Arise Windpower AB Company presentation February 2013
Cautionary statement This document does not constitute or form part of any offer or invitation to sell or issue, or any solicitation of any offer to purchase or subscribe for, any securities. Statements made in this document relating to future status or circumstances, including future performance and other trend projections are forward-looking statements. By their nature, forward-looking statements involve risk and uncertainty because they relate to events and depend on circumstances that will occur in the future. There can be no assurance that actual results will not differ materially from those expressed or implied by these forward-looking statements due to many factors, many of which are outside the control of Arise Windpower AB. Please read our most recent annual report for a better understanding of these risks and uncertainties. 2
Agenda I. Q4 highlights II. III. IV. Market trends Status update Appendix 3
Q4 2012 highlights Key figures Net sales: MSEK 63 (59). Average revenue: 748 SEK/MWh (680) Total income: MSEK 71 (104) Group EBITDA: MSEK 56 (75) Net income: MSEK -7 (28), including a reservation of MSEK 24 in the development portfolio Production 109 GWh (87) Key events during the period Broadened business model and new goal; 1 000 MW built and under management by year end 2017 of which Arise owns 500 MW Focus on larger projects Wind conditions below normal (-15%) Increasing certificate prices but power prices remain at low levels for the season Sweden: Agreements signed giving Arise the right to acquire projects (300 MW) in the permit process Key events after the period 58 out of 66 turbines installed in Jädraås, expected to be fully operational during Q1 2013, on time and budget Norway: Agreement signed giving Arise the right to acquire a project (130 MW) in the permit process Scotland: First land lease agreement signed. Expected size of project approx. 150 MW Decision to invest in 15 turbines (25.4 MW) in Southern Sweden expected to become fully operational in Q3-Q4 2013 4
Operating highlights production Production FY 2012 (GWh) (DW Index) 45 140 40 120 35 100 30 25 80 20 60 15 40 10 5 20 0 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Production, GWh Danish wind index Normal production, GWh Q4 and Q1 are normally strong production quarters (Wind distribution index) 150 140 130 120 110 100 90 80 70 60 50 Annual variation compared with 20 year mean value Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Annual wind energy distribution Wind conditions FY 2012 were below normal (-5%) Availability somewhat below normal due to implementation of improvement measures Improvement of 4-8% expected in affected wind farms Mode adjustments and noise reduction, software, pitch angles Q2 and Q3 seasonally weak production quarters Q4 and Q1 are normally strong and account for approx. 60% of annual production during a normal year Annual variation 85-115 on index 100 (20 year mean value) Source: Arise Windpower and Vindstat.dk 5
Operating highlights market prices FY 2012 Power - Nordic spot ( /MWh) Certificates spot (SEK/MWh) 120 100 80 60 Q4 power market prices 220 210 200 190 180 170 Strong upward trend from low levels since Jun 40 160 150 20 0 jan feb apr maj jul sep okt dec 140 130 120 Week 01 Week 11 Week 21 Week 31 Week 41 Week 51 Bearish conditions due to: Strong hydrological balance Good availability in Swedish and Finish nuclear power Macro economics Increasing prices in Q4 but still low for the season Oversupplied market led to falling prices in 2011 and 2012 Strong and fast price increase during Winter due to changed fundamentals Quota increase and phase out 2013 Slower build-out pace expected Norway is a net byer (3.5 to 4 TWh during 2013) Source: Nordpoolspot, SKM and Arise Windpower 6
Operating highlights income Realised price vs market for wholly owned assets FY 2012 Power (SEK/MWh) Certificates (SEK/MWh) Total (SEK/MWh) 500 450 400 350 300 250 200 150 100 50 416 340 363 253 314 176 447 322 350 300 250 200 150 100 50 285 203 145 148 243 175 301 201 800 700 600 500 400 300 200 100 619 486 648 401 557 351 748 523 0 Q1 2012 Q2 2012 Q3 2012 Q4 2012 0 Q1 2012 Q2 2012 Q3 2012 Q4 2012 0 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Realised price Market price Hedges provided 39% uplift from power market prices in Q4 Realised price Market price Hedges provided 50% uplift from certificate market prices in Q4 Realised price Market price Hedges provided 43% uplift from combined market prices in Q4 Hedges provided 43 % up lift from market prices in Q4 2012 Source: Nordpoolspot, SKM and Arise Windpower 7
Agenda I. Q4 highlights II. III. IV. Market trends Status update Appendix 8
Wind trends CAPEX/OPEX CAPEX: Downward price trend flattening out. Specific cost still decreasing due to higher efficiency and FX OPEX: Longer contracts on new technology, shorter on existing to drive down price Technological development Higher towers and longer blades Increased potential to optimise turbine characteristics to site specifics Increased efficiency (SEK/KWh) Funding availability Increased interest for the Nordic wind market from European long term investors Relative high country risk in Southern Europe (vs. Northern) coupled with more or less stable support systems financed by state or by high charges on consumers increase risk of policy change and diminishing support Debt financing available for competitive projects and established partners Sweden Good supply of permitted projects with good wind resources (7 to 8 m/sec) No major hurdles for a continued build out of large scale wind power Reinforcement of the Swedish national grid (by SvK) improves the possibility to increase the renewable goal even more Other markets of interest Norway: Slow development, grid issues and higher civil cost compared to Sweden, good wind (8 to 9 m/sec) Scotland: Interest from landowners to sign up land for greenfield projects, very strong wind (8 to 10 m/sec) Poland: Interesting market with a good availability of permitted projects, medium wind (6 to 7 m/sec) 9
Power price drivers # 1- short term Mainly driven by the hydro situation in Norway and Sweden Availability of Swedish and Finnish nuclear power also have an impact Throughout 2012 high levels compared to normal Now decreasing due to cold weather (perception as snow combined with higher consumption) The hydro levels normally mirror the system price i.e. High levels (A) Low prices (B) and vice versa A. Storage, TWh B. System price, EUR/MWh Source: SKM 10
Power price drivers # 2 medium/long term Medium term prices determined by coal and CO2 price development Still bearish fundamentals on coal Strong supply and relatively weak demand and on CO2 Decreasing emissions (low fossil fuel consumption due to weak macro economics), political actions to set-aside CO2 allocations? Long term prices are also influenced by supply/demand trends in Nordpool system Production capacity, consumption and transmission capacity Coal, Cal-14 (USD/t), Jan 2011 Jan 2013 EUA s, Dec-14 ( /ton), Jan 2011 Jan 2013 Jan 11 Jan 12 Jan 13 Jan 11 Jan 12 Jan 13 Source: Montel 11
Certificate price drivers In 2012-2020, 13.2 TWh of new capacity is needed to meet the target in Sweden and the equivalent in Norway In total 26.4 TWh by 2020 in Norway and Sweden compared to 2011 (equal to 3 000-4 000 turbines) Consumers are obligated by law to buy certificates at a certain % of total consumption (quota) Targets for new renewable energy in Sweden (TWh) 30 25,0 25 20 13.2 TWh 15 11,6 11,8 8,5 9,1 10 4,6 4,8 5,7 6,8 5 2,0 0 2003 2004 2005 2006 2007 2008 2009 2010 2011E 2020E Strong expansion in 2011 and 2012 on the back of supportive power and certificate market prices 2009-2011 Certificate growth and surplus Slowdown in new capacity expected as market prices in 2012 will have a dampening effect on investment activity 400 350 300 Certificate spotprice development (SEK/MWh) Decreasing certificate growth 250 Phase out of eligible production (11 TWh) end of 2012, quota increase from Jan 2013 and net buyers in Norway Decreasing surplus Positive price trend from low levels since Jun 2012 200 150 100 jan 07 jun 07 nov 07 apr 08 sep 08 feb 09 jul 09 dec 09 maj 10 okt 10 mar 11 aug 11 jan 12 jun 12 nov 12 apr 13 Source: Swedish Energy Agency (SEA), Svensk Energi and SKM 12
Outlook on Nordic electricity and certificates 5-year monthly spot prices (SEK/MWh) 1200 1000 2012 a tough year for new investment decisions from a market price perspective 800 600 400 200 0 jan 09 maj 09 sep 09 jan 10 maj 10 sep 10 jan 11 maj 11 sep 11 jan 12 maj 12 sep 12 Power Certificates Price area IV jan 13 maj 13 sep 13 Competitive projects offer reasonable returns in the current price environment Active management and hedging strategies on existing assets important to bridge price cycles 2009-2017F annual average prices (SEK/MWh) 1000 800 600 400 200 0 Long run marginal cost for onshore windpower 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Power Certificates Price area IV Long term we expect the sum of market prices on electricity and certificates to establish on an attractive level for competitive projects. Electricity prices will continue to be volatile and the certificate price will support to even out the gap to marginal investments Source: Nordpoolspot, Nasdaqomx commodities, SKM and Arise Windpower 13
Agenda I. Q4 highlights II. III. IV. Market trends Status update Appendix 14
Ongoing investments and projects Decided investments Solberg Norway Scotland 25.4 MW or 15 turbines in Southern Sweden. Estimated production approx. 87 GWh Technology: 7 Vestas V100 (1.8 MW) and 8 GE 1.6 100 (1.6 MW), 3 400 full load hours on average Construction start during spring with commissioning in Q3 and Q4 2013 Total CAPEX of approx. MSEK 400 fully financed through existing cash and new committed senior debt Fully permitted Approx 75-85 MW planned Detailed planning, procurement and financing on-going Construction start targeted for Q3 2013 In permitting process Up to 45 turbines or approx. 130 MW planned New wind measurement campaign initiated Construction start in 2014 at the earliest Green field project with very strong wind conditions Development initiated together with local partners Up to 35 turbines, construction start in 2016 at the earliest Additional large scale green field projects in pipeline Other In addition to the above mentioned projects approx 700 MW has been secured in Sweden across 4 projects Continued development of proprietary portfolio but focus is increasingly on large projects. As a consequence Arise has reserved MSEK 24 relating to the proprietary portfolio which may be reversed pending further development 15
Broadened business model 1 000 MWs built by the end of 2017-342 MW have been built or are under construction 500 MW owned by Arise at the end of 2017 - currently Arise owns 241 MW Operational management of 1 000 MW both wholly and partly owned assets Increased shareholder value Growth increasingly financed though internal cash flow generation Additional income streams and increased profitability Increased leverage on existing capital and proprietary knowledge 16
Value creation illustrative Project cash flow NPV RoE: 10% NPV: MSEK 6+/MW Value Creation MSEK/MW Sale pre-construction: Profit: MSEK 1 /MW Sale post construction Profit: MSEK 2/MW NPV operations mgmt: MSEK 1/MW Total NPV: MSEK 3/MW Project cash flow NPV RoE: 15% NPV: MSEK 3.5/MW NPV operations mgmt: MSEK 1 /MW Total NPV: MSEK 2/MW Capital employed 17
Outlook 2013 139 MW in operation expected to produce approx. 350 GWh given a normal wind year 50 % hedged in 2013 at an average price of approx. 820 SEK/MWh In addition, Arise owns 50% of wind park Jädraåsen expected to produce 570 GWh given a normal wind year From Sep 2013 hedged in accordance with loan requirements Production up until Sep 2013 sold at spot price Full operation by end of Q1 2013 Funds available for the construction of approximately 80 MW of which 25 MW of investments decided and on-going Arise will seek a co-investor for project Solberg, 78-85 MW We expect to be more active in making new investments during 2013. However investment decisions related to larger projects are subject to market conditions Well positioned for continued growth and realising targets 18
Agenda I. Q4 highlights II. III. IV. Market trends Status update Appendix 19
Financial summary Income statement MSEK Q4 2012 Q4 2011 2012 2011 Net sales 63 59 210 180 Other revenues 8 45 38 74 Total revenues 71 104 248 255 Capitalis ed work on own account 5 6 19 31 Pers onnel cos ts 13 14 46 45 Other external costs 16 21 53 64 Income from associated companies 9 0 9 0 EBITDA 56 75 177 177 Depreciation 24 22 98 73 Write downs 24 0 24 0 EBIT 8 53 54 104 Financial income 5 1 16 8 Interest expense 24 14 93 46 EBT 11 40 22 65 Deferred ta x 4 11 6 18 Net income 7 28 16 47 Cash flow MSEK Q4 2012 Q4 2011 2012 2011 Cash flow from operating activities 60 77 181 200 Cash flow from investments 31 340 176 821 Balance sheet MSEK 2012 2011 Property plant and equip. 2 162 2 127 Financial assets 591 488 Current a ss ets 114 128 Ca s h and bank balances 341 137 TOTAL ASSETS 3 207 2 880 Equity 1 152 1 243 Non current liabilities 1 603 1 349 Current liabilities 452 287 TOTAL EQUITY AND LIABILITIES 3 207 2 880 Segment reporting Wholly owned wind Co owned wind Wind power power operations power operations development MSEK Q4 12 Q4 11 Q4 12 Q4 11 Q4 12 Q4 11 Total revenues 63 59 13 0 11 47 EBITDA 50 48 11 0 2 28 EBITDA margin 79% 81% 85% n.m. neg 60% EBIT 30 28 11 0 31 27 EBIT margin 48% 47% 85% n.m. neg 57% EBT 14 16 11 0 34 26 EBT margin 22% 27% 85% n.m. neg 55% Cash flow from financing activities 15 29 199 509 Total cash flow 14 292 204 113 20
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