E.ON Climate & Renewables An overview of our business activities

Transcription

1 E.ON Climate & Renewables An overview of our business activities Dr. Frank Mastiaux CEO Climate & Renewables London Roadshow February 5th, 2009

2 The renewables business our core beliefs E.ON Climate & Renewables our strategic principles and aspiration - Where we play - How we compete - How we are organized Summary 2

3 Renewables: all signs on green for sustainable material growth of the sector In 2007, 25% of global energy capacity added was renewables By 2020, global renewables installed capacity will have quadrupled Climate concerns From rising awareness to global consensus Renewables A cornerstone of energy policy making Energy security Affordability of energy 3

4 Horses for courses: need to understand technology evolution for optimum portfolio management Global generation capacity (GW) 4,100 GW GW Examples Wind Solar Marine energy % 6,500 GW GW x~4 Global capacity [GW] Long-term feasible potential worldwide [GW] ,000-6,000 50,000-80,000 3,000-6,000 Revenue potential (in 2020) bn bn bn Current technology maturity Solar PV Solar thermal (CSP) Renewables Large Hydro Gas Coal Nuclear Current costs per MWh Source: E.ON; IEA; BTM; California Institute of Technology; World Energy Council; World Energy Assessment; Roland Berger Strategy Consultants 4

5 This growth is shifting shape and size of the renewables industry Utilities now set the pace Consolidation drives intense M&A activities Larger and more sophisticated projects Europe Top 10 Installed wind capacity 2007 [MW] Iberdrola Acciona EDP IPL E.ON B&BW Enel DONG Vattenfall EDF % of utilities purchased at least one renewables company in the last three years Single deals hitting $ 2 bn record mark last year The corporate M&A within the renewables power sector has increased more than tenfold since 2001 Average wind farm size: + 20% in the last four years E.ON wind farm size: + 50% in the last four years More sophisticated projects in development E.ON Alpha Ventus offshore wind farm Source: Emerging Energy Research Source: UNEP, SEFI and NEF 5 5

6 Still a lot of headroom in industrializing the renewables value chain Origination, development & procurement Construction Operations & maintenance e.g. Contractual risk allocation e.g. Process integration e. g. Monitoring Gas turbine Suppliers provide full guarantee (e.g. 100% paid back if total turbine failure) Suppliers meet all grid requirements Proven construction/ installation technology Full monitoring and control Preventive maintenance vs. vs. vs. Wind turbine Suppliers provide low guarantee level Asymmetric contracts (e.g. 50% paid back if total WTG 1 failure) Suppliers consider grid requirements `out of scope Some key offshore construction steps still not tested Random monitoring Reactive maintenance Heavy delays in data transmission and intervention 1. Wind Turbine Generator 6

7 The tight supply conditions for wind turbines will not prevail demand forecasts less clear Market Consensus EC&R View Deep analysis of the market and continuous dialogue with key suppliers? Extensive workshops Established partnerships Due diligence led to the following conclusions: 2010 Demand 2010 Supply 2010 Supply 2010 Demand Major investments increased capacity in critical areas (i.e. gearboxes and towers) Improvements in assembly productivity and purpose-built assembly units Sub-suppliers capacity increasingly available for major components Greater product innovation and substitution Due to financial crisis accelerated consolidation of supply market expected 7

8 E.ON is well positioned to succeed in the renewables market Our market beliefs Sustainable and material growth Shifting shape and size What is needed to succeed Capacity and capability for large-scale projects, political engagement, financial strength and M&A capabilities E.ON positioning E.ON is in top position in a dozen countries Strong financial capacity Track record of managing large transactions Understand technology evolution for optimum portfolio management Boutique to Industrial Technical capabilities and market insights Step change in value chain management In-depth knowledge of energy markets and technologies Strong R&D function and capability JV with Schüco, Lunar Energy and Pelamis Operational excellence in running large-scale energy systems Deep know-how in supply chain management Extensive engineering capabilities Excellent understanding of infrastructure implications (grid management) 8

9 ...and has set up E.ON Climate & Renewables (EC&R) to achieve its ambitious targets EC&R remit Setting strategy, portfolio and the investment plan for renewables 50% E.ON s generation portfolio ~ 90 GW Renewables capacity (GW) 1 Managing all existing and future renewables operations 61 GW ~ 40% Carbon sourcing (JI/CDM) for the entire E.ON Group Driving E.ON's key growth aspirations Spearheading E.ON's activities in emerging markets 35% 34% 11% 18% 2% ~ 30% ~ 11% ~ 7% ~ 12% Renewables Large Hydro Gas Coal Nuclear Excluding Large Hydro (6,019 MW in 2007) E.ON will invest at least 6 bn until 2010 and will decrease own CO2 emissions by 50% until

10 The renewables business our core beliefs E.ON Climate & Renewables our strategic principles and aspiration - Where we play - How we compete - How we are organized Summary 10

11 Continues growth: 2.2 GW installed capacity globally 2,200 EC&R installed capacity (MW) 2,000 1,800 1,600 1,400 1,200 1,000 North America Acquisition of Airtricity Spain Acquisition of E2-I Germany Solar JV with Schüco UK Steven's Croft biomass plant US Roscoe and Champion wind farms Germany Schwandorf biogas plant Nordic Approval for Rödsand 2 wind farm France & Italy Integration of former Endesa assets Portugal Alto de Folgorosa and SEE wind farms US Panther Creek wind farm Global Partnership with Masdar US Panther Creek (Phase II) wind farm US Pyron wind farm Start up activities May June July 2007 Aug. Sept. Oct. Nov. Dec. Jan. Feb Mar. April May June July Aug. Sept. Oct. Nov. Dec. Jan. 2009

12 Strategic principles and aspiration E.ON Climate & Renewables Shaping the next phase of the industry as a leading global player 1. Where we play 2. How we compete 3. How we are organized In principle a global footprint Highly selective in markets Scalable technologies only Scalable already or Scalable in the future Superior value chain management First class assets and locations Collaborative partnerships Up the technology game Uncompromising in safety Flexible and agile organization Centralized key functions support empowered decentralized team Diverse and experienced workforce Strong performance drive Full leverage of E.ON skills and capabilities Key theme: From Boutique to Industrial 12

13 Focus on the most attractive markets: current footprint Installed renewables capacity as of January 2009 (MW)* 1 1, Nordic North America 280 Iberia UK Italy 2, Other Renewables EC&R portfolio (%) EC&R with a very balanced portfolio E&Y Index NA Germany Spain UK Italy France Portugal Germany 57 Europe (others) 2,152 Wind EC&R Ernst & Young All Renewables Index Q * E.ON Equity MW (Figures rounded), excluding large Hydro. Source E.ON 13

14 Focus on the most attractive markets: project pipeline Figures as of January 2009 (MW) 6,000 1,000 2,460 UK 960 Nordic 13,600 5,645 Development Probability of success 20% No absolute showstoppers are known Reasonable chance that key steps concerning permits and grid connection will be successfully taken 1 North America Iberia 530 Probability of success 50% Key steps concerning permits and grid connection have been successfully taken or are about to be successfully taken 1,800 Germany Italy 850 4, Probability of success 90% Ready or nearly ready to build All permits received or about to be received Economic viability proven Appropriate turbines available Construction Europe (others) 2,244 1,774 Operation In addition, there is another 5,000 MW of identified sites (origination) whose likelihood of success cannot yet be evaluated 14

15 Portfolio management: focus on promising technologies 1 Technology roll out First commercial plants Proof-of-concept & technology tracking EC&R technology selection criteria Scalability Growth potential Financial attractiveness Wider E.ON Group interest Closeness to E.ON capabilities Deep dive technology analysis Wind offshore Wind onshore Large biogas / biomethane, Large inland biomass Solar / thin film applications Large coastal biomass Solar / CSP Wave / tidal 15

16 Portfolio management: focus on the most attractive markets 1 Constant monitoring of the most attractive market/technology combinations EC&R portfolio criteria Ensure value creation Be robust to market changes Ensure E.ON license to operate Achieve E.ON Group renewables and carbon targets Deep dive regional analysis Market Attractiveness (MA) Market Size Incentive level Capex Incentive Premium Market Growth Wholesale Price Opex Grid Parity Attractiveness to E.ON EBIT Impact Annualized Full Cost Load Factors Market Driving Capabilities E.ON Market Share in Country E.ON s Capability Technical Expertise EC&R Asset Presence in Region Linkage Effects Technology/ country combinations Market attractive-ness and E.ON capability drivers high low Natural Extension Focus Seed-Invest Opportunistic Trial Watch low 33 Emerging technologies Wind onshore/offshor e ~ 90% Risk high Market Attractiveness Market Attractiveness Market Attractiveness Fossil 2015 Future / Unabated Growth 2020 Market Attractiveness A1 A 1 E.ON s Capability E.ON s Capability 2015 Climate Concern 2020 Market Attractiveness A2 A 2 E.ON s Capability E.ON s Capability 2015 Green World 2020 E.ON s Capability Market Attractiveness A3 A 3 E.ON s Capability Various scenarios forecasts in 2015, and 2020 high Natural Extension Focus Seed-Invest Opportunistic Trial Watch 33 low low Risk high

17 A view on the offshore wind business: mastering high waters Current offshore portfolio Water depth [m] Scroby Sands Blyth Roedsand II Humber Gateway Scarweather Sands Nysted Robin Rigg Beta Baltic London Array Arkona- Becken 20:20 Envelope Alpha Ventus Delta North Sea Amrumbank West Bubble size Distance to shore [km] = 200 MW In operation Under construction Under development Challenges Soil conditions/ foundations O&M access Availability of critical equipment, vessels, logistics, staff Our strategy Opportunities Load factors (up to 50%) Nearly constant energy production Efficient size of projects Measured steps to expand our activities Near-term focus on 20:20 envelope Mid-term objective to extend outside 20:20 envelope (Alpha Ventus pilot) 1 17

18 Cutting edge technology in solar - early engagement in marine energy 1 Solar portfoliosolar Thin film JV with Schüco (Malibu), 100m investment New R&D center and production site with an initial volume of 40 MW p and significant capacity upside Drive cost-effective thin film solutions and access concentrated solar power market Wave and tidal portfolio Active in Marine Energy since 2005 Ventures with Lunar Energy and Pelamis, UK Planning commercial trials of marine energy in 2009 and 2011 Be at the forefront of marine energy Lunar Tidal Turbines Pelamis Wave Converter 18

19 Selective engagement in biomass and biogas/-methane 1 Biomass portfolio Steven's Croft Operating UK's largest dedicated wood burning power station (Steven's Croft 44 MW el ) 300 MW el project pipeline Apply extensive know how in prime locations only Biogas/-methane portfolio Schwandorf 10 years experience in pacesetting biomethane R&D A dozen biogas/biomethane plants across EU World's largest biomethane plant (10 MW th ) in Schwandorf commissioned Spearheading the market development 19

20 JI/CDM: dedicated unit to capture carbon market potential 1 Our market beliefs Carbon regulation will grow more pervasively Offset mechanisms will remain important until at least 2020 JI/CDM will remain the predominant offset mechanism Renewable energy and energy recovery will form the bulk of carbon offset projects The value in carbon offset projects will move upstream What is needed to succeed Government relationships Established regional presence Business development capabilities Technical capabilities Privileged access to mid-/ large-sized industrial companies Large trading volumes JI/CDM project development Our activity set Origination Placement E.ON E.ON own customers consumption Primary sourcing Global markets The total carbon market is estimated at ~ 250 bn over the period 20

21 JI activities will concentrate on Russia and Ukraine CDM initiated in China, South Africa and Southeast Asia 1 Target countries for JI/CDM business and examples of projects in 2008 China biomass plant 400 ktco2/year Priority 1 Priority 2 South Africa gas-fired CHP 230 ktco2/year SE Asia Waste-to-energy projects South Africa wind farm 150 ktco2/year 21

22 Value chain management: procurement and operations and maintenance (O&M) are the most significant value levers Development cost Equipment capex (incl. construction) Land lease O&M 10% 65% 5% 20% Procurement and O&M take about 85% of the total lifecycle cost 2 Total lifecycle cost 100% Focus on procurement and O&M drives return improvements through both costs (efficiency) and revenues (e. g. availability) % = NPV cost item/npv total cost 22

23 From Boutique to Industrial : move procurement to new levels 2 Past Today EC&R way forward Transaction approach Procurement on a project by project basis Framework approach Long-term agreements on several projects Collaborative approach Long-term agreement with commitment to joint value chain improvements + Site output optimization Volume and price certainty Keep benefits of framework approach Various suppliers limit serial failure risk Reduced transaction costs Early supplier involvement/ development optimization - Limited economies of scale Inflation exposure High transaction costs O&M and scale economies Arms-length supplier relationship/ no learning economies Joint approach to design, construction, monitoring Mutually agreed and measurable targets 23

24 Concept of collaborative partnerships 2 Front end to back end joint supply chain improvement A joint approach to design, construction and monitoring of wind parks Both parties working together to improve turbine efficiency and reduce maintenance costs Well-defined program of work Mutually agreed performance measures A unique agreement in the renewables industry 09/09/08 EC&R and Siemens sign a sales purchase agreement Siemens will supply 500 wind turbines with a total capacity of 1,150 MW A global alliance in the renewables industry Complementary resources, skills and experiences Work on a wide range of large scale global renewable projects Shape the next phase of the renewable industry Expand our business into new parts of the world and along the broad chain of renewable technologies 16/10/08 EC&R and Masdar announce global partnership As a first step Masdar has joined the London Array project with a 20% share 24

25 From Boutique to Industrial : step change in O&M 2 SCADA 1 Optimized spare part concept 2011 target availability 98% Scale of projects and harmonized WTG 2 use Spare part pooling CMS 3 and predictive maintenance Widen O&M contracts Access to critical equipment and tools Proper and complete documentation 2011 target O&M cost reduction -10% Optimized share of 3 rd party O&M O&M framework agreement 1: Supervisory Control And Data Acquisition 2: Wind Turbine Generator 3: Condition Monitoring System 25

26 We see more growth potential on top of our current business plan Current business plan At least 6 bn committed for investments in focused on wind onshore Focal countries -US (50%) - Spain (20%) -UK (15%) Cost of capital between that of regulated and unregulated activities; projects to deliver at least 100 bps additional margin More than 300 mn of Adj. EBIT by 2010 Growth potential Renewables capacity (GW) EC&R performance Solid contract top 5 position Scale effects realized (Boutique to Industrial) Deliver double digit earnings growth Carbon price hedge time 26

27 Our organization is set up to drive functional excellence whilst preserving local presence and flexibility 3 Ways of working Single point of accountability replaces complex formal structures Rigorous performance management Business Unit North America Chicago Toronto Austin Business Units in Europe HQ Düsseldorf UK Coventry Iberia Madrid, Lisbon Nordic Malmö Biomethane Essen Central Europe Munich, Potsdam, Milan, Paris, Szczecin Business Units New Markets New Technologies and Emerging Markets JI/CDM, Carbon sourcing Kuala Lumpur Centralized key functions support highly decentralized organization A supportive company culture: highly diverse and informal style Operational functions Procurement Construction Asset strategy and technical excellence Corporate functions e.g. Central team diversity mix Construction Asset Strategy and American Technical Belarussian Excellence Strategy HSSE Finance and business control Peruvian Dutch Danish Irish German British Spanish Swedish French 27

28 Summary Performance with purpose Managing the fundamental energy challenges with a strong commercial drive Pace and consistency Expanding our current footprint significantly over the coming years, selectively in technologies and markets at a global scale Boutique to industrial Uniquely positioned to drive a step change in industry and to take a leadership role excellence in supply, construction and operation driving our performance and costs to grid parity Ambition Shaping the next phase of the industry as a leading player 28

29 Our vision: E.ON - the world s leading power and gas company

30 Backup 30 30

31 Germany Portfolio 31

32 Germany Portfolio * E.ON Equity MW (Figures rounded). Source E.ON 32

33 France Portfolio 33

34 France Portfolio * E.ON Equity MW (Figures rounded). Source E.ON 34

35 Iberia Portfolio 35

36 Iberia Portfolio Spain * E.ON Equity MW (Figures rounded). Source E.ON 36

37 Iberia Portfolio Portugal * E.ON Equity MW (Figures rounded). Source E.ON 37

38 Italy Portfolio 38

39 Italy Portfolio * E.ON Equity MW (Figures rounded). Source E.ON 39

40 Nordic Portfolio * E.ON Equity MW (Figures rounded). Source E.ON 40

41 Nordic Portfolio * E.ON Equity MW (Figures rounded). Source E.ON 41

42 North America Portfolio * E.ON Equity MW (Figures rounded). Source E.ON 42

43 North America Portfolio * E.ON Equity MW (Figures rounded). Source E.ON 43

44 Poland Portfolio 44

45 Poland Portfolio * E.ON Equity MW (Figures rounded). Source E.ON 45

46 UK Portfolio 46

47 UK Portfolio * E.ON Equity MW (Figures rounded). Source E.ON 47

48 A snapshot of the renewables landscape: Some similarities, many differences Wind Solar (PV/ Thermal) Marine energy Biogas/ -methane Biomass Geo-thermal Global capacity [GW] Maturity of technology Solar PV Solar Thermal Annual growth rate until % 24.3% 9.7% 12.2% 4.4% 4.8% Revenue potential (in 2020) EUR bn EUR bn EUR bn EUR bn EUR bn EUR bn Observations Safe capacity bet Offshore as new horizon Step changes in technology possible Large revenues; small GW Very early days Massive theoretical potential Biomethane: great potential Biogas: focus on decentral heat use Location is key for economics Cost-wise close to grid parity Drilling business Heat pumps: Potential for domestic heating Source: E.ON; IEA; Roland Berger Stategy Consultants 48

49 Regional distribution of current asset base in different regulatory regimes Support Scheme Feed-in tariffs EC&R Capacity (MW) % Green certificates Premium % Tax credits 51% Total 2240 Tax Credits Green Certificates Feed-in Tariffs Premium 23% As of January

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56 This presentation may contain forward-looking statements based on current assumptions and forecasts made by E.ON Group management and other information currently available to E.ON. Various known and unknown risks, uncertainties and other factors could lead to material differences between the actual future results, financial situation, development or performance of the company and the estimates given here. E.ON AG does not intend, and does not assume any liability whatsoever, to update these forward-looking statements or to conform them to future events or developments. 56