The offshore wind challenge at RWE Innogy Hans Bünting Chief Executive Officer, RWE Innogy Liverpool, 12 September 2012 Forward Looking Statement This presentation contains certain forward-looking statements within the meaning of the US federal securities laws. Especially all of the following statements: Projections of revenues, income, earnings per share, capital expenditures, dividends, capital structure or other financial items; Statements of plans or objectives for future operations or of future competitive position; Expectations of future economic performance; and Statements of assumptions underlying several of the foregoing types of statements are forward-looking statements. Also words such as “anticipate”, “believe”, “estimate”, “intend”, “may”, “will”, “expect”, “plan”, “project” “should” and similar expressions are intended to identify forward-looking statements. The forward-looking statements reflect the judgement of RWE’s management based on factors currently known to it. 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RWE Offshore Capital Market Day | 12 September 2012 RWE is very active in the European offshore wind market … Power plants under development Power plants under construction Power plants in operation North Hoyle, UK, 60 MW: Innogy Nordsee Ost, GER, 295MW Fully commissioned in 2004 Nordsee 1, GER, 996MW Seven years of experience in operation and maintenance Galloper, UK, 500MW Gwynt y Môr, UK, 576MW Triton Rhyl Flats, UK, 90 MW: Knoll, UK, Fully commissioned in 2009 1200MW Second of a total three wind farms to be installed off the coast of Wales Atlantic Array, UK, 1500MW Greater Gabbard, UK, 504MW Tromp Binnen, NL, 300MW Thornton Bank I, B, 30 MW: Fully commissioned in 2009 Dogger Bank, RWE‘s first offshore wind farm outside Thornton Bank II+III, B, 295MW UK, 9000MW the UK RWE Offshore Capital Market Day | 12 September 2012 … with projects from Liverpool Bay to the German bight Development Construction Dogger Bank5 (9,000 MW) Operation North Hoyle1 (60 MW) Nordsee Ost (295 MW) Rhyl Flats (90 MW) Gwynt y Môr4 (576 MW) Nordsee 1 (960 MW) Triton Knoll (1,200 MW) Greater Gabbard3 (504 MW) Tromp Binnen (300 MW) 3 Galloper (500 MW) Thornton Bank 1 (30 MW)2 Thornton Bank 2&3 (295 MW) Atlantic Array (1,500 MW) 1 RWE Innogy (33%), owned by Zephyr Investments Ltd. 2 RWE Innogy (27%), phase 1 (30 MW) in operation since 2009; Phase 2 und 3 (295 MW) under construction 3 RWE Innogy (50%), SSE (50%) 4 RWE Innogy (60%), Stadtwerke Munich (30%) and Siemens (10%) 5 Development through Forewind-Consortium (RWE Innogy, SSE, Statoil, Statkraft) RWE Offshore Capital Market Day | 12 September 2012 RWE‘s approach: Cover the entire project life cycle Operation & Development Construction Maintenance several GWs at various stages two offshore jack-up vessels three wind parks operational Covering the entire project life cycle ensures that construction and especially O&M requirements are already considered in earlier project phases Close collaboration between employees of all three project phases also allows for lessons learned to be quickly adopted for future projects RWE Offshore Capital Market Day | 12 September 2012 What it takes to build an offshore wind park RWE Offshore Capital Market Day | 12 September 2012 From near shore to far offshore – RWE’s stepwise approach reduces execution risks Dogger Bank Gwynt y Môr Greater Gabbard Nordsee Ost 2017+ North Hoyle Rhyl Flats 2012 2010 Thornton Bank 2012 250 x 6.0MW+ Pipeline 2003 2009 160 x 3.6MW 140 x 3.6MW 2009 48 x 6.15MW 18-50m depth 12-28m depth Under Construction 30 x 2.0MW 25 x 3.6MW 25-30m depth 6 x 5.0MW 22-26m depth 7-11m depth 10-15m depth 12-25m depth Operational - Monopile -Gravity - Jacket North Hoyle – 7km Rhyl Flats – 8km Gwynt Y Môr – 13km Greater Gabbard – 25km Thornton Bank – 30km Nordsee Ost – 45km1 Dogger Bank – 125km 1 Off the Island of Helgioland RWE Offshore Capital Market Day | 12 September 2012 Offshore logistics are key for project success – a typical schematic operational risk profile risk t Bid & Detailed Manu- Commis- Operation & Decommis- ConsentConsent FEEDFEED TenderTender Detailed Manufac- InstallationInstallation Commis- Operation & Feasibility Design facturing sioning Maintenance sioning Design turing sioning Maintenance FID RWE Offshore Capital Market Day | 12 September 2012 Turbines are the biggest element of the capital expenditures for a typical Offshore wind farm Project lifecycle split, in % of total spent Capex split offshore wind farm1 in % of total capex 100% 90% 80% 70% 60% 50% 40% 30% 50 % over 20% 2-4 years 10% 0% Turbine Foundations Grid & Electrical Other 45 % over 20 years 5 % over +5 years Development Construction O&M 1 UK example and therefore includes grid connection RWE Offshore Capital Market Day | 12 September 2012 Historically understated capex estimates: Strong necessity for cost reductions, but where do they come from? € million per MW, 2011 real prices 4.5 Alpha Ventus London Array Bubble size equivalent to Sheringham Shoal project capacity, e.g. 100 MW Thornton Bank II/III 4.0 Greater Gabbard Gwynt y Môr RWE Innogy projects Nordsee Ost 3.5 Thanet Rhyl Flats Innogy Nordsee 1 Gunfleet Phase II Walney 3.0 Robin Rigg Horns Rev II Princess Amalia 2.5 North Hoyle Gunfleet Phase I EWEA Offshore CAPEX assumption Horns Rev Nysted Egmond an Zee Kentish Flats 2.0 Bockstigen Blyth Utgrunden Lillgrund Samso 1.5 Scroby Sands Irene Vorrink Middlegrunden Yttre Stengrunden 1.0 EU-Commission Offshore CAPEX assumption 0.5 1990 1995 2000 2005 2010 2015 2020 2025 2030 year (main contracts signed) Source: EC: Renewable Energy Roadmap 2007; EWEA: ‘Pure Power’ 2011 Costs: renewableUK (formerly BWEA) 2009, RWE Innogy analysis RWE Offshore Capital Market Day | 12 September 2012 UK projects including costs for grid connection Cost reductions to be expected for: wind turbines > Increasing turbine sizes (> 6 MW) reduce costs per installed MW > More intensive competition among turbine manufacturers (Siemens, REpower, Vestas, Gamesa, Alstom) > Technological improvements (e.g. direct drive technology) increase turbine reliability and reduce unplanned maintenance activities RWE Offshore Capital Market Day | 12 September 2012 Cost reductions to be expected for: foundations > Serial production of foundations > Optimised and standardised design for foundation types (monopiles, jackets, gravity foundations) > Standardisation of European norms, standards and regulation RWE Offshore Capital Market Day | 12 September 2012 Cost reductions to be expected for: O&M > Increased O&M in-house activities will partly or fully replace O&M contracts with turbine manufacturers > Geographical clusters for offshore wind farms (e.g. off the coast of North Wales) create synergies > Increased reliability of components and rated power of turbines reduces number of arduous and expensive offshore service activities RWE Offshore Capital Market Day | 12 September 2012 Germany & UK – The main Offshore markets Market growth expectation in MW UK GER 13,000 + 1,200 MW 10,000 + 1,100 MW per year per year 2,200 220 2011 20201 2011 20201 Support scheme mechanism + Higher