Valuation & Capital Structure Director Power & Renewable Energy Lars Ove Skorpen, Pareto Securities AS January 31, 2013 Tlf: +47 22 87 87 16 E-mail: lars.ove.skorpen@paretosec.com
Pareto is consistently part of the top deals in both equity and debt Equity: Top 10 deals in Norway Bonds: Top 10 deals in Norway NOKbn NAUR Dockwise SpB1 SR REC Höegh LNG DETNOR SpB1 SMN Songa Offshore Selvaag Bolig NORECO 0.7 0.7 0.6 0.4 1.5 1.5 1.3 1.2 1.0 1.9 2012 NOKbn OSX-3 NAUR Pacific Drilling Stolt Nielsen Aker Solutions Deep Drilling Oro Negro Golar LNG Seadrill Floatel 1.5 1.5 1.4 1.3 1.3 1.3 1.2 1.8 2.1 2012 3.0 Aker Drilling Sevan Drilling Standard Drilling Archer Höegh LNG DOF Panoro Energy DETNOR SpB1 NN Prospector 1.1 0.9 0.7 0.6 0.6 0.5 0.5 0.4 2.0 2011 4.0 Ocean Rig Stolt-Nielsen Aker Drilling FOE Songa DNO BOA Jasper PA Resources Chloe Marine 1.6 1.5 1.4 1.4 1.3 1.2 0.9 0.9 0.8 2011 2.8 Source: OSE; Pareto 2
M&A proven capabilities within renewable energy M&A Hydro power Sale of E-CO s 30% stake in EB Kraftproduksjon Financial Advisor to E-Co Energi AS Sale of 78% of Fjellkraft Financial Advisor to Fjellkraft AS Sale of AS Tyssefaldene and power contract (20 TWh) Financial Advisor to Boliden AB Acquistions of Norsk Hydros s stake in SKS Produksjon AS Financial Advisor to SKS AS Purchase of 20% of E-CO Vannkraft Financial Advisor to Oslo kommune Sale of 7 power plants Financial Advisor to Orkla ASA Top-ranked M&A advisor within the hydro power sector M&A - Utilities Acquisition of 100% of the shares in Trondheim Energi Nett TrønderEnergi AS Merger of Malvik Everk and TrønderEnergi Nett Malvik municipality Sale of shares in the company several municipal owners Share sale Gjøvik and Østre Toten kommuner Sale of 49% of the company several municipal owners Merger of HEAS, HrE and LGE. Merger with Hedemark Energi (distr. and retail) Eidsiva Best-in-class execution within the utility sector M&A - Wind Sale of Arctic Wind to Finnmark Kraft Statoil ASA Sale of Sarepta Energi (50%) to TrønderEnergi Kraft Statoil ASA Sale of offshore wind project Havsul I to Vestavind Havgul AS Sale of smaller wind power parks and projects Statoil ASA Valuation of Vardar s wind power parks and projects in the Baltic States Vardar Valuation of Agder Energi s wind power portfolio Agder Energi Best knowledge within the wind sector M&A Other renewable/ infrastructurere Merger of Nettpartner and EB Energimontasje Nettpartner and Fredrikstad Energi Acquisition of Viken Fjernvarme AS from the City of Oslo Financial Advisor to Hafslund ASA Merger with Hafslund the City of Oslo Sale of Hafslund s fiber network activities to EQT Financial Advisor to Hafslund ASA Sale of technology assets from OCAS to Vestas OCAS Sale of Fortum s ownershare (24,5%) Fortum Experience to related renewable and industry sectors
Critical assumptions in valuation of a wind park Site characteristics Other Wind speed (m/s) and full load hours Size of park & expansion possibilities Grid (central & regional) Access to park (24/7 and seasons) Climate (temperature, snow, icing, extreme wind, saltcontent) Geology and topography WACC Terminal value Economic lifetime 4
Economic Lifetime of a windpark
Critical assumptions in valuation of a wind park Capex Turbine Infrastructure costs Roads & internal roads Quay (length, depth, storage capability and load capacity) Grid (investment contribution?) Transformers & cabling Opex Service agreement with turbine supplier Feed-in cost and transmission loss Land lease & property tax Power price Power price Price area Seasonality (day/night and season) Price of ElCert 6
Low spot price in 2012 - also in longer perspective øre/kwh 45 42.5 40 39.1 36.9 36.7 35 30 29.1 30.6 25 24.2 23.5 22.4 23.4 20 18.6 20.1 15 10 11.2 10.3 5 0 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 7
However the combined price of approx. 50 øre/kwh is challenging with regard to building new capacity Øre / kwh 100 90 80 70 64,7 63,7 2012 60 50 56,7 52,7 49,8 40 37,8 30 20 10 0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Kraftpris Powerprice Elsertifikat ElCert price Total Tot. pris price Årlig Average gj.snitt price og gj.snitt av forwardkursene 8
Long run marginal cost for onshore wind according to Arise Windpower (SEK 63 /MWh) 9
Valuation case ElCert price ElCert prices + inflation 3200 full load hours All in CAPEX NOK 11m/MW CAPEX Assumed 17 øre/kwh OPEX Economical life 20 years assumed No terminal value 10
Source and use of capital Banks Many are cautious and scaling down their balance sheet Good relations to several banks important Shop around Bonds Increased interest in bonds and new issuers are entering the market Well functioning market Construction risk an issue Utility owners and dividend Owners will have to adjust their view on future dividends Utilities will have to prioritize hard between various projects Investments 11
Falling equity ratio for Norwegian utilities together with lower power prices, creates challenges in financing wind parks Equity % historical development 12
Capital structure Høg Jæren Uses m Sources m CAPEX 112 Enova grant 62 Development costs 15 Debt 52 Financing costs 4 Equity 24 Contingency 4 Debt Service Reserve 3 Total Uses 138 Total Sources 138 Financing provided by: 50% 50%
Covenants
Summary - valuation Norway vs. Sweden Norway Wind speed Investment contribution Area prices Property tax Permitting process Interest rate Depreciation Taxes CAPEX pr MW Feed-in cost ElCert duration Grid access > > < < < < < < < Sweden Wind speed Investment contribution Area prices Property tax Permitting process Interest rate Depreciation Taxes CAPEX pr MW Feed-in cost ElCert duration Grid access 15
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