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The Offshore Wind opportunity for Ireland

Renewable Energy Summit, Dublin, December 2016

Magnus Brogaard Larsen, Market Development, DONG Energy Wind Power

Wind Power

DONG Energy today

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Danish utility Oil & Gas

§ Global leader in attractive offshore wind market

§ Solid track-record in delivering large scale projects

§ Cost-of-electricity being systematically reduced

§ Robust and highly visible build-out plan

§ Differentiated partnership model

§ Attractive pipeline options post-2020

§ #1 power distribution network in Denmark

§ #1 residential and industrial energy sales position in Denmark

§ #1 in Danish heat and power generation with a strong and increasing biomass position

§ REnescience: Innovative bioenergy technology for waste treatment

§ Focused position with activities in Denmark, Norway and UK

§ Low-cost, low-risk core assets

§ Managed for cash to support renewable growth

§ Strong hedging position

75% 16% 9%

% share of capital employed as of 31 December 2015

Key figures 2015: § DKK 70.8 Bn revenue§ DKK 18.5 Bn EBITDA§ ~6,700 employees

1. Excluding small-scale demo sites2. Wind farms where DONG Energy provides operations and maintenance

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DONG Energy Wind Power asset portfolio, build-out plan and pipeline options2016-2025

Wind farm capacityGW

§ The largest offshore wind portfolio globally in attractive offshore wind markets

§ Differentiated competitive position resulting from integrated business model

§ At the forefront of reducing cost of electricity from offshore wind

§ Solid track-record in delivering large and complex projects

§ Robust and highly visible 3.7 GW build-out plan leading to 6.7 GW installed capacity in total by 2020

§ Numerous and attractive pipeline options post-2020 with 8.1 GW of secured project rights

DONG Energy Wind Power at a glance

Under constructionPipeline options

West of Duddon Sands

Burbo BankBurbo Bank Extension

Walney 1&2

Barrow

Isle of Man

London Array

Gunfleet Sands 1&2

WestermostRough

Race Bank

Horns Rev 1&2

Hornsea 1

GodeWind 1&2

Borkum Riffgrund 2

Borkum Riffgrund 1

Cluster 1

Anholt

Nysted

Middelgrunden

Walney Extension

Lincs

VindebyGode Wind

3&4

Bay State Wind

Ocean Wind

Operational

Hornsea 2&3&4

Source: Bloomberg New Energy Finance (BNEF)

APAC Taipei office

DONG Energy Wind Power overview

Borssele 1+2

2020 Expected capacity

2016 - 2020 indevelopment/construction

6,7

3,0

6,5

3,7

2020 DONG Energy target

Mid-2016 in operation

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Offshore wind is a large scale renewable technology with growth rates exceeding other renewables

Source: Bloomberg New Energy Finance (BNEF)1. Sum of utility-scale PV and small-scale PV2. Capacity factor is a performance indicator measuring to what degree a wind farm has produced according to the farms capacity (actual production / (capacity x hours in period))3. Average electricity consumption pr. household 5,300 kWh, see: http://www.bonkers.ie/guides/gas-electricity/national-average-energy-consumption/4. According to BNEF, long-term offtake price required to achieve a required equity hurdle rate for the project

0%

7%

14%

25%

Hydro

Onshore wind

Solar PV

Offshore wind

Fastest growing renewable technology in OECDInstalled capacity CAGR, 2014-2020%

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Offshore wind offers multiple advantages

Rapidly declining costIndustry maturity, volume and technological development

reduce LCoE4

Limited visual impact on landscapeWind farms are built far from shore

Utility size power generation 800 MW wind farm will power more than 660,000 Irish homes3

Offers +45% Capacity factors2

Significantly higher than onshore wind and solar PV

1

2

3

4

Offshore wind shows rapidly declining costs across all markets

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Offshore wind costs incl. transmission costs over lifetime1

Levelised revenue at the year of contracting, EUR/MWh, 2016 prices

0

50

100

150

200

20172014

8.0 GW

2013

6.6 GW

2012

5.0 GW

2010

3.0 GW

20162011

3.8 GW

2009

1.5 GW

2015

11,0 GW

Race BankWalney

Borselle I+II

West of Duddon Sands

Horns Rev III

HornseaWalney Ext.

Anholt East AngliaBorkum Riffgrund II

1.5 doubling of installed capacity

6 MW turbine is commercially attractive

8 MW turbine is commercially attractive

3.6 MW turbine is commercially attractive

Cumulative capacity installed

• Cost halved in less than a decade

• Industry 2020 cost target of 100 EUR/MWh achieved four years ahead of time

• Market volume, scale and industrialisation drive cost reductions

NetherlandsGermany

UK Denmark

9985848078

Nuclear

Baseload

Offshore wind

Industry aspiration

Gas

Baseload

PV

Utility scaleNorth

Western Europe

Coal

Baseload

LCOE, FID 20252, EUR/MWh, 2016 prices

Offshore wind is expected to be cost competitive with traditional utility size generation by 2025

1. The levelised revenue strike price and market income is used as a proxy for LCOE. The market income is based on public country specific wholesale market projections at the time of contracting. Discount rate of 3,5% (real) used to reflect the rate used by the European Commission for socioeconomic calculations. Adjustment of costs to account for differences in project scope compared to UK projects (primarily costs of transmission and extra development costs). Source: DECC; Danish Energy Agency; Energinet.dk; NEV; WindEurope

2: Sources: World Energy Outlook 2016 used for fuel and CO2 prices (€31/t 2030 and €53/t 2050). For technology cost data: IEA technology perspectives 2015 for coal & CCGT; BNEF for PV, DECC Generation Costs 2013 for nuclear and DEA Teknologikatalog 2016 for onshore wind. For offshore wind 80 €/MWh represent a WindEurope industry agreement, UK scope and conditions. Discount rate of 10% nominal on all technologies. Capacity factors used: 93% for coal and CCGT(gas), 91% for nuclear, 36% for onshore wind and 12% for PV.

Capacity factors above 45% and high wind predictability make offshore wind a stable source of power

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Ireland average capacity factors among renewable technologies1

2015

§ New offshore wind farms tend to exceed the above figure- The 2013 Anholt offshore wind farm had an average capacity factor

of 51% between 2013-2014

Offshore wind produces in almost all hoursDuration curve, Denmark 2015

Source: Energinet.dk (Danish TSO)

0%

20%

40%

60%

80%

100%

Solar PV Onshore wind Offshore windHours in 2015 (total 8,760)

Offshore wind produces in 98% of all hours

Source: BNEF; IWEA, ISEA, JRC, DONG Energy1. Offshore wind data is based on average capacity factor of DONG Energy’s OSW portfolio in 2015. Onshore wind and solar PV are based on BNEF data and represent gross US average.

Production profile w. observed wind speeds in the Danish North Sea Jan-09 2009

Source: Siemens; MHI Vestas:Note: Calculated by imposing hourly average wind speeds over technical specifications of selected WTGs

40352010 55

1

3025 4520:0015 Jan

650

5 15 13:0018 Jan

6050

2

6543

78

Hours

20

15

10

5

25

0

6MW 154 8MW 1644MW 120

Wind speed

Output (MW)

m/s

SolarPV

9%

Onshore WindOffshore Wind (UK)

28%

45%

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Strong growth in established and new offshore wind marketsInstalled Capacity, GW

27,2

45,5

11,0

12,6

31,9

+6 GW

+8 GW

2015

+1 GW

11.9

2025

77.4

2020

39.8

0.9

0.7

2005

%#EuropeNew markets GW addition/year CAGR

33%

27%

14%

Source: Bloomberg New Energy Finance (BNEF), H2 2016 offshore wind market outlook

By 2025 offshore wind will be truly global…

Impact of an 800MW Offshore Wind farm (based on historical UK data)**

• ~ 3,5TWh / year (~10% of consumption)• ~ 30% of 40% REN electricity 2020 target• Direct investment construction ~£2.3bn and

O&M ~£70m/year• Jobs: +2,000 construction and 950 O&M

Offshore wind could be a significant contributor to the green transformation of Ireland towards 2020/30

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* 16% FINAL ENERGY CONSUMPTION** UK SOCIO ECONOMIC STUDIES (REGENERIS REPORT) – ECONOMIC IMPACT OF OFFSHORE INVESTMENTS IN UK EASTAND WEST COAST

Industry enablers -

Ireland

Offshore Wind -Ireland

• Large scale REN technology supporting green transformation and binding

EU 2020* and 2030 targets

• Stable and predictable source of power (high capacity factors and stability)

• New industry in Ireland. Foreign direct investments, supply chain

investments, jobs and innovation

• Longer term export opportunities to a global demand.

• Ensure continued market by providing long term framework for Offshore Wind,

• Tap into the current European supply chain and reap the benefits of the

latest cost developments

• The Irish industry and especially offshore industry will gradually take a

larger portion of the market through supply chain investments both Irish and

foreign

• Potential of building up competitive export capabilities and be positioned as

a part of the global supply chain

• Dialogue between government and industry to ensure best practises on

regulatory design and competition in all parts of supply chain.

• Use the North Sea cooperation on OWE (North Sea Declaration) as a lever to

coordinate with and get inspiration from other OWE-countries

Summary of benefits and industry enablers for offshore wind in Ireland.

Public

Q&A