Power Market Study 2025 …In 10 Years This Will Be a Different Place

Power Market Study 2025 …in 10 years this will be a different place

Munich, May 2015 Power Market Study 2025 The traditional business model for utilities is gone, let’s talk about how to build the future

Technological, social and most of all regulatory influences changed the 1 Current Situation utilities industry over the last 10 years for good, resulting in significant challenges in terms of market valuation, profits and returns for utilities

Key issues exist in three areas: In generation, over-capacity eliminates spreads; in distribution, increasing geographical disparity exists Key Issues 2 between generation and demand; in consumption, new segments with diverse behaviors and needs arise besides the “traditional” consumers

To respond to these challenges, utilities need to fix current business, invest in intelligent and commercially optimized demand/supply Implications 3 balancing solutions, become more customer centric and reposition for new business models

2005-2009 2009-2014 >2014

Market Liberalization Nuclear Phase-Out Flexible Energy System • National Energy Act, 2005 • Start of nuclear plant decommissioning • Introduction of decentralized storage • Transformation of negotiated into in reaction to the Fukushima accident capacity regulated third party access in 2011 • Increasing usage of micro-generation • Real-time demand & supply Unbundling Renewables Push management • Regulation-induced separation of utilities’ • Renewable Energy Act empowered generation and sale operations from installation of 80 GW renewable capacity transmission networks as of 2007 (as of 2014) with power production of Smart Network Technology • Creation of separated legal and 157.3 TWh (ca. 25%) • Introduction of smart metering informational entities • Big data analytics Ownership Unbundling ITOs • Smart consumer devices Upcoming Competition • Regulation-induced application of non- • Machine to machine communication • End of price authorization in 2007 discriminatory measures by ITOs (legally • Increasing competition through new independent transmission subsidiaries) market players without own power plans Digital Customer Engagement or supplier networks First Smart Initiatives • Gamification, proliferation of social • Steady decline in number of customers • Evolving linkage of generation, grids, sto- media served by four largest German energy rage and consumption to adjust towards • Voice analytics companies the variable nature of renewable energies • Proliferation of digital channels

KEY DRIVER: KEY DRIVER: KEY DRIVER: Release of Market Forces Release of Decentralized Power Market Technology & Business Model Innovation

Source: Federal Ministry of Economics and Technology (BMWi), BDEW, Deloitte Analysis

MARKET VALUATION PROFITABILITY RETURNS

• Utility shares significantly under- • EBIT decline consistently over • Return collapsed even though performed between 2009-2014 the last 3 years after Fukushima capital employed reduced • While DAX value increased by • Outlook until 2018 shows only • Major Utilities are nearly back to approx. 90%, value of major utilities stabilization on low level without where they started 10 years ago decreased by the same amount uptake

Source: ICIS, Company Annual Reports, EEA, SETIS, IEA, DECC, EPA, IEA, COSPP, Primary Interview s, Transparency Market Research

Share Price Development Impact

• Utilities are in trouble, share performance is 250% significantly underperforming against other sectors (~98% performance difference) 200% DAX +90% • Decreasing wholesale prices result in performance issues

150% • “Marginal cost-zero” economics for renewables create flat supply and lower wholesale prices,

reducing producers’ rent for good Indices 100% STOXX -8% • Fixed cost/capex cannot be earned back via markets

50% RWE -53% • While European Utilities stagnate, performance of E.ON -51% German Utilities compared to their European peers is even more drastically eroded influenced by the 0% “Energiewende” • Overall utility business is shifting to higher granularity around decentralized solutions and services, larger player are not well positioned for innovative, smaller business models RWE E.ON STOXX Util DAX

Source: Bloomberg; STOXX® Europe 600 Utilities

Profit KPIs Impact

RWE E.ON • Profitability has decreased significantly over the last 3 years • Outlook indicates no significant improvement -7% 10,8 -5% 9,3 9,2 7,9 8,3 8,0 • If so, utilities are facing structural underperfor- ] 7,1 7,5 7,3 7,7 € 6,4 7,0 5,9 6,2 6,0 6,0 6,2 5,6 mance – this might lead to 4,0 4,7 4,2 4,0 4,4 4,6 [bn. 3,7 3,4 3,5 3,5 − EBIT not sufficient to cover depreciation

− Required investments in new business models EBITDA, EBITDA, EBIT will not be taken 2012 2013 2014 2015f 2016f 2017f 2018f 2012 2013 2014 2015f 2016f 2017f 2018f − Lower profitability negatively impacts dynamic gearing ratio (net debt/EBITDA) with further consequences for capital market rating -6% 18% 15% 15% 13% -3% 12% 11% 12% 12% 12%

[%] 8% 8% 8% 7% 7% 7% 8% 8% 7% 7% 7% 5% 6% 5% 4% 4% 4% 4%

Profit ratios 4%

2012 2013 2014 2015f 2016f 2017f 2018f 2012 2013 2014 2015f 2016f 2017f 2018f

EBITDA EBIT EBITDA/Revenue EBIT/Revenue Source: Annual reports E.ON and RWE; www.finanzen.net/schaetzungen/RWE; www.finanzen.net/schaetzungen/E.ON

Return on Capital Employed Journey Impact

RWE • International growth strategies from the early 2000s completely eroded and failed to add value in the long 20 2008 run (e.g. RWE Essent, E.ON’s Italian and Spanish 2006 2010 acquisitions) 15

2004 • Overall shift from asset-based to cash-flow based (in %)(in

ROCE returns 10 2012 2002 • Since 2006, returns on capital have been decreasing 2014 0 constantly caused by market liberalization 0 35 40 45 50 55 • In terms of capital employed, RWE and E.ON are E.ON nearly back to where they started from in 2002

14 2006 2008 • ROCE values close to the WACC (~7,5%) highlight 2010 the loss in competitiveness and limited room for 12 2004 investments / capital acquisition

10 (in %)(in

ROCE 2012 8 2002 2014 0 0 55 60 65 70 75 80 Capital Employed (in € bn.) Source: Annual reports E.ON (Note: Capital employed in continuing operations; annual average; ROACE from 2010 onwards) and RWE

GENERATION DISTRIBUTION CONSUMER PROBLEM PROBLEM PROBLEM

• Generation dilemma: • Distribution dilemma: • Consumer dilemma: Over-capacity shock eliminating Significant imbalance of generation More technology choices than spreads and consumption locations customer needs, customer requires • “Marginal cost-zero” economics: • Generation location choice not energy manager to find right renewables flat supply, reducing a function of distribution cost solutions producers’ rent for good anymore as unbundling pared • Utilities currently focus on solution • Fixed cost/capex cannot be earned with subsidies are creating local side rather than customer needs back via today’s EOM markets supply imbalances • Churn is less a consequence of • Value is moving upstream, i.e. goes • Resulting local supply/demand price, but rather lack of individual to equipment manufacturers imbalances need fixing using services, e.g. advise on self supply, three levers: energy efficiency − Moving demand to new supply • New segmentation needed into by price differentials a) Commodity Buyers − Invest in infrastructure to b) Power Users/Prosumers transport • Granularity in business models − Flexible demand/storage increasing, often with start-up cha- solutions racter with focus on agile, flexible, cost efficient products and services

Crowding out traditional generation Increases need for flexibility

Available Conventional Capacity Remaining Energy Demand = Power Demand – Renewable Production 80 6.000 60 5.000 4.000 40 3.000

peryear 2.000 20

1.000

capacity (in GW)

Number of hours Averageavailable 0 0 2005 2014 < 20 GW 20 - 40 GW 40-60 GW > 60 GW Nuclear Lignite Coal Natural Gas Oil 2005 2014

• Significant decrease of the available capacity of conventional • Overall decrease of the remaining energy demand due to an power plants due to shut-downs of coal and nuclear plants increase in renewable production between 2005 and 2014 • However, there are still situations with a high peak demand • Further lignite & coal power plants need potentially to be shut- (e.g. in the winter w/o any renewable production) down based on recent comments from the German Minister of • At the same time, an increase of market situations with a low Economy & Energy (Sigmar Gabriel, May 2014) remaining energy demand require a high level of generation flexibility  Increasing risk for security of supply  Flexible asset management necessary

… taken this into account power Power Price Development prices will not recover to 2011 level

70 65,8 • Wholesale power prices declined significantly by approx. 30% between 2010 and 2014, mainly 60 51,1 44,5 42,7 driven by: 50 38,9 37,8 − Considerable decrease in coal prices due to MWh 32,8 32,5 32,3 / 40 31,3 € overcapacities caused by shale gas exploration 30 20 − Ongoing massive development of renewables 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 generation capacities (more than 20 GW of PV since 2010) − In 2025 renewables will be accounted for Development of installed Renewable Capacity 40-50% of overall power generation − Stagnant or rather slightly declining power Generation in direct marketing model demand Generation remunerated under EEG 190 200 200 174 − Significant fall of CO2 prices 152 150 135 61% 103 113 55% 59% 82 64% 100 11% 40% 60% 2% TWh 50 98% 89% 45% 60% 40% 36% 41% 39% 0 2010 2011 2012 2013 2014 2015 2016 2017

Source: BDEW Slide Deck, Erneuerbare Energien und das EEG: Zahlen, Fakten, Grafiken 2013, Forecast 2012 of the TSOs, Federal Ministry of Economics and Technology (BMWi), Deloitte Analysis

Generation Spread Coal/ Generation Spread Gas/ Market observations & CDS (Efficiency: 46%) CSS (Efficiency: 50%) comments

11 0 • Efficient gas power plants required for balancing -2 are not competitive in today’s energy market 10 environment

-4

MWh MWh /

/ 9 • Low emission certificate prices support the “dirty” € € -6 power production (especially from lignite plants) 8 -8 • Future impact: Jan-14 Jul-14 Jan-15 Jul-15 Jan-14 Jul-14 Jan-15 Jul-15 − Investments in renewable production capacities will worsen a cost-efficient security of supply Generation Spread Lignite/ Generation Spread Nuclear situation CLS (Efficiency: 42%) (incl. Nuclear Tax) − Current generation spreads leads to almost no incentives for new power plant investments 28 28 − Reliable and cost-efficient energy supply in 26 26 Germany after nuclear exit requires fossil generation

24 24

MWh MWh

/ / € € 22 22

20 20 Jan-14 Jul-14 Jan-15 Jul-15 Jan-14 Jul-14 Jan-15 Jul-15

Source: EEX

A rising CO2 price is a fundamental uncertainty to the sector with prospective winners and losers

CO2 Prices incl. Forecast Scenario 30 €/t CO2 Pricing

25 • Price parity between lignite and gas assumed ETS Reform at 30 €/t CO2 • Regulation pushes towards lignite and hard coal exit 20 Price Cap CO2 Tax Consumers • Reformation of ETS system targets a clean energy Backloading Market Stability Reserve ecosystem with renewables plus gas generation • Winners: 15

2 − Low-carbon emission generation

CO2 Tax Industry (Renewables, Gas, CHP, Nuclear) /t CO

€ − Low carbon emission consumption via 10 ? Energy Efficiency technologies (Smart Building, Smart Home, eMobility, Insulation) • Losers: 5 − High Carbon Emission generation, e.a. lignite-fired turbines − High-carbon emission consumption 0 (combustion engines) 2006 2008 2010 2012 2014 2016 2018 2020

Source: BDEW Slide Deck, Erneuerbare Energien und das EEG: Zahlen, Fakten, Grafiken 2013, Forecast 2012 of the TSOs, Federal Ministry of Economics and Technology (BMWi), Deloitte Analysis

INDUSTRY CONSOLIDATION OF FOSSIL FUEL GENERATION 1 • Portfolio review • Players stuck with stranded assets • Further concentration especially in fragmented markets

RUNNING FOR CASH 2 • Only incremental investments in existing assets for operational excellence • Focus on high availability and maximum of run-time hours

INVESTMENT IN FLEXIBILITY • Flexibility within generation portfolio needs to be increased until storage solutions 3 will cover volatility issues • But focus on short payback period investment of any cash investment

Market events with a negative EEX spot price Demand Response Solutions

100 56 64 64 • Instead of balancing supply and demand by adjusting fossil power generation, demand response solutions strive to adequately vary 50 12 15 the consumption levels of end users 0 -5 -20 -10 -14 -16 • Estimates of demand response potential in Germany range from -50 -37 -61 1.5 GW on the demand side to 3.5 GW for negative residual loads -100 -65 -100 • The biggest challenge for demand response solutions currently -150 # hours w ith price < 0 €/MWh consists in finding a working business model. First concepts are -200 average price (in €/MWh) mainly based on flexible tariffs for industrial clients who can directly -250 low est price (in €/MWh) -222 influence large capacities • For example, some manufacturing clients have decided to change their work rhythms or to switch to generators during peak times Redispatch Incidents (number of hours per year) and reduce the required electricity to a minimum • Innovative demand response solutions including the use of smart 10.000 7.160 7.965 technologies especially for private households are not yet in place 5.000 on a large scale in Germany, however, a significant market growth 5.000 segment within the next years 1.589

0 2010 2011 2012 2013 2014

Source: EEX, Bundesnetzagentur

Possible split of the German market (2023) Two price zone model benefits and drawbacks

Supply Demand • Current price model assumes the country acts like a “copper plate”, making it easy to transport electricity • In reality, missing grids combined with electricity surplus in the 220 TWh Renewable north and deficit in the south creates bottlenecks • To counteract these bottlenecks different price zones could be implemented to adjust demand and generation with the electricity price, similar to Nordic countries 320 255 TWh TWh Conventional Benefits Drawbacks • Power plant dispatch more • Political counter current reasonable, no costly • Decreased competition due Redispatch required to regional markets • Reduced intervention by • Relocating the problem to higher entities other industries (e.g. road/ • Supply and demand adjust train transportation system) 250 70 TWh themselves on regional basis TWh • Electricity price dependent Renewable 75 TWh • Reduced Grid extension on investment decisions of Conventional necessity different players

Source: BDEW; 50Hertz; Deloitte Analysis

Generation imbalance & Current Situation major transmission projects

• 4 co-current • To compensate for the nuclear power phase out and the disability flow corridors of the German south to generate wind power, north-south power lines have to be build • Length: 2,100 km • Disagreements between political parties and Citizens intervention • Power: 10 GW causing 15 of 24 transmission projects an anticipated time delay between 1-5 years • In July 2014, the federal government reported that since 2009, 4 GW only about 400 km were built by the total of 1,877 km planned power lines

2 GW • In total, the grid expansion plan approved in 2014 includes 2,800 km grid optimization for the existing infrastructure and 2,650 km of new transmission lines until 2023 2 GW 2 GW

Over Supply Under Supply

Source: Electricity Grid Development Plan BNetzA

Market maturity levels for storage technologies Current Situation

Flow batteries • New storage technologies need to prove their bankability Lithium-ion batteries to obtain commercial project finance Supercapacitor Molten salt Flyw heel (low speed) − Biggest hurdle in their market roll out is the financing of a first Superconducting commercial-scale plant Adiabatic CAES magnetic energy − R&D support in the form of grants or risk sharing storage (SMES) Compressed air Hydrogen energy storage • Established storage technologies often need targeted support (CAES) Synthetic natural gas to achieve scale and reduce cost through continued technology improvements

• Mechanical Storage − Support schemes vary by regulatory context: • Electro-chemical storage Feed-in-Tariffs used to be favorite in Europe • Thermal storage • Electrical storage • German policy makers seek to reduce Feed-in tariff support

• Chemical storage Pumped hydro storage (PHS) − Alternative support schemes such as Renewable Standard Capitalrequirement xTechnology risk Portfolios (RSP) or effective CO2 prices could be a solution Research Develop. Demo Deployment Mature Technology − Educating regulators about technologies will be key to success Non-bankable technologies Proven technologies • R&D support schemes • Targeted FiT, ETS, RSP • Hurdle: Construction and • Challenge: compete with operation of first commercial- substitutes on cost scale plant Note: FiT: Feed-in Tariff; ETS: Emission Trading Scheme; RSP: Renew able Standard Portfolio Source: Deloitte Analysis

Load balancing on micro-grid level Outlook

• Commercial role of the aggregator responsible for the ex-ante Large Scale Large Scale Large Scale optimization of supply and demand portfolio, Consumers Storage Generation e.g. through − Virtual Power Plant and Demand Response,

Transmission − Load Management/ Peak Shaving, Allocation − Cumulated market integration of renewables etc. • Load will be balanced on micro-grid level by allocators based Aggregation & on results and prognoses of aggregators, decentralized Communication generation/consumption units and DSO input • Optimization needs to be backed by a smart communications Demand Virtual Power Response Plant infrastructure set on top of today’s metering infrastructure

Smart Energy • A fragmented setup enables the seamless integration of

System & Services innovative assets, e.g. electric cars Distribution

Supply/Demand Optimization

Decentralized Decentralized Consumers Storage Generation

SHORT TERM SOLUTION: • Add transmission capacity on TSO level and balance of unequal generation and demand 1 patterns across Germany from off-shore generation (North) to consumption (Centre/South) • Invest in interconnectors to allow for additional flexibility for balancing regional fluctuations

MID TERM SOLUTION: • Invest in better forecasting solutions and smart infrastructure to balance supply and demand 2 real-time on DSO and micro-grid level • Invest in smart micro-grid balancing solutions, e.g. decentralized CHP generation capacity and demand response mechanisms

LONG TERM SOLUTION: • Invest in R&D for storage solutions on all grid levels (TSO and DSO) as well as end-consumer 3 solutions for different solutions regarding storage duration and storage capacity

Increasing self-supply by Prosumers Customer engagement on the rise

Traditional Non-commodities +16% 148 28 +11% commodities and services 82 45 8 17 Energy 2 Power efficiency 2000 2005 2010 2015 2023 2033 2050

Decentral electricity Home battery storage in GW Customer Customer Renewable production in GWh Gas needs demands energies • Double digit growth of • Increasing distributed battery Energy distributed energy production storage deployment due to Heat challenges central utility plunging LIB1) prices and new services capacities battery use cases

• Interplay of growing self-supply, increased storage • Traditional commodities serve basic customer deployment and energy efficiency reduce demand needs with limited differentiation for residual energy supply from utilities • Customers want to decrease energy consumption • Prosumers demand for service partners instead of and become “green” – higher engagement with pure energy delivery product variety and new market entries apart from traditional utilities 1) Lithium-Ion-Battery Source: BDEW, Agora

Small/medium-sized enterprises’ (SME) Private consumers’ expectations expectations

New expectations related to website/mobile offerings – Interest in SME-specific services with tariff models e.g. detailed insights into own energy consumption; tailored to business needs (e.g. reduced daytime tariff) personalized advice on saving potentials; consumption notifications

Emergence of more diversified customer segments Interest in new energy-related products and services, and increasing interest in individualized product/service e.g. energy efficiency products (energy efficient cooling offerings – e.g. Smart Home solutions with additional systems, isolation); installation and maintenance security or comfort packages services for energy systems (PV systems, heating); energy consultancy services

Interest in provision of information on energy-related High interest in self-generation opportunities products/services, e.g. during purchase of domestic (PV system, wind turbine, etc.) appliances

Source: Trend study on energy consumers (2013), Deloitte Analysis

Digitization of the customer experience Digital implications for utilities

Smart Smart applications applications Monitoring and controlling of light, heat, cold and electricity in homes and buildings by every preferred Devices device of the customer. TMT companies enter energy business through digital infrastructure and service Online- offerings and increase competition mobile-shift

Analytics Cloud Online-mobile-shift Becoming single point of contact between businesses and clients, mobile internet changes customer buying habits. Comprehensive omni-channel offering of products and services is required. Risk of loosing customers due to poor mobile service integration

User experience UX is crucial for customer acquisition. Utilities need to User experience understand how their clients live and work and which needs and problems they face. The digital “look and feel” differentiates service offerings. Hence, utilities face the challenge of increased customer interaction

Micro-CHP Value Chain Installation/ R&D Production Sales Operation After sales Financing Maintenance

Low dynamic High dynamic – High dynamic – Low dynamic High dynamic – Low dynamic – High dynamic – based on high automotive, energy amongst trading local presence utilities, initial heating system efficiency start- established companies and required producers, Dynamic investments and technology ups and installation utilities enter banks enter companies international companies market segment segment enter segment utilities enter segment

Power: utility contracts, PV, conventional CHP Substitutes Heat: utility contracts, heat pump, conventional boiler (gas, oil, etc.), conventional CHP

Time to market, Brand, technical Existing Local presence, Trading Local presence, Financial technical merits, merits, customer base, reputation capabilities, reputation, power, margin Success innovation bankability, partner net- technical distribution expectations Factors capabilities guarantees work, sales endowment network spare channel mix parts

Value Pools • Cost 30-35% 9-11% 8-10% 8-10% 15-20% 10-20% • Margin

Utilities? Utilities?

CUSTOMER INSIGHT GENERATION • Understand consumer behaviors and customer needs based on customer analytics 1 (e.g. shift from pure consumers to prosumers with different expectations) • Identify profitable products and segments

DE-COMMODITIZATION 2 • Develop micro-segment strategies and tailor products and services accordingly • Increase customer experience via multi-channel approach • Move away from commodity provider to solution provider (e.g. energy manager)

NEW POSITIONING • Drive innovation and engage in new business models 3 • Move away from traditional vertical integration and find clear positioning along new value chains

Strategic Options of Corporate Level

Option A: Smart, decentralized Utility

Is the current strategy robust?

Option B: Option C: Option D: Option E: Clustering of regulated Consolidation of Transformation to Turn-around assets traditional utility customer centricity

(Infrastructure Service (Focus on centralized (Value-added service (Enter new markets) Provider) generation) offering)

Example: Example Example Example Stromnetz Hamburg GmbH Uniper new E.ON Kelag

Typical Business Areas of Utilities

Typical Business Areas of Utilities Define Centralized Value-add Trading T&D Sales value chain Generation Services positioning Define commo- Business Area dities Power Define Customers Business business Business Area Area B2C B2B areas Supply & Trading (S&T) Distribution Gas

Business Area Water Water

Commodities Production Distribution Sales

Telecom Business Area Fiber

S&T T&D grids B2C B2B

Flexibilization of the generation Remote monitoring and Distributed generation Sale of distributed generation 1 1 1 1 portfolios control of grid facilities systems, e.g. PV, CHP, etc. and storage systems Expansion and marketing of Distributed power, heat and 2 2 Automation of load balancing 2 2 Contracting renewable energies cooling storage systems Load management via Smart Provision and operation of Electric vehicle fleet and fleet 3 Expansion of storage systems 3 3 3 Meter data eMobility infrastructure management Portfolio management Integration and control of Energy consulting and energy Trading platform for energy 4 4 4 4 for Third Parties renewable energies efficiency measures management Marketing of distr. generation Grid-integrated building Energetic modernization of Customer-specific tariffs via 5 5 5 5 and storage via VPP automation buildings real time forecasts Offering of balancing energy Energy management of public Installation, operation and Partner for energy efficiency 6 6 6 6 and generation capacity infrastructure maintenance services measures Sale of product bundles Energy benchmarking across 7 Marketing of storage capacities 7 Smart public lighting 7 7 (energy and TelCo) sites Trading of distributed Integrator for converging grids Financing, insurance, residual 8 8 8 Smart Home solutions 8 commodities (e.g. H2) from power to traffic current delivery Services for regional micro 9 Marketing of waste heat 9 9 Smart Meter services 9 Analytic data services grid structures Marketing of end customer Offering of network services Connected security and care Security systems for systemi- 10 10 10 10 flexibility (DSM) for external networks services cally relevant infrastructure

Key operating model design considerations Notes

Customer • Products/services 1 • Who are the targeted customer groups and what are their needs? segments − New ways of creating a personalized and emotionally connected customer Products/ Products/ • What products/services will be provided (e.g. traditional services; 2 Services Services new, non-commodity products and services)? experience − New products/services “beyond the • What channels will the products/services be delivered through 3 Channels meter” e.g. partner network, call center, etc.) • Capabilities • What processes, functions and activities are required and how will they 4 Processes − New technologies, processes and interact (e.g. strategy, service mgmt., customer mgmt., system mgmt.) capabilities allowing closer customer Infor- • What information & metrics will be used to measure organizational and interactions and use of available plant/ 5 mation process effectiveness grid/customer data to drive insight and Capa- bilities act in real-time • What capabilities are required to support the functional model? 6 People • How will these be delivered (in house, third party, outsourced, etc.)? • Organization − Organization which is geared for instant, Tech- • What enabling technologies will be needed to deliver services effectively 7 24h, multi-channel response to reactive nology and drive efficiencies? or proactive customer contact Organi- • In which organizational structure will functions and services be delivered? − Clear customer engagement strategy to 8 zation • What roles/responsibilities are required to bring the structure to life? Organi- ensure fully customer-centric organization zation 9 Locations • In which locations will the functions be delivered?

© 2015 Deloitte Consulting GmbH 28 © 2015 Deloitte Consulting GmbH Consulting Deloitte © 2015 will In future environmentchainclassicalvalue future aHowlike?mightutility look Future Currently transform into integrated data driven organizations integrateddatadriventransform into Generation Key operating model design design operating modelKey Operational portfolio management Operational Generation Traditional businessTraditional Trading Trading Long term portfolio management portfolio Long term (investment strategy planning) (investment and Retail T&D (“Big (“Big areas considerations Data Data base Data“/Analytics) Retail management Grid Grid energies New businessNewareas wable wable Rene - Value efficiency services services Energy - added organizations • • • • third parties offeringof value Additional divisionfor development and Management”division activities willbe spun off intoan “Asset will Focus of the new organizationdesigns (consideration of regulatory requirements!) the Data management and centralized and distributedgeneration to Traditional and new business areas have be integrated in the tension between core of the futureoperating model be on operations;investment Implications - addedservices, also for - analysis are at - related 29 Your Contacts at Deloitte

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