Hydro pump storage plant in Estonia

February 2011

EnergiaSalv: company presentation

Agenda for today

Introduction to 4Energia

Snapshot of Estonian electricity market

Hydro pump storage project overview

Riverbank hydro pump storage project in the US

2

Introduction to EnergiaSalv / 4Energia

3

Experienced project development team

4

Martin Kruus(CEO of 4 Energia)

Education: Tallinn Technical University - Thermal Engineering

Previous employment:Eesti Energia, Director of Business Unit of Renewable Energy. Main responsibility was to establish and run power plants using renewable energy sources – wind, hydro, biomassMinistry of Economic Affairs, Department of Management of State CompaniesEstonian Privatization Agency, Project Manager for IPO’s

Main accomplishments: Renovation of Estonian biggest hydro power plant – Linnamäe HPP Building of Estonian first wind park – Virtsu wind parkSeveral feasibility studies and project management about CHPs

Lembit ValiEnergiasalv CEO

Kalle Kiigske

(CFO of 4 Energia)

Education: Estonian Business School – Banking and Financial Management

Previous employment:United Partners Group, Pan-Baltic investment bank, Partner, responsible for merchant banking and investmentsAS Hansa Capital – leading asset-based finance company in the Baltics, Russia and Ukraine with total assets over EUR 1,7 billion, Hansa Capital is the industry’s largest company in Eastern Europe and among top 50 in Europe, Member of Board and Head of Factoring and Trade Finance Several positions in Factor Chain International (Amsterdam, the Netherlands) - Member of the Communication Committee, Member of the Internal Audit

Education: Tallinn Technical University – Electrical Engineering

Previous employment:Elering, Estonian national grid company – CEOEstonian Energy – Technical Director, a member of the management boardNarva Elektrijaamad (Narva Power Plants) - CEO

Main accomplishments: Extenstive experience in power industry since 1973Worked on top management positions in energy sector for 18 years

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Hands-on experience in renewable energy and granite mining

Peep SiitamVoolu Energia CEO

Education: Tallinn Technical University- M.Sc. in civil engineering Estonian Business School - MBA

Previous employment:Vool - Co-founder of of the company having majority shareholding in Maardu Granite MineMerko Mines - Chairman of the management boardEstonian Energy Technology Program - Program Manager

Main accomplishments: Chartered Engineer since 1998Substantial experience as a member of top management in the Baltic leading construction companies

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4 Energia is focused on renewable energy projects and operating wind parks

Vardar Eurus is 90% owned by Vardar, a Norwegian power company, and

10% by NEFCO, Northern Environmental Finance Corporation

35% EBRD

Project developers

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Vardar Eurus

90%

10%

Freenergy

Inv

est

ors

Organizational structure

Competence in development

and management of renewable energy projects M

an

ag

em

en

t co

mp

an

y

Competence in granite mining

Vool is an investment company

active in energy and mining

65% Private

investors

Energiasalv

Hydro pump storage project developer

Voolu Energia4E Technoinvest

50% 50%

4Energia snapshot

Sudenai

Mockiai

Dundaga

KundaPaldiski

Pakri

Tooma

Esivere

Virtsu II

Virtsu I Virtsu III

• Operational wind farm

• Wind farm under development

Aseri

SiluteSilale

Hiiumaa

offshore

Ciuteliai

Pakri 18,6 MW Viru Nigula 24 MW

Esivere 8,0 MW Sudenai 14 MW and Mockiai 14 MW

Company estimated capitalization EUR 200 m

Investment pipeline in the BalticsEUR 482 m (onshore)

EUR 2,100 m (offshore)

In operation as of Jan 1, 2011 116 MW

Planned in operation by the end of 2012 285 MW

Current development pipeline 268 MW + 700 MW (offshore)

Snapshot of Estonian electricity market

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Electricity generation split in 2009

Dependence on imports & increasing connectivity

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Imports55%

Gas39%

Hydro3%

Other 3%

Source of electricity: Estonia – local, oilshale, Latvia – local hydro, gas, imports, Lithuania – gas, imports

Oilshale91%

Wind2%

Other RES4%

Other3%

Nuclear71%

Gas19%Hydro

3%

Wind1%

Other6%

Hydro49%

Gas24%

Other3%

Wind1%

Imports23%

2010 1 000

1 500

2 000

2 500

3 000

2011 2016 2018 2023

Peak load Installed capacity

Peak demand and capacities in Estonia

New oilshale 300

MW constructed

New 2 oilshale 300

MW constructed

Gap to be filled500 MW

Shutdown of old

oilshale 1,105 MW

Gap between production capacities and peak consumption is projected to be around 500 MW by 2023 in Estonia

MW

Baltics still connected to Russian system

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Baltics is connected to the IPS/UPS interconnection with Russia and Belarus, with Estlink (350MW) being the only interconnection with EU

Existing connections

Planned connections

Electricity prices on the move

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Electricity prices for domestic users* in 2010

EU

R/M

Wh

0

20

40

60

80

100

201

0

201

1

201

2

201

3

201

4

201

5

201

6

201

7

201

8

201

9

202

0

Electricity prices (10d moving average) Price forecast for Estonia (IEA 2009)

EU

R/M

Wh

Estonian area of Nordpool opened in April 2010, Baltpool – commenced in January 2010 in Lithuania

Electricity prices in the Baltics are projected to grow more than two times by 2020

EU

R/M

Wh

* With taxes

168

97105

116

0

40

80

120

160

200

EU27 average Estonia Latvia Lithuania

42% lower than EU average

International Energy Agency

forecasts 93 EUR / MWh in

2020

Hydro pump storage project

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0

400

800

1 200

1 600

2 000

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Emergency reserve capacities

Peak-load reserve capacities

Balancing capacities to wind parks

Balancing capacities needed in Estonia

National Development Strategy

envisages building 1 800 MW of

reserve and wind parks’ balancing

capacities by 2018

Wind balancing: 900 MW

Peak-load reserve: 300 MW

Emergency reserve: 600 MW

Significant share of wind energy in the

country’s electricity balance leads to

the need for wind farms’ balancing

capacities

Possibilities to balance wind energy

with other countries’ electricity systems

are limited due to insufficient grid

connections

Need for internal solution

121 800 MW of reserve and balancing capacities to be built

MW

Electricity generation split in 2009 Balancing and reserve capacities needed

Hydro pump storage to cover peak loads 2023

Hydro pump storage is the ideal solution to cover peak load hours, as investment per MW is the lowest

comparing to alternatives (e.g. Gas PP)

Gas power plant does not solve peak load problems, as peak loads in Estonia coincide with peak

consumption of gas; therefore technically there will be no gas supply available for producing electricity in

peak hours

Same capacity gas power plant with LNG terminal (to guarantee gas supplies) is around two times more

expensive than hydro pump storage

Power plant with capacity of 500 MW is needed to cover the peak load of 1 800 MW in 2023 13

Existing oilshale capacity 380 MW

CHP 300 MW

New oilshale 300 MW

Hours

New PP 300 MW

Upper reservoirBaltic Sea

Lower reservoir

Maintenance tunnelHigh pressure pipe

Low pressure pipe

Turbines

Electrical grid tunnelLift

Management centre

Sub-station Entrance to maintenance tunnel

Hydro pump storage power plant

Pump storage technology combines traditional pumped storage hydro-electric power generation with deep mining techniques

300 MW envisaged by Estonian Renewable Energy Development strategy approved by the government in November 2010

Need for wind energy balancing capacities in the region

Ideal solution for balancing of wind farms and as a reserve capacity station due to short start-up times

Low investment per MW due to low cost of reservoirs

Strong project with positive impact on the environment

Strong bussiness concept Positive impact on the environment

Realisation of the hydro pump storage would allow reducing production of energy from oil shale, meaning significant reduction of CO2 emissions

Expected CO2 reduction per annum: 1,5 MT of CO2

Hydro pump storage with contemplated capacity of 500 MW would allow 1,5 TWh production of wind energy per annum

No CO2 emissions and no related expenses

No reliance on imported resources, no gas

Preliminary design

Key figures

Plannedcapacity

500 MW

Reservoir size 5,4 mln m3

Water intake flow

270 th m3

Depth 500 m

Max non-stop working hours

12 h

Investment ~ EUR 270 m

Hydro pump storage power plant

In times of peak demand and

high electricity prices, water is

temporarily diverted through

hydroelectricity turbines

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In times of excess power on the

grid and low electricity prices,

water is pumped (returned) to

the sea using wind power

Working cycle: buy cheap & sell expensive

Daily distribution of electricity prices (average for 2010)

Plant pumps water up, consuming abundant cheap electricity

Plant produces electricity, when it is in high demand

Pump at night & produce in a day

Pump storage would earn from:

Capitalising on daily spread in electricity spot prices: night vs peak time

Capitilizing on spread between times of strong winds (low prices) and no-wind hours (expensive prices)

Providing balance power service to TSO

Some part of the capacity could be sold to TSO as emergency reserve

Pump storage will help facilitate Estonian goal to develop 650 MW onshore plus 500 MW offshore of wind power by stabilizing the variability and intermittent nature of wind generation, essentially acting as a battery for wind power.

This partnership of wind and pump storage makes wind generated energy more predictable and therefore more reliable and secure

EU

R/ M

Wh

Off-peak

Peak load

Source: Riverbank Power

Hydro pump storage power plant

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Hydro pump storage power station – most efficient way for balancing wind farms

500 MW installed capacity

Upper reservoir is the Baltic sea, while the lower reservoir is a granite mine

Synergy created with granite mining

The power plant is projected to be commissioned by 2017

Geological studies

Need to agree the subsidy scheme with the government

ǺF carried out pre-feasibility study

LOI signed with the Port of Tallinn regarding the land plot

Efficient logistic site for granite sales

Upper reservoir would be Gulf of Finland

Port territory is industrial land according to the detail plan

Seawater intake scheme design completed

Detail planning and EIA process initiated

Ideal solution for covering peak loads and provision of balancing power to wind energy

Project snapshot

Activities so far

Next steps

Energy benefits

Reduce dependence on fossil fuel

Increase energy independence

Diversify energy portfolio

Reduce environmental impacts of energy generation

Wind Energy Battery stores the intermittent wind energy during low demand periods and shifts it to the peak periods

Security, Reliability and Assurance:

Black Start Capability

Spinning and non-spinning reserves

Voltage regulation, frequency control and load following

Energy Storage

Storing and converting low cost power into peak demand capacity meeting Blatic peak load requirements

Enhancing Wind

Converting intermittent wind power into a scheduled renewable electricity source in peak demand period

Pump storage will help Estonia meet its objective to develop 1,150 MW of wind by 2020

By adding pump storage to the Baltic energy supply network, Estonia would diversify its resources in a responsible and sustainable manner while enhancing its ability to integrate large quantities of wind generation

Benefits

Riverbank hydro pump storage project in the US

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Hydro pump storage project in US

The company has created an underground pumped storage

hydro-electric generation concept called Aquabank and has

a stated goal of developing at least five of these facilities in

the northeastern United States and Canada

Aquabank technology combines traditional pumped storage hydro-electric power generation with deep mining techniques to generate power

These alternative power generation facilities will use an existing water source to create electricity from turbines located underground

The typical facility will have an installed capacity of 1,000 MW

Project in in Wiscasset, Maine is currently under

consideration for development

The company plans to develop a portfolio of at least 15

more sites over the next 5 years

In 2010 Riverbank Power was acquired by Symbiotics, a

leading licensor and developer of hydro generation facilities

in the United States

Riverbank Power Hydro pump storage PP design

Technical design of the plant by

Riverbank Power with reservoirs underground is similar to the concept developed by EnergiaSalv

EnergiaSalv and Riverbank Power

could extract mutual benefits from cooperation and sharing ideas on development of similar projects