:Even in the lack of physical trading activity, the financial market must NEVER be used to price indices.

globalCOAL Commoditised Physical Market

globalCOAL globalCOAL Commoditised Commoditised Physical MarketPhysical Market

globalCOAL Commoditised

Financial Market

globalCOAL globalCOAL Commoditised Commoditised

Financial MarketFinancial Market

INDICESINDICESThe importance of a good index

Published, Auditable and FSA Regulated globalCOAL Index MethodologyPublished, Auditable and FSA Regulated globalCOAL Index Methodology

Questions and Answers

Thank you