CRITICAL SUCCESS FACTORS FOR ELECTRICITY GENERATION PROJECTS

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1 17 th INTERNATIONAL CONFERENCE & EXHIBITION ON LIQUEFIED NATURAL GAS ( 17) 17 th INTERNATIONAL CONFERENCE & EXHIBITION ON LIQUEFIED NATURAL GAS ( 17) CRITICAL SUCCESS FACTORS FOR ELECTRICITY GENERATION PROJECTS <Title BASED of Presentation> ON <Title of Presentation> By: By: <Author Name>, <Organization> By: Pablo Quiroga, Repsol-Gas <Date> Natural Enrique Dameno, Repsol April 18 th, 2013

GENERATION PROJECTS <Title BASED of Presentation> ON <Title of Presentation> By: By: <Author

2 Content 1. Introduction and purpose 2. Infrastructure 3. Business models and challenges 4. market: competition, hurdles, regulation 5. Conclusions BBG regasification terminal and BBE CCGT power plant. Bilbao 2 V3

Power Capacity (GW) 1 Introduction and purpose Energy is one of the key factors in economic development Oil prices have driven power generation costs extremely high in many markets Natural gas is

3 Power Capacity (GW) 1 Introduction and purpose Energy is one of the key factors in economic development Oil prices have driven power generation costs extremely high in many markets Natural gas is seen as one solution to reduce the energy bill World Power Plants Capacity by fuel type Marine CSP Solar PV Geothermal Wind Bioenergy Hydro Nuclear Gas Oil Coal Not all projects manage to fulfil their objectives in time and within budget Source: World Energy Outlook IEA CSP: Concentrating Solar Power Solar PV: Solar Photovoltaics This presentation outlines the challenges that the sponsor of an power generation project faces, the ways to overcome them and be successful 3

Bioenergy Hydro Nuclear Gas Oil Coal Not all projects manage to fulfil their objectives in time and within budget - 2010 2015 2020 2025 2030 2035 Source: World Energy Outlook 2012.

4 2 Infrastructure. The facilities Discharge and reception Storage Regasification Electricity generation Transformation and Delivery to the network Terminal Electric power plant 4 ECOELECTRICA regasification terminal and power plant. Puerto Rico

5 2 regasification terminal Typology Onshore and Offshore Onshore 81 Terminals Sendout capacity range:1 to 30 Bcma Storage: 30,000 to 2,700,000 m 3 1 or 2 berthing points Offshore 14 Terminals Regasification vessel 11 Terminals GBS 1 Terminal Sendout capacity: 8 Bcma Storage: 250,000 m 3 1 berthing point Dock sendout 8 Terminals Sendout capacity range:1 to 4 Bcma Storage: 125,000 to 150,000 m 3 0 or 1 additional berthing point Buoy sendout 3 Terminals Sendout capacity :4 Bcma Storage: 138,000 to 150,000 m 3 No berthing point Onshore (Canaport terminal) Buoy sendout (Neptune terminal) Dock sendout (Bahia Blanca GasPort) GBS (Adriatic terminal) Mixed configurations 5 Note: Typical ranges Vessel storage and onshore regasification 2 Terminal Sendout capacity: 2 Bcma Storage: 162,000 m 3 1 berthing point Mixed configuration (GNL Mejillones)

150,000 m 3 0 or 1 additional berthing point Buoy sendout 3 Terminals Sendout capacity :4 Bcma Storage: 138,000 to 150,000 m 3 No berthing point Onshore (Canaport terminal) Buoy sendout (Neptune

6 2 Power Generation Power plants typology Steam cycle Potential fuels: solid (coal, wood, waste), liquid (oil), gas (LPG, natural gal) Efficiency: 25% - 45% Steam cycle power plant (Narcea Power Plant. Spain) Gas turbine Potential fuels: liquid (diesel oil), gas (LPG, natural gas) Reciprocating engine Potential fuels: liquid (oil), gas (LPG, natural gas) Open cycle gas turbine Potential fuels: liquid (diesel oil), gas (LPG, natural gas) Efficiency: 30% - 35% Combined cycle gas turbine Potential fuels: liquid (diesel oil), gas (LPG, natural gas) Efficiency: 45% - 55% Reciprocating engine without heat recovery Potential fuels: liquid (oil), gas (LPG, natural gas) Efficiency: 45% - 55% Combined cycle gas turbine (Barcelona Port Power Plant. Spain) Reciprocating engines power plant (Iberafrica Power Plant. Kenya) 6 Reciprocating engine with heat recovery Potential fuels: liquid (oil), gas (LPG, natural gas) Efficiency: 50% - 60%

liquid (diesel oil), gas (LPG, natural gas) Efficiency: 30% - 35% Combined cycle gas turbine Potential fuels: liquid (diesel oil), gas (LPG, natural gas) Efficiency: 45% - 55% Reciprocating engine

7 3 Business models Model A Supplier Flow Terminal Gas Flow Power Plant Electricity Electricity Consumers EPC Contractor 1 Construction Construction EPC Contractor 2 SPA EPC Contract Project Company EPC Contract PPA Lenders EPC: Engineering, Procurement & Construction SPA: Sales & Purchase Agreement PPA: Power Purchase Agreement 7

SPA EPC Contract Project Company EPC Contract PPA Lenders EPC: Engineering,

8 3 Business models Model B Supplier Flow Terminal Gas Flow Power Plant Electricity Electricity Consumers Lenders BOO Company Services Contract SPA Guarantees Project Company PPA BOO: Build, Own & Operate SPA: Sales & Purchase Agreement PPA: Power Purchase Agreement 8

Services Contract SPA Guarantees Project Company PPA BOO: Build,

9 3 Business models Model C Supplier Flow Terminal Gas Flow Power Plant Electricity Electricity Consumers BOO Company Services Contract Construction EPC Contractor 2 SPA Lenders Project Company EPC Contract PPA BOO: Build, Own & Operate EPC: Engineering, Procurement & Construction SPA: Sales & Purchase Agreement PPA: Power Purchase Agreement 9

Lenders Project Company EPC Contract PPA BOO: Build, Own & Operate EPC: Engineering,

10 3 Business models Model D Supplier Flow Terminal Gas Flow Power Plant Electricity Electricity Consumers BOO Company 1 Lenders BOO Company 1 SPA TSA Guarantees Project Company PGSA PPA BOO: Build, Own & Operate TSA: Terminal Services Agreement PGSA: Power Generation Services Agreement SPA: Sales & Purchase Agreement PPA: Power Purchase Agreement 10

Company PGSA PPA BOO: Build, Own & Operate TSA: Terminal Services Agreement PGSA: Power

11 3 Business models Tolling Model Supplier Flow Terminal Gas Flow Power Plant Electricity Electricity Consumers Lenders Project Company Services Contract Guarantees SPA SPA: Sales & Purchase Agreement 11

3 Business challenges Power Market Market Power demand Uses of electricity Seasonality Medium to short term Reliability Conditions precedent Price issues PPA Spot

12 3 Business challenges Power Market Market Power demand Uses of electricity Seasonality Medium to short term Reliability Conditions precedent Price issues PPA Spot power market with no firm commitment Global market Steady production Take-or-pay Medium to long term Guaranties Conditions precedent Price issues SPA Reduced spot market 12

Spot power market with no firm commitment Global market Steady production

13 3 Power generation economic model Fixed costs Variable costs Amortization Fuel Financial costs Emissions (CO 2 ) Fixed taxes and fees Income Tax Fixed Operation and Maintenance Variable Operation and Maintenance Fuels historic prices Reference index (RI) historic prices Current electric system Fuels historic prices estimation Price Fuel1 = SLP 1 * RI + K 1 Price Fuel2 = SLP 2 * RI + K 2 Price FuelN = SLP N * RI + K N 13 Costs of electricity generation Costs of electricity generation with gas Other costs: regasification, gas transportation, etc. Current averaged generation costs Ceiling price for gas Ceiling price for Cost Electricity = SLP E * RI + K E Ceiling price Gas = SLP G * RI + K G Ceiling price = SLP * RI + K

Price Fuel2 = SLP 2 * RI + K 2 Price FuelN = SLP N * RI + K N 13 Costs of electricity generation Costs of electricity generation with gas Other costs: regasification, gas

14 4 market Commercial & Markets Permitting & Authorities Organization & Structure Real life markets are very complex structures Engineering & Technology Small-Mid Regas Scale and Power Regas Generation Project Project Finance Risks Geopolitics 14 Energy Markets Environment Competitors

Technology Small-Mid Regas Scale and Power Regas Generation Project

15 Project 1 Project 2 Project 3 Project 4 Project 5 Project 6 Project 7 Project 8 Project 9 Project 10 Project 11 Project 12 Project 13 Project 14 Project 15 Project 16 Project 17 5 Business challenges Financing Access to supply Commercial aspects Gas regulation Environment Electricity regulation technology Power generation technology Least Important Most Important 15

Business challenges Financing Access to supply Commercial aspects Gas regulation

16 5 Wrap up is available only to those able to compete with worldwide demand price is a significant issue. Economic models ought to estimate if will be competitive if introduced in an existing power market Project sponsors must overcome many uncertainties. Risk mitigation is mandatory, both for the power generation business as well as for the supply business If you want different results, do not do the same things. - Albert Einstein - 16

sponsors must overcome many uncertainties.

17 Thank you for your kind attention Pablo Quiroga L. REPSOL GAS NATURAL Business Development & Technology Manager 17

CRITICAL SUCCESS FACTORS FOR ELECTRICITY GENERATION PROJECTS BASED ON LNG

CRITICAL SUCCESS FACTORS FOR ELECTRICITY GENERATION PROJECTS BASED ON Enrique Dameno Supply and Sales Director edamenog@repsol.com Pablo Quiroga Lopez Business Development and Technology Manager Repsol