Dominykas Tučkus

2016 09 29, Riga

BIOMASS AND WASTE TO ENERGY CHPs IN VILNIUS AND KAUNAS

Lietuvos energija Group

Natural gas trade and

distribution

Power and heat generation and

supply

Maintenance and development of

the energy sector

EMPLOYEES

5300

CONSUMERS ELECTRICITY, HEAT PRODUCTION

ELECTRIC POWER TRADE AND DISTRIBUTION

NATURAL GAS TRADE AND DISTRIBUTION

MAINTENANCE OF POWER PLANTS AND GRID

€1,095M I L L I O N

GROUP REVENUE (2015)EBITDA 221 mEUR 1.6 million

570 thousand

LIETUVOS ENERGIJA IS ONE OF THE TOP 5 LARGEST COMPANIES BY THE SALES REVENUES IN LITHUANIA

LIETUVOS ENERGIJA IS THE 206TH LARGEST COMPANY IN CENTRAL EUROPE (DELOITTE 2015).

325,9; 30%

58,7; 5%

55,8; 5%

309,4; 28%

315,2; 29%

Electricity distribution revenue Revenue from provision of balancing,regulating and power reserve services

PSO service revenue of LietuvosEnergijos Gamyba Heat energy revenue

Revenue from connection of newcustomers Revenue from other activities

Revenue from sale of electricityproduced,electricity trade and supply

Revenue from gas distribution and sale

GROUP REVENUE2015

€1,1BILLION

The Structure of Lithuania‘s Energy Sector

Strategic Financial targets

Indicator Target value in 2020

Group’s value growth x 2 by 2020, > EUR 2,32 billion

EBITDA growth x 2 by 2020, > EUR 319 million

Return on invested

capital (ROIC)> Group’s actual WACC exceeding 6%

Return on equity

(ROE)> sector market, over 9%

Capital structure (D/E) D/E < 1.1

Credit ratingNot lower than Lithuania’s

international credit rating (A-) in 2020

6

STATE OF PLAY OF ENERGY SECTOR IN LITHUANIA

ENERGY OUTLOOK (energy dependence)

-20

0

20

40

60

80

100

Lithuania ranks 6th among most energy dependent EU members

ENERGY OUTLOOK (electricity sector)

• One of the biggest importer ofelectricity among EUcountries (~ 70% from thecountry‘s demand)

• CHP plants are beingpreserved due to noncompetitive fossil fuels andhave been depreciated already

• RES in local electricityproduction ~20% fromcountries demand

Electricity supply balance

12%

2016-04-09 10:35

SE LV

RUS

PL

BY

ENERGY OUTLOOK (district heating)

• Ineffective use or no use ofcogeneration based ondistrict heat demand

• Biomass sector is still in thetransition from a few majorplayers into the biomassexchange based market

• The majority of the heatproduction capacities‘ aredesigned to use wood chips

Fuel balance in district heat production(cogeneration power plants and heat only boilers)

Source: LDHA (2015)

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Other fuels

Firewood, municipal and wood waste for fuel

Naturas gas

12%

~60%

10

STRICTLY PRIVATE AND CONFIDENTIAL

I. COUNTRY ENERGY OUTLOOKENERGY OUTLOOK (district heating)

District heat production ~ 8,3 TWhVilnius city ~ 2,6 TWh (~31%)Kaunas city ~1,2 TWh (~15%)

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Firewood, municipal and wood waste for fuel Naturas gas Other fuels

Government target up to 2021

Source: LDHA (preliminary data for 2015)

11

21

%

8%

7%

64

%

28

%

17

%

54

%

2%

19

%

13

%

42

%

25

%

33

%

16

%

50

%

1%

RECYCLED COMPOSTED INCINERATED LANDFILLED

Lithuania Denmark Finland Sweden

Source: Eurostat (2013)

ENERGY OUTLOOK (waste management)

• Ineffective waste management - 60%of waste containing energy value is stilllandfilled

• EC ambitions for recycling (65 %, 2030)push to optimize WtE capacities in theconservative manner

• Lack of WtE capacities to incinerateRDF/SRF locally produced by MBTs(mechanical biological treatmentplants)

EC limit25%

12

ENERGY OUTLOOK (waste management)

13

Potential usage of municipal waste

ENERGY OUTLOOK (Potential usage of municipal waste)

Kaunas CHP input~200.000 t

Vilnius CHP input~160.000 t

• Municipal waste generation 1.3-1.4 milliontons / year.

• Expected waste amount for incineration640 th.tons / year.

14

Agenda

1. Introduction

2. Market overview

3. CHPs project

4. Financial forecast

CHP projects

14

15

Vilnius city

Population 540 000

District heating 90%

Annual district heat demand 2,7 TWh

Annual RDF/SRF potential

in the region for energy ~145-160 th.tons

Waste landfilled ~85%

VILNIUS BIOMASS AND WtE CHP

Bio CHP unit

MWe MWt~70 ~174~400 kt biomass

WtE CHP unit

MWe MWt~18 ~53

160 kt RDF

Vilnius high efficiency CHP installation

MWe MWt~88 ~227

Ministry of Finance

100% - control

100% - control

OWNERSHIP OF THE VKJ PROJECT

SPV Project of National importance

Completed Environmental Impact

Assessment

Completed concept project of

connections to existing infrastructure

EPC tendering finished

Finishing negotiations with EIB

Cleared State-Aid

State of play

EPC contractsEPC contracts

Public procurement company

2 EPC contracts – 9 EPC offers

WtE CHP winner:

Steinmuller Babcock Environment - Germany

Budimex – Poland

Kauno dujotiekio statyba - Lithuania

Bio CHP winner:

Rafako - Poland

Preparatory works

Construction work

2015 2016 2017 2018

Securing of financing

EPC contractor(s) work(s)EPC tender

Financing structure

Environmental Impact

Assessment

Territory planning

State Aid/ EU Funding

\

Works at the site

First fireFinal

completion

Commiss

ioningCompletion

VILNIUS CHP PROJECT TIMELINE

20

Kaunas city

Population 301.296

District heating 90%

Annual heat demand 1,2 TWh

Municipal waste (RDF) ~200.000 t/yr.

Landfilling ~95%

KAUNAS BIOMASS AND WtE CHP

Kaunas high efficiencyCHP WtE power plant

MWe MWt~24 ~71

~200 kt RDF and IW

Ministry of Finance

100% - control

51%

OWNERSHIP OF THE KKJ PROJECT

SPV Project of National importance

<49% (up to 5% to Kaunas Municipality)

Completed Environmental Impact

Assessment

Concentration allowed by EC

Obtained construction permit

Negotiations with banks in progress

EPCM tendering in progress

PROGRESS OF THE PROJECT

EPCM contracts

Main equipment:1) Fuel receiving, handling, storage and feeding system;2) Steam boiler;3) Steam turbine with electricity generator;4) Technological water preparation system;5) Fuel gas cleaning system;6) Condensing economizer;7) Collection system of ash, slag and flue gas cleaning products.

• EPCM model

• Procurement procedures equipment (boiler, FGT, cranes,turbine and generator)) started on 2015/12/31.

Vilnius

CHP

Kaunas

CHP

Electricity production, GWh(share of LT demand)

400 (~3,7%) 175 (1,2%)

District heat production, GWh(share of Vilnius demand)

1.240(<50%)

500 (17%)

CO2 reduction, tones/year

~ 300.000 ~ 100.000

Primary energy savings

~40 % ~ 40%

Overall efficiency of the units

≥ 101 % ≥ 101 %

I. EXPECTED RESULTS OF VILNIUS CHP PROJECTOBJECTIVES AND EXPECTED RESULTS

Investments into high

efficiency CHP

Primary energy savings compared

to HOB installations

Heat and power energy

produced from RES

CO2 reduction, increased share of

RES, decreased energy poverty

Reduced landfill Resource efficiency,

CO2 reduction

Thank you!