Citigroup Reverse Roadshow October 27, 2009 - rwe.com · Citigroup reverse roadshow | October 27,...
Transcript of Citigroup Reverse Roadshow October 27, 2009 - rwe.com · Citigroup reverse roadshow | October 27,...
Citigroup Reverse Roadshow | October 27, 2009
Citigroup Reverse Roadshow October 27, 2009Market uncertainties: not a threat but a chance Dr. Bernhard Günther, CFO, RWE Supply & Trading GmbH
RWE’s portfolio management: being prepared for volatile marketsDr. Thomas Glimpel, Head of Portfolio Management, RWE AG
Offshore Wind EnergyProf. Dr. Martin Skiba, Head of Offshore Wind, RWE Innogy
2Citigroup reverse roadshow | October 27, 2009
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; andStatements 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. No assurances can be given that these forward-looking statements will prove accurate and correct, or that anticipated, projected future results will be achieved. All forward-looking statements are subject to various risks and uncertainties that could cause actual results to differ materially from expectations. Such risks and uncertainties include, but are not limited to, changes in general economic and social environment, business, political and legal conditions, fluctuating currency exchange rates and interest rates, price and sales risks associated with a market environment in the throes of deregulation and subject to intense competition, changes in the price and availability of raw materials, risks associated with energy trading (e.g. risks of loss in the case of unexpected, extreme market price fluctuations and credit risks resulting in the event that trading partners do not meet their contractual obligations), actions by competitors, application of new or changed accounting standards or other government agency regulations, changes in, or the failure to comply with, laws or regulations, particularly those affecting the environment and water quality (e.g. introduction of a price regulation system for the use of power grid, creating a regulation agency for electricity and gas or introduction of trading in greenhouse gas emissions), changing governmental policies and regulatory actions with respect to the acquisition, disposal, depreciation and amortization of assets and facilities, operation and construction of plant facilities, production disruption or interruption due to accidents or other unforeseen events, delays in the construction of facilities, the inability to obtain or to obtain on acceptable terms necessary regulatory approvals regarding future transactions, the inability to integrate successfully new companies within the RWE Group to realise synergies from such integration and finally potential liability for remedial actions under existing or future environmental regulations and potential liability resulting from pending or future litigation. Any forward- looking statement speaks only as of the date on which it is made. RWE neither intends to nor assumes any obligation to update these forward-looking statements. For additional information regarding risks, investors are referred to RWE’s latest annual report and to other most recent reports filed with Frankfurt Stock Exchange or SWX Swiss Exchange and to the material furnished to the US Securities and Exchange Commission by RWE.
Forward Looking Statement
Citigroup Reverse Roadshow | October 27, 2009
Market uncertainties: not a threat but a chance!
Dr. Bernhard GüntherCFO, RWE Supply & Trading GmbH
4Citigroup reverse roadshow | October 27, 2009
“The future is uncertain… but this uncertainty is at the very
heart of human creativity.”Ilya Prigogine (25 January 1917 – 28 May 2003)*
* Ilya Prigogine was a Russian-born Belgian chemist and Nobel Laureate noted for his work on dissipative structures, complex systems and irreversibility
5Citigroup reverse roadshow | October 27, 2009
Over the last few months we have seen a significant drop in average spot prices…
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… while price volatility keeps increasing both short term…
Growing proportion of renewables leads to higher price volatility. October 2008 to October 2009: 60 hours with negative prices; highest price reached + € 500/MWh, lowest - € 500/MWh
Source: EEX spot prices
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… and long term
1 German base load electricity forward for the respective year as traded in the prior year.2 Average of the German EEX spot prices during the respective year.
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8Citigroup reverse roadshow | October 27, 2009
Early hedging protects us from recession and allows flexible short-term optimisation
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Forward selling of RWE Power in the German market (base load forwards in €/MWh)
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1 Forward selling as of July 31, 2009; price data as of August 10, 2009
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> 20% sold> 20% sold > 25% sold> 25% sold > 35% sold> 35% sold > 65% sold> 65% sold > 90% sold> 90% sold> 10% sold> 10% sold
> 10% sold> 10% sold > 40% sold> 40% sold > 90% sold> 90% sold
> 50% sold> 50% sold
> 25% sold> 25% sold
> 60% sold> 60% sold
> 20% sold> 20% sold
> 10% sold> 10% sold
9Citigroup reverse roadshow | October 27, 2009
RWE sold forward Q1 2009 power generation from hard coal units in Q2 2008
Now, in Q1 2009 the prices of power and fuels have changed
In this example RWE would opt for “buying instead of making”
Power sold forward at 70€/MWh
Hard coal costs locked in at 40€/MWh
CO2 costs locked in at 20€/MWh
Locked in Clean Dark Spread +10€/MWh
Power price 40€/MWh
Hard coal costs 30€/MWh
CO2 costs 15€/MWh
Possible Clean Dark Spread (power plant is out of the money)
-5€/MWh
Power sold forward at 70€/MWh is covered by power bought today at 40€/MWh +30€/MWh profit
Hard Coal bought at 40€/MWh is sold at 30€/MWh -10€/MWh loss
CO2 bought at 20€/MWh is sold at 15€/MWh -5€/MWh loss
Total effect +15€/MWh
An illustrative example
> Forward hedging ensures the required return of our generation fleet.
> On this basis, we can decide every day if we produce the contracted power at the locked in clean dark spread or buy the power in the market instead.
RWE’s daily make or buy decision: Extracting additional value on top of forward selling
10Citigroup reverse roadshow | October 27, 2009
Flexibility is also key for our Gas Portfolio Management
Gas Sales Contracts
Gas Purchase Contracts
Gas Storage Contracts
Gas Transport Contracts
> Perform contract optimization (maximize the value against the market)
> Trade around positions
> Sales to RWE Energy, RWE Power / STPM, RWE Energy Nederland: serve as their sole or main supplier
> Manage the Gas Operations: handle nominations
> Trade underlying commodities: oil, coal etc.
Activities
Where:
Germany (all 12 market areas),
Czech Republic
but also:
Netherlands,
Austria
Slowakia
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How Gas Portfolio Management changes with the emergence of a Gas Market
> “Distributers” such as Ruhrgas and RWE closed long term purchase contracts: Safeguard for seller (= producer of Gas) to cover investment cost
> Buyer would have gas available to sell
> Buyer needed flexibility, because of weather dependency
> “Take-or-Pay” of 80 %
The old days
> Separation of supply and demand theoretically possible (like in power generation):> managing the Gas to Oil Spread
from the long term supply contracts> buying all the customer demand
short-term
> Hybrid situation:> Before only long term gas supply
contracts, oil-indexed> Today also liquid markets, with fixed
price gas trading
New market opportunities
All of a sudden, the long term supply contracts and storage contracts have become an asset which can generate money in whole-sale markets and not only in retail markets
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hThe additional value of optimizing our Gas Asset Portfolio
Normal situation
> Oil-indexed contract is in-the- money in winter
> And out-of-the-money in summer
Unusual situation
> Oil-indexed contract is out-of the money in winter
Provided the demand side didn‘t change optimizing the portfolio means: We are long Q4/2008 and short Q3/2009. We sell the Q4/2008 and buy the Q3/2009. We can deliver the same volume at on average lower prices
TTF
Oil-indexed Contract
TTFOil-indexed Contract
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This means...
> Continuous monitoring of spreads (fixed price gas vs. oil-indexed gas)
> “locking in” spreads by selling gas & buying an oil swap> Trading gas and oil products at the same time
> Liquidity is the restriction: most of the time market depth doesn’t allow to do more
> The same logic can be applied to storage
> We hedge the total of the portfolio = the positions of all flexible contracts (assets)
The bigger your portfolio the more flexibility you have. And we are on a good way to a 60bcm p.a. gas portfolio1 by 2012.
1 contracted European gas supply purchase volume
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While “out there” people question the necessity of additional gas infrastructure …
… more than 100,000 households in Bosnia's capital Sarajevo and other cities stood without heating in January 2009, due to lack of gas!
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… the next crisis could be on the way
PUTIN SAYS RUSSIA UNABLE
TO MAKE GAS PAYMENTS FOR
UKRAINE RIA Novosti (23 June 2009)
EU expects for new conflict between Ukraine and Russia in July MIGnews (19 June 2009)
Ukraine Gas Payments: Russia reserves ´the right to act´
Russia Today Business (23 June 2009)Germany warns of renewed
Ukraine-Russia gas conflict
Energy Environment News (17 June 2009)
No easy solution to Russia-
Ukraine gas dispute
Xinhua (09 June 2009)
Gas transit through Ukraine to Europe may be suspended - Mr Putin
SteelGuru (12 June 2009)
Steinmeier calls on Ukraine to avoid another gas crisisDeutsche Welle (17 June 2009)
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RWE prepares for the next crisis – with innovative ideas and with NabuccoRWE initiative to store gas in the Ukraine
> Given the fact that the Ukrainians seem to have serious cash problems, another payment default could trigger another crisis with similar delivery curtailments. A renewed gas conflict might threaten Europe’s security of supply – especially as the gas storage facilities in Ukraine are not fully utilised
> RWE proposes to fill these empty storages in summer, making this gas available to the market next winter. A win-win situation: The Ukraine receives income for (otherwise empty) gas storage facilities, Russia exports additional gas this summer and Europe improves its security of gas supply
RWE initiative to diversify Europe’s gas supply portfolio
> Against the background of renewed threat of supply interruptions, Nabucco will offer choice of both supply and transit for at least 150 million EU citizens
> Thus, the Nabucco pipeline will offer an important infrastructure link between Europe and the world’s largest combined gas reserves: the Caspian countries and the Middle East
17Citigroup reverse roadshow | October 27, 2009
Through Nabucco Caspian/Middle Eastern gas could reach some 10 million RWE customers
UK 2.7 m
Germany 3 m
Czech Rep. 2.3 m
Hungary 2.1 m
Netherlands 0.2 m
Potential gas supply sources for Nabucco
Egypt
IraqIran
Kazakhstan
Saudi Arabia
Turkmenistan
Azer- baijan
Russia
Note: Essent Deal not included
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Nabucco pipeline
RWE pipelines
RWE customer markets
Number of RWE customers
> RWE serves some 10 million end customers in Europe with gas
> RWE’s gas downstream position is strongest in the Czech Republic, Germany, Hungary and the UK
> The Nabucco pipeline project links RWE’s downstream positions with the Caspian region and other potential gas resources
> Nabucco will also support RWE’s development activities in Turkey and South East Europe
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Yes, Nabucco will come!
> The completion of the Inter-Governmental Agreement (IGA) on July 13 represents a significant breakthrough in the realization of the project. It provides the legal and regulatory certainty for the building and running of the pipeline – an important requirement for the gas supply countries in the Caspian region and Middle East to begin signing long term gas supply commitments.
> The Open Season process, involving binding capacity booking, will follow in early 2010. The European gas markets are ready for Nabucco: a preliminary market survey undertaken with gas buyers in the summer of 2008 revealed a strong level of interest. Non-binding indications from potential gas buyers far exceeded the planned maximum pipeline capacity of 31 bcm.
> Now detailed engineering and environmental work can also begin apace, with the procurement of large construction materials (e.g. steel).
> Financing discussions are well advanced, and Nabucco has received strong commitments from the EIB, EBRD and other multilateral and export credit agencies. The final investment decision is expected at the end of 2010.
> Gas is targeted to start flowing through Nabucco by 2014. By 2020 at the latest it is anticipated that 31 billion cubic metres of gas per year will be transported via the Nabucco pipeline - stretching from the Eastern border of Turkey to Austria and with access from there to the rest of Western Europe.
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“The greatest challenge to any thinker is stating the problem in a way that will allow a solution.”
Bertrand Russell (18 May 1872 – 2 February 1970 )*
* Bertrand Russell, 3rd Earl Russell, was a British philosopher, logician, mathematician, historian, social reformer and pacifist.
RWE bears the challenge!
Citigroup Reverse Roadshow | October 27, 2009
Dr. Thomas Glimpel Head of Portfolio Management, RWE AG
RWE’s Portfolio Strategy - Being prepared for volatile markets
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Agenda
1. Need for flexible generation capacity
2. Impact of a German nuclear lifetime extension on our Portfolio
3. The brake release – benefiting from increasing price levels
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Price volatility keeps increasing in Germany – opportunities for a flexible portfolio like RWE’s
Growing proportion of renewables leads to higher price volatility. October 2008 to October 2009: 60 hours with negative prices; highest price reached + € 500/MWh, lowest - € 500/MWh
Source: EEX spot prices
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23Citigroup reverse roadshow | October 27, 2009
RWE‘s hunting strategy to fetch flexibility premia is threefold.
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ramp capacity CCGT Lingen
ramp capacity hard-coal plant Hamm
ramp capacity nuclear e.g. Biblis
min min min
Gas capacities offer quick start-up capabilities. Partial load is expensive. Gas remains ideal to cover peaks, even in volatile markets.
net capacity net capacity net capacity
New coal capacities can be dispatched with 25% of rated output. The plants can profitably wait for high prices over a period with temporarily low demand.
Although designed for the baseload regime, nuclear plants can be dispatched more flexibly than any other plant type, and they can be operated to provide partial load.
24Citigroup reverse roadshow | October 27, 2009
In the early hours of October 4th the “Market-Clearing- Jackpot” blew up to 500 €/MWh – the recipe: go physically short and make the deal.
A flexible use of 1 GW generation capacity earns premium in a magnitude of almost €1m on just one weekend like the first October one.
€/MWh
Flexible dispatch optimisation on EEX hourly spot market prices of October 3rd and 4th
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Forward selling price 2008 for Base
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Premium spread by going physically short
e.g. hard coal
25Citigroup reverse roadshow | October 27, 2009
Westfalen hard coal plant
RWE Power‘s newbuilds ensure a strong market position beyond 2020.
BoA 2&3 lignite plant
Eemshaven hard coal plant
CCGT Lingen under constructioncommissioning in 2010
Predried lignite fired plant
Peaker GT Emsland gas plant CC
Optional CCGT plants
under constructioncommissioning in 2011
under constructioncommissioning in 2011
final permission phasepossible commissioning in 2013
under constructioncommissioning in 2011
permission phasepossible commissioning 2013 - 2015
permission phaseInvestment decision not before 2010
investment: ~500 million €efficiency: >59%
investment: 2.4 billion €efficiency: >43%
investment: 2.1 billion €efficiency: ~46%
investment: 2.4 billion €efficiency: >46%
investment: ~200 million €efficiency: ~50%
26Citigroup reverse roadshow | October 27, 2009
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oil
gas
hard coal
lignite
nuclear
hydro
Merit order of the German wholesale generation portfolio in 20141,2
1) New-build projects currently under construction and announced decommissionings included; renewables with feed-in tariffs not on the supply-side of the wholesale market. Renewables and heat directed CHP reduce residual demand, which is partly compensated by increasing export-demand in Germany.
2) commodity prices: 5 €/MWh th lignite; 10 €/MWh th hard coal, 28 €/MWh th gas, 30 €/t CO2
GW
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Lingen CCGT
BoA 2&3 lignite
Hamm hard coal
> RWE’s strategy is to operate a fuel diversified generation portfolio to stabilize the market position even in a volatile environment.
> RWE’s new builds will be the most efficient plants within the respective fuel type.
RWE’s generation portfolio remains well diversified – existing plants and new builds guarantee long term competitiveness.
27Citigroup reverse roadshow | October 27, 2009
Agenda
1. Need for flexible generation capacity
2. Impact of a German nuclear lifetime extension on our Portfolio
3. The brake release – benefiting from increasing price levels
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Phase-out of nuclear power in Germany as agreed in 2000 would result in seven reactor shut downs until 2013.
ObrigheimBiblis ANeckarwestheim-1Biblis BBrunsbüttelIsar-1UnterweserPhilippsburg-1GrafenrheinfeldKrümmelGundremmingen BGundremmingen CPhilippsburg-2GrohndeBrokdorfIsar-2EmslandNeckarwestheim-2
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TWh remaining by 2000 according to Nuclear Energy Act
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Feb 2009
Plant lifetime based on residual electricity generation
Transfer of 21.45 TWh from Mülheim-Kärlich to Biblis B (without govern- mental permission, life- time extension until early 2013)
Shut down
Remark: RWE has a total allotment of 107.25 TWh from Mülheim-Kärlich
Stade 23
29Citigroup reverse roadshow | October 27, 2009
Nuclear lifetime extension will push some 7 GW of old hard coal plants out of the market within the next 5 years.
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gas
hard coal
lignite
nuclear
hydro
nuclear capacity coming back into the market
1167 MW Biblis A785 MW Neckarwestheim 1
1227 MW Biblis B771 MW Brunsbüttel878 MW Isar 1
1345 MW Unterweser890 MW Philippsburg 1
____________________= ~7000 MW
hard coal capacity dropping out ~9500 MW of old inflexible hard-coal units with a block-size of c150- 350MW which were commissioned in the late 60s or early 70s
Merit order of the German wholesale generation portfolio in 2014 before nuclear extension1,2
Assumptions:
1) newbuild projects currently under construction and announced decommissionings taken into account; renewables with feed-in tariffs not on the supply-side of the wholesale market. Renewables and heat directed CHP reduce residual demand, which is partly compensated by increasing export-demand in Germany.
2) commodity prices: 10 €/MWh th hard coal, 28 €/MWh th gas, 30 €/t CO2
>Nuclear life time extension will bring 7 GW of additional capacity in the market.
>Plants fired today with subsidized hard coal mined in Germany will then not be redesigned to import coal but decommissioned in the next years. This is obligatory due to insufficient flexibility for peak load operation.
>The peak segment of the merit order will be almost not affected by a nuclear lifetime extension.
GW
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-9.5GW
30Citigroup reverse roadshow | October 27, 2009
Decreasing pressure on CO2 -prices will leverage lignite spreads, although power prices will fall by trend.
€/MWh €/MWh
fuel cost
nuclear phase out: merit order (2014) with flat pricing segment
nuclear extension: steeper merit order (2014) due to lower CO2 -cost
CO2 -cost
base price levelbase price level
> Nuclear lifetime extension results in some 70 million t of CO2 reduction p.a.
> Decreasing carbon mitigation pressure on the fossil fired portfolio reduces CO2 -prices in the EU for >5 €/t.
> Nuclear lifetime extension results in some 70 million t of CO2 reduction p.a.
> Decreasing carbon mitigation pressure on the fossil fired portfolio reduces CO2 -prices in the EU for >5 €/t.
> Nuclear lifetime extension results in up to 70 million t of CO2 reduction p.a.
> CO2 -price reduction of >5 €/t in the next years expected due to decreasing carbon mitigation pressure on the fossil fired portfolio.
> German power prices are directed 50% by gas and 50% by hard coal, both of lower carbon intensity than lignite.
> The market will see increasing spreads for older lignite capacity.
nuclear
oil
nuclearlignite
hard coalCCGT
GT
lignitehard coal
CCGT
GT
nuclear
GW
oil
lignitehard coal
CCGT
GT
nuclear
GW
illustrative
lignite spread
31Citigroup reverse roadshow | October 27, 2009
RWE will benefit in total from revising the phase out due to high portfolio shares of nuclear and lignite.
lignite-fired plants
old hard coal-fired plants
gas-fired plants
nuclear plantsImpacts of nuclear extension on the margins of the German power plant portfolio.
Load-factor: Nuclear plants will be operated in base-load regime. Extended plants can be operated further.
Spread: Only low merit-order effects on power prices expected, but a lower carbon price level will decrease power prices at the expense of nuclear spreads.
Load-factor: Existing plants will be operated with constant high load-factors in base load regime even if additional nuclear capacity remains in the market.
Spread: Decreasing CO2 -prices will have stronger impact on generation cost of lignite plants than on power prices. Spreads will increase.
Load-factor: Older hard-coal will be pushed out of the base load regime. Due to low flexibility, older plants cannot be operated in the peak-regime and will be decommissioned.
Spread: Typical intermediate load hours will be influenced most by merit-order price effects. Only falling CO2 -cost will act as a compensation.
Load-factor: No relevant load-factor variations for flexible peakers expected. Some CCGTs will face an insignificant load-factor decrease in the mid-merit-regime.
Spread: A falling spark-spread for CCGTs is to expect. The plants cannot benefit that much from falling CO2 -cost than coal fired power stations.
++- -
+-++
- -+-
+-- -
effect on profit margin: ++ positiv +- neutral - - negative
32Citigroup reverse roadshow | October 27, 2009
Agenda
1. Need for flexible generation capacity
2. Impact of a German nuclear lifetime extension on our Portfolio
3. The brake release – benefiting from increasing price levels
33Citigroup reverse roadshow | October 27, 2009
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The steepest contango since liberalising the sector! The market believes in increasing price levels.
Commodity forwards in October 2009
34Citigroup reverse roadshow | October 27, 2009
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Achievable Spreads are kept tight by weak demand and low fuel price levels.
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Merit order of the German wholesale plant portfolio in October 2009
fuel cost level: lignite 5 €/MWh th, hard coal 7 €/MWh th, gas 18 €/MWh th, CO2 15 €/t
LFO
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hard coal
gas
nuclear
run of river
35Citigroup reverse roadshow | October 27, 2009
As price levels increase higher efficiency folds up into systematically higher spreads for efficient plants.
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Merit order of the German wholesale plant portfolio in October 2009
Spread Leverage at increasing
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36Citigroup reverse roadshow | October 27, 2009
variable Kosten
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full cost hard coal plant1 Merit Order of the German wholesale plant portfolio 2009
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demand for generation capacity in GW
2) Forwards front year (2010) at 15 €/t CO2 , 23 €/MWhth gas, 8 €/MWhth hard coal (plus fuel transport cost)
1) financial average cost, plant price level 2009, efficiency factor of 46%, plant service time: 40 years at 7000 flh/a
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required base price level
We believe in market forces – And the market needs increasing spreads to cover full cost of new investment projects.
37Citigroup reverse roadshow | October 27, 2009
Spread escalation at increasing commodity prices won’t be stopped before long-run marginal cost levels are covered again.
Full costs1 of new hard coal-fired power plants and power price level€/MWh
With CO2 auctioning, covering the full costs of new plants needs further electricity price increase.
High commodity prices as in summer 2008 are necessary if the efficiency advantages of new plants are to generate adequate Spreads.
EU draft directive: no CO2 allocation
for new-builds!
30
40
50
60
70
80
90
100
Jun 0
7Ju
l 07
Aug 07
Sep 07
Oct 07
Nov 07
Dec 07
Jan 0
8Feb
08Mar
08Apr
08May
08Ju
n 08
Jul 0
8Aug
08Sep
08Oct
08Nov
08Dec
08Ja
n 09
Feb 09
Mar 09
Power base forward1 Market-entry price hard coal2
with CO2 auctioningMarket-entry price hard coal2
with CO2 benchmark allocation
1) Valuation on basis of forward listings, front year for hard coal API#2, CO2 EUA, electricity EEX base 2) Efficiency: 46%, € 1,450/kW, O&M at 3% of investment p.a., 7,000 full-load h/a, 40 years useful lifeSource: CAWM, University of Münster; CERA
Spread Leverage at increasing
commodity prices
Citigroup Reverse Roadshow | October 27, 2009
Prof. Dr. Martin Skiba Director Wind Energy Offshore RWE Innogy GmbH
Essen, 27th October 2009
Offshore Wind Energy
39Citigroup reverse roadshow | October 27, 2009
Content
RWE Innogy – An overview
Offshore Wind – Background / Present Development
Components for Offshore Wind Power Plants
RWE Innogy – Approach & Portfolio
40Citigroup reverse roadshow | October 27, 2009
RWE Innogy and Essent form a leading renewables generation position in Europe
> Together with more than 2GW renewable assets in operation - Essent contributes 636MW (232MW Netherlands, 405MW Germany) to RWE Innogy’s existing portfolio
> Strengthened combined project pipeline of 20GW – Essent contributes a 2.8GW project pipeline
> Improved diversified regional generation mix– Significant increase in Dutch and German onshore
wind capacity
RWE Innogy and Essent combined renewables capacity in operation (consolidated)
Total installed capacity: 2,052 MW
Biomass 6%
Germany 42%
Other 3%
RWE Innogy and Essent combined projects by technology (generation capacity in GWel , consolidated)1
Offshore windOnshore wind
HydroBiomass
Onshore wind 66%
Offshore wind 3%
Hydro 25%
UK 20%
Spain 20%
Netherlands 11%
France 3%
0
2
4
6
8
10
12
14
16
18
20
Under construction
Pipeline status 1
Pipeline status 2
Total pipeline
Pipeline status 3
0.51.4
7.5
10.9 19.7
1 Definition of pipeline status:Pipeline status 1 – Permitted projects: all permits (including grid) in place, but not yet under constructionPipeline status 2 – Unconsented projects: RWEI has rights to the project, e.g. land agreementsPipeline status 3 – Prospects: identified sites with a known MW capacity, initial discussion on agreements
41Citigroup reverse roadshow | October 27, 2009
We will be growing the business, but value creation is superior to additional megawatts
Our medium-term targets
> Capacity of 4.5 GW in operation or under construction by 2012.
> This translates into generation of 15 TWh/a in 2013.
> The planned acquisition of Essent will contribute 1 GW to our target.
Our roadmap
> Strong organic growth (incl. development of acquired pipeline) and strategic acquisitions.
> Value creation in line with RWE’s strict investment criteria.
RWE Innogy growth targets (capacity in operation or under construction – in GW, accounting view + PPA)
0
2
4
6
8
10
12Assets under construction
Assets in operation Essent
Assets in operation RWE Innogy
2.4 2.5
4.5
> 10
Dec 2008 June 2009 20202012
42Citigroup reverse roadshow | October 27, 2009
Risk diversification across technologies, regions and support mechanisms
… generation capacity … electricity generation
… country (electricity generation) … support mechanism (electricity generation)
RW
E In
nogy
targ
etpo
rtfo
lioby
…
Germany
UK
Spain
NetherlandsOther
Italy Certificate
Feed-In Tariff
OtherPower Price only
Premium Tariff
Hydro
Offshore Wind
Biomass
Onshore Wind
Hydro
Offshore Wind
Biomass
Onshore Wind
43Citigroup reverse roadshow | October 27, 2009
Content
RWE Innogy – An overview
Offshore Wind – Background / Present Development
Components for Offshore Wind Power Plants
RWE Innogy – Approach & Portfolio
44Citigroup reverse roadshow | October 27, 2009
50 mms -1
100 mms -1
> 9.0 > 10.0
8.0 – 9.0 8.5 – 10.0
7.0 – 8.0 7.5 – 8.5
5.5 – 7.0 6.0 – 7.5
< 5.5 < 6.0
Wind speed Offshore
Source: Risö, Dk
> because onshore sites become more and more scarce,> because Offshore-sites generate a higher energy yield,> because Offshore-potential is very high,> because bigger turbines can be developed due to the
progress in the development of technology,> because the dependency on imports can be
decreased.
Why Offshore?
45Citigroup reverse roadshow | October 27, 2009
Status quoCountry Project Number Type Capacity Commiss. annual sum
Uk Lynn & Inner Dowsing 54 3,6 MW, Siemens 194 MW 2008 > 349.00
B Thornton Bank 6 5 MW, REpower 5M 30 MW 2008
Deutschland Hooksiel 1 5 MW, Bard VM 5 MW 2008
NL Q7 Ijmuiden 60 2 MW, Vestas V80 120 MW 2008
UK Burbo Bank 25 3,6 MW, Siemens 90 MW 2007 > 410.00
Schweden Lillgrund 48 2,3 MW, Siemens 110 MW 2007
UK Barrow 30 3 MW, Vestas V90 90 MW 2007
NL Egmond aan Zee 36 3 MW, Vestas V90 108 MW 2006
UK Beatrice Field 2 5 MW, REpower 5M 10 MW 2006 > 118.00
UK Kentish Flats 30 3 MW, Vestas V90 90 MW 2005 > 90.00
Deutschland Ems/Emden 1 4,5 MW, E-112 4.5 MW 2004
UK Scroby Sands 30 2 MW, Vestas V80 60 MW 2004 > 64.50
Irland Arklow Bank 7 3,6 MW, GE 3.6 25.2 MW 2003
UK North Hoyle 30 2 MW, Vestas V80 60 MW 2003
Dänemark Nysted 72 2,2 MW, Bonus 158.4 MW 2003
Dänemark Frederikshavn 4 Bonus, Nordex, Vestas 10.6 MW 2003
Dänemark Samsø 10 2,3 MW, Bonus 23 MW 2003 > 277.20
Dänemark Horns Rev 80 2 MW, Vestas V80 160 MW 2002 > 160.00
Schweden Yttre Stengrund 5 2 MW, NEG Micon 10 MW 2001
Dänemark Middelgrunden 20 2 MW, Bonus 40 MW 2001
Schweden Utgrunden 7 1,5 MW Enron 10.5 MW 2000
UK Blyth Offshore 2 2 MW, Vestas V80 3.8 MW 2000
Schweden Bockstigen 5 550 kW, Wind World 2 MW 1997
Niederlande Donten (Ijsselmeer) 28 600 kW, Nordtank 16.08 MW 1996
Dänemark Tunø Knob 10 500 kW, Vestas 5 MW 1995
Niederlande Lely (Ijsselmeer) 4 500 kW, Nedwind 2 MW 1994
Dänemark Vindeby 11 450 kW, Bonus 4.95 MW 1991
Schweden Norgersund 1 220 kW, Wind World 0.22 MW 1990
Total 1443.25 MW
< 1MW Cl., Test phase
2MW Cl., Commercia-lisation
3-5MW Cl., Marketshift
46Citigroup reverse roadshow | October 27, 2009
Dong Energy
Vattenfall
Centrica
RWEInnogy
Others
E.ON
17% Centrica
6% E.ON
5% RWE Innogy
23% Dong Energy
29% Others
20% Vattenfall
Source: RWE Innogy GmbH, 2008
Operators of Offshore Wind Power Plants
47Citigroup reverse roadshow | October 27, 2009
Utilisation and Protection Areas
Source: BSH
Offshore Wind Farms, German North Sea
48Citigroup reverse roadshow | October 27, 2009
consent given
Alpha Ventus
BorkumRiffgrund
BorkumRiffgrundWest
Norder-gründe
Stralsund
Meerwind
Amrumbank/Nordsee-Ost
Dan Tysk
Nördlicher GrundSandbank 24
NSWP
HochseewindparkNordsee
Sky 2000
Baltic 1
Kriegers Flak
Ventotec Ost 2Arkona-Becken Südost
Rostock
WismarLübeckSwinoujscie
Kiel
Cuxhaven
Hamburg
Eckernförde
Husum
Flensburg
Norden
Leer
BremerhavenWilhelmshavenEmden
Butendiek
Amrumbank/W
Global Tech IGode Wind BARD I
Hochsee WindparkHe dreiht
Consented wind farm capacity: approx. 8 GW
Offshore Wind Power Plants in Germany
49Citigroup reverse roadshow | October 27, 2009Sources: Google Earth and http:www.offshorecenter.dk/OffshoreWindFarms/
Offshore Wind Farms in UK
50Citigroup reverse roadshow | October 27, 2009
Content
RWE Innogy – An overview
Offshore Wind – Background / Present Development
Components for Offshore Wind Power Plants
RWE Innogy – Approach & Portfolio
51Citigroup reverse roadshow | October 27, 2009
Capex split onshore wind farm (UK example)
(in % of total capex)
Capex split offshore wind farm (UK example)
(in % of total capex)
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Turbine Foundations Grid & Electrical Other0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Turbine Foundations Grid/Other
> For both on- and offshore projects, wind turbines dominate the capex split – appropriate turbine prices are thus crucial for an attractive return on investment
> Offshore investment split varies according to project details, e.g. water depth, distance to shore, grid connection works etc.> Cost of grid connection depends on distance to coast, foundation also depends on depth of water – in contrast to the UK market,
the grid operator in Germany is obliged to connect the projects to the electricity grid and to bear capital and finance cost
Source: RWE Innogy
Turbines dominate cost of wind projects
52Citigroup reverse roadshow | October 27, 2009
Rotor diameter
Hub
hei
ght
Source: Bundesverband Windenergie, BTM Consult – World Market Update 2008 (March 2009).
1980 1985 1990 1995 2000 2005 2008Nominal capacity
30 kW 80 kW 250 kW 600 kW 1,500 kW 3,000 kW 6,000 kW
Rotor diameter 15 m 20 m 30 m 46 m 70 m 90 m 126 m
Hub height 30 m 40 m 50 m 78 m 100 m 105 m 135 m
Electricity output p.a.
35,000 kWh
95,000 kWh
400,000 kWh
1,250,000 kWh
3,500,000 kWh
ca. 6,900,000 kWh
ca. 22,000,000 kWh
> Wind turbines are getting larger – along with scaling-up efforts aiming to design Multi-MW turbines for offshore application, developers have demanded larger turbines– Average turbine size in 2008 was 1,419 kW,
some 73 kW above the 2007 level– Significant difference between mature (2,256 kW in UK)
and emerging markets (e.g. India with 999 kW)
Evolution of turbine technologies
53Citigroup reverse roadshow | October 27, 2009
2,000
2,500
3,000
3,500
4,000
4,500
5,000
5,500
6,000
6,500
7,000
6,000 7,000 8,000 9,000 10,000 11,000 12,000 13,000 14,000Swept Rotor area (m²)
Rat
ed p
ower
(kW
) Multibrid 116/5000M
REpower 5M
E-112/4500
GE 3.6s
Vestas V90
122/Bard VM
Siemens 3.6
REpower 6M
E-127/6000
The multi-megawatt class
54Citigroup reverse roadshow | October 27, 2009
Source: Renewable Energy World, Vol. 6, No. 3, 2003, pp. 138
Wind energy turbines – concepts for 5MW-class
55Citigroup reverse roadshow | October 27, 2009
Energy yield
Accessibility> Helihoist> Access system> Katamarans or SWATH
Maintainability> Condition Monitoring> Maintenance frequency> Simplification of works> Tool storage in tower> Suitable crane system
Reliability> Track record> Proven technical concept> Redundant systems> Corrosion protection
Service strategy> Site specific concept in dependence on distance to service harbour and water depth
Key success factors to optimise energy yield
56Citigroup reverse roadshow | October 27, 2009
Accessibility: Resulting availability as a function of accessibility
57Citigroup reverse roadshow | October 27, 2009
Helicopter test at the REpower 5M in Brunsbüttel/Germany
Source: REpower Systems AG
Accessibility
58Citigroup reverse roadshow | October 27, 2009
Gravity foundationMonopile
TripodJacket
Foundation types
59Citigroup reverse roadshow | October 27, 2009
Pilot project „Beatrice“, Scotland 2006
Jacket-Structure
Source: REpower Systems AG
60Citigroup reverse roadshow | October 27, 2009
Offshore wind farm „Thornton Bank“, Belgium 2008
Source: C-Power n.V.
Gravity foundation
61Citigroup reverse roadshow | October 27, 2009
Monopiles Rhyl Flats
62Citigroup reverse roadshow | October 27, 2009
Source: Bladt
132 kV Transformer Platformfor offshore wind farm at Rødsand, DK
Total weight:600 tonnes
Substation platform
63Citigroup reverse roadshow | October 27, 2009
Source: E.ON Netz
Planned grid connection in Germany
64Citigroup reverse roadshow | October 27, 2009
Content
RWE Innogy – An overview
Offshore Wind – Background / Present Development
Components for Offshore Wind Power Plants
RWE Innogy – Approach & Portfolio
65Citigroup reverse roadshow | October 27, 2009
Speci-fication
Tendering Production Transport Installation Commis- sionning
BasicDesign
Detailed Engineer.
TenderingProduction Transport Installation
Design,Simulation
Tendering Production TransportCable Laying/Installation
Commis- sionning
-Project-devel.
-Finance
Wind turbine
Foundation
Grid connection
bottleneck
RWE Innogy is managing offshore wind farms across the whole life cycle – from developing to decommissioning. Bottlenecks in the supply chain have been identified and will be removed by new and innovative business approaches.
Value chain
66Citigroup reverse roadshow | October 27, 2009
A2Sea – Sea JackA2Sea – Sea Worker MPI – Resolution Smit – Lisa
Siemens – Titan 2
Jack-Up Barge BV – JB114
Dong CentricaDong
Operating Company A2Sea MPI Siemens Smit Jack Up Barge BV
Vessel name Sea Worker Sea Jack Resolution Titan 2 Lisa JB114/JB115
Vessel dimensions 55x32m 91x33m 130x38m 54x34m 73x40m 55x32m
Max. turbine size (Crane) 3.6MW 5.0MW 3.6MW 3.6MW 3.6MW <5.0MW
Max. water depth (Jack up system) 40m 35m 35m >40m 33m 40m
Market after A2Sea deal:
> A2Sea, the company with the most expertise, assets and manpower, is no longer available. It built 60% of operational offshore wind farms, and was bought by DONG
> 40% of market assets are no longer available
Current installation vessels
67Citigroup reverse roadshow | October 27, 2009
Seabreeze
68Citigroup reverse roadshow | October 27, 2009
“Pioneer” Phase
Commercial2015 + X
New, unproven O&M concepts required above 40km offshore
Innogy Offshore projects + Essent Nordsee Ost
Princess Amalia (Q7)
Burbo Bank
Samso
Belwind
Robin Rigg
Lynn & Inner Dowsing Lillgrund
Barrow Egmond aan Zee
Beatrice Field
Kentish Flats
Scroby Sands
Arklow Bank
North Hoyle
Nysted
Horns Rev
Innogy Nordsee 1
London Array
Nordergründe
Nordsee Ost
Sheringham Shoal
Lincs
Rødsand II
Côte d'Albâtre
Baltic 1
Bard Offshore 1
Greater Gabbard
Thanet
Gunfleet Sands
Horns Rev 2Rhyl Flats
Alpha VentusThornton Bank
Gwynt y Môr
Global Tech 1
Amrum Bank West
Dan-Tysk
Sandbank 24
Triton Knoll
Hochseewindpark De Dreiht
Gode Wind
Butendiek
Albatros
0
5
10
15
20
25
30
35
40
45
50
0 10 20 30 40 50 60 70 80 90 100
Shore Distance [km]
Wat
er D
epth
[m]
UK Round 3East Coast
Hochsee Windpark Nordsee
Planned OWF
Offshore Wind Farms - Shore Distance and Water Depth
69Citigroup reverse roadshow | October 27, 2009
Operational offshore wind farmsOffshore wind projects under construction
Thornton Bank
Rhyl FlatsNorth Hoyle
Offshore wind farms in development
Gwynt y Môr
Inch Cape
Triton Knoll
Greater Gabbard
Nordsee 1
Tromp Binnen
Project Name Country Status Current share
North Hoyle UK Operational 60MW
Thornton Bank 1 Belgium Operational 8MW
Rhyl Flats UK Under construction 90MW
Greater Gabbard UK Under construction 252MW
Thornton Bank 2 & 3 Belgium Pipeline 1
Pipeline 132MW38MW
Nordsee Ost (Essent) Germany Pipeline 1 288MW
Gwynt y Môr UK Pipeline 1 576MW
Nordsee 1 Germany After 2013 960MW
Tromp Binnen Netherlands After 2013 295MW
Triton Knoll UK After 2013 1,200MW
Inch Cape UK After 2013 675MW
Total 4,476MW
Nordsee Ost
Projects commissioning (in full or in part) before 2013
Projects commissioning after 2013
Project operated by RWE since 2004, part of Zephyr since 2005.
Diversified project pipeline across four regulatory regimes
70Citigroup reverse roadshow | October 27, 2009
> RWE was one of the first companies in the offshore market, gaining offshore experience during the last 10 years.
> RWE Innogy is capable to develop, construct and operate large offshore wind power plants.
> RWE Innogy has build extensive in-house know-how.
> RWE Innogy’s ability to remove bottlenecks in the value chain by innovative business approaches ensures a sustainable growth and a risk controlled project realisation.
Conclusions
71Citigroup reverse roadshow | October 27, 2009
Backup
72Citigroup reverse roadshow | October 27, 2009
> 60 MW
> 30 turbines V80 (Vestas)
> Westcoast UK
> First commercial offshore project in UK
> Construction 2003
> More than 5 years operational experience
North Hoyle
73Citigroup reverse roadshow | October 27, 2009
> Approximate output of 200 GWh/year, sufficient for ~40,000 homes
> Best performing UK offshore wind farm (see graph)
> North Hoyle load factor consistently higher than competitors
Nor
th H
oyle
Loa
d fa
ctor
0%
10%
20%
30%
40%
50%
60%
70%
Apr 20
06May
2006
Jun 2
006
Jul 2
006
Aug 20
06Sep
2006
Oct 20
06Nov
2006
Dec 20
06Ja
n 200
7Feb
2007
Mar 20
07Apr
2007
May 20
07Ju
n 200
7Ju
l 200
7Aug
2007
Sep 20
07Oct
2007
Nov 20
07Dec
2007
Jan 2
008
Feb 20
08Mar
2008
Apr 20
08May
2008
Jun 2
008
Jul 2
008
Load
Fac
tor
UK Offshore Average
North Hoyle Offshore Wind Farm
North Hoyle – operational experience
74Citigroup reverse roadshow | October 27, 2009
> 90 MW
> Construction start in 2008, foundations and cable
> 25 turbines Siemens 3.6 MW
> West coast UK
> Fully operational in 2009
> Once operational the 25 turbines with 3.6 MW each will meet the average needs of approx. 61,000 homes and will prevent the release of some ten thousand tonnes of CO2
(Under construction)
Rhyl Flats
75Citigroup reverse roadshow | October 27, 2009
> 500 MW
> 139 Turbines Siemens 3.6 MW with Monopiles
> East coast UK
> Shore distance 23 km, 30 m water depth
> Installation start in 2009
> Installation in two stages
> Fully operational in 2011
Greater Gabbard
76Citigroup reverse roadshow | October 27, 2009
> 576 MW
> Application submitted in 2005
> Consent received 3rd December 2008
> Consent for grid connection received
> Installation planned in three stages in 2011 – 2014
(Under construction)
Gwynt y Môr
77Citigroup reverse roadshow | October 27, 2009
Early experience of key technologies> REpower 5M
> Gravity base foundations
> North Sea location
Strategic investment> Well-advanced project.
> RWE’s first continental offshore wind farm, and the first for any German utility.
> Excellent strategic fit with other sites in NW Europe allowing us to build strong operations base.
Strategic rationale for investment: An opportunity to learn the use of 5MW technology in a low-risk way
78Citigroup reverse roadshow | October 27, 2009
> Approx. 1,000 MW
> Approx. 165 turbines REpower 6M
> German Bight, 40 km off shore of the Isle Juist, water depth 26 – 34 m; area 146 km²
> Nearly 4,000 full load hours
> Preferred area according to German regulations
> Consent expected in 2009
> Soil investigation 2009
> Thorough integrated layout optimisation
> Installation in three stages in 2012-2015
> Investment of approx. € 2.8 bn
> Annual CO2 reduction of approx. 3.1 million tonnes
Innogy Nordsee 1 (former ENOVA NSWP3)
79Citigroup reverse roadshow | October 27, 2009
> 35 km north from Helgoland
> Capacity 288 MW
> Water depth about 22-25 m
> Building permission since June 2004
> Stable wind conditions proven by metering mast in operation since April 2005
> Grid connection point: Brunsbüttel
> 90 km sea cable / 45 km land cable
> Voltage level: 150 kV/AC
Nordsee Ost
Nordsee Ost
80Citigroup reverse roadshow | October 27, 2009
> Sub location of Tromp – red area
> Size of 33 km2
> Optimal orientation wind direction
> Foundation: Monopile or Gravity
> 200-300 MW capacity range
> Cable distance to shore (75 km)
> Water depth (21 – 31 m)
> Soil type (fine-medium w. sand, slip sand)
Offshore Wind Netherlands Project development for Tromp Binnen
81Citigroup reverse roadshow | October 27, 2009
Round 3, UK
> Participation in R3 in UK as NRL and within the consortium Forwind consisting of - Scottish and Southern Energy - Statoil - Statkraft
Citigroup Reverse Roadshow | October 27, 2009
Citigroup Reverse Roadshow October 27, 2009Market uncertainties: not a threat but a chance Dr. Bernhard Günther, CFO, RWE Supply & Trading GmbH
RWE’s portfolio management: being prepared for volatile marketsDr. Thomas Glimpel, Head of Portfolio Management, RWE AG
Offshore Wind EnergyProf. Dr. Martin Skiba, Head of Offshore Wind, RWE Innogy