Wind Power in Germany - Market Drivers and Strategies of...

Wind Power in Germany - Market Drivers and Strategies of

Individual Players

Adding value to energy ventures.

Agenda

I. The German Electricity Industry

II. The German Wind Market

III. Conclusions

110th Meeting of the Reform Group, Schloss Leopoldskron, Salzburg 2005

The German ElectricityIndustry

1 210th Meeting of the Reform Group, Schloss Leopoldskron, Salzburg 2005

3

Source: UCTE (Union for the Co-ordination of Transmission of Electricity)

Physical Electricity Exchanges 2003


Sources: BBR, VDEW

Market Structure 2003

German Electricity Generation Mix as of 2003

30%

24%

28%

7%

8% 3%

Nuclear Power Hard Coal Lignite Natural Gas Renewables Oil / others


Industry Consolidation in Gemany I – Market Shares in 2000

Market share in %

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Production Transmissiongrid

Distribution grid Industrialcustomers

Retailcustomers

sonstigeBewagHEWEnBWVeagVEWRWEViagVeba

Source: BKartA, EU-Commission, enervis


Industry Consolidation in Gemany II – Market Shares in 2002

Market share in %

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Production Transmissiongrid

Distributiongrid

Industrialcustomers

Retailcustomers

sonstigeEnBWVattenfallRWEE.on

Source: BKartA, EU-Commission, enervis


Cost of Traditional & Renewable EnergyTechnologies – Current and Expected Trends

7

Source: Imperial College Centre for Energy Policy and Technology (ICCEPT) 2002, EEX


External Costs for Electricity Production (EU)

Source: European Commission / Owen (2004) Units: euro¢/kWh


Introducing Renewables as Competitors

New markets created by legislation (StrEG 1991; EEG 2000)

Political markets (fostering new technological development)

Diversification of generation mix

Increased security of supply

Will become competitive if continuously supported

“Competition of the subsidized systems”


Market Structure Renewables

Renewables Electricity Mix

44%

41%

1%

3%

0%

2%

2% 3% 4%

Hydro Wind PVWood Liquid Biofuels BiogasSewage Gas Landfill Gas Waste-to-Energy (organic)

Source: BMU


The German Wind Market


Installed Wind Capacity in Germany

0

2000

4000

6000

8000

10000

12000

14000

16000

18000

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

1

Source: German Wind Energy Institute (DEWI)

16.629 MWCumulated installed capacity (in MW)

New capacity added (in MW)


Top 19 Wind Nations

1

Source: World Wind Energy Association


1

Wind Energy Value Chain (Macro Level)

Sub-Supply

upstream downstream

WTG Manufacturing

SiteDevelopment

& Construction

Wind Farm Ownership

O & M

• Gearboxes

• Generators

• Rotor Blades

• Towers

• Control Units

• OEM • Wind Survey

• Site Acquisition

• Building Permit Application

• Financing

• Turn-Key Installation

• Operation

• ConditionMonitoring

• Maintenance

• Private Owners via Closed-End Funds

• Owner Operators

• Institutional Investors ?

• Utilities ?

Estimated Value Added:

62 %24 %

14 %


Estimated Added Value p.a. (Germany)

62 %24 %

14 %8-9 %Manufacturing Development /

Packaging O&MIRR

/ (year 2003)

1

Source: German Wind Energy Institute (DEWI)


The Market for IPP (Wind-) Developers –Where does it come from?

1

Small and medium-sized players

Fragmented market / many weak projects

Private equity financed (tax-driven closed end funds)

Tariff degression as main driver of efficiency gains

First wave of consolidation due to

Collapse of private equity market in 2002 / 2003

Changing perception of bankability


Drivers of Consolidation…

Financial marketequitydebt

Tariff degression(2 % p.a.)

Time

Growth

MarginScarcity of sites

1

Grid accessSource: ENERTRAG Structured Finance


… and how to cope with it

Operational Constraints

Time

Growth

Margin

Financial expertiseProfessionalismLearning CurveStrategy

1

Source: ENERTRAG Structured Finance

Financial Constraints


Recent Market Developments

1

Strong competition between developers

Market concentration increases

Wind farm developers integrate downstream

Some become operators / owners

Some diversify into other renewables markets (caveat: focus! Umweltkontor)

Dutch utilities buy wind farms / developers


1

The Players & Degree of Vertical Integration


Valu

e Added

Development (siting, permitting, land right procurement)

Construction

Financial Structuring, Packaging & Distribution

Ownership / Investment

O & M

Administrative Services

Ostwind, ABO, Boreas

Essent, Edis

Winkra (for Essent)

WPD, Sachsen-

fond

ENERTRAG, Energiekontor, WKN

Plambeck

EBV, P&TUMAG


The Players & StrategiesFull-Line Financial Packagers

1


CoreCompetences

Economies of Scale

Economies of Scope

WKN

Integrated Full-Liners, Operators

Developers,Mono-Line Fin. Packagers

Energiekontor

ENERTRAG

WPD

Sachsenfond

BoreasEssentABO

Ostwind


Conclusions


Conclusions

1

Continental European energy markets are fragmented and policy driven

Subsidies (open or hidden) have been a fact of life and will continue to be so

Renewable energy laws have created significant economic value for the German economy

The overall sector has reached critical mass …

… the individual economic actors have not, yet !


ContactDetlev Hartmann

Chief Financial Officer

ENERTRAG AGBerliner Str. 25 AD - 13507 Berlin

Tel. +49 30 4360 [email protected]

2124

Alexander Boensch

Financial Engineering & Risk Management

ESF - ENERTRAG Structured FinanceBerliner Str. 25 AD - 13507 Berlin

Tel. +49 30 4360 [email protected]

Adding value... ...to energy ventures.

Merdelou / Fontanelles, France

€ 25,8 Mio. Project FinancingStructured by ESF in 2002

Wind Power in Germany - Market Drivers and Strategies of...

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