Energy Management in GSK

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Presentation Objectives

• Introduction to GSK• Energy Issues• Significance of Energy for the Pharmaceutical Industry

and GSK• Energy Management at GSK

– Opportunities– Examples

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Every second, 45 doses of GSK vaccines are distributed

Examples of Popular Products

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Key facts*

• Company valued at approximately €115 billion

– Turnover in 2005 approximately €32 billion

– More than €4.5 billion invested in R&D

– More than 100,000 employees

• Products are sold in more than 190 global markets

– More than 1,400 different brands

– More than 10 million packs per day!

• 80 Manufacturing facilities & more than 20 R&D facilities

– Over 34,000 employees in manufacturing & 15,000 in R&D

*2005 data

In 2005 GSK made humanitarian donations worth €600 million

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Energy Issues

• Environment (Global Warming) and Health• Operational (Security)• Commercial (Costs)

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Extreme Weather Events and Disease Outbreaks 1997 to 1998

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The Frequency of Weather Related Epidemics

031 44

86

317

0

50

100

150

200

250

300

350

1950-1959 1960-1969 1970-1979 1980-1989 1990-2001

Number ofEvents

Year

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Is Energy Important to GSK?

• Key issue for external stakeholders– Identified at 2003 Stakeholder panel

• Investor expectations– Carbon Disclosure Project

• (CDP3 = 143 institutional investors with assets of $20 trillion)

• Priority for UK Government– Raised at informal meetings between GSK and the

Government• Security of Supply

– Increased reliance on imported gas• Energy cost increases

– GSK’s energy costs have risen significantly in recent years and this trend is expected to continue

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Source: Trucost Analysis based on direct emissions FTSE 100

Direct Greenhouse Gas (GHG) Emissions by Sector (CO2e*)

How does Pharmaceuticals compare to other sectors?

*Different GHGs have a different warming impact. To take account of these differences they are normally represented as CO2 equivalents

GSK’s energy consumption is equivalent to

–240,000 UK Households; and represents–0.33% of the UK’s overall emission of CO2

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GSK Global Warming Potential

*compounds that contribute to global warming*Includes waste treatment and fermentation

0

500

1000

1500

2000

2500

3000

3500

4000

2001 2002 2003 2004 2005

operations energy

transport energy

*compounds

*other

Mill

ion

kg C

O2

equi

vale

nt

54% from manufacturing

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Impact of Regulations

• GSK has participated in the UK’s greenhouse gas emissions since its launch in April 2002– 8 UK Sites participated

• Responsible for more than 32% of GSK’s total energy consumption

• 18 Sites currently participate in the EU Emissions Trading Scheme– Responsible for more than 49% of GSK’s total energy

consumption• Several sites have Integrated Pollution Control

Authorisations– Need to demonstrate energy efficiency

In absolute terms GSK’s global warming potential has fallen 8% since 2001 or 13% relative to sales

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Energy Management in GSK

Position Paper

Global EHS Standard

Technical Guidance and Awareness

Metrics and Targets

Global Utilities Team & Energy Managers

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Summary of GSK’s Energy Management Position Paper

• Seeks to reduce its reliance on fossil fuels whenever it is technically and economically possible

• Commits to reducing energy by at least 1% per annum pro-rata to sales• Actively supports market-based mechanisms, such as emissions trading,

provided they are structured to be efficient, flexible and responsive to business needs

• Evaluates opportunities, including the use of renewable energy such as wind turbines, solar photovoltaic cells and waste-to-energy plants, to allow it to become less reliant on external sources of energy

• Encourages its suppliers and contractors to improve their energy efficiency

• Evaluates energy related projects over their lifetime rather than over the normal payback period

• Includes energy infrastructure considerations as part of business continuity planning activities

• Promotes greater energy awareness and encourages its employees to reduce energy consumption both in work and at home

• Is committed to the transparent reporting of environmental data and provides this information to stakeholders in a timely manner

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Metrics and Targets (start of 2006 to the end of 2010)

• Environment (pro-rated on sales)– Air (volatile organic emissions)

• 2%/yr reduction– Wastewater (organic waste – COD)

• 3%/yr reduction– Solid Waste (non-hazardous)

• 1%/yr reduction– Energy consumption

• 1%/yr reduction per unit sales– Water consumption

• 2%/yr reduction

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Energy Awareness Intranet Site

Examples of Technical Guidance & Awareness

High Efficiency Motors

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Role of Global Utilities

• Helps the business to understand regulatory requirements– Coordinate GSK’s participation in energy conferences– Share knowledge and understanding and feedback

from Regulators• Appointment of Verification Body

– Selected following a reverse auction (ebid)• Manage carbon trading

– Whenever possible GSK will trade internally to ensure compliance

– In 2005 GSK traded 85,000 tonnes of carbon• Helps sites to draft their Integrated Pollution Prevention

and Control Authorisations (permits)– Ensures that the energy management is explained in

a consistent manner

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Opportunities• Data : Monitoring &Targeting, Utilities Modelling• Metering• Thermography, Insulation upgrades• Steam Trap Monitoring• Pump Smart & Laser alignment• Compressed Air, Ultrasonics• Air Handling & HVAC, Pilot Studies • Air conditioning, Heat Pump• Boiler Design & Operation/ Ionised Fuel • VSD, Motor Management • Refrigeration ,Cooling, Eutectic Tank • Electronic Expansion Valves , Chillers• Process & Automation• Heat Recovery, Stirling Engine• Nitrogen & Water Optimisation • Solvent Recovery, WWTP • BMS, Lighting, Elect transmission• Combined Heat & Power• Wind Power • Solar Power , Bio gas• Continuous Processing

The Challenges :

•Resource Availability

•Business Priority

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Energy Costs

Energy Price

0.00

5.00

10.00

15.00

20.00

25.00

30.00

35.00

40.00

2001 2002 2003 2004 2005 2006Year

£/M

Whr

• Increasing costs mean paybacks are reducing

Examples

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Implementation – Wind Turbines

• Two second hand turbines rated at 0.5 MW installed at Barnard Castle (UK)– Payback achieved in 2.6 years– Provide 10% of the sites electricity– Saves 550 tonnes of carbon per year

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Implementation - Combined Heat and Power

• Combined Heat & Power plants burn oil or gas to generate electricity on site thereby avoiding electricity grid losses– Currently installed at

Verona & Dartford– Must be a need for the

recovered heat (Steam)

Even though CHP reduces overall emissions it increases emissions from GSK sites

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Implementation - Motor Management

• A Motor Management Policy is being implemented within Primary & Antibiotics – High efficiency motors (HEMs) will be used for all

new investments; and– Instead of repairing old inefficient motors they will

be replaced with HEM equivalents• payback 0.5 - 2 year

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Implementation – Monitoring and Targeting Software

• Installation of meters; and

• Software to monitor performance– Data gathering,

trending and analysis

– Identification of improvement opportunities

Helps GSK to manage compliance with Regulations e.g. EU ETS

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Some more examples:

• Research Triangle Park, US - increased its sponsorship level in the state green power programme, which will add more than 700,000 kWh of renewable energy to North Carolina's power supply

• Zebulon, US - saved energy by better control of laboratory lighting, introducing motion-activated lighting and reducing the temperature of the office buildings by 2 degrees

• Suzhou, China - modified the chilled water system to avoid using the chiller when the air temperature is low enough to ensure cool water. This has saved an estimated 550,000 kWh of electricity in a year.

Thank you

Questions?

BackupOther Examples

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Some other projects

• High efficiency lighting• Voltage reduction• Steam boiler

economisers• Solar PV roofing

systems

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How does GSK compare to other pharmaceutical companies (2004 data)?

44716.3Novartis

105922.6Bristol Myers Squibb

*1179Did not reportJohnson & Johnson

+1490+8.9Astra Zeneca

Did not reportDid not reportMerck

93414.8Sanofi Aventis

+1750+19GSK

*2550*27Pfizer

Greenhouse Gas Emissions (CO2e)

Energy Consumption (million GJ)

Company

*2003 data where indicated

+ Facility emissions

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Implementation - Air Conditioning and Ventilation

• Upgrade and replacement of fans with new high efficiency aerofoil bladed belt driven fans

• Efficiency improvement c. 18%

• Payback around 4 years is possible

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Future projects - Renewables

• Installation of micro turbines and solar panels (water heating)

• Wind turbines– Evaluation

of developer “build own, operate” schemes

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Future projects – Energy from Biomass

• Evaluation of Anaerobic Digestion and Advanced Fluidised Composting technologies for particular wastes– Energy generation; and– Reduced waste disposal costs