13 th October, 2006 AUSTRIAN FEDERAL FORESTS ACTIVITIES IN BIOMASS SECTOR

13 th October, 2006 AUSTRIAN FEDERAL FORESTS ACTIVITIES IN BIOMASS SECTOR

AUSTRIAN FEDERAL FORESTS (ÖBf AG) > Joint Stock Company since 1997: 150 Mio. capital stock > Republic Austria as sole shareholder > Forest areas owned by the Republic of Austria, usufruct and management by the ÖBf AG > 517.000 ha woodland, 355.500 ha commercial forests,15% of Austria s forests, sustainable annual yield 1.6 mio m³

AUSTRIAN FEDERAL FORESTS MAINSTAYS Sustainability model Forest/timber Supply with timber Hunting/fishing Forestry technology Real estate Rentals/tourism Water/resources Renewable energies Services Nature-area managmt. Consulting Domestic services Services abroad forest management units profit centres/ holdings abroad staff resources technology

AUSTRIAN FEDERAL FORESTS BIOMASS ACTIVITIES > SWH GmbH (Strom und Wärme aus Holz / Electricity and Head from Wood Ltd.) Joint venture construction and operation of biomass heating plants and biomass power plants 50% ÖBf AG - 50% Wärmebetriebe GmbH > Wien Energie Bundesforste Biomasse Kraftwerk GmbH / Vienna Energy Austrian Federal Forests Biomass Power Plant Ltd. Joint venture construction and operation of biomass power plant Simmering max. output: 37 MW th and 24,5 MW el (annual production: 94 GWh th and 160 GWh el ) 33,3% ÖBf AG 33,3% Wienstrom Ltd. 33,3% Fernwärme Wien GmbH

ÖBf AG / SWH BIOMASS ACTIVITIES KEY FIGURES > Market leader in construction and operation of biomass heating plants and biomass power plants in Austria > 9 plants in operation 94 GWh th, 9,2 GWh el, 187.000 loose m³ annual demand > 9 plants under construction 397 GWh th, 246 GWh el, 1.377.000 loose m³ annual demand > 8 plants planned 78 GWh th, 15 GWh el, 196.000 loose m³ annual demand

ÖBf AG / SWH BIOMASS PLANTS LOCATIONS

SPECIFIC ENERGY CONTENT fuel 1 l fuel oil extra light 1 l fuel oil light 1 kg anthracite 1 kg coke 1 kg lignite 1 m³ compressed natural gas (CNG) 1 m³ liquefied gas (propan) 1 kwh electricity 1 kg wood (w=35%) calorific value (MJ) 36,17 MJ/l 38,6 MJ/l 27,6 MJ/kg 29,5 MJ/kg 20,2 MJ/kg 36 MJ/m³ 46,3 MJ/kg 3,6 MJ 11,5 Mj/kg kwh 10,00 kwh/l 10,70 kwh/l 7,67 kwh/kg 8,20 kwh/kg 5,60 kwh/kg 10,00 kwh/m³ 12,87 kwh/kg 1,00 kwh 3,20 kwh/kg 3,1 kg wood (w=35%) ~ 1 l oil 1.000 l fuel oil can be substitued by: 5-6 m³ hard wood (broadleaves) 7-8 m³ soft wood (conifers) ca. 10-15 m³ of hoed/chipped wood

ARGUMENTS PRO BIOMASS UTILIZATION > CO 2 neutral energy generation > contribution to global reduction of CO 2 emissions according to Kyoto protocol (1kW installed biomass capacity ~ 1 t CO 2 emission reduction per year) > renewable source of energy > guaranteed supply due to sustainable management > regional added value secures employment opportunities in rural areas > independence from (imported) fossil fuels > In Europe: cheapest option for heat production

BIOMASS UTILIZATION PRODUCTS OFFERED BY SWH > local and district supply for heating systems and hot water processing system components: combustion unit, boiler or central heat exchanger, distribution network, end-user heat exchangers

BIOMASS UTILIZATION PRODUCTS OFFERED BY SWH > process heat (hot water/steam) for industrial plants system components: combustion unit, boiler or central heat exchanger distribution network, application heat exchangers

BIOMASS UTILIZATION PRODUCTS OFFERED BY SWH > environmentally friendly electricity co-generated in combined heating plants (CHP) to be fed into the grid system components: combustion unit, steam boiler, steam turbine, generator, central heat exchanger, power and heat distribution network, end-user heat exchangers

MODELS FOR BIOMASS PLANTS FINANCING AND OPERATIONS No private sector participation municipality finances construction and operates the facility advantages: local access to credits cheapest energy price for end-users disadvantages: municipality needs funds for investments no economy of scale lack of qualified staff Private sector participation private investor finances construction and operates the facility advantages: municipality does not need funds for investments specialized company economy of scale disadvantages: end user price higher

DETERMINANTS for the END USER PRICE of HEAT/ENERGY from BIOMASS Marketing-mix (4Ps) > Product (quality, service, technology/innovation) > Price (price structure biomass, price differentiation, conditions, securing) > Place (distribution/distribution channels) > Promotion (advertising, subsidies, markets)

PRICE COMPONENTS for HEAT from BIOMASS End user price consists of: > consumption related element (price of biomass) 1 > capital related elements (investment costs, costs of capital, subsidies) 2 > operations related elements (staff and operations costs) 3 > return on investment 4 Small plant: 4 3 2 Large plant: 4 3 2 1 1

PRICE STRUCTURE for HEAT from BIOMASS 2 basic input parameters > Amount of heat supplied and measured [kwh] > Connection capacity requested by client Price components > nonrecurring: - contribution towards building costs [ /kw] - connection fee for the direct costs of a house connection from distribution network up to user [ /kw] > recurring: - price for amount of energy supplied and measured [ /MWh] working price - connection fee depending on installed capacity [ /kw] capacity price - meter rental [ /month]

RECURRING ENERGY COSTS for the CUSTOMER total costs = working price + capacity price + meter rental > working price = f(amount of energy used per time period) [ /y] > capacity price = f(installed capacity) [ /y] > meter rental = f(installed capacity) [ /y] meter rental capacity price working price

REQUIREMENTS to ATTRACT a PRIVATE INVESTOR > Long term availability of biomass > Guaranteed minimal heat demand for contractual period (min. 15 years) > Contractually agreed upon price for energy supplied plus agreed formula for price adjustments > Legal security > Favorable regulatory framework

P x G = x HZ x STx Ax P0 a + b + c + d G 0 HZ 0 ST 0 A 0 EXAMPLE for PRICE ADJUSTMENT P x G = x HZ x STx Ax P0 a + b + c + d G0 HZ0 ST0 A0 P x P 0 G x G 0 HZ x HZ 0 ST x ST 0 A x A 0 calculated price for heat supply in year x price for heat supply at time of contract signature price for compressed natural gas in year x price for compressed natural gas at time of contract signature fuel wood price index in year x fuel wood price index at time of contract signature price for electric energy in year x price for electric energy at time of contract signature salary index in year x salary index at time of contract signature a 30% compressed natural gas => 0,3 b 30% fuel wood index => 0,3 c 20% electricity price => 0,2 d 20% salary index => 0,2

ADDITIONAL COSTS/REQUIREMENTS for END USERS > Heat exchange unit (~ 1.500,-- for an average household) > House needs to be equipped with a central heating system for heat and warm water distribution (~ 2.800)

DEVELOPMENT of BIOMASS CONSUMPTION in AUSTRIA

DEVELOPMENT of BIOMASS PRICES in AUSTRIA 2004 2005 2006 2007 ~12 /m³ ~14 /m³ ~16 /m³?

DEVELOPMENT of ÖBf BIOMASS SALES 2004 2005 2006 2007 31.310 m³ 50.400 m³ 550.000 m³ 1,2 Mio m³

STRATEGIC POLICY - KYOTO PROTOCOL Policy for climate protection. Between 2008 and 2012 average reduction of greenhouse gases by 5,2% compared to level of 1990 (8% in EU) Each signatory country shall achieve its quantified emission limitation and reduction commitments > through implementation and further development of appropriate measures > through cooperation with other countries to enhance the individual and combined effectiveness of their policies and measures

STRATEGIC POLICY - KYOTO PROTOCOL Emission trade: Annex B country A emission rights acc. protocol 100 observed emissions 80 20 20 freely tradable certificates! A sells 20 certificates to B Annex B country B emission rights acc. protocol 120 observed emissions 140-20 20 certificates deficit! => balancing through purchase

STRATEGIC POLICY - KYOTO PROTOCOL Flexible mechanisms: > Joint Implementation (JI) 2 industrialized countries reduce emissions through a joint project in one country, the country not benefiting from the measure receives the emission reduction units (ERUs) > Clean Development Mechanism (CDM) Industrialized country finances technologies for climate protection in developing country or a country in transition. Industrialized country receives part of the ERUs.

STRATEGIC POLICY - KYOTO PROTOCOL Joint Implementation (JI): > small scale fuel switch project ~ 500 kw => ~ 500 t CO 2 ERUs > 5 / t CO 2 ERU => additional return 12.500 (2008-2012) > JI project cycle management (baseline study, validation + verification) costs ~ 175.000 => umbrella projects

STRATEGIC POLICY EUROPEAN UNION > EC White paper: increase energy supplied from biomass from 3,3% in 1995 to 8,3 % in 2010 > EC action plan: increase biomass utilization from actual 69 mtoe use by 189 mtoe until 2010, 239 mtoe until 2020 and 316 mtoe until 2030 > Directive 2004/101/EC scheme for greenhouse gas emission allowance trading within the Community > Instrument for Structural Policies for Pre-Accession (ISPA) for transport and environmental infrastructure > Special Program for Agriculture and Rural Development (SAPARD) structural and rural development projects

Thank you Österreichische Bundesforste AG Consulting Pummergasse 10-12 A-3002 Purkersdorf AUSTRIA Tel.: +43(0)2231/600-551 Fax: +43(0)2231/600-559 mail: consulting@bundesforste.at www.forstconsult.at SWH-Strom und Wärme aus Holz GmbH Pummergasse 10-12 A-3002 Purkersdorf AUSTRIA Tel.: +43(0)2231/600-601 Fax: +43(0)2231/600-609 mail: office@swh.co.at www.swh.co.at