EMFESZ

First Hungarian Natural Gas and Energy Trading and Service Provider Ltd. was born of the recent liberalization of the European natural gas market. The firm was chartered in 2003 upon the opening of the national market to independent companies. EMFESZ started activities in September 2003, based on the capital stock of 552 million Hungarian Forint (currently about US$2.56 m).

EMFESZ's primary business aims at the continuously expanding Hungarian natural gas market, which is characterised by a high gas pipe penetration and seasonal consumption trends.

Currently, some 40% of all energy consumed in Hungary comes from natural gas. Some 75-78%of all gas used here is imported. Natural gas needs are covered primarily through the "Gazprom".

Therefore, import of Central Asian gas to Europe through our company constituted a significant milestone in the diversification of energy sources, the task set forth by the EU and the European Energy Charter.

In accordance with regulations of the European Union, first steps have been taken in Hungary in the past few years to create a free market in natural gas, which will be complete in 2007. Presently, the domestic market is served by three active gas providers, with our company claiming 75% of all free market consumers and near 60% of the total volume provided to them.

We now have about 50 consumers with 180 delivery points. Last year EMFESZ delivered 2.6 billion m ³ , out of which nearly 1 billion m ³ was provided directly to the competitive market. This year the company plans to sell 3 billion m ³ , which cover 20% of Hungarian gas consumption. The volume stored for the present gas year by EMFESZ has exceeded 150 million m ³ .

Our product has Central Asian, primarily Turkmen origin. Natural gas travels through the pipelines inherited from the Soviet Union over several thousand kilometres across five states, before it finally reaches the Ukrainian-Hungarian border. There, EMFESZ receives the gas from the giant RosUkrEnergo AG (RUE), our strategic partner.

Our primary goal is to provide quality service, consistently competitive prices, and favourable terms of payment to all our customers. EMFESZ has been active for nearly two years, with gas supply overseen by a team of highly qualified professionals using a 24-hour dispatch centre with an advanced IT platform that conforms to the ISO 9001-2000 quality assurance system. Thus, our business offers the background and references necessary to prepare consumers, currently supplied by public utilities, to enter the competitive market, and to sell them natural gas under favourable terms.

As a result of sound strategy, EMFESZ Ltd. managed to increase total sales almost 15 times in 2005 compared to the previous year and made up US$437.6 million (based on the Hungarian National Bank's average rate as of December 31, 2005). Operational profit went up from negative to US$50.1 million as did net income, which approached US$47.1 million.

In further indications of our success, our Polish subsidiary, which was recently launched to operate in the free gas market, has already signed their first gas delivery contact with the major fertilizer producer Pulawy. Additionally, EMFESZ's agreement to import some 1,6 billion Kwh of electricity from the Ukraine in 2007, will enable the Company to appear as a new player on the national power market.

In recent surveys, EMFESZ was 52 ^nd in the 2005 Hungary TOP 200 list and was called the fastest expanding newcomer of the year. This position may be much improved in 2006 results.

We strongly believe that this unique take-off makes EMFESZ Ltd. a genuine Rising Star of the World Energy market.

István Góczi, Managing Director, EMFESZ Ltd.