Scatec Solar ASA

Solar Energy in Brazil Terje Pilskog, Executive Vice President, Scatec Solar ASA Rio de Janeiro, November 17, 2015

Copyright: Scatec Solar ASA www.scatecsolar.com • [email protected]

A solar IPP with an integrated business model Scatec Solar Equipment manufacturing

Project development

• Own development • Local partners

Financing

Construction

Operations

• Equity and debt structuring

• Project management

• Performance

• Construction monitoring

• Maintenance and repair

• Funding of developers “One stop shop” for smaller developers: • Take up to 100% equity requirements together with Norfund • Bring all required debt financing • Do full EPC, O&M and asset management Copyright: Scatec Solar ASA www.scatecsolar.com • [email protected]

Ownership (IPP)

• Long-term ownership • Investment JV with

A strong position in emerging markets

1

Established Main offices Norway South Africa United States

A

Market Cap

A Oslo B Cape Town C San Francisco

~ 400 MUSD

6

C 7

8

Operational Power Plants Czech Republic 20 MW 1 Kalkbult, RSA 75 MW 2 Linde, RSA 40 MW 3 Dreunberg, RSA 75 MW 4 ASYV, Rwanda 9 MW 5 Red Hills, Utah 7 105 MW Agua Fria, Honduras 8 60 MW

5

B

• 480 MW in operation / under construction • 350 MW in emerging markets Copyright: Scatec Solar ASA www.scatecsolar.com • [email protected]

2001

23

4

Power Plants in Construction 6 Jordan 43 MW 8 Los Prados 53 MW

Scatec Solar achievements in emerging markets  Built 3 projects of in total 190 MWp in South Africa

under the country’s Renewable Energy Programme  Awarded 3 more project of in total 258 MWp in round 4

of the program in South Africa  Built 1 project of 8,5 MWp in Rwanda based on a PPA

with EWSA, the national utility company of Rwanda  Signed PPA in Mali for a 33 MWp project  Secured 5 projects in Egypt’s Fit program, in total

about 300 MWp  Awarded land by government of Sindh in Pakistan for

building 150 MWp  Finished 60 MWp in Honduras and initiated

construction of another 53 MWp project

Copyright: Scatec Solar ASA www.scatecsolar.com • [email protected]

Page 4

Brazilian large-scale solar market is emerging quickly •

Total installed capacity of 125GW, consumption of approx. 600TWh

•

Electricity mix dominated by hydro (ca 70%), whereas drought periods have lead to increased thermoelectric generation

•

New capacity of 70GW expected in next 9-10 years

•

Latest governmental targets: 7GW of solar by 2023

•

Specified federal solar auctions, about 1GW of PPAs to be awarded in each tender

•

Highly competitive market with challenging macroeconomics (esp volatile currency)

Copyright: Scatec Solar ASA www.scatecsolar.com • [email protected]

5

Solar energy pricing in Brazil is already competitive Indicative tariff in South Africa REIPP programme, ZAR / kWh

Indicative tariff in seected emergin market programs USD / MWh

3

300

2,5

250

2

200

1,5

150

1

100

0,5

50

0

0 Phase 1

Phase 2

Copyright: Scatec Solar ASA www.scatecsolar.com • [email protected]

Phase 3

Phase 4

Pakistan

Egypt Honduras Kenya

Brazil

Jordan Page 6

PV costs driven by many factors and continue to decline Description

Site

 Site factors are driven by region and development choices  Costs of land, solar irradiation, temperature and elevation, ease

of construction, grid availability and connection costs.

Capex

 Capex includes all costs for building the plant  Design and engineering, technology choices, efficiency

improvements, size of project, component prices, construction services, local content, import duties, etc

LCOE*

 Plant performance, availability and operational costs

Opex

 Operations costs include administration, security, monitoring,

insurance, maintenance, spare parts, cleaning, green keeping, etc

Capital

 Country risk, taxes, support schemes, currency risk, inflation

impacts overall return requirement  Leverage, interest rates, tenure, transaction costs and

reserves significantly drive the LCOE * Levelized cost of energy over a contract period Copyright: Scatec Solar ASA www.scatecsolar.com • [email protected]

 Sponsor equity return requirements

Trend

Return requirement big driver in emerging markets

 Funding and Costs of Capital is much more important for PV energi than most other energy sources due to high investment costs, no

fuel costs and low operating costs  Financing costs represent more than 50% of the enegy costs when costs of capital exceed about 10 %  Reduction of risk and securing project fiannce and reasonable rates is key to drive down costs of PV, especially in emerging markets * LCOE calculation is based on 1 360 kWh/kW/year, capex of USD 1 500/kW, yearly opex of 1%, 20 year lifetime and 0 i rest value Copyright: Scatec Solar ASA www.scatecsolar.com • [email protected]

Summary – Brazil outlook  Strong fundamentals for solar energy

- huge future potential  Already 3 GW auctioned,

no projects financed and built so far  Predictable process attract foreign players

to invest in project development  Very effective auction process for creating

competition and bringing prices down  Prices are still higher than in some

comparable markets  Partly due to limited experience with building large scale solar in Brazil  Partly due to high costs of capital, currency uncertainty, yield and local content requirements (foreign

player perspective)  Prices likely to come further down, with maturing local industry, further efficiency improvements and

costs reductions in industry and lower costs of capital in Brazil Copyright: Scatec Solar ASA www.scatecsolar.com • [email protected]

Page 9

Thank you

Copyright: Scatec Solar ASA www.scatecsolar.com • [email protected]