The motto of our Trading department: security of supply and better economic conditions for partners and clients.

We offer two different types of procurement contracts: long-term and short term.

LONG-TERM CONTRACTS

Long-term contracts (generally over a period of 10 years) allow us to supply gas in sufficient volumes to meet the requirements of our partners over the years. These contracts refer to gas procured from varying geographical locations. Thanks to these different sources, we are able to reduce risk from potential upheavals and also reduce global costs by using varying prices.

2008 saw the signing of important long-term gas procurement contracts, ensuring Switzerland's security of supply. Mid-October 2008, Gaznat and other regional gas operators, all part of Swissgas, signed an important contract with E.ON Ruhrgas which has its own varied gas portfolio.

The volume of gas bought equates to approximately one third of the natural gas consumption in Switzerland until 2015; it is mainly supplied by the European Union and Norway, the latter being the 6^th largest gas producer in the world.  

Following this, on the 17^th of December 2008, Gaznat agreed with GDF SUEZ an extension to its current procurement contract which expired in 2009. This new agreement concerns supplies over a period of 10 years and represents just over a third of Gaznat's current supply volumes. 

Furthermore, in 2009, the contract between Swissgas and the Dutch producer GasTerra was extended until 2023.

These contracts are the back-bone of our supplies. They allow us to have varied and reliable resources.

PRICING

Natural gas is a "network" energy; therefore, its cost is mainly due to transport costs between production sites and consumers (gas pipelines or LNG ships). As gas is transported over long distances, transport must be as continuous as possible in order to optimise costs.

However, consumption is much higher in winter than it is during summer time, mainly due to heating. The conversion between "Continuous production and transport" and "Consumption with important seasonal variations" is possible by using storage (either in aquifers or in saline cavities). 

Gas price is the result of two components: transport (including distribution) and storage. Regarding gas price itself, two systems coexist and are complementary on the European market:

• The price of gas purchased via long-term contracts is linked to the price of oil products; this approach is understandable since at the time of the first contracts were negotiated both producers and consumers wanted a price comparable to the main energy supply on the market, i.e. oil. Furthermore, thanks to indexation mechanisms in place, strong variations in the price of oil products were partially smoothed out.  

• The price of gas acquired via spot market (short-term contracts) will vary depending on supply and demand. This works as long as the market remains "fluid", i.e. that sufficient gas is available and that there are sufficient numbers of buyers and sellers for reaching an equilibrium. This is the case in the United States with the "Henry Hub" pricing point, located in Louisiana. In Europe, the UK market is the most developed (virtual NBP, National Balancing Point); continental platforms are gaining more importance, especially the hubs in Zeebrugge in Belgium, the TTF (Title Transfer Facility - Dutch gas trading hub) in Holland as well as those in Germany, France and Italy.

Prices can be extremely volatile. It should however be noted that facilities for transporting procured gas to consumers must be available.  

For the time being, Continental Europe supplies are mainly guaranteed by long-term contracts.