RWE Innogy – green growth continued
Paul Coffey Chief Operating Officer RWE Innogy GmbH
Commerzbank Growth & Responsibility Conference Frankfurt, 11 March 2010 RWE Group | RWE Innogy | Offshore Wind Renewable Energy in RWE Group today: A leading renewables generation position in Europe
RWE Group renewable energy capacity in > 2.5 GW operational renewables assets operation by technology and country (end 2009) account for roughly (Accounting view1 + PPA, as of December 31, 2009) - 5% of the Group’s generation Biomass France Other capacity and 6% 3% 4% Netherlands Germany - 3% of energy generation Hydro 11% 47% 31% > The vast majority of 2.2 GW is operated by RWE Innogy, in which RWE pooled its Spain 16% renewable energy activities > The outstanding 0.3 GW have not been transferred to RWE Innogy in February Offshore Onshore UK wind 6% wind 57% 2008 and are held by RWE’s regional 20% companies (former RWE Energy) and Total installed capacity: 2.5 GW3 RWE Power
1 Capacity with <50% RWEI ownership is consolidated to 0 MW, capacity with 50% is consolidated to 50% of capacity, and capacity with >50% RWE Innogy ownership is consolidated to 100% of capacity. 3 RWE Group capacity, of which 2.2 GW are operated by RWE Innogy.
RWE Innogy | Commerzbank Growth & Sustainability Conference, Frankfurt 11 March 2010 PAGE 2 RWE Group | RWE Innogy | Offshore Wind RWE’s generation portfolio is set to be 75 % “zero or low carbon” by 2025 – focus on Renewables
Capacity 2009 Capacity 2025: ~65 GW Pump storage, other Pump storage, other
Renewables Renewables Lignite & hard coal Gas 75% Nuclear Lignite & (capacity in (capacity %) Nuclear hard coal Gas RWE generation mix RWE generation
Output 2009 Renewables Output 2025 Pump storage, other Pump storage, other
Gas Renewables Lignite & hard coal
Lignite &
(output in %) Nuclear hard coal Gas Nuclear RWE generation mix RWE generation
RWE Innogy | Commerzbank Growth & Sustainability Conference, Frankfurt 11 March 2010 PAGE 3 RWE Group | RWE Innogy | Offshore Wind Nearly € 6 billion earmarked for renewable energy projects in 2010 – 2013
€7.0 bn p.a. +/- 10% Other €100m p.a.
Upstream €1,000m p.a. > Renewable energy activities account for 20% of RWE’s planned annual capital expenditures… Renewables €1,400m p.a.
> …and represent one third of the CEE €900m p.a. Group’s growth investments of €14 billion in 2010 to 2013. Netherlands/ €1,000m p.a. Belgium
UK €500m p.a.
€2,100m p.a. Germany ~50% Generation ~50% Sales & Distribution
Capital expenditures 2010 – 2013
RWE Innogy | Commerzbank Growth & Sustainability Conference, Frankfurt 11 March 2010 PAGE 4 RWE Group | RWE Innogy | Offshore Wind
RWE Innogy: Strong European footprint with focus on wind and hydro (as of 31 December 2009, accounting view1)
Biomass (5%) Onshore wind (64%)
Hydro (24%) NL 2.2 GW
RWE Innogy RWE Offshore wind UK (7%) Poland BE
capacities by technologyby capacities Onshore Wind GER Offshore Wind Czech Biomass Republic France (3%) Other countries (4%) Hydro France New Applications Switzerland Netherlands (10%)
Spain (19%) 2.2 GW Germany (41%) Portugal Spain
RWE Innogy RWE United Kingdom (23%) capacities by regionby capacities
1 Capacity with <50% RWE Innogy ownership is consolidated to 0 MW, capacity with 50% is consolidated to 50% of capacity, and capacity with >50% RWEI ownership is consolidated to 100% of capacity.
RWE Innogy | Commerzbank Growth & Sustainability Conference, Frankfurt 11 March 2010 PAGE 5 RWE Group | RWE Innogy | Offshore Wind We plan to increase the installed generation capacity significantly
Capacity growth targets (in GW, pro rata) Ramp-up capacities until 2013
12 Assets in operation or under construction > 10 Target capacity: 4.5 GW 10 Assets under construction
8 Assets in operation RWE Innogy 2.6 GW
6 4.5 4 2.63) 2) 1) 1.7 2 1.3
0 2009 2010 2011 2012 2013 Dec 2007 Dec 2008 Dec 20092012 2020 In operation Under construction
> We want to increase our capacity to 4.5 GW in operation or under construction by 2012 and exceed 10 GW by 2020 – Strong organic growth (incl. development of acquired pipeline) and selective strategic acquisitions. > Minimum annually generated electricity of 15 TWh/a to be achieved from 2013 onwards on that basis. > We keep operating in markets we know – our focus is on Europe
1) Composed of 1.1 GW capacity in operation and 0.2 GW under construction. 2) Composed of 1.3 GW capacity in operation and 0.5 GW under construction. 3) Composed of 2.2 GW capacity in operation and 0.4 GW under construction.
RWE Innogy | Commerzbank Growth & Sustainability Conference, Frankfurt 11 March 2010 PAGE 6 RWE Group | RWE Innogy | Offshore Wind RWE Innogy’s basis for organic growth: Our project pipeline (as of 31 December 2009)
Project pipeline by technology & status (electricity generation capacity in GW, accounting view + PPA1) 7.5 17.1 > Total pipeline with projects until 2020 amounts to 17.1 GWel – up by more than New Applications 30 % year-on-year Hydro Biomass Offshore Wind > Strongly geared towards onshore (42%) Onshore Wind and offshore wind (35%) 8.3
> We are concentrating on technologies which promise to become largely independent of subsidies in the foreseeable future 1.2 2.2 0.4
In Under Pipeline Pipeline Pipeline Total Operation Construction Status 1 Status 2 Status 3 Pipeline
Note: Pipeline status 1 – Permitted projects: all permits (including grid) in place, but not yet under construction 1) For pipeline projects no power purchase agreement (PPA) is assumed. Therefore pipeline projects with Pipeline status 2 – Unconsented projects: RWEI has rights to the project, e.g. land agreements <50% RWEI ownership are consolidated to 0MW, pipeline projects with 50% are consolidated to 50% of Pipeline status 3 – Prospects: identified sites with a known MW capacity, initial discussion on agreements capacity, and pipeline projects with >50% RWE Innogy ownership are consolidated to 100% of capacity.
RWE Innogy | Commerzbank Growth & Sustainability Conference, Frankfurt 11 March 2010 PAGE 7 RWE Group | RWE Innogy | Offshore Wind Risk diversification across technologies, regions and support mechanisms
… generation capacity … electricity generation
Biomass Onshore Wind Hydro Biomass
Onshore Wind Offshore Offshore Wind Hydro Wind
… country (electricity generation) … support mechanism (electricity generation)
Netherlands Other Other Power Price only
Germany Premium Italy Tariff Certificate RWE … target portfolio by Innogy
Spain Feed-In UK Tariff
RWE Innogy | Commerzbank Growth & Sustainability Conference, Frankfurt 11 March 2010 PAGE 8 RWE Group | RWE Innogy | Offshore Wind
Value creation is superior to additional Megawatts
RWE Innogy – operating results: Value enhancing growth strategy 2009 performance and outlook 2010 & 2013 > Objective is profitable growth of renewables business € million 500 > Value creation in line with RWE's strict investment criteria - IRR has to be above hurdle rate (cost of capital plus value contribution)
55 56 2010 forecast Ò > Operating result is expected to improve significantly in 2010 2008 2009 2010 2013 > From 2010 onwards, Essent’s wind electricity generation will be stated under RWE Innogy First-time consolidation of + Essent’s wind activities Earnings increase accelerating Further results from growth + investment programme > We anticipate that RWE Innogy’s operating result will post double-digit growth rates every Upfront costs of large year. investment programme > By fiscal 2013, the company aims to have hit the €500 million operating result mark.
RWE Innogy | Commerzbank Growth & Sustainability Conference, Frankfurt 11 March 2010 PAGE 9 RWE Group | RWE Innogy | Offshore Wind Comparing offshore and onshore wind
Wind Offshore Wind Onshore
Criteria
Maturity of technology > Some technical hurdles but industry is making > Mature substantial progress
Markets > UK: growing > CE/SE: stable > Germany, Netherlands, Belgium: emerging > EE: growing > SEE: emerging
Specialities > Deep water technology at demonstration stage > Partly fragmented markets – large scale repowering > Partnerships share risk and expertise not happening yet > Lack of industrial scale experience > As markets recover debt financed project return to > Infrastructure not suitable market and potentially increase prices > Limited competition in component supply and > M&A shortage of installation vessels > Offshore wind competitiveness driven by subsidy schemes
Size of projects (capacity) > Large (500 – 1,000 MW) > Small to medium (20 – 200 MW)
Approx. load factor 35 – 40% 20 – 25%
Average capex & trend € 3.0 – 3.5 million / MW € 1.5 – 2.0 million / MW
RWE Innogy | Commerzbank Growth & Sustainability Conference, Frankfurt 11 March 2010 PAGE 10 RWE Group | RWE Innogy | Offshore Wind Turbines dominate cost of wind projects
Capex split offshore wind farm (UK example) Capex split onshore wind farm (UK example)
(in % of total capex) (in % of total capex)
100% 100% 90% 90% 80% 80% 70% 70% 60% 60% 50% 50% 40% 40% 30% 30% 20% 20% 10% 10% 0% 0% Turbine Foundations Grid & Electrical Other Turbine Foundations Grid/Other
> For both on- and offshore projects, wind turbines dominate the capex split – appropriate turbine prices are thus crucial for attractive return on investment > Offshore investment split varies according to project details, e.g. water depth, distance to shore, grid connection works etc. > Cost of grid connection depends on distance to coast, foundation also depends on depth of water – in contrast to the UK market, the grid operator in Germany is obliged to connect the projects to the electricity grid and to bear capital and finance cost
Source: RWE Innogy.
RWE Innogy | Commerzbank Growth & Sustainability Conference, Frankfurt 11 March 2010 PAGE 11 RWE Group | RWE Innogy | Offshore Wind RWE Innogy has strong starting position in offshore wind
1 Examples of offshore wind projects > 150 MW offshore wind farm (North Hoyle , Rhyl Flats) in operation and 252 MW (Greater Gabbard) under construction
> 27% stake in Belgian offshore wind project Thornton Bank – 30 MW of planned total capacity of 300 MW already operational
Nordsee Ost Wind Distance to Water First Rhyl Flats Farm Size shore depth generation North Hoyle North 60 MW 7 km off the Shallow Nov 2003 Hoyle (30 x 2.0 MW coast of North water Vestas) Wales (7 – 11 m) Greater Gabbard Rhyl Flats 90 MW 8 km off the Around Dec 2009 (25 x 3.6 MW coast of North 15 m In operation Siemens) Wales Thornton Bank 3 Greater 504 MW1) 25 – 47 km 24 – 34 m First electricity Gabbard1 (140 x 3.6 MW offshore production early Siemens) 2011, fully operational in late 2011
4 Nordsee 295 MW 32 – 45 km 22 – 26 m First generation Ost (48 x 6 MW offshore in 2012, full REpower generation in
Under construction turbines) 2013
1) 50% owned by RWE Innogy.
RWE Innogy | Commerzbank Growth & Sustainability Conference, Frankfurt 11 March 2010 PAGE 12 RWE Group | RWE Innogy | Offshore Wind
Offshore wind project pipeline: Critical mass reached
RWE Innogy project pipeline: RWE Innogy’s Offshore Wind Projects
Close to 800 MW installed by 2013 Dogger Bank Triton Knoll
Nordsee Ost Project pipeline of 9.7 GW (pro rata) and North Hoyle 6.4 GW (accounting view) as of December 2009, incl. UK Round 3 Gwynt y Môr Innogy Nordsee 1
Rhyl Flats Tromp Binnen Critical mass reached to contemplate Bristol Channel alternative logistic supply strategy Thornton Bank Greater Gabbard
Projects in operation or under construction Projects consented or in development
RWE Innogy | Commerzbank Growth & Sustainability Conference, Frankfurt 11 March 2010 PAGE 13 RWE Group | RWE Innogy | Offshore Wind
Talking about offshore wind: What are the major challenges?
1. Demanding weather conditions
2. Key components have to be installed in large numbers
> in deep water (up to 40m)
> great heights (100m+)
3. Unsufficient availability of installation vessels with fitting design
4. Difficult environment and low level of experience for operation and maintenance
RWE Innogy | Commerzbank Growth & Sustainability Conference, Frankfurt 11 March 2010 PAGE 14 RWE Group | RWE Innogy | Offshore Wind
Example Rhyl Flats: Which steps have to be taken to build an offshore windfarm?
2002: Jun - Sept 2007, May - Jul 2008: Aug - Nov 2008: Apr - Oct 2009: Apr - Oct 2008: Met Mast Scour Protection Installation of Export Turbine Installation (preparing seabed foundations Cable Laying Installation for installation) Inter array cable laying
RWE Innogy | Commerzbank Growth & Sustainability Conference, Frankfurt 11 March 2010 PAGE 15 RWE Group | RWE Innogy | Offshore Wind
Weather changes carry significant financial risk exposure
Average days with good weather1 > Winter months with its rough conditions and extended period of bad weather can seriously 30 impede installation/ 25 maintenance works 20
> Delays cause increased 15 installation costs, but also foregone revenues 10 from missing power generation 5
> Superior planning, smooth 0 y logistics and excellence in ry ril l er May une Ju b execution of construction are rua Ap J gust mber b March u e e A Octo vember key to success. JanuaryF September No Dec
1 12 hours installation windows per month at 1.5 m significant wave height and maximum wind speed of 10 m/s, statistical values for German North Sea
RWE Innogy | Commerzbank Growth & Sustainability Conference, Frankfurt 11 March 2010 PAGE 16 RWE Group | RWE Innogy | Offshore Wind
Future projects in deeper water and further offshore
50 Beatrice Field 45 Planned OWF Sandbank 24 Bard Offshore 1 40 Albatros Hochseewindpark De Dreiht Global Tech 1 Bristol Channel Hochsee Windpark Nordsee 35 Dogger Bank Thornton Bank Innogy Nordsee 1 Dan-Tysk Alpha Ventus UK Round 3 [125 km] 30 Gode Wind Greater Gabbard Belwind East Coast 25 Nordsee Ost Côte d'Albâtre Thanet Princess Amalia (Q7) Sheringham Shoal Amrum Bank West 20 Barrow Triton Knoll Egmond aan Zee Butendiek Baltic 1 London Array 15 Samso Avg. water [m] depth Gwynt y Môr Lincs Horns Rev 2 Rhyl Flats North Hoyle 2015 + X Lynn & Horns Rev Inner10 Dowsing Lillgrund Rødsand II Nysted Nordergründe Commercial Gunfleet SandsRobin Rigg 5 Scroby SandsBurbo Bank Kentish Flats Arklow Bank 0 “Pioneer” 0Phase 102030405060708090100 Shore Distance [km]
RWE Innogy Offshore Projects
RWE Innogy | Commerzbank Growth & Sustainability Conference, Frankfurt 11 March 2010 PAGE 17 RWE Group | RWE Innogy | Offshore Wind
Deepwater installations require giant component dimensions
Gravity Foundations Monopiles weight: ca. 2,500 t height: ca. 60 m material: concrete turbines: 5/6 MW
Jackets weight: weight: ca. 250 t plus ca. 1,000 t transition piece ca. 180 t height: ca. 60 m height: ca. 30 m material: material: steel steel turbine: 3.6 MW turbines: 5/6 MW
RWE Innogy | Commerzbank Growth & Sustainability Conference, Frankfurt 11 March 2010 PAGE 18 RWE Group | RWE Innogy | Offshore Wind
Availability of vessels is extremely limited – design of existing vessels does not meet offshore needs
Max. depth (m) 60 Maximum conditions for current installation vessels
50
40 Dong
Centrica Dong 30
20
10
0 0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 Turbine capacity (MW)
Offshore Parks in operation under construction / development RWE Innogy projects
RWE Innogy | Commerzbank Growth & Sustainability Conference, Frankfurt 11 March 2010 PAGE 19 RWE Group | RWE Innogy | Offshore Wind
Our approach: In the end it comes down to perfect project organisation, logistics and own vessels
Seabreeze Programme:
> Construction of 2 self propelled Jack-Up vessels
> Specially designed for turbines in the 5 to 6 MW class…
> and deepwater environment: possibility to be used in water depth > 45 meters (using leg extensions)
> Less exposed to weather conditions
RWE Innogy | Commerzbank Growth & Sustainability Conference, Frankfurt 11 March 2010 PAGE 20 RWE Group | RWE Innogy | Offshore Wind Development and construction of an offshore windfarm is one thing, operating it at a high level another
> Long distances to shore and rough weather makes North Hoyle load factor consistently higher operation & maintenance of offshore windparks than competitors (% load factor) challenging 70% > New solutions have to be developed for projects far North Hoyle Offshore Wind Farm UK Offshore Average out in the sea 60% > Steep learning curve in operation of offshore 50% windfarms, but Innogy has a good foundation with North Hoyle and Rhyl Flats. 40%
> Reduced risks as maintenance contracts include 30% guarantees for specific technical availability or even 20% minimum electricity generation for 5 years and more > Early mover, having build first commercial offshore 10%
wind farm in the UK (North Hoyle, 60MW, 2003): 0% Today North Hoyle is best in class in the UK. Apr 2006 Jun 2006 Apr 2007 Jun 2007 Apr 2008 Jun 2008 Oct 2006 Oct 2007 Feb 2007 Feb 2008 Aug 2006 Dec 2006 Aug 2007 Dec 2007
RWE Innogy | Commerzbank Growth & Sustainability Conference, Frankfurt 11 March 2010 PAGE 21 To be trusted leaders in sustainability, renewable energy and innovative technology
RWE Innogy aims to ...
… be among the top 5 companies in the European renewable energy sector
… contribute to the RWE Group‘s growth strategy
… provide sustainable value added to the RWE Group
… be a key element in RWE’s CO2 reduction programme
… stand for state of the art operation of renewable technology
… be a leading player in developing new renewable technologies
RWE Innogy | Commerzbank Growth & Sustainability Conference, Frankfurt 11 March 2010 PAGE 22