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EMERGING CEE WIND TURBINE AND COMPONENT SUPPLY CHAIN PROSPECTS 2010-2013 EUROPEAN AND GLOBAL PERSPECTIVE BY: MIKE HANNON CONSULTANT & PARTNER MHM PARTNERSHIP LLP 2 BOSWELL PARK AYR KA7 1NP SCOTLAND TEL: INT + 44 1292 263625 WEB: WWW.MHM.INFOWWW.MHM.INFO MHM www.mhm.info

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ENERGY PROVIDERS & DEVELOPERS DEVELOPING RENEWABLES TECHNOLOGIES PORTFOLIOS MHM www.mhm.info

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MAJOR EUROPEAN NACELLE ASSEMBLY WIND TURBINES SOURCE : MHM NACELLE MULTICLIENT IN-HOUSE TOP 15 IN-HOUSE OTHER OUTSOURCED LARGE OUTSOURCED SMALL + + + + + + + UK/POLAND INWARD INVESTMENT ADDS SIGNIFICANTLY - MITSUBISHI (100M)... ROMANIA NEXT? POSSIBLE:... SINOVEL, GOLDWIND, DONGFANG,...?? + + DEVELOPING DEMAND LITTLE INFRASTRUCTURE

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MAJOR EUROPEAN ELECTRONICS CONTROL SYSTEMS WIND TURBINES IN-HOUSE TOP 15 IN-HOUSE OTHER OUTSOURCED LARGE OUTSOURCED 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

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MAJOR EUROPEAN BLADES MANUFACTURE WIND TURBINES IN-HOUSE TOP 15 IN-HOUSE OTHER OUTSOURCED LARGE OUTSOURCED SMALL + + + + + + + + + + + + + + + + + POLAND AND UK MAJOR GROWTH DEVELOPMENT... ALSO SOON ROMANIA + + SOURCE : MHM BLADES MULTICLIENT DEVELOPING DEMAND LITTLE INFRASTRUCTURE

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MAJOR EUROPEAN TOWERS MANUFACTURE WIND TURBINES IN-HOUSE TOP 15 IN-HOUSE OTHER OUTSOURCED LARGE OUTSOURCED SMALL + + + + + + + IN-HOUSE BIG TOWERS DISTRIBUTED + + + + +++ + + + + + EVERY PLAYER OUTSOURCES SOME TOWERS DISTRIBUTED TOWER MANUFACTURE ACROSS EUROPE... ROMANIA STARTING + + SOURCE : MHM TOWERS MULTICLIENT DEVELOPING DEMAND LITTLE INFRASTRUCTURE

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MAJOR CEE COUNTRIES SECTOR WEIGHTED MONTHLY LABOUR COSTS 2007-2011 EURO MHM www.mhm.info

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WIND TURBINE - INTEGRATED OUTSOURCING (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 MHM www.mhm.info

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CHANGING WIND TECHNOLOGY ISSUES ENERGY PROVIDERS & DEVELOPERS* MHM www.mhm.info 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 WIND SPEED OPERATION, OTHER *PARTIAL LIST - MHM GREENTECH STUDY OF ENERGY PROVIDERS/DEVELOPERS

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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 MHM www.mhm.info

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VERTICAL INTEGRATION EXAMPLE EG GAMESA (MOSTLY) TODAY CORE TECHNOLOGY MATERIALS COMPONENTS TURBINE ASSEMBLY WIND FARM ERECTION, REPAIR & MAINTENANCE CORE TECHNOLOGY DEVELOPERS MARKETERS CONTROL MARKET ACCESS DESIGN HOUSES MATERIALS PRODUCERS 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

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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)... POLANDS 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 MHM www.mhm.info

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MAJORITY OF WIND TURBINE COMPONENT PRODUCTION IN GERMANY/BENELUX ONE OF THE WORLDS 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 MHM www.mhm.info

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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 MHM www.mhm.info