Infrastructure and new energies from planning to realization_Value Partners

• 1. ITA-SOLne-090928-P0The information contained in this document belongs to Value Partners S.p.A and to the recipient of the document. The information is strictly linked to the oral comments which were made at its presentation, and may only be used by attendees of that presentation. Unauthorized copying, disclosure or distribution of the material in this document is strictly forbidden and may be unlawful. Milan, 28 September 2009

2. ITA-SOLne-090928-P1 Finance &Objectives PlanAuthorize realize Definition of long- Assessment of Screening/ Financing ofterm objectivespossible areas of approval of approved projectsfor the Country, intervention andprojects-Project financee.g.:priorities setting: -Approval at schemes-System security -New generationnational/local level -Special Purpose-Energy costs capacity(Title V devolution)Vehicles-Share of-Improvement of -Conferenza dei-Infrastructural renewablesystem efficiency serviziFunds generation (existing plants,-VIA/VAS-Emission reduction interconnectors,)procedures Realization of-Consumption -Improvement of -Regional projects reduction (energy energy efficiency Administrative -Build efficiency) Definition ofCourt rulings-Start-up- incentive/ penalty (TAR)-Operate & schemesTransfer Focus of EU Directive Definition of (20-20-20)national/regional energy plans 1 3. ITA-SOLne-090928-P2Italy targets at 202020% renewable generation 20% emission reduction20% energy efficiency Today 5% of 340 TWh ~600 Mio tons CO2/y Italy today: ~170 Mio TEP 2020 17% of 470 TWh -20% to reach ~500 Mio -20%: -34 Mio TEP(European targettons/y20%) -13% for sectors notcovered by EU EmissionTrading Scheme (ETS)Possible Incentives to Zero emission Building efficiency Levers renewable sources: generation: nuclear?certificates. Solar. Wind CCS: Carbon Capture & Process efficiency. BiomassStorage. Co/ Tri generation New transport technologies (new modal transport, hybrid cars, mass transport, )Source: GSE, 2007 Energy Report, AEEG, Bocconi IEFE, RIE Bologna, Value Partners Estimates2 4. ITA-SOLne-090928-P3 ! FOR DISCUSSION 1 Which are the interventions on the generation mix required to balance cost/environmental objectives? 2 Which interventions on infrastructures (particularly on the grid) are needed to optimize system efficiency in the new scenario? 3 Which types of incentive systems are more appropriate to promote the evolution towards the desired scenario? 4 Which initiatives should be taken to ensure that incentives contribute to the development of national industries? 3 5. ITA-SOLne-090928-P4" ! 1ESTIMATESHydro + renewablesNuclearFossil fuels Generation mix Italy vs. EU27,Possible future developmentsPercentage of production Further push on renewables (inRenewables*5%5% progress)12%Hydro 13%9%12% Increase of gas supply throughOil 13% the introduction of new LNG7% 30%terminalsCoal14% 14% 4% Selective introduction of nuclearplants?31% Further development of cleanGas coal?55% 55% Italian CCGT efficiency higher Increase of electricity imports than OECD avg.21%from neighbouring countries(51% vs. 45%) through new interconnections?Italy, 2007Italy, 2020 EU27, 2007 (projected) * Wind, solar, bio-mass, waste, Source: SAFE, Value Partners analysis4 6. ITA-SOLne-090928-P52Removal of internalIncrease of internationalDevelopment of bottlenecksconnectionsSmart Grids Critical sections Congestions among different Strong price differentials Change of paradigm: from few areas do not allow the mostbetween Italy and neighbouring large-size plants to distributed efficient plants to operate andcountries (France, Austria,generation result in price differentialsCEE, ) but international links Development of domestic South and Islands are generallystill limitedsystems (solar, micro- disadvantaged June 2008: new UCTE plan turbines,) which need to Congestions bound to increaseenvisions several new lines with exchange energy with the grid in with new plants if no measures France, Switzerland, Austria,both directions takenSlovenia, Croatia and TunisiaSource: SAFE; UCTE; Value Partners analysis 5 7. ITA-SOLne-090928-P6# !3Billion EurosEstimated Estimated cost Possible areas Examplesincentivesto reach 2020 of intervention2000-2010 (total) targetsNeed to re-balance Conto Energiathe incentive New (80 Mln in 08)schemes: CIP6 generation~30 ~60 (~5 Bln in 07). Carry on the effort capacity Green certificates on generation, Tax exemptions focusing it on Trans EU networksreal renewables Improvement Green book on interconnections ~2. Invest in network of system ~40 efficiency and efficiency security of supply . Strongly promote White certificates energy efficiency Improvement market on end users and of energy 55% tax reduction ~5~100 not only on efficiencyon energy saving distributors investments Source:GSE, 2007 Energy Report, AEEG, Bocconi IEFE, RIE Bologna, Value Partners Estimates 6 8. ITA-SOLne-090928-P7 $% &4 ' MW Old incentive schemesThanks to "Conto Energia" Conto EnergiaNew "Conto Energia" Feed-in tariff to re- Existing photovoltaic plantsExpected evolution launch development of photovoltaic ~2.000generation introduced in July 2005~1.400 The tariff rewards production, is granted for 20 years and is~800 about 0,4 /kWh~500 produced with a 2% ~300 reduction per year ~40~120 ~40 ~50~40~260~30 ~32 Rates increase with~40~10 ~80 2009E 2010E2011E 2012E level of architectural2003200420052006 2007 2008integration and varies In 2011 the 1.200 MW, cap of the existing with power installed "Conto Energia will be reachedSource: Politecnico di Milano, Solar Energy Report 2008; Value Partners analysis7 9. ITA-SOLne-090928-P8 '!4EXAMPLE: PHOTOVOLTAICItalian companiesItalian companies Foreign companies Foreign companies with subsidiary in Italy % on total50-60%30% 10% investments Components/ Silicon & Cells &control EPC/ Wafer Modules Installerssystems Distributors producers producersproducersPresence of2%23%26% Italian 40% 38%52% companies25% 74% 98%22%Typical~50%~18%~15%~10%~20% EBITDASource: Politecnico di Milano, Solar Energy Report 2008, Press clippings8 10. ITA-SOLne-090928-P9 Initiatives taken so farOpen issuesFurther improvements needed Autorizzazione Unica Different implementation by Regions Implement homogeneously in all Often an on-top procedureRegions making it really the +20-25% extra costs and +10-15%only authorization needed extra time with respect to EU standards Conferenza dei servizi Authorization doesnt mean Sanctions to plaintiffs in case of realization (minorities can rely onunjustified/ unproven legal TAR and State Counsel suspension)actions Regional Energy Plans Different application by Regions Create PEAR in all the regions, (PEAR) using the same guidelines VIA procedure for larger Lack of national guidelines Create a VIA - Autorizzazione plants Unica valid for all plants DIA procedure for smaller Separate procedures for plant and Parallel procedure for plant + plants in some Regionsfeed-in-point connection (especially connection if expropriation is needed) 9 11. ITA-SOLne-090928-P10 Italian context Public institutions and private investorsImplications on funding of energy with limited experience in infrastructural projects investments The Italian context as-is is not ableto mobilize the size of investments Limited use of innovative financialwhich is needed to support the instruments (e.g. bonds for financialevolution of the system investors, asset backed securities) As a result, many projects already Credit market crunch increasingapproved/ quasi approved fail to caution from lenders and investorsstart because of lack of capitals Institutional investors interested mostly To fill the infrastructural gap, Italy in brown field equity investmentsneeds a strong evolution in terms offinancial culture of the institutions Complexity, uncertainty of times andoperating in the market unclear authorization procedures strongly influence investors interest 10 12. ITA-SOLne-090928-P11$( &) FOR DISCUSSION Finance &Objectives Plan Authorizerealize System security New energy plan: More agile Extension of new Energy cost reduction -Nuclear authorizationproject financing Renewable energy-Renewablesprocedures for schemes Emission reduction generation and grid-SPV involving utilities Energy efficiency New infrastructure connection -SPV promoted by plan:financial companies -Energy corridors Improved cooperation -Securitization -Gas hubsbetween central and schemes to create -Smart grids local authorities new financial-Reduction of local vetoproducts New incentive power, particularly for Optimal resourceschemes strategic investments Involvement of other allocation-Renewables-Introduction of local financial subjects: National industry -System efficiencybenefits linked to-PE funds creation-Energy efficiencyinvestment realization-Infrastructural funds R&D -Fondazioni New industrial policy Central monitoring of- -Promotion of R&D on projectnew technologiesimplementation times -Promotion of national and analysis of criticalindustrial chains cases11 13. ITA-SOLne-090928-P12 % Milan RomeLondon Via Vespri Siciliani, 9 Via di Porta Pinciana 1 Greencoat HouseEnergy experts worldwide 20146 Milan 00187 RomeFrancis Street Italy Italy SW1P 1DH - LondonRuggero Jenna Tel. +39 02 485 481 Tel. +39 06 697 6481UK Director Tel. +44 (0) 20 7630 1400Singapore [email protected] MunichIstanbulDubaiEnrico Lanzavecchia Maximilianstrasse 35a SunplazaBusiness Central TowersDirector 80539 MunichDereboyu Sk. No:24 Maslak Suite 1304 AShanghai office Germany 34398 IstanbulP.O. 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