EMERGING CEE WIND TURBINE AND COMPONENT SUPPLY CHAIN

PROSPECTS 2010-2013 – EUROPEAN AND GLOBAL

PERSPECTIVEBY: MIKE HANNON CONSULTANT & PARTNER MHM PARTNERSHIP LLP 2 BOSWELL PARK AYR KA7 1NP SCOTLAND

TEL: INT + 44 1292 263625WEB: WWW.MHM.INFO

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ENERGY PROVIDERS & DEVELOPERS – DEVELOPING RENEWABLES TECHNOLOGIES PORTFOLIOS

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COMPANY HQ WIND WAVE/ BIOMASS SOLAR GEOTHERMAL RIVER ONSHORE OFFSHORE TIDAL PV/ CSP HYDRO I BERDROLA RENOVABLES

SPN UK, SPN, EE & ROW

UK, GER, DEN, SPN

WAVE : SCOTLAND

MEX, SPN SPN, GRE, USA

SPN

EGP (ENEL GREEN POWER)

I TA EUROPE & USA

EUROPE & USA

EUROPE & USA

EUROPE & USA

EUROPE & USA EUROPE & USA

ENEL BULGARIA

BUL BUL BUL

EDF ENERGY

FRA UK, GROUP UK, GROUP W/ T: GROUP + DEVT IN NEXT 3 YRS FOR UK

UK, GROUP UK, GROUP GROUP, NOT UK

E.ON

SWE E.ON GROUP E.ON GROUP W/ T : DEMO STAGE SWEDEN & GROUP

E.ON GROUP E.ON GROUP + DEMO STAGE FOR SWEDEN

I N FUTURE GROUP

RWE I NNOGY

GER UK, FRA, SPN, POR, GER, NETH

UK GER, CZ REP UK, FRA, SPN, POR, GER

VATTENFALL

SWE DEN, GROUP DEN, GROUP WAVE: GROUP IN LONG TERM

DEN, GROUP GROUP I N LONG TERM

GDF SUEZ

FRA YES YES

ABO WIND

GER FRA, GER, UK (DEVT)

GER

MAJOR EUROPEAN NACELLE ASSEMBLY – WIND TURBINES

SOURCE : ‘MHM NACELLE MULTICLIENT’

IN-HOUSE TOP 15IN-HOUSE OTHEROUTSOURCED LARGEOUTSOURCED SMALL

+

+

+ ++ +

+

UK/POLAND INWARD INVESTMENT ADDS SIGNIFICANTLY - MITSUBISHI (£100M)

... ROMANIA NEXT?

POSSIBLE:

... SINOVEL, GOLDWIND, DONGFANG, ...??

+

+

DEVELOPING DEMAND – LITTLE INFRASTRUCTURE

MAJOR EUROPEAN ELECTRONICS CONTROL SYSTEMS – WIND TURBINES

IN-HOUSE TOP 15IN-HOUSE OTHEROUTSOURCED LARGEOUTSOURCED SMALL+

+

+ +

+

+ +

++

+

+ HUGE R&D OPPORTUNITY

CABLE HARNESS SUPPLIED FROM ASIA/EUROPE

... CAPACITY EXISTS IN ROMANIA

SIGNIFICANT CONTROL SYSTEM R&D/ MANUFACTURE OPPORTUNITY - AS YET FRAMENGTED+

SOURCE : ‘MHM WT ELECTRONICS MULTICLIENT’

DEVELOPING DEMAND – LITTLE INFRASTRUCTURE

MAJOR EUROPEAN BLADES MANUFACTURE – WIND TURBINES

IN-HOUSE TOP 15IN-HOUSE OTHEROUTSOURCED LARGEOUTSOURCED SMALL+

+

++

++

+

+ + +

+ +

+ ++

+ +

POLAND AND UK MAJOR GROWTH DEVELOPMENT

... ALSO SOON ROMANIA

+

+

SOURCE : ‘MHM BLADES MULTICLIENT’

DEVELOPING DEMAND – LITTLE INFRASTRUCTURE

MAJOR EUROPEAN TOWERS MANUFACTURE – WIND TURBINES

IN-HOUSE TOP 15IN-HOUSE OTHEROUTSOURCED LARGEOUTSOURCED SMALL+

+

+

+

++

+

IN-HOUSEBIG TOWERS DISTRIBUTED

+ +

++

+ + + + +

+

+

+

EVERY PLAYER OUTSOURCES SOME TOWERS

DISTRIBUTED TOWER MANUFACTURE – ACROSS EUROPE

... ROMANIA STARTING

++

SOURCE : ‘MHM TOWERS MULTICLIENT’

DEVELOPING DEMAND – LITTLE INFRASTRUCTURE

MAJOR CEE COUNTRIES SECTOR WEIGHTED MONTHLY LABOUR COSTS 2007-2011 EURO

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WIND TURBINE - INTEGRATED OUTSOURCING CURRENT OUTSOURCING GAMESA

(6% )

SIEMENS (7% )

VESTAS (16% )

TURBOWINDS (SMALL % )

R&D & PROTOTYPE WIND TURBI NE CONCEPTUAL DESI GN MOST SYSTEM DESI GN MOST TOWER/ METALWORK DESI GN

MOST MOST MANUFACTURE NACELLE ASSEMBLY I NDI A CONTROL SYSTEMS MOST BLADES MOST TOWERS POST MANUFACTURE WIND TURBI NE SERVI CE & REPAIR OUTSOURCED IN-HOUSE MIXED

(GLOBAL SHARE)

+ TURBOWINDS THE FUTURE MODEL FOR MOST – GAMESA MODEL DECLINES+ NOW NEW CHINESE SINOVEL, DONGFANG, GUPT AND OTHERS VIEWING EUROPE+ OEM MARKET PRESSURE TOWARDS WINDFARM COMMISSIONING

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CHANGING WIND TECHNOLOGY ISSUES – ENERGY PROVIDERS & DEVELOPERS*

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MHM IS WORKING WITH ENERGY PROVIDERS/DEVELOPERS AND COMPONENT SUPPLIERS FOR:

KEY ISSUES – WIDEST APPEAL OFFSHORE TECHNOLOGY – REFERENCE DESIGN, OPPORTUNITY (TO SPEED TECHNOLOGY FASTER)

NEW TURBINE DESIGNS – VERTICAL AXIS, JET ENGINE, ... (RISK TO CURRENT PROVIDERS)

MANY INTERESTED IN: UPSCALING

GEARLESS TURBINES – VARIOUS OFFERINGS TODAY

SMALLER PARTS (TRANSPORT)

GRID CONNECTIN (OFFSHORE)

ALSO OF INTEREST: GREATER RELIABILITY, BLADE OPTIMISATION, LOW WINDSPEED OPERATION, OTHER

*PARTIAL LIST - ‘MHM GREENTECH’ STUDY OF ENERGY PROVIDERS/DEVELOPERS

GLOBAL WIND TURBINE OEM MARKET SHARE 2009 – TOP 12

EUROPEAN/US PLAYERS LOSING IN CHINA MARKET – MANY OTHER CHINESE - MINYANG, WINDEY, SEWIND, XEMC, CSIC, COMING ...

... ACCIONA DROPS OUT OF TOP 12

CHINA PRODUCTION SOON TO BE GLOBAL LOW-COST BASE, HUGE INTERNAL DEMAND

... BLADES/ROTORS

... GENERATORS

... TOWERS

... GEARBOXES

MARKET SHARE IS KEY OUTSOURCING METRIC

... NO OEM HOLDS C. 30%

SOURCE : MHM WT PROGRAMME MHMwww.mhm.info

VERTICAL INTEGRATION EXAMPLE EG GAMESA (MOSTLY) TODAY

CORE TECHNOLOGY

MATERIALS

COMPONENTS

TURBINE ASSEMBLY

WIND FARM ERECTION, REPAIR & MAINTENANCE

CORE TECHNOLOGYDEVELOPERS

MARKETERS – CONTROL MARKET ACCESS

DESIGN HOUSES

MATERIALSPRODUCERS

COMPONENT PRODUCERS

SUBCONTRACTORS/ OEM

POWER STATION PROVIDERS/ OPERATORS

= HORIZONTAL SPECIALISATION =

SYSTEM R&D

WIND FARM MARKETING

HUGE OPPORTUNITY : THE DECLINE OF VERTICAL INTEGRATION – 2010 ONWARDS

TREND 2010-2030

GEARBOXES, BLADES/ROTOR, CONTROLS/ BEARINGS, GENERATORS, CASTINGS, TOWERS, CABLING, SUB-STATIONS/GRID ACCESS, SAFETY WALK

STEELS, COMPOSITES, ADHESIVES, ADDITIVES, COATINGS/TAPES/CORROSION, CONCRETE

SPECIALIST R&D – GEARLESS, OFFSHORE, PORTABILITY, UPSCALING, LOW WIND, BLADE YIELD, SMARTGRID

AEROFOIL

CONCLUSIONS OPPORTUNITY : POLAND AND OTHER CEE COUNTRIES

EU POLICY SHOULD ENCOURAGE POLAND/OTHER CEE TO COMPETE WITH CHINA:

ACCELERATING TREND TO POLISH WIND TURBINE COMPONENT OUTSOURCING:

... OUTSOURCING INCREASES AS NO WIND TURBINE SUPPLIERS WITH DOMINANT SHARE (BENEFITS POLAND)

... TOP WIND TURBINE OEMS CURRENTLY VIEWING INCREASED OUTSOURCING TO REDUCE COSTS

... OUTSOURCING TO INCREASE IN LOW-COST AND DIFFICULT TO ACCESS REGIONS (SCOTLAND/CEE/INDIA/ CHINA)

... POLAND’S INDIGENOUS WIND ENERGY SIGNIFICANTLY INCREASING (BIGGEST IN CEE)

... ALREADY SIGNIFICANT OUTSOURCED BLADES, ELECTRONICS CONTROLS AND TOWERS DEVELOPMENTS IN POLAND – MUCH MORE COMING

... ALSO CZECH REPUBLIC, HUNGARY AND OTHERS BUT SMALLER

... WIND TURBINE OEMS SLOWER TO MOVE THAN SUPPLIERS

COMBINATION OF GERMAN EXPERTISE AND OVER-THE-BORDER POLAND LOW COSTS HARD TO BEAT – EUROPEAN POWERHOUSE

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MAJORITY OF WIND TURBINE COMPONENT PRODUCTION IN GERMANY/BENELUX – ONE OF THE WORLD’S HIGHEST COST BASES

... MIGRATION TO LOWER COST/LOCAL UNDER WAY

TACTICAL UK MANUFACTURE/R&D/HQ DEVELOPMENT RELOCATIONS – DEVELOPMENTS INCLUDE:

... IBERDROLA RENOVABLES HQ RELOCATED TO SCOTLAND

... £100M MITSUBISHI R&D IN UK

... GE, SIEMENS, NEW FACTORIES + GAMESA AND MANY OTHERS VIEWING

... SINOVEL, DONGFANG, GOLDWIND YET TO LOCATE EUROPEAN OPERATIONS (SCOTLAND? – UK BIGGEST FOR OFFSHORE)

... SIGNIFICANT COMPETITIVE LEAPFROG POSSIBLE FOR NEWER PLAYERS DUE TO CURRENT HIGH COST BASE/DISTANT MANUFACTURE CONCENTRATION

... UK LEADS IN OFFSHORE (£100BN INVESTMENT) – SHORTLY 1GW OF CAPACITY

CONCLUSIONS OPPORTUNITY : SCOTLAND AND REST OF UK

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EU POLICY CAN FURTHER HELP STRENGTHEN EUROPEAN WIND TURBINE SUPPLY CHAIN BY LEVERAGING:

CONSOLIDATION OF ELECTRONICS CONTROLS MARKET – AS YET FRAGMENTED (MANY SEPARATE R&D/DESIGNS)

... EUROPEAN SUPPLIERS DEVELOP TO PROVIDE CONTROL ELECTRONICS AS OUTSOURCED SERVICE

... FOR EXAMPLE, COULD BE VESTAS DE-MERGER OF CONTROL SYSTEMS, WORTH MORE SEPARATE

... COULD BE EXISTING ELECTRONICS COMPANY SUCH AS ABB, HONEYWELL, ...

INCREASING BLADES OUTSOURCING – SUBCONTRACTOR NEEDS 30%+ TO DOMINATE

DISTRIBUTED EUROPEAN TOWER MANUFACTURING – EVERY PLAYER OUTSOURCES SOME TOWERS

CHINA PRODUCTION WILL SOON LEAD GLOBALLY – USA SUPPLIERS LEFT STANDING

... SIEMENS SHARE HOLDS STEADY

... MANY EUROPEAN OEMS SHARES MARGINALISED BY QUICKLY GROWING CHINESE

CONCLUSIONS OPPORTUNITY : GENERAL

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