MAKING IT MAINSTREAMDEVELOPING RENEWABLE ENERGY IN GLOBAL MARKETS

University of StrathclydePresentation by Adam BruceGlobal Head of Corporate Affairs, Mainstream Renewable Power

March 2016

Overview

• Introduction to Mainstream Renewable Power

• The Renewable Energy Opportunity

• Some parting thoughts

Introduction to Mainstream

3

Develop and sell wind and solar plant at scale on a global basis

Onshore: exit at commissioning

Offshore: exit at “ready to build”

Sell to utilities and infrastructure asset investors

EntrepreneurialRenewable

Energy Company

The world is in a once-off transition from fossil fuels to

sustainability

Holders of generation assets need new plant

Mainstream has the ability and focus to address the need for new

plant at scale

The Value Proposition

4

Unique Source of Competitive Advantage

A ValuesDriven Culture

Differentiated Business Model

Record of DeliveringReal Value toShareholders

Positioned at the Cutting Edge

of Policy Formation

Companyand Investor

Interests are Aligned

Sale of Airtricity for total equity of €1.80bn,

realizing value of €1.36bn over invested shareholders capital of

€0.44bn

Management invested significant amount of equity capital

Not a utility

Focus on development and

create high value by building strong JV partnerships with local developers

Industry foresight, thought leadership

and first mover advantage

Four Continents

Dr Eddie O’Connor /Founder & CEO• Founded Mainstream in 2008.• Previously founded global renewable

energy company, Airtricity. • CEO of Airtricity until 2007. Airtricity

was sold to utilities E.ON and SSE (UK) for €2bn.

• 2008: Founded Mainstream.• Awarded the European Wind Energy

Association’s most coveted prize, the ‘Poul la Cour’

• Named World Energy Policy Leader by Scientific American magazine.

• Named in top five most influential figures in US clean energy by Oil.com.

• Received honorary doctorates from Universities in Ireland and the UK.

Chicago

Dublin

Glasgow

Toronto

Santiago Cape Town

Johannesburg

Mainstream officesMainstream activityAs at January 2016

…and now with numbers…

DateInvestment

amountCumulative

raised Description

Dec 2014 €60m €362Closed a four year €60m corporate debt facility arranged by BlueBayIreland Corp Credit Ltd with substantial investment from the National

Pensions Reserve Fund of Ireland.

Oct 2013 €50m €302m Closed an equity investment from Marubeni Corporation.

Sept 2012 €40m €252m Corporate facility closed with Macquarie Bank and Macquarie Capital comprising junior debt and equity warrants for up to €60m.

Sept 2012€17m €212m Equity raised from retail investors in Ireland.

Dec 2011 €40m €195m Refinanced loan notes issued in December 2008 with €40m loan notes from retail investors.

Aug 2010 €57m €155m Raised €57m from retail investors in a series of equity fundraising rounds.

Dec 2008 €26m €98m Successfully raised €26m in loan notes from Irish retail investors.

Aug 2008 €40m €72mClosed a €20m investment from Barclays for a 14.6% stake in the company, with the Board, management, staff and related parties

investing a further €20m.

Feb 2008 \ €32m Founded with a seed capital of €32m.

€3

62

m

Putting capital to work

Projects in Construction and Operation

De Aar solar park, South Africa Noupoort wind farm, South Africa

Knockaneden wind farm, Ireland Knockaneden wind farm, Ireland

Offshore

We have developed almost 8000MW of offshore wind plant in the North Sea – including Scotland’s largest

We have our CfD and grid connections and are in pre-construction of 450MW in Scotland

Offshore – power at scale

Mainstream Neart na Gaoithe offshore power station450MW – 6MW WTG

Scottish Territorial Waters5 sites 4.8GW

Zone and approximate

capacityDevelopers

Argyll Array(1.8 GW)

ScottishPowerRenewables

Beatrice(1 GW)

SSE Renewables plc

Inch Cape(1 GW)

Repsol

Islay(0.68 MW)

SSE Renewables plc

Neart na Gaoithe(450 MW)

Mainstream Renewable Power Ltd

Inch Cape

Neart na Gaoithe

Beatrice

Argyll Array

Islay

Neart na Gaoithe

• Neart na Gaoithe = Nart na Gweeha

• Gaelic for ‘Strength of the Wind’

• 450 MW capacity

• Will generate enough electricity to power 325,000 homes – equivalent to the city of Edinburgh

• Between 70 and 90 turbines

• 15.5 km from shore at closest point (Fife Ness)

• Area of approximately 105 km2

• Water depths of 45-55 m

• 1 or 2 offshore substations

• 28 km of offshore export cable

• 12 km of onshore cable

• Grid connection at Crystal Rig onshore wind farm in East Lothian

Neart na Gaoithe• Planning consent – Q3 2014

• CfD contract – Q1 2015

• Financial close – Q2 – 2016

• Total estimated capital expenditure (“capex”) -£1.3bn

• Compares to: -– New Forth crossing (~£.15bn)

– New QE Class Carrier (~£2bn)

• All three projects require similar transferable skills and are all located in the R. Forth basin

• Potential for up to 40% of total capex to be sourced in Scotland

• Potential £150m-£600m GVA for Scottish economy

THE RENEWABLE ENERGY OPPORTUNITY

The electric society

Power sector business models

Energy demands of

modern society

Sustainability and climate

action

• No new fossil plant

• Carbon taxes• Large scale

variable generation

• Big grids

• “Utility death spiral”

• Utilities as energy services providers

• “Intelligent” and active consumers

• Electric vehicles and solar pv

• Domestic/local storage

• Anticipatory technology

the “we have done it like this for a century” value chain in developed electricity markets will be turned upside down within the next 10-20 years.UBS August 2014

Key Drivers – the Energy Trilemma

16

Finite fossil fuel supply – where will the electricity come from?

Reduce dependency on imported fossil fuels

Reduce CO2 and noxious gas emissions

Average global surface temperature is likely to rise by 2.6-4.8C this

century(1)

Threat of extreme climate events – economic disruption

Worldwide energy consumption projected to rise 56% from 2010 to

2040(2)

EIA projects that developing countries will require c. 90% more

energy by 2040(3)

EIA projects OECD countries will require c. 17% more energy by

2040(4)

Today’s population expected to increase from 7.2 bn to 9.6 bn in

2050(5)

Transportation – moving to electricity

Climate Change

Increased Global Energy Demand

Security of Supply

___________________________1. Footnote: The Intergovernmental Panel on Climate Change, Physical Science Basis, 20132. Footnote: EIA, International Energy Outlook, June 20133. Footnote: Ibid.4. Footnote: Ibid.5. Footnote: UN Department of Economic and Social Affairs, World Population Prospects: The 2012 Revision, Updated Feb. 2014

17

Volatility of prices of fossil fuels

Wind is a vital part of energy mix

Carbon being included in cost base for generators and users of

fossil fuels

New industry promotes economic development

Renewable sector considered a safe haven for investments

Ongoing technology innovation

Correlation of wind to fossil fuel prices

Government support and policy interventions – e.g. Feed-in Tariffs,

Renewable Obligation Standards, PTC, ITC, Loan Guarantees

EU Targets – to 2020 (and possibly to 2030)

China – 12th 5 year plan

S Africa – IRP and SARI

Targets drive volume: volume drives price

Solar PV down 70% since 2011; Onshore wind down 38% since

2008

New RES cheaper than new fossil plant

Australia (2013): new wind AUD 80/MWh (USD 83), new coal AUD

143/MWh or new CCGT AUD 116/MWh (inc carbon tax)

S Africa (Rd 3 2013): new wind ZAR 737/MWh (USD 68), projected

new coal (Eskom) ZAR 1050/MWh (USD 96)

Economic Drivers

Government Response

The Economics of Renewables

The new reality

The economics of renewablesOnshore wind, coal and gas - 2014

With thanks to Bloomberg New Energy Finance

The economics of renewablesOnshore wind, coal and gas – 2015 to 16

With thanks to IRENA

• LCOE onshore wind has fallen by 30% since 2005

• LCOE solar PV has fallen by 80% since 2005

• Recent tenders in South Africa and Morocco –USD0.03 KW/hr

• In emerging markets, off-grid diesel often the price-setter

The World’s Transition

• International policies and targets in place to support development of renewable energy

– 138 countries have renewable energy targets(1)

– 71 countries have adopted some form of feed-in tariff to promote renewable power generation, while 22 countries have implemented renewable portfolio standards (1)

• In 2013, more than €184 bn was invested in renewable energy globally (2)

• Renewable energy will account for nearly 50% of all new power generation capacity additions from 2014 to 2035(3)

• Wind and solar will make up 45% of all new renewable energy generation out to 2035(4)

___________________________1. Footnote: REN21 Renewables Global Status Report (June 2013)2. Footnote: New Energy Finance: Global Trends in Renewable Energy Investment 2913, 20133. Footnote: International Energy Agency, World Energy Outlook, 20134. Footnote: Ibid.5. Footnote: International Energy Agency, World Energy Outlook 2012; Renewable Energy Outlook

The world is undergoing a fundamental transition from fossil-fired electricity generation to renewable energy sources

Global Electricity Generated from Renewables (5)

0

3,000

6,000

9,000

2010 2020 2035

TWh

31% (5)

25% (5)

20% (5)

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The Marginal cost of renewable energy is essentially zero,

because there are no fuel costs

Spain’s high wind penetration levels illustrate the price impact of

renewables:

When the wind blew strongest in 2013, wholesale power

cost €7.69/MWh

When there were the lowest levels of wind, power cost

€93.11/MWh(1)

As renewable penetration rises, wholesale power costs go

down, which challenges conventional generators profitability

As a consequence, utilities are losing money and being forced to

mothball gas plant (coal is still competitive compared to gas)

Major utilities declaring staggering write downs:

RWE wrote down $4.5bn in European assets

GDF-Suez announced writedown of $20bn in assets

Net income at Eon declined by 50% over course of

2013(2)

Utility share prices have plummeted

The fall of the traditional utility model

___________________________1. Footnote: EWEA blog power, Wind energy is Spain’s number one electricity provider, 3 March 20142. Footnote: The Financial Times, RWE warns of €3.3bn writedown on power plants, 28 January 20143. Footnote: The Economist, How to lose half a trillion euros, 12 October 2013

Falling power prices and losses at utilities (3)

A look ahead

Utility sized pressures

An elephant in the room…

The European conundrum

• EU imports EU400bn of fossil fuels each year

• 2020 energy and climate package designed in part to increase EU energy security

• 2030 energy and climate package “Energy Union”

• Will renewable energy and an internal market for electricity deliver security of supply, competitiveness and GHG reductions?

Supergrid

What is the Supergrid?

• EU 2030 direction of travel: -– EU GHG target– EU RES target– ? EU Interconnection target– Internal electricity market

• How to deliver?• Supergrid

• The Supergrid is a pan-European transmission network that: -

– facilitates the integration of large-scale renewable energy

– the balancing and transportation of electricity

– with the aim of improving the European market.

RENEWABLES and life beyond fossil fuels

Some parting thoughts

Wind energy is a subsidy junkie

• Global subsidies for fossil fuels significantly exceed renewables

• All new energy tech supported by Government:

– UK Nuclear – 1950s to date

– UK Oil & Gas – N Sea 1970s

– UK Renewables - 2002 to date

• Government dilemma– Tax the bad (Carbon tax)

– Support the good (RO/ FiT)

• Reduction in RES costs– Significant cost savings

– Reduction in subsidies (RO Banding)

– CfD auctions

Wind energy is intermittent and unreliable

• Wind energy is a variablegenerator

• N Grid maintains sufficient reserve capacity

• 30 GW wind in 2020 will require 6.5 GW additional short term operating capacity

• N Grid est. 2% increase in annual bills

• OR – replace with greater interconnection with other markets

Supergrid and Smartgrids

www.friendsofthesupergrid.eu

The carbon bubble

Do the economics of fossil fuel extraction still make sense?Falling demand and falling pricesIs this an asset class you still want to hold?

The electric society

Power sector business models

Energy demands of

modern society

Sustainability and climate

action

• No new fossil plant

• Carbon taxes• Large scale

variable generation

• Big grids

• “Utility death spiral”

• Utilities as energy services providers

• “Intelligent” and active consumers

• Electric vehicles and solar pv

• Domestic/local storage

• Anticipatory technology

the “we have done it like this for a century” value chain in developed electricity markets will be turned upside down within the next 10-20 years.UBS August 2014

The old order passeth…

Conclusions

• Global energy – and electricity – consumption will continue to grow

• Wind and solar energy are part of the global energy mix

• Wind and solar energy reduce costs to consumers, increase energy security and enable policy makers to meet GHG reduction targets

This is a once off transition to a sustainable future

The Stone Age did not end for lack of stone, and the Oil Age will end long before the world runs out of oil.

Sheikh Zaki Yamani, Minister for Oil, Saudi Arabia 1962-86