The Schaffner Group

Investors’ Day 2011The Schaffner Group

Investors’ Day 2011

1

Caution regarding forward-looking statements

This communication contains statements that constitute “forward-looking statements”, including, but not limited to statements relating to the implementation of strategic initiatives and other statementsnot limited to, statements relating to the implementation of strategic initiatives, and other statements relating to our future business development and economic performance.

While these forward-looking statements represent our judgments and future expectations concerning the development of our business, a number of risks, uncertainties and other important factors could cause actual developments and results to differ materially from our expectations.

These factors include, but are not limited to, (1) general market, macro-economic, governmental and regulatory trends, (2) movements in currency exchange rates and interest rates, (3) competitive pressures, (4) technological developments, (5) changes in the financial position or credit worthiness of our customers, and counterparties and developments in the markets in which they operate, (6) legislative developments, (7) management changes and changes to our Business structure and (8) other key factors that we have indicated could adversely affect our business and financial y yperformance which are contained in other parts of this document and in our past and future filings and reports, including those filed with the SIX Swiss Exchange.

More detailed information about those factors is set forth elsewhere in this document and in documents furnished by Schaffner Group, including Schaffner Holding's Annual Report for the year ended September 30, 2010 Report as well as the 2010/11 Half-Year Report. Schaffner Group is not under any obligation to (and expressly disclaims any such obligations to) update or alter its forward-looking statements whether as a result of new information, future events, or otherwise.

The Schaffner Group

Investors' Day 2011

9:00 – 10:45 Update on strategy implementation Alexander Hagemann Currency impact, financing

and taxes Cleantech and marketing initiatives Electromobility Q&A

Kurt Ledermann

Stefan MellyAlexander Hagemann

10:45 – 11:00 Break all

11:00 – 12:30 Asia-Pacific with focus on China Leading edge technology generated

by collaboration with universities

Eduard HadornFabian Beck

by collaboration with universities Some Thoughts on European

electricity mix Q&A

Alexander Hagemann

12:30 – 13:30 Lunch – Individual discussions all

The Schaffner Group

Update on strategy implementationAlexander Hagemann, CEO

The Schaffner Group

Update on strategy implementationAlexander Hagemann, CEO

4

Schaffner growth supported by power electronics markets and reliability concerns

Energy efficiency Renewable energy Transport

Power electronic equipment is prerequisite for better energy efficiency and alternative power generationC f S ff f f Components from Schaffner guarantee the safe and reliable operation of power electronic equipment

- Filtering of harmful electrical noise- Increasing the stability of electric power grids- Ensuring compliance with standards and regulations- Increasing lifetime of electrical machines

Some shift in strategic markets to be expected

Continued focus on energy efficiency (motor drives) and renewable energy Growth of traction market slows down, Schaffner market share is high

El t bilit ill l t ti l t i Electromobility will propel automotive electronics Maintain leadership in mature markets

Motor drives

Renewable energy

Traction

Electronic devices & power supplies

Strategic markets: 56% (51%)

Historic growth markets: 32% (36%)

Electronic devices & power supplies

Machine tools & robotics

Telecom equipment

Automotive electronics

Other

Other markets: 12% (13%)

Share of HY1 2010/11 net sales (in brackets: PY)

Asia-Pacific growth strategy so far a success

Strong foundation for continued organic growth in APAC

Underrepresentation in North America is addressed

I di i i i d i 2010 B il i 2012 India activities were started in 2010, Brasil in 2012

2015 goal: 40% APAC, 40% Europe, 20% Americas

Share of Asia-Pacific sales (in %)Sales by regions (in %)

33%

20%

30%

20% 27%

33%

APAC Americas Europe

7%60%

0%

10%

FY

05/06

FY

06/07

FY

07/08

FY

08/09

FY

09/10

17% 18%

Power Quality: Schaffner‘s growth engine

CAGR after Jacke acquisition exceeds 40%: market/share

Schaffner to become the first global supplier of power quality solutions

Market share Power Quality

Schaffner to become the first global supplier of power quality solutions

Increase goal to no. 1 or 2 position in 2015 (incl. M&A)

Contributors to growth: technology, manufacturing processes, distribution

Margin expansion is a must

Addressed market: ca. CHF 1.4bn

6.

2011-2015: Growth strategy

The Schaffner business model allows for sustained double-digit l th d ti i di 10%sales growth and operating margins exceeding 10%

More output, protected IP R&D collaboration Electromobility

Lean conversion Process redesign and SAP PQ manufacturing efficiency

Expanded resources in China Pole position in electro-mobility Develop Schaffner’s talent pool

Continued focus on operational excellence Objective: Margin expansion, while CHF strengthens and inflation is

i i (l b t i l )increasing (labor, materials, energy)

1. Implementation of Lean Manufacturing: 62.5% of manufacturing (by labor hours) is done lean (March 2011)

2. New Shanghai operations to set benchmark in efficient power magnetics manufacturing: lean cells, material flow, automated testing

3. Establishment of Material Group Management in Q1/2011 to p greduce material cost, improve supplier performance

4. New initiative: supply chain improvements to reduce inventories, reduce obsolete materials, improve customer service

SAP implementation

Complete business process redesign in 2008

Started SAP implementation with go-live in China/Singapore/Japan in 2009

End of 2011, almost every operation will be on SAP

Multiple benefits

- Company-wide transparency of processes

- Improved master-data quality

- Warehouse management

- Planning systems

Schaffner employees are key to strategy implementation Company-wide succession planning

Talent pool

Hiring excellent 2nd level managers to secure strategy achievement

The bottom line

Schaffner is set up for 10% annual organic growth between now and 2015

Double-digit operating margins are a clear objective

The Schaffner Group

Currency impact, financing and taxesKurt Ledermann, Chief Financial Officer

The Schaffner Group

Currency impact, financing and taxesKurt Ledermann, Chief Financial Officer

14

Currency exposure

0 027

0.029

THB/EUR 5 yrs. 10% 2 yrs. 11% 1 yr. -9%

0.0042

0.0044

HUF/EUR 5 yrs. 0% 2 yrs. 6% 1 yr. 3%

0.015

0.017

0.019

0.021

0.023

0.025

0.027

Jun.2006 Jun.2007 Jun.2008 Jun.2009 Jun.2010

0.003

0.0032

0.0034

0.0036

0.0038

0.004

Jun.2006 Jun.2007 Jun.2008 Jun.2009 Jun.2010

EUR/CHF5 yrs. ‐22%

USD/CHF5 yrs. ‐31%

1

1.2

1.4

1.6

1.8

2

Jun.2006 Jun.2007 Jun.2008 Jun.2009 Jun.2010

y2 yrs. ‐20%1 yr. ‐14%

0.7

0.8

0.9

1

1.1

1.2

1.3

Jun.2006 Jun.2007 Jun.2008 Jun.2009 Jun.2010

2 yrs. ‐21%1 yr. ‐27%

Currency exposure – Correlation

Currency CNY EUR HUF JPY SGD THB USD

CNY 1.000 0.536 0.215 0.529 0.870 0.930 0.984

EUR 0.536 1.000 0.743 0.177 0.689 0.563 0.518

HUF 0.215 0.743 1.000 -0.146 0.477 0.278 0.190

JPY 0.529 0.177 -0.146 1.000 0.348 0.512 0.547

SGD 0.870 0.689 0.477 0.348 1.000 0.868 0.856

THB 0.930 0.563 0.278 0.512 0.868 1.000 0.928

USD 0.984 0.518 0.190 0.547 0.856 0.928 1.000

Currency exposure – Cashflow

CHF USD/CNY EUR HUF THB Rest

Net sales Net operating expenses

Currency exposure – Net assets

18%

22%

31%USD/CNY

THB

HUF

EUR

25%

4%Rest

Currency exposure – Translation

Translation risk on P&L (for H1-10/11):

- on Bookings CHF ‒ 10.5 mon Bookings CHF 10.5 m

- on Net sales CHF ‒ 9.8 m

- on EBIT CHF ‒ 1.1 m

Translation risk on Balance sheet (for H1-10/11):

- on Equity CHF ‒ 2.0 m

Income taxes2004/05 2005/06 2006/07 2007/08 2008/09 2009/10

Earnings beforetaxes 5,971 8,710 9,601 11,590 -11,575 12,013

in CHFT

Taxes -1,623 -2,219 -2,038 -2,782 640 -30

Net profit 4,348 6,491 7,563 8,808 -10,935 11,983

Applicable tax rate 28% 27% 28% 19% 19% 13%Effective tax rate 27% 25% 21% 24% 6% 0%

Applicable Tax

Earnings before tax 12,013 Applicable tax rate 13%Expected tax -1,592

?? ?? ??

RateGroup 13%France 33%Germany 30%Thailand 30%USA 30%China 25%Switzerland 8.5% - 23%

Utilization of unrecg. tax losses 1,385 Others 177 Tax in P&L -30

Unrecog. tax losses 23,052 - Expiry in more than 5 yrs. 22,386 - Expiry in 5 yrs. 634 - Expiry in 4 yrs. 32

Financing (1)

2006/07 2007/08 2008/09 2009/10 2010/11

EBITDA 12-month avg. 15,598 18,922 -3,875 20,405 24,113

Equity 51,710 52,617 47,305 55,985 58,273

Intangibles 13,298 13,402 15,835 14,773 14,275

Total balance sheet 147,213 140,802 126,643 126,883 128,296

in CHFT

Covenants

Debt capacity max. 3 x EBITDA 46,794 56,766 -11,625 61,215 72,339

Equity w/o intangibles >25% 26.1% 27.9% 24.8% 32.5% 34.3%

Equity ratio >30% 35.1% 37.4% 37.4% 44.1% 45.4%

Financing (2)

Scenario 1dd d bt 20

Scenario 2dd d bt 40

Scenario 3dd d bt 60add. debt 20m add. debt 40m add. debt 60m

EBITDA 12-month avg. 24,113 24,113 24,113

Equity 58,279 58,279 58,279

Intangibles 14,275 14,275 14,275

Total balance sheet 148,296 168,296 188,296

in CHFT

Covenants

Net debt/EBITDA 1.3 2.2 3.0

Equity w/o intangibles 29.7% 26.1% 23.4%

Equity ratio 39.3% 34.6% 30.9%

The Schaffner Group

Schaffner cleantech markets & marketing initiativesStefan Melly, Manager Strategic Marketing

The Schaffner Group

Schaffner cleantech markets & marketing initiativesStefan Melly, Manager Strategic Marketing

23

Schaffner is tipping winners

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Energy efficiency Energy efficiency

Energy efficiency

Efficient power electronics contribute togreen building technologies helping togreen building technologies, helping toreduce the consumption of electrical power

Motor drives for heating, air conditioning, elevators Savings -30% to -70%

LED lighting technologies -80%

EnergyStar rated datacenters -20%

Energy efficiency

These devices create complex power lit h ll f b th th b ildiquality challenges for both the building

power supply and the power grid

Schaffner ECOsine™ active harmonic filters support a reliable and clean power network e.g. in the new office building One Island East in Hong Kong

Energy efficiency

One of the key technologies, energy efficient motor drives, keeps developing t ff i f t t iti f S h ffstrong, offering future opportunities for Schaffner

AC & DC low voltage motor drives market 2010 USD 10.6bl. (+13%)

APAC15.0%

20.0%

25.0% Americas

EMEA

Japan

APAC

20142013 201420132012201120100.0%

5.0%

10.0%‛Total Market’

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11

Energy efficiency

New EU guideline for energy-related products 2009/125/EG drives future growthfuture growth

Relevant eco-design deadlines:

June 2011 - all electric motors to fulfill efficiency class IE2

January 2015 - electric motors (7.5 to 375kW) to fulfill efficiency class IE3, or IE2 in combination with an efficient motor drive

January 2017 - electric motors (0.75 to 375kW) to fulfill efficiency class IE3, or IE2 in combination with an efficient motor drive

Renewable energyRenewable energy

Renewable energy – PV

After the feed-in tariff driven boom in Spain (2007/08) and in Germany (2010) th l b l PV k t h t d l i d i 2011the global PV market has entered a slower period in 2011

Sour

ce: B

loom

berg

NEF

201

1ItalyItaly

Germany2010

Germany2010

Spain 2007/08Spain

2007/08

Renewable energy – PV

The future PV market will be much less d d t f d d i b tdependent from and driven by government incentives

An increasing number of case studies show that PV can be competitive without subsidies

Reasons

Falling costs of PV panels

PV i f i i i PV inverter manufacturing over-capacities

Increasing cost of electricity

Increasing cost of fossil fuels

Renewable energy – PV

Example

‛Solar energy competitive with oil in the Persian Gulf’ (Bloomberg)

Selling oil rather than using it to generate discounted electricity

Large scale plants can generate a rate of return of >9% if oil prices rise to above USD 150

Renewable energy – PV

ExamplePV systems help cover peak energy demand in hot regions duringPV systems help cover peak energy demand in hot regions duringnoon hours, when electricity cost are the highest

Building air conditioning

Cold storage refrigerated warehousesExample: Fond Du Lac Cold Storage, New Jersey, USA

Renewable energy – PV

ourc

e: B

loom

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NEF

201

1

There is still new government stimulus to help drive further development of th l b l PV k t Sothe global PV market

China’s 12th five-year plan (2011-15)

Target: 5GW of installed capacity by 2015 Target: 5GW of installed capacity by 2015

China‘s historical and expected PV demand in MW (conservative scenario)

China‘s historical and expected PV demand in MW (optimistic scenario)

885956 1132

948

1389

15011621

1750

160

338

585

820 885

160

464

948

2009 2010 2011 2012 2013 2014 2015 2009 2010 2011 2012 2013 2014 2015

Renewable energy – Wind

Global cumulative installed Wind Capacity 1996 2010Global cumulative installed Wind Capacity 1996 2010Global cumulative installed Wind Capacity 1996 - 2010Global cumulative installed Wind Capacity 1996 - 2010

Global annual installed Wind Capacity 1996 - 2010Global annual installed Wind Capacity 1996 - 2010-7.3%

The global wind market cooled off in 2010 in terms of new capacity

Sour

ce: G

WEC

201

1

Renewable energy – Wind

The potential for Schaffner continues to grow

The following trends can be observed

More off-shore wind parks

Bigger turbines (e.g. Vestas 7MW)

Optimized for low wind locations

Higher efficiency

Higher efficiency requires a new innovative ‛f ll i ’ t h l‛full conversion’ technology

Full conversion increases thefiltering need per turbine 3x

Renewable energy – Wind

Wind Turbine - Double Wind Turbine - Full

PowerElectronics

P = 30%

PowerElectronics

P = 30%

Filt

erF

ilter

Filt

erF

ilter

Filt

erF

ilter

Filt

erF

ilter

PowerElectronics

P = 100%

PowerElectronics

P = 100%PowerElectronics

P = 30%

Filt

er

Filt

er

Filt

er

Filt

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PowerElectronics

P = 100%

Stator

Ro

tor

Example: 3MW turbine

~2MW direct

~1MW power electronics

1MW filters needed

Example: 3MW turbine

0MW direct

3MW power electronics

3MW filters needed

P = 30%P = 30%P = 30%

Marketing initiativesMarketing initiatives

Segment marketing

Integrated segment marketing allows a more specific and targeted approach oft t i ti l k t i l i b th k ti d l

Define Strategic Segments

Build Specific Expertise

Define Target Accounts

Develop Marketing Tools

Launch Segment Campaign

strategic vertical markets, involving both marketing and sales groups

Marketing job:

Qualify Addresses

Prioritize Accounts

Call On Accounts

Local Marcom Feedback

Sales job:

Segment marketing example

Direct sales organization

Key aspects of marketing and sales efforts differ between segments

EMC Harmonic Filters

Power Magnetics

Automotive

Product Management

XXX XX

Channel Marketing

XXX XXX

Key Account Management

XX X XXX XXX

Applicationengineering

X XX X

Customengineering

XX X XXX XXX

After sales services

XX

Direct sales organization

In bigger sales organizations, EMC, Power Quality and Automotive sales ti iti lit t th factivities are split up to ensure the necessary focus

Besides the change in organization, additional sales engineers and application engineers are hired in many regions

Example Schaffner USA

Sales USA

EMC Components

Group

Power Quality Group

Automotive (planned)

Channels to marketElectronics distributorsSchaffner uses major electronics distributors to serve the broad market with EMC d tEMC products

Inventory management

Logistics

Re-packaging

Overnight shipments

Some design-in and technical support

Extended regional coverage

Channels to marketPower Quality sales partnersIn 2009 Schaffner started to establish a dedicated network of specialists to

t th i b i ith ti d i h i filtsupport the growing business with active and passive harmonic filters

Access to end user markets

High technical competency

Complementary products and services

Commissioning, preventive maintenance, repairs, spare parts

Channels to marketRockwell Automation partnerIn 2010 Schaffner became member of the prestigious Rockwell Automation ENCOMPASS i lth f k ti t itiENCOMPASS program, opening a wealth of new co-marketing opportunities for EMC and Power Quality products

Summary

Schaffner continues to focus upon a few selected strategic growth markets.

Segment marketing ensures that each market segment is properly and individually addressed

Splitting the direct sales organization up in EMC, Power Quality and Automotive allows an optimum market penetration and customer support

Dedicated channels to market help to reach more customers and more regions quicker and more effectively. Additional services can be offered

The Schaffner Group

ElectromobilityAlexander Hagemann, CEO

The Schaffner Group

ElectromobilityAlexander Hagemann, CEO

48

EV reduce CO2 – even with coal power plants

Market will evolve – uncertainty about speed

Newly launched models are a big success

Nissan Leaf Chevrolet Volt Pure electric vehicle

2011 allocation for US market sold out in March: 10,000 units

Considered an economic choice for urban commute

Electric vehicle with range extender

~50% reduction of fuel consumption at normal use

No range anxiety

A great driving experience

German carmakers decide on their strategy in 2011 – likely PHEV and range extenders

Multiple opportunities for Schaffner components in PHEV and EV Total addressable value per car exceeds EUR 100

Market entry strategy: focus on partnering, IP generation Fundamental understanding of EMC related problems through simulation

Development of EMC filters with unmatched compactness, cost

Integrated modules, filtering, protection, monitoring

Specialized power magnetic components

Leverage of existing customer base

Significant opportunities with keyless entry systems: functional integration, market growth

Resources to achieve objectives

~20 projects for electromobility are either won or under development

Have increased engineering resources by 100%

Introduction of new process capabilities at Schaffner Thailand

Getting ready for Automotive at Schaffner Shanghai

Objective to achieve CHF 40 million sales with Automotive solutions in FY 2014/15

The Schaffner Group

Asia-Pacific with focus on ChinaEduard Hadorn, Vice President Business Development Asia

The Schaffner Group

Asia-Pacific with focus on ChinaEduard Hadorn, Vice President Business Development Asia

58

Economic outlook in major markets in Asia

Solid outlook for H2/11 with potential slow down in growth due to

- soaring inflation

- rising Asian currencies will lead to a steady realignment in global market share

The earthquake in Japan will have minor effect on the macro outlook

Likely new leaders in Japan, Korea, China, Taiwan, HK in 2011/12

Expected GDP growth in 2011

- APAC 5.6%

- developing Asia 8.9% (Asean, China, India)

Economic outlookChina Is adjusting policy settings

- higher minimum wages for factory workers

- curb excessive loans and inflation

- control of the real estate market (high- vs. low-end apartments)

Corruption scandal in the Ministry of Railway (MOR) and the subsequent policy changes has major impact on all parties

GDP growth expected to ease to 8-9% in H2/11

Economic outlookJapan A rebound in industrial output is not expected soon

Push for alternative energy generation

Currency (JPY) is rising again

Economic outlookTaiwan Export will drive growth in H2/11 (Taiwan is producing products which the

d d d th i k t t)advanced and the emerging markets want)

Taiwan chip makers gained major market shares

Low inflation but stronger currency (TWD)

Economic outlookAustralia Export dependent business continues to struggle where as the

i i t i till b imining sector is still booming

Inflation is expected to soar in H2/11

Strengthen (AUD) currency

Economic outlookIndia Corruption scandals and high inflation dominate the political situation

Overall GDP growth is expected to ease to ~ 7.5% (total 2011) but export surged >40% (yoy)

Though anti-corruption law and tighter monetary policies expected

Business outlook for SchaffnerChina Strong demand for EMC and PQ products from the PV and wind turbine

k t i H2/11 f ll i l i h H1/11market in H2/11 following a sluggish H1/11

Schaffner has developed new magnetic components for these markets to achieve cost and technology leadership

Well positioned to benefit from the strategic changes announced by the Ministry of Railway which is expected to release new projects/orders

Through new strategic partnerships, Schaffner will become a major supplier of harmonic and other PQ filters aiming infrastructure, factory automation and energy saving projects. Schaffner has already equipped several metro gy g j ylines with active harmonic filters in each station

Business outlook for SchaffnerChina First projects started with foreign and local automotive companies for EMI

filt i l ti i l tfiltering solutions in electro-cars

Although well publicized, this business is expected to take off at the earliest in 2013

The use of EV in big numbers will challenge the electric grid too which will require the use of EMC and harmonic filters in the stationary charging stations

Business outlook for SchaffnerJapan In spite the earthquake, we expect improved sales in H2/11 mainly due to

- Industrialization of several new projects

- Push for alternative energy generation

- Shift towards localization (production shift to eg. China) to remain price competitive in the global market

As one of the few non-Japanese companies, Schaffner managed to penetrate the Japanese traction market for our magnetic components. They are mainly used in their overseas projects

Business outlook for Schaffner Australia – Korea – South East Asia These countries are moving ahead strongly with active/passive harmonic

filt d t t filt Thi f i l f t t ti i f t tfilters and out-put filters. This for mainly factory automation, infrastructure (data centers, hospitals, metro stations, etc.) and mining projects

Further acceleration expected in sales as complementary product series will become available in the next 12 months

Strong regional partnerships have been established with global industry leaders already contributing to this fast growth in sales

Business outlook for SchaffnerIndia Whilst the EMC market is still in its infant stage, PQ filters for the sub-

t d d l t i l i f t t i hi h d dstandard electrical infrastructure are in high demand (e.g. 20 units active harmonic filters for a cement company)

The aging railway system (>50 year old technology) will be up-graded gradually in the next years where as there is already a substantial demand for magnetic components used in metro trains

Schaffner will also tap the fast emerging PV and wind turbine market in India in H2/11

Growth initiatives in Asia

Schaffner moves to a new building in Shanghai in H2/11(18’000 / t i th t i )(18’000 sqm/ ~ twice the current size)

Next to the expansion of production capacity mainly for magnetic components and active/passive harmonic filters, the location offers dedicated production facilities for automotive parts

The move will allow to introduce optimized material and production flows (designed in cooperation with an European consulting company) and a state-of-the art fully automatic testing system for magnetic components

Growth initiatives in Asia

A regional (3rd party) warehouse established in Singapore

Expanded sales and application services throughout Asia and new distributor and partnerships were added mainly for harmonic filter series (infrastructure projects)

Established presence in India with own sales and application engineers and built-up regional distributors

Schaffner obtained IRIS certification (for traction) in 2011 and works towards ISO/TS certification (for automotive)

The Schaffner Group

Leading edge technology generated bycollaboration with universitiesFabian Beck, Vice President Research & Development

The Schaffner Group

Leading edge technology generated bycollaboration with universitiesFabian Beck, Vice President Research & Development

72

Strategy and benefits

Cooperation with university for future solution for reliable and innovative tcomponents

Motivated person which are challenged by tasks from industry and science

Broad basis of competence with practical implementation at Schaffner

Networking helps us to seek for suitable partner

We support the qualification of young academics to identify and recruit talent for Schaffner

Scientific network

BFE Bundesamt für Energie,BernBern NTB Interstate University of Applied Sciences of

Technology, Buchs Hesso Haute école spécialisée de

Suisse occidentale, Sion Fraunhofer-Institut IZM, Berlin Silesian University of Technology, Gliwice Cologne University of Applied Science,

KölnKöln

Successful product launch

Novel patented technology to suppress dangerous and unwanted leakage t f l t i t t i t li bilit d f tcurrent for electronic apparatus to increase system reliability and safety

Short development period by intense project collaboration of science, development, production and supply chain

Successful research andtechnology development BFE financed technology project to

i titi d t igain competitive advantage in harmonics mitigation

European Center for Power ElectronicsECPE European network

Establish EMC specific lectures together with Dr. E. Hoene and Prof. J.-L. Schanen

The main objective of ECPE European Center for Power Electronics e.V. is the promotion of research, innovation, education, publicity and technology transfer in the area of power electronics in Europe

The Schaffner Group

Some Thoughts on European electricity mixAlexander Hagemann, CEO

The Schaffner Group

Some Thoughts on European electricity mixAlexander Hagemann, CEO

78

Changes in economics of electricity market

Price of electricity will increase short- and long-term- Oversupply from German PV and wind power is eliminated by decommissioning

of oldest nuclear reactors

- Hot summers reduce supply of hydro power and nuclear power

- No more political acceptance of cost externalization

Gaining a realistic perspective on the cost of nuclear- Significant increase in capital spending for safety updates

- Higher than expected cost to decommission old plants

- Worldwide no solution for waste storage, but spent-fuel storage pools inherently o d de o so ut o o aste sto age, but spe t ue sto age poo s e e t yunsafe, and final storage to be expensive

Finally a focus on energy conservation- European regulation on energy efficient motors

- Economics of energy conservation improve

Shale gas as alternative bridge technology

Aspects related to alternative energy

Cost of alternative energy generation (focus on PV, wind)

Distribution of alternative energy

Electricity storage

Distribution and storage are no issue until the share of alternative energy becomes high – most regions of the world will face such problems in 5 to 10 years only

Cost of alternative energy

On-shore wind power electricity cost is now 9.2 US cents per kilowatt-hour (l li d t 63MW Ki d C it j t i V t USA i V t(levelized cost 63MW Kingdom Community project in Vermont, USA, using Vestas 3MW turbines, commissioning in 2012. Source: Bloomberg New Energy Finance)

After the latest cost decreases, 2011 IRR of German PV projects equals 2010 IRR

Electricity cost from PV in China currently at 0.73 Yuan (11 US cents) per kilowatt-hour; cost for homes and industry to reach coal-generated electricity in 2015(Source: Xinhua)

PV: new market dynamics at grid parity?

PV: Reduce distribution issues by emphasis on own consumption PV output is highest when demand

is highis high

Modest storage capacity sufficient to balance generation and demand

Makes already economic sense in Southern Europe, Southern USA, without subsidies

High demand for inverters with storage at Intersolar

Storage: the big frontier

Short-term, no big problem

- Rare situation of oversupply

- Pumped reservoirs

- Flexible supply by natural gas when needed

Need for fundamentally new solutions when share of renewables increases

Recent advances in research are promising: example HTE

- High-Temperature Electrolysis (HTE) can generate Hydrogen at 90% efficiency

- Methane (equivalent to natural gas) can be generated from hydrogen and carbon dioxide

- Methane can be stored in the natural gas grid

Conclusion

Electricity prices will increase – with or without renewables

There can be no doubt that renewables reach grid-parity

Shift in political climate puts focus on solving open issues (distribution, storage)

The drive towards energy efficiency has just begun

But: Expect continued resistance from major utilities to protect legacy investments; many still believe that low electricity prices can stay