Challenges & opportunities in the Nordics Experience from recent transactions SEB Nordic Infrastructure and Renewable Energy Day, Oslo, June 8 th, 2017
Agenda 1 Aquila Group 2 Track Record in the Nordics 3 Nordic Market 4 Conclusions 5 Q&A 6 Contact details 2017 Aquila Capital 2
Aquila Group overview Focused on alternative investments Founded in 2001 6.1bn Euro AuM/AuA Independently owned and operated Fully regulated by BaFin (Germany) and CSSF (Luxembourg) 10 offices in Europe, Asia and Asia-Pacific Institutional client focus Overview Aquila Group 1, 2 AuA 39% AuM Financial Assets 4% AuM Real Assets 57% 1 Assets under Management (AuM) based on Net Asset Value (NAV); Enterprise Value for Real Asset-funds respectively; 2 Assets under Administration (AuA) of the AIFM Alceda includes funds managed by Aquila Capital AuM Real Assets in EUR bn 4,0 3,0 2,0 1,0 Investment Center Client Advisory As at 31.12.2016; Locations shown in the map also include investment affiliates; 0,0 2010 2011 2012 2013 2014 2015 2016 Renewables Others 2017 Aquila Capital 3
A leading renewables operator in Europe Active in renewables since 2009 Total invested capital in renewable energy assets Wind Energy 2 Norway; 13% UK, 2% Sweden; 47% Solar PV Energy 2 Hydro Power 2 Other; 19% France; 42% Other, 26% Macro-driven strategic approach EUR 2.3 bn total investment volume 1 Germany ; 38% Germany ; 39% Norway; [WERT] Dedicated investment team with in-depth asset knowhow 976 MW based on transactions in wind energy 1 Differentiated Investment Opportunities 625 MW based on transactions in Solar PV energy 1 Disciplined underwriting 430 MW based on transactions in hydropower 1 Fiduciary responsibility Notes: 1 With approx. EUR 2.3 bn of Total Investment Volume (asset based) in renewables (developed or under construction), Aquila has become a leading asset manager in the growing renewables market in Europe. MW figures based on past and current transactions. As of 31.12.2016. 2 Based on total investet capital of Aquila Capital in the respective asset class. As of 31.12.2016. 3 Source: The Top 70 overview of European solar PV portfolios is provided by Solarplaza International BV ( Solarplaza ). Solarplaza assumes no responsibility for any errors or omissions in these materials. Solarplaza makes no commitment to update the information contained herein. The data used for this overview are as at 31.05.2016. www.solarassetmanagementeu.com 2017 Aquila Capital 4
Agenda 1 Aquila Group 2 Track Record in the Nordics 3 Nordic Market 4 Conclusions 5 Q&A 6 Contact details 2017 Aquila Capital 5
Nordic footprint Investment experience in the Nordics since 2011 Country-Specific Track Record (in m EUR): UK 48 DE 785 SE & NO 1.078 US 30 FR 811 TR 168 JP 119 Hydro Jopeland Wind Atlantic Portf. Wind Midtfjellet I+II³ Wind Midtfjellet III 40 MW Norway Acquisition: 2011 61.2 MW Sweden Acquisition: 2014 110 MW Norway Acquisition: 2015 40 MW Norway FID: 2017 2011 2012 2013 2014 2015 2016 2017 Hydro NGK Hydro Smakraft Wind Hökölen Wind Kokkola 119.4 MW Norway Acquisition: 2014 160.9 MW Norway Acquisition: 2015 64.8 MW Sweden Acquisition: 2016 14.4 MW Finland Signing: 2017 Hydro Tinfos 90 MW Acquisition: 2014 Wind Lehtirova 147.6 MW Sweden Acquisition: 2016 Wind Kappeln 24.2 MW Denmark Signing: 2017 2017 Aquila Capital 6
Nordic wind portfolio overview c. 462 MW since 2014 c. 1.5 TWh of annual production Midtfjellet Phase I III (NO) Operational (110 MW) / Extension (39.6 MW) COD: Q4-2013 40 MW extension (Q4-2018) Ownership: Majority, coinvestment Expected capacity: 150 MW (incl. 40 MW extension) Capacity factor: 32% Turbines: Nordex N90 2.5 MW Nordex N100 2.5 MW Nordex N117 3.6 MW 3 5 Lehtirova (SE) Under construction COD: Q4 2018 Ownership: 100% Capacity: 147.6 MW Capacity factor: 37% Turbines: Vestas V126-3.6 MW Kokkola (FI) Under construction COD: Q4 2018 Ownership: 100% (as of closing) Capacity: 14.4 MW Capacity factor: 43% Turbines: Nordex N131 3.6 MW 32% 47% High capacity factors 1 Kappel (DK) Operational COD: Q2 2017 Ownership: 100% (as of closing) Capacity: 24.2 MW Capacity factor: 47% Turbines: Vestas V117 3.45 MW Vestas V126 3.45 MW 2 6 1 4 Högkölen (SE) Under construction COD: Q4 2018 Ownership: 100% Capacity: 64.8 MW Capacity factor: 43% Turbines: Vestas V126 3.6 MW Atlantic Portfolio (SE) Operational COD: Q1 2015 Ownership: Minority, coinvestment Capacity: 61.2 MW Capacity factor: 36% Turbines: Vestas V90 2.0 MW Vestas V100 2.0 MW Vestas V112 3.3 MW 2017 Aquila Capital Note: 7 1 Based on P-50 estimates
Agenda 1 Aquila Group 2 Track Record in the Nordics 3 Market 4 Conclusions 5 Q&A 6 Contact details 2017 Aquila Capital 8
Comparison of selected wind markets Region Germany Sweden Norway Rating 1 S&P: AAA ( ) Moody s: Aaa ( ) Fitch: AAA ( ) S&P: Moody s: Fitch: AAA ( ) Aaa ( ) AAA ( ) S&P: Moody s: Fitch: AAA ( ) Aaa ( ) AAA ( ) Currency EUR NOK, EUR investment structure possible NOK, EUR investment structure possible Maturity Mature (2014: 57.4 TWh) 2 Mature (2014: 11.2 TWh) 2 Mature (2014: 2.2 TWh) 2 Wind resources Capacity factors: 18-25% Capacity factors: 30-40+% Capacity factors: 30-40+% Energy yield assessments Usually reference data based Usually site-specific data based Usually site-specific data based Capex incl. developers margin Relatively high Low Low LCOE Unknown due to FIT Low Low Support scheme CfD for 100% of production, 20 y, 5.07 ct/kwh (down from 8 ct/kwh) Elcerts in addition to power sales, 15y, no fix price (until 2035) Elcerts in addition to power sales, 15y, no fix price (until 2021) Macroeconomic costs Significant, approx. 7 ct/kwh for consumer Low, approx. 0.1 ct/kwh for consumer Low, approx. 0.1 ct/kwh for consumer Availability of commercial price hedging instruments Not available, not required Power: Up to 15y (good liquidity) Elcerts: Up to 5y (decent liquidity) Power: Up to 15y (good liquidity) Elcerts: Up to 5y (decent liquidity) Availability of KfW Financing Yes Depending on investment structure Depending on investment structure Debt levels Up to 80% 40-60% depending on hedging structure 40-60% depending on hedging structure Inflation indexation No Depending on hedging structure Depending on hedging structure 1 Source: www.tradingeconomics.com/country-list/rating, date: June 6, 2017; (stable) (negative) (positive); 2 Source: HSH Nordbank 2017 Aquila Capital 9
Electricity costs in the Nordics and Europe Average wholesale baseload electricity price, Q4 2016 SE: 36.9 <= EUR 37.00 / MWh EUR 37.01 40.00 / MWh EUR 40.01 52.00 / MWh > EUR 52.00 / MWh No data NO: 33.9 FI: 37.5 EE: 37.5 IE: 52.9 UK: 66.0 FR: 59.8 NL: 41.4 DK: 34.6 DE: 37.6 CZ: 40.9 AT: 38.0 PL: 37.1 HU: 45.1 LV: LT: 37.7 37.9 RO: 40.9 PT: 56.4 ES: 57.3 IT: 55.9 BG: 39.6 GR: 45.8 Source: European Commission ttps://ec.europa.eu/energy/sites/ener/files/documents/quarterly_ report_on_european_electricity_markets_q4_2016.pdf 2017 Aquila Capital 10
Sound macro-story for Nordic wind Supported by attractive supply / demand dynamics and growing cross-border interconnections with the rest of Europe, the Nordic power market offers an attractive pool of liquidity, with encouraging signs of development for additional wind capacity The largest and most liquid power market in the world NordPool spot 1 is the world s largest exchange for electrical energy measured in volume NordPool power prices are mainly influenced in the short-term by weather conditions (e.g. precipitations) and the cost of fossil power generation; influencing factors in the long-run are the development of power demand, the aging of thermal generation capacities (nuclear, coal), the build-out of interconnectors to other Continental European markets as well as the prices for carbon emissions Growing amount of cross-border interconnections Attractive power market dynamics A growing role for wind Interconnector capacities expected to double, from c.4 GW today to c.8 GW by 2025 (c. 10 new cross-border projects 2 ) Heavy phase out of Swedish nuclear starting in the 2020 s Nordic households enjoy one of Europe s fastest growing populations (+22% in Norway and +13% in Sweden by 2050), with high consumption per capita in both Sweden and Norway Data centres becoming a relevant industry in the Nordics Nordic countries are early adaptors of e-mobility With a large amount of flexible hydro capacity and limited land constraints, Nordic markets are well positioned to integrate significant amounts of wind power The seasonality of wind power, with more production in winter times, is well correlated with local patterns in power demand and seasonal price peaks Supported by Sweden s target of additional 18 TWh /a new renewable production by 2030, the region is likely to continue seeing increasing demand for renewable capacity, especially for wind Status quo of energy mix in the Nordics Denmark Finland Norway Sweden Hydro Nuclear CHP Condensing Wind Geothermal Source: Swedenergy, 2015 Renewable build-out targets achieved as of 2017 (TWh) 60 40 20 0 Source: 14.3 Source: 3.5 10.6 Sweden Norway To be built Nord Pool Spot, Statnett, SKM 28,4 Total 2020 target 18.0 46.4 Ambition increase, Sweden Total 2030 target Swedish Energy Agency, Norwegian Water Resources and Energy Directorate Notes: 1 Sweden, Norway, Finland, Denmark, Estonia, Latvia, Lithuania 2 SKM 2017 Aquila Capital 11
Encouraging signals on Elcert market New Elcert-quotas presented by Energimyndigheten and NVE The new, prolonged Swedish 18 TWh target will be included in the existing system, Projects in Norway can be built until end of 2021 to be eligible for elcerts until 2035. There will be a substantially raised quota during the period 2018-2020. That will lead to an increased demand for certificates from 2018 This will decrease the existing Elcert surplus of approximately 12 million electricity certificates can be down by 50% during the period. 1 Source: Neas Energy Apart from this there will be a linear raised quota from 2020 and onwards, instead of the previously backloaded curve. Sweden will introduce a stop mechanism towards 2030 to prevent an oversupplied system. The stop mechanism should be in place in 2020. Technical adjustments to the system will be handled by the Energy Agency and not by the government/parliament, which means quicker processes 2017 Aquila Capital 12
Agenda 1 Aquila Group 2 Track Record in the Nordics 3 Nordic Market 4 Conclusions 5 Q&A 6 Contact details 2017 Aquila Capital 13
Conclusions Challenges Balanced hedging strategy to manage merchant risk remains essential Scarcity of high quality projects at good wind sites with grid connection is not yet a problem, but will probably be in the future as the superior sites are developed and more investors will enter the market As competition among investors for the best projects will increase, those investors will be successful, which provide value-add to the developer Opportunities Due to slightly higher domestic demand expectations, ongoing convergence with higher power prices in Continental Europe (driven by higher commodity and carbon prices) and ambitious renewables build-out targets to replace phased-out thermal generation, we expect (in accordance to the known forecast providers) power prices to rise The Norwegian-Swedish agreement on the transition of the Elcert scheme sent a strong signal and should have positive impact on Elcert pricing and decrease backlog Further improvements of LCOE will also make site with less attractive wind resources economically viable for wind projects The Nordic will stay an dynamic investment environment among others due to the following market trends: The raise of corporate PPA with terms of up to 20y will allow for new, attractive debt financing structures More and more utilities pursue an asset-light investment approach and seek for cooperation models with financial investors There will be increasing competition for O&M as a third party O&M provider market will be established and result in even lower opex for wind 2017 Aquila Capital 14
Agenda 1 Aquila Group 2 Track Record in the Nordics 3 Nordic Market 4 Conclusions 5 Q&A 6 Contact details 2017 Aquila Capital 15
Agenda 1 Aquila Group 2 Track Record in the Nordics 3 Nordic Market 4 Conclusions 5 Q&A 6 Contact details 2017 Aquila Capital 16
Today s presenter Ingmar Helmke Investment Manager Director Energy & Infrastructure EMEA Tel: +49 875050-235 Email: ingmar.helmke@aquila-capital.com 2017 Aquila Capital 17
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