International Management and Executive Search Consultants allocate “Stormy Weathers” in the European Wind Power sector – how to keep the pace? Dr. Jörg Fabri allocate International, Managing Partner Presentation at EcoSummit Düsseldorf, 15. November 2012
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International Management and Executive Search Consultants
allocate
“Stormy Weathers” in the European Wind Power sector – how to keep the pace?
Dr. Jörg Fabri allocate International, Managing Partner
Presentation at EcoSummit Düsseldorf, 15. November 2012
Investment “hot spot”: more than $ 200 billion investment annually in Renewable Energy
Comments New investments in Renewable Energy by sector Q1 2004 to Q2 2012 in bn. $
Source: allocate, Bloomberg
Is the Renewables sector prepared for further growth if subsidization is decreasing?
• Global new investments in renewable energies is app. $ 200 billion annually
• Since peak in 2011 decreasing volumes • Share of wind investments is 33% • VC/PE share stable at low level $ 8 bn. • New class of investors entering rene-
wables markets: low interest levels for low risk assets directs attention to renewables with infrastructure characteristics
New investments in Renewable Energy
Initial growth to a large extend driven by subsidization and legal framework
Investors’ perspective: not all wind is the same – onshore and offshore wind investments with different risk-reward profiles
Attraction of different investors: infrastructure funds focusing on the low risk profile of Onshore Wind – PE investors on high IRR of Offshore Wind (if the risk can be managed)
Investors are becoming increasingly reluctant towards wind power investments
Technical
Subsidies
Grid connection
Operational
Obvious high first mover risks in deep water offshore wind, grid uncertainties and reduced subsidization currently reduce investors’ appetite
Risks Description
Source: allocate
• Near shore/ 40+km offshore experiences uncovers a magnitude of unexpected problems (foundations, ship & employee bottlenecks,…)
• Deep water pioneer project BARD with big financial problems
• Feed in tariffs guaranteed for 10 year, planning cycles are 25 years • Decreasing willingness to grant new subsidies, trend to reductions & caps • Government tries to avoid another „solar bubble“ due to over subsidization
• Sales risks, TenneT with problems to connect the wind parks to the grid • Planned state guarantees still have to pass the parliament • New annual grid plan will coordinate grid and generation build up
• Limited experience in „true“ operational costs esp. maintenance. (manufactures often guarantee for 20 years only)
Costs of offshore wind parks increase significantly with distance to coast & water depth…but do the profits as well?
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Source: Company web pages; allocate research Remark: other parameters such as turbine capacity not considered in this analysis 1) Exposure = distance to coast [km] + water depth [m]
Cost per MW installed [EUR m]
Exposure1)
1,5 1,8 1,9
3,3 3,5
2,2 2,7
3,7 3,6
4,2
3,5 3,5
0
1
2
3
4
5
6
10 20 30 40 50 60 70 80 90 100 110 120 130
Lill- grund
Thanet Belwind
Alpha Ventus
Global Tech 1
Horns Rev2
Nysted
Egmond am Zee „Official“
figures
Will this be sufficient?
Borkum West II
London Array Thornton
Banks Ph. 2+3
BARD Offshore 1
EUR 250m for 60 MW
With more distance to coast the operational (wind) hours increase – thus the higher investment might pay back by higher energy output per installed MW (but risks increase)