Challenges & opportunities in the Nordics · Nordic households enjoy one of Europe’s fastest growing populations (+22% in Norway and +13% in Sweden by 2050), with high consumption

Challenges & opportunities in the Nordics Experience from recent transactions

SEB Nordic Infrastructure and Renewable Energy Day, Oslo, June 8th, 2017

© 2017 Aquila Capital 2

Track Record in the Nordics 2

Nordic Market 3

Conclusions 4

Q&A 5

Aquila Group 1

Agenda

Contact details 6


1 Assets under Management (AuM) based on Net Asset Value (NAV); Enterprise Value for Real Asset-funds

respectively; 2 Assets under Administration (AuA) of the AIFM Alceda includes funds managed by Aquila

Capital

Focused on alternative investments

Founded in 2001

6.1bn Euro AuM/AuA

Independently owned and operated

Fully regulated by BaFin (Germany) and CSSF (Luxembourg)

10 offices in Europe, Asia and Asia-Pacific

Institutional client focus

Overview Aquila Group1, 2

AuM Real Assets in EUR bn

AuM Real

Assets

57%

AuA

39%

AuM Financial

Assets

4%

Investment Center

Client Advisory

0,0

1,0

2,0

3,0

4,0

2010 2011 2012 2013 2014 2015 2016

Renewables Others

Aquila Group overview

As at 31.12.2016; Locations shown in the map also include investment affiliates;


Solar PV Energy 2 Hydro Power 2

A leading renewables operator in Europe

Notes:

1 With approx. EUR 2.3 bn of Total Investment Volume (asset based) in renewables (developed or under construction), Aquila has become a leading asset manager in the growing renewables market in Europe. MW figures based on past and current

transactions. As of 31.12.2016. 2 Based on total investet capital of Aquila Capital in the respective asset class. As of 31.12.2016. 3 Source: The „Top 70 overview of European solar PV portfolios“ is provided by Solarplaza International BV („Solarplaza“).

Solarplaza assumes no responsibility for any errors or omissions in these materials. Solarplaza makes no commitment to update the information contained herein. The data used for this overview are as at 31.05.2016. www.solarassetmanagementeu.com

Active in renewables

since

2009

EUR 2.3 bn

total investment volume1

976 MW

based on transactions in

wind energy1

625 MW


Solar PV energy1

430 MW


hydropower1

Macro-driven strategic

approach

Dedicated investment team

with in-depth asset know-

how

Differentiated Investment

Opportunities

Disciplined underwriting

Fiduciary responsibility

Total invested capital in renewable energy assets

Wind Energy 2

France; 42%

Germany; 39%

Other; 19%

Norway; [WERT]

Other, 26% Sweden;

47%

Germany; 38%

Norway; 13%

UK, 2%

http://www.solarassetmanagementeu.com/



Aquila Group 1

Nordic Market 3

Conclusions 4

Q&A 5

Contact details 6

Agenda


Nordic footprint

Country-Specific Track Record

(in m EUR):

JP

119 US

30 FR

811

DE

785

UK

48

TR

168

SE & NO

1.078

2011 2012 2013 2014 2015 2016 2017

Wind Midtfjellet I+II³

110 MW | Norway

Acquisition: 2015

Wind Midtfjellet III

40 MW | Norway FID:

2017

Wind Lehtirova

147.6 MW | Sweden

Acquisition: 2016

Hydro Tinfos

90 MW | Acquisition:

2014

Hydro Jopeland

40 MW | Norway

Acquisition: 2011

Wind Atlantic Portf.

61.2 MW | Sweden

Acquisition: 2014

Hydro NGK

119.4 MW | Norway

Acquisition: 2014

Wind Hökölen

64.8 MW | Sweden

Acquisition: 2016

Hydro Smakraft

160.9 MW | Norway

Acquisition: 2015

Wind Kokkola

14.4 MW | Finland

Signing: 2017

Wind Kappeln

24.2 MW | Denmark

Signing: 2017

Investment experience in the Nordics since 2011


Högkölen (SE)

Under construction

COD: Q4 2018

Ownership: 100%

Capacity: 64.8 MW

Capacity factor: 43%

Turbines: Vestas V126 – 3.6 MW

Lehtirova (SE)

Under construction

COD: Q4 2018

Ownership: 100%

Capacity: 147.6 MW


Turbines: Vestas V126-3.6 MW

Midtfjellet Phase I – III (NO)

Operational (110 MW) /

Extension (39.6 MW)

COD: Q4-2013

40 MW extension (Q4-2018)

Ownership: Majority, co-

investment

Expected capacity:

150 MW (incl. 40 MW extension)


Turbines:

Nordex N90 – 2.5 MW



c. 462 MW

since 2014

c. 1.5 TWh

of annual

production

32% – 47%

High

capacity

factors1

3

2

4

Nordic wind portfolio overview

Note:

1 Based on P-50 estimates

Atlantic Portfolio (SE)

Operational

COD: Q1 2015

Ownership: Minority, co-

investment

Capacity: 61.2 MW


Turbines:

Vestas V90 – 2.0 MW



1

Kokkola (FI)

Under construction

COD: Q4 2018

Ownership: 100% (as of closing)

Capacity: 14.4 MW


Turbines: Nordex N131 – 3.6 MW 5

6

Kappel (DK)

Operational

COD: Q2 2017

Ownership: 100% (as of closing)

Capacity: 24.2 MW


Turbines:





Market 3

Aquila Group 1

Conclusions 4

Q&A 5

Contact details 6

Agenda


Region

Rating1 S&P: AAA ()

Moody‘s: Aaa ()

Fitch: AAA ()

S&P: AAA ()

Moody‘s: Aaa ()

Fitch: AAA ()

S&P: AAA ()

Moody‘s: Aaa ()

Fitch: AAA ()

Currency EUR NOK, EUR investment structure possible NOK, EUR investment structure possible

Maturity Mature (2014: 57.4 TWh) 2 Mature (2014: 11.2 TWh)2 Mature (2014: 2.2 TWh)2

Wind resources Capacity factors: 18-25% Capacity factors: 30-40+% Capacity factors: 30-40+%

Energy yield assessments Usually reference data based Usually site-specific data based Usually site-specific data based

Capex incl. developers margin Relatively high Low Low

LCOE Unknown due to FIT Low Low

Support scheme

CfD for 100% of production, 20 y, 5.07 ct/kWh

(down from 8 ct/kWh)

Elcerts in addition to power sales, 15y, no fix price

(until 2035)

Elcerts in addition to power sales, 15y, no fix price

(until 2021)

Macroeconomic costs Significant, approx. 7 ct/kWh for consumer Low, approx. 0.1 ct/KWh for consumer Low, approx. 0.1 ct/KWh for consumer

Availability of commercial price

hedging instruments

Not available, not required Power: Up to 15y (good liquidity)

Elcerts: Up to 5y (decent liquidity)

Power: Up to 15y (good liquidity)

Elcerts: Up to 5y (decent liquidity)

Availability of KfW Financing Yes Depending on investment structure Depending on investment structure

Debt levels Up to 80% 40-60% depending on hedging structure 40-60% depending on hedging structure

Inflation indexation No Depending on hedging structure Depending on hedging structure

1 Source: www.tradingeconomics.com/country-list/rating, date: June 6, 2017; (stable) (negative) (positive); 2 Source: HSH Nordbank

Germany Norway

Comparison of selected wind markets

Sweden


Electricity costs in the Nordics and Europe

SE:

36.9

NO:

33.9

FI:

37.5

DK:

34.6

EE:

37.5

LV:

37.7 LT:

37.9

PL:

37.1

NL:

41.4

DE:

37.6

FR:

59.8

UK:

66.0

IE:

52.9

ES:

57.3

PT:

56.4 IT:

55.9

GR:

45.8

BG:

39.6

RO:

40.9

HU:

45.1

AT:

38.0

CZ:

40.9

<= EUR 37.00 / MWh

EUR 37.01 – 40.00 / MWh

EUR 40.01 – 52.00 / MWh

> EUR 52.00 / MWh

No data

Source:

European Commission

ttps://ec.europa.eu/energy/sites/ener/files/documents/quarterly_

report_on_european_electricity_markets_q4_2016.pdf

Average wholesale baseload electricity price, Q4 2016

https://ec.europa.eu/energy/sites/ener/files/documents/quarterly_report_on_european_electricity_markets_q4_2016.pdf





Supported by attractive supply / demand dynamics and growing cross-border interconnections with the rest of Europe, the Nordic

power market offers an attractive pool of liquidity, with encouraging signs of development for additional wind capacity

The largest

and most

liquid power

market in the

world

NordPool spot1 is the world’s largest exchange for electrical energy measured in volume

NordPool power prices are mainly influenced in the short-term by weather conditions (e.g.

precipitations) and the cost of fossil power generation; influencing factors in the long-run are the

development of power demand, the aging of thermal generation capacities (nuclear, coal), the

build-out of interconnectors to other Continental European markets as well as the prices for

carbon emissions

Interconnector capacities expected to double, from c.4 GW today to c.8 GW by 2025 (c. 10 new

cross-border projects2)

Attractive

power market

dynamics

Heavy phase out of Swedish nuclear starting in the 2020’s

Nordic households enjoy one of Europe’s fastest growing populations (+22% in Norway and

+13% in Sweden by 2050), with high consumption per capita in both Sweden and Norway

Data centres becoming a relevant industry in the Nordics

Nordic countries are early adaptors of e-mobility

A growing role

for wind

With a large amount of flexible hydro capacity and limited land constraints, Nordic markets are

well positioned to integrate significant amounts of wind power

The seasonality of wind power, with more production in winter times, is well correlated with local

patterns in power demand and seasonal price peaks

Supported by Sweden’s target of additional 18 TWh /a new renewable production by 2030, the

region is likely to continue seeing increasing demand for renewable capacity, especially for wind

Sweden

Norway

Finland

Denmark

Hydro Nuclear CHP Condensing Wind Geothermal

Growing amount of cross-border interconnections

Status quo of energy mix in the Nordics

Source: Swedenergy, 2015

Renewable build-out targets achieved as of 2017 (TWh)

14.3

28,4

18.0 46.4

3.5 10.6

0

20

40

60

Sweden Norway To bebuilt

Total2020target

Ambitionincrease,Sweden

Total2030target

Source: Swedish Energy Agency, Norwegian Water Resources and

Energy Directorate

Notes:

1 Sweden, Norway, Finland, Denmark, Estonia, Latvia, Lithuania

2 SKM

Sound macro-story for Nordic wind

Source: Nord Pool Spot, Statnett, SKM


Encouraging signals on Elcert market

• The new, prolonged Swedish 18 TWh target will be

included in the existing system,

• Projects in Norway can be built until end of 2021 to

be eligible for elcerts until 2035.

• There will be a substantially raised quota during the

period 2018-2020. That will lead to an increased

demand for certificates from 2018

• This will decrease the existing Elcert surplus of

approximately 12 million electricity certificates can be

down by 50% during the period.

• Apart from this there will be a linear raised quota

from 2020 and onwards, instead of the previously

backloaded curve

• .

• Sweden will introduce a stop mechanism towards

2030 to prevent an oversupplied system. The stop

mechanism should be in place in 2020.

• Technical adjustments to the system will be handled

by the Energy Agency and not by the

government/parliament, which means quicker

processes

New Elcert-quotas presented by Energimyndigheten and NVE

1Source: Neas Energy



Nordic Market 3

Conclusions 4

Q&A 5

Contact details 6

Aquila Group 1

Agenda


Conclusions

Balanced hedging strategy to manage merchant risk remains essential

Challenges

As competition among investors for the best projects will increase, those investors will be successful, which provide “value-add” to the developer

Scarcity of high quality projects at good wind sites with grid connection is not yet a problem, but will probably be in the future as the superior sites are

developed and more investors will enter the market

Due to slightly higher domestic demand expectations, ongoing convergence with higher power prices in Continental Europe (driven by higher

commodity and carbon prices) and ambitious renewables build-out targets to replace phased-out thermal generation, we expect (in accordance to the

known forecast providers) power prices to rise

Further improvements of LCOE will also make site with less attractive wind resources economically viable for wind projects

The Norwegian-Swedish agreement on the transition of the Elcert scheme sent a strong signal and should have positive impact on Elcert pricing and

decrease backlog

Opportunities

The Nordic will stay an dynamic investment environment among others due to the following market trends:

The raise of corporate PPA with terms of up to 20y will allow for new, attractive debt financing structures

More and more utilities pursue an “asset-light” investment approach and seek for cooperation models with financial investors

There will be increasing competition for O&M as a third party O&M provider market will be established and result in even lower opex for wind



Nordic Market 3

Conclusions 4

Contact details 6

Aquila Group 1

Agenda

Q&A 5



Nordic Market 3

Conclusions 4

Q&A 5

Contact details 6

Aquila Group 1

Agenda


Today’s presenter

Ingmar Helmke

Investment Manager | Director

Energy & Infrastructure EMEA

Tel: +49 875050 - 235

Email: [email protected]


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Documents

Challenges & opportunities in the Nordics · Nordic households enjoy one of Europe’s fastest growing populations (+22% in Norway and +13% in Sweden by 2050), with high consumption