Show me the Money. Rabobank International. Marc Schmitz Rabobank December 20 th 2011

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1 Show me the Money Rabobank International Marc Schmitz Rabobank December 20 th 2011

2 -How viable is the offshore wind sector?

3 The history of onshore and offshore wind Onshore wind Started in 1985 with first onshore wind farms (250KW) To date turbine size 2-3 MW/turbine Onshore wind is already a commodity with 200GW installed world wide From strong decline in O&M costs and later on still improvements, but smaller Offshore wind Started only a few years ago (Horns Ref, Prinses Amalia Windfarm and C-power 10) Turbine size started with 2/3 MW, increasing to 5-7 MW Only 3GW installed until now. Forecast: 36 GW in 2020 Strong learning curve coming years

4 Levelised cost of selected power technologies (EUR/MWh) STEG-Tower & Heliostat Wind - offshore PV - c-si Biomass - anaerobic digestion Biomass - incineration Wind - onshore Coal fired Natural Gas CCGT Electricity prices LCOE BNEF 2011 EU-ETS ETS EUA forecast Central scenario

5 Rabobank s view on lowering cost of offshore wind energy: A calculation exercise Assumptions Medium sized wind farm (200 MW), 3300 full load hours, 660GWh per annum Capex EUR 4 mln/mw (EUR 800 mln) Construction two years, FiT tenor 15 years (EUR 150 MWh) Debt/equity: 65/35, ROE 10-12% Potential improvements Scale Planning Equipment Operation and maintenance Financing According to Bloomberg and Rabobank the investment costs and O&M costs could decrease in 2022 up to 30%!

6 Influence of cost reduction Results Operation and maintenance cost Investment cost/mwh 0-15% -30% % % Please note that O&M costs in onshore wind decreased d from EUR 50 per MWh to EUR 15 per MWh in the period from

7 Market price electricity Electricity Price 60 Offshore 40 LCOE

8 Investment volumes Total investments in Europe of EUR 130bn ( )coming from 3GW in 2010 to 36GW in 2020 EUR 15bn/year 4% 23% 14% 40% Turbine Foundation Electrical Installation Project 19%

9 Funding example (400MW wind farm) Financing Equity 1 Public financing institutions 2 Commercial loan 3 EUR 1.5bn EUR 500m EUR 700m EUR 300m Example 1. Utilities (Eneco, EDF, RWE, Dong), Project developers (C-power, Belwind, PNE)Private equity (Blackstone), Turbine suppliers (Siemens, Vestas), Pension funds (PGGM, Pension Denmark), Rabobank. Rabobank has as well provided subordinated debt 2. Kfw, European Investment Bank, Green Investment Bank, Export Credit Agencies 3. Rabobank, Unicredit, BNP, BOTM, ASN, ING, etc.

10 Financing Offshore Wind to date Non-recourse Financings Approximately 1 GW of Offshore Wind has been financed on a non-recourse basis until now Other 2 GW financed on balance sheet by utilities like Centrica, RWE, Eneco, Stadtwerken in Germany, Dong, EON, etc Until now approximately 25 commercial banks have been involved in the offshore market Before 2011 maximum 2 non recourse financings/year. In 2011, 5 non-recourse financing have been done (Borkum West, Global Tech 1, Lincs, Meerwind and Baltic I), of which two were financed by Rabobank

11 Offshore Wind Non-recourse Financings In Operation Portfolio Rabobank: 1.4GW EUR 6 bn 2006 Prinses Amalia 120 MW Netherlands 2007 C-Power I 30 MW Belgium egu 2009 Belwind 165MW Belgium 2010 GLID 194 MW UK Under Construction 2010 C-Power II, III 325 MW Belgium 2011 Borkum West 200 MW Germany 2011 Global Tech I 400 MW Germany

12 Lessons learned Complex projects require good communication Most projects are based on multi contracting, so strong project management is required Cable damages could arise, but issues are solved adequately Issues in design of the foundations and turbines (grouting issue) strongly improved Cost overruns during construction are within contingency levels Project completion is mostly on time All projects are performing to (and slightly above) expectations, even with the issues mentioned above

13 Financing requirements Stable subsidy schemes (stable income), fixed price PPA, consistent governmental support Proven/reliable technology. In case of new technologies strong guarantees are even more important (Areva) Solid, creditworthy and reliable partners Strong sponsor Long term operation and maintenance contracts (5 15 years today) Good insurance package Last but not least: Strong project management

14 PdW1 How can we reach our common goal to increase Offshore Wind? Stable support from governments Innovative technologies Lower costs, more efficient (larger capacities for example) Mobilizing new providers of funding Institutional investors Public Financing institutions Export Credit Agencies More commercial banks Project bonds More advanced project finance structures (Shorter tenors and/or hard refinancing triggers)

15 Slide 14 PdW1 Een hoofdconclusie trekken; maar gericht naar de drie typen stakeholders: constructie, regulatie en financiële instituties WaardP;

16 PdW2 Conclusions In years off shore wind can compete with other sources of sustainable energy Political support for sustainable energy has increased after Fukushima Teething problems off shore mainly solved, however a lot of room for cost reductions Promising off shore wind market, good returns compared to the risks

17 Slide 15 PdW2 Een hoofdconclusie trekken; maar gericht naar de drie typen stakeholders: constructie, regulatie en financiële instituties WaardP;

18 Questions? Rabobank International Marc Schmitz Telep h o ne:+ 31 (0) Marc.Schmitz@rabobank.com