Analyst PRESENTATION

Offshore wind industry Status and trends in the offshore wind market Possibilities for Norwegian companies within offshore wind, intpow, Stavanger, Norway September 2015 Steen Broust Nielsen [email protected]

Introduction

A few words about MAKE Summary  MAKE is one of the global wind industry's premier strategic consulting and research firms, serving the world’s leading wind companies from all parts of the value chain from raw material suppliers to IPPs and utilities.  MAKE is based in Aarhus (DK) and has offices in Hamburg (D), Chicago, Boston (U.S.) & Shanghai (China).  Publish industry leading wind energy research reports, analysis and databases

 Consult on wind farm investments, market assessment, supply chain dynamics, technology, operations & maintenance, M&A advisory, business & market modelling and offshore wind  Due-diligence partner for European and international PE and industrial investors

Steen Broust Nielsen - Partner at MAKE  More than 20 years of wind sector experience including from LM Wind Power.  Has served on the Board of EWEA and GWEC.  Extensive due diligence, consulting and senior management experience in the wind industry. Track record for driving and enabling profitable growth, through development and execution of focused business strategies. Master of Science in Economics and Business Administration

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Introduction

Global footprint and key milestones

MAKE’s strategically placed global offices

Top 15 wind power markets

2005 MAKE is founded in Aarhus, Denmark, with a focus on offering high-quality research products for the wind power industry.

2007 The first overseas office is opened in Shanghai, China.

2008 MAKE broadens its global presence through the establishment of another branch office in Chicago, U.S.

2010 Yet another office is opened in the U.S., in Boston. MAKE starts to build its technology team.

2011 The technology team is fully formed and launched for both intelligence and advisory services.

2013 MAKE launches new and improved research product portfolio.

2014 MAKE opens an office in Hamburg, Germany

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Introduction

A sample of our clients

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Executive summary

Global offshore wind on growth path from 2017 Global growth in offshore wind expected to come close to 25% CAGR (2014-2024)



LCOE is gradually reduced over the coming years -



Global growth in 2017-24 will be lead by Asia and Europe -



Offshore wind has cost reduction opportunities in multiple areas Innovation and new technologies required to bring down LCOE Offshore wind requires scale to reach grid parity

After a contraction around 2016, the global offshore wind power market will grow significantly from 2017 Asia is expected to ramp up massively and install more capacity every year than Europe from 2017 Strong commitment to offshore wind in China, as evidenced by ambitious targets of 5GW in 2015 and 30GW in 2030 and recent policy signals Lengthy consenting procedures and low support for offshore wind projects pose an imminent threat to large scale offshore build-out in China

European growth to accelerate from 2017 – current political climate dominated by ambitions to bring down consumers’ energy bills – energy security on the rise -

EU climate package introduces 2030 renewable targets, but national binding targets are missing European national offshore ambitions scaled down Lack of clarity on long term national offshore wind policies may hamper growth already before 2020 Energy security concerns may take center stage in raising EU renewables ambitions and targets

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Offshore wind LCOE

Offshore wind is at start of the learning curve with large potential to reduce gap to grid parity Technology liftetime (years)

Installed global capacity (GW)

113

Coal

75

Gas

63

Nuclear

38

PV

33

Wind onshore Wind offshore

Source: Siemens

23

1,970

Coal

1,600

Gas

401

Nuclear

113

PV

343

Wind onshore Wind offshore

9

Source: Siemens, MAKE

Being one of the youngest electricity sources having not yet gained economies of scale and standardization Offshore Wind has large cost reduction potential.

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Offshore wind LCOE

Offshore wind has cost reduction opportunities in multiple areas including scale effects Turbines & plant

Substructures

Transmission

O&M









 

Larger turbines and wind farms Increased reliability Scale effects and industrialisation



Standardised and optimised offshore foundation design and design criteria Industrialised manufacturing

 

eBoP optimisation of substation and transmission capex Innovative transmission solutions Improved grid access

 

Low OPEX drivetrains Turbine and component quality Condition monitoring, diagnostics, preventive maintenance

Source: Siemens, MHI-Vestas, MAKE

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Global market trends

Offshore wind segment to more than triple in share of global market Global grid-connected forecast: 2014-2024e 4-6%

4-9%

11-23%

80

60

(GW) 40

20

0 ´14

Source: MAKE

´15e

´16e

´17e

Offshore markets

´18e

´19e

´20e

´21e

´22e

´23e

´24e

Onshore markets

Offshore growth largely to be European until 2017 after which Chinese offshore is expected to be a key driver for global offshore

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Global market trends

Northern Europe - 92% of global offshore wind Annual grid connected capacity 2013 & 2014 (MW) 1.800

Cumulative grid connected capacity (MW) YE 2014

+8%

7% 0% 1% 0% 0%

1.600 1.400 1.200 1.000 800

92%

87%

600 400 200

92%

0

2013

2014

APeC

Northern Europe

China

Americas

Southern Europe

RoW

Source: MAKE

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Outlook for offshore markets in Northern Europe

Offshore wind increase importance in N Europe Grid-connected forecast for new wind power capacity: 2014-2024e (MW) -9% 11 10 9 8 7 6 (GW) 5 4 3 2 1 0

-1%

16%

30% 10%

32%

44% 31%

31% 52%

´14

´15e

´16e

´17e

´18e Offshore

´19e

´20e

´21e

42%

44%

44%

´22e

´23e

´24e

6

Onshore

Source: MAKE

EU 2020 targets and national policies for offshore wind in Northern Europe is set to more than double the share of the regions overall demand for new wind power capacity to 2020.

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Future Outlook

Offshore developers and governments in key role to drive development of European sector Technology development

Supply chain maturation

Political support



Development of larger and more reliable turbines







Develop next generation foundations



Redevelop the transmission solution for far-from-shore projects



Optimised O&M solitions

Developers & OEMs are to push technology innovation, risk mitigation and entrance of new technologies



Consolidation of business to provide for 4-5 supplier having critical business mass for innovation, yet being in competition Develop industrialized supply chain, standardization of main components and serial production

Developers and governments to secure supply chain development

  

Secure transparent long term planning horizon on EU and national level Continued high certainty on revenue and subsidy levels throughout asset lifetime Ensure stable support levels during the transition towards lower cost-of-energy Create level playing field and set fair price for CO2

Governments to support future buildout in the mid- to long- term with stable and transparent subsidies

Source: DONG, Siemens, MAKE

Modelled cost of energy reductions are possible but require clear roadmap for all industry stakeholders

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Leading insights into wind power industry dynamics MAKE reports and industry insights Through a series of annually published reports, forecasts, research notes and data MAKE’s Regional Analysts provide comprehensive analysis and data for the key wind power markets globally, supply chain, technology trends and industry dynamics enabeling our subscribers to:



Understand key drivers and barriers in wind power development at global, regional, and country levels



Evaluate countries and regions of interest based on detailed market attractiveness assessments



Assess business opportunities for product positioning, commercial strategies and successful business development

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Our Offshore Subscription research products Market Report:  Global Wind Turbine Technology Trends Insights into key technological issues Sector Reports:  Global Wind Turbine O&M In-depth analysis of the global wind power services market and strategies  Global Offshore Wind Power Market Analysis of current and expected global and local conditions

 4 Research Notes 20+ pages of expert synthesis of key issues in the industry  4 Global Wind Power Market Outlook Quarterly updates of detailed market forecasts – offshore as well as onshore  Offshore Flash Notes 2-3 pages of instant analysis and insights into the latest industry developments

 4 Global Offshore Wind Power Project Database Updates  Offshore Analyst Presentations

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To receive full presentation contact:

Steen Broust Nielsen [email protected]

consultmake.com © 2015 MAKE Consulting A/S. All rights reserved. Reproduction or distribution of this report in any form without prior written permission is strictly forbidden. Violation of the above restrictions will be subjects to legal action under the Danish Arbitration Act. The information herein is taken from sources considered reliable, but its accuracy and completeness are not warranted, nor are the opinions, analyses and forecasts on which they are based. MAKE Consulting A/S cannot be held liable for any errors in this report, neither can MAKE Consulting A/S be liable for any financial loss or damage caused by the use of the information presented in this report. Denmark Sønder Allé 9 DK-8000 Aarhus T +45 7026 6628

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