Lessons for solar development from

conventional and wind plant IPP experiences

Alex Katon, Head of Strategy & Communications

International Power-GDF Suez META region

4th May 2011

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Content

1. Introduction to IPR-GDF Suez

2. Middle East and wind bid success factors

3. Site and fuel source

4. Technology providers & EPC options

5. Partnerships and competitiveness

6. Lessons learned & conclusions

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Introduction to IPR - GDF SUEZ: the merger…..

In February 2011, International Power and GDF SUEZ successfully completed the

creation of a global leader in independent power generation, with the merger of

GDF Suez’s non-European assets and International Power plc.

The combined business has:

• FTSE 100 listing as International Power plc (“IPR”) remains.

• Combined 66GW of gross capacity in operation and 22GW under construction.

• A diversified asset portfolio in terms of markets, fuel mix (nuclear capability) and

contract type.

• IPR has six core regions: Latin America; North America; UK-Europe; Middle East,

Turkey & Africa (META); Asia and Australia.

• Combined experience/successes in the development, construction and operation of

large scale energy projects (eg 4 bids won in the META region in 2010 ).

• A strong growth profile with many positions in the faster growing world economies.

• Strengthened capital structure that underpins the growth ambitions (investment rating).

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Introduction: the META region footprint

Operational (19GW+ gross):

• United Arab Emirates, Bahrain, Oman, Qatar,

Saudi Arabia and Turkey.

Under construction (6GW+ gross):

• Qatar: Ras Laffan C – Gas – 2,730MW.

• Saudi Arabia: Riyadh IPP – Gas – 1,730MW.

• UAE: Shuweihat 2 – Gas – 1,510MW.

• Bahrain: Al Dur – Gas – 1,234MW.

• Oman: Sohar 2 & Barka 3 – Gas 2 x 744MW .

•Highlights:

• Long-term contracted gas-fired assets.

• GCC integrated power and water plants

(IPWPs).

• Wider regional expansion in 2011 (2 x Morocco

and 1 x SA PPAs).

• Region expanded with generation, gas sales

and distribution in Turkey.

MOROCCO

Introduction: GDF Suez renewables end Dec 2010

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Introduction: IPR renewables in Dec 2010

•1,255MW wind power operational– Germany, France, Italy, The Netherlands,Australia & Canada (~3,700MW wind with GDFS)

•84MW small hydro operational– Spain

•70MW wind in construction- UK, Italy & Canada

• 700MW+ wind in permitting– UK, Italy, Canada & Turkey

• 1.5MW Solar Plant in Spain

•5MW CSP pilot plant in Chile (Fresnel)

•Top 10 global renewables portfolio

Vestas V90 turbine at our Canunda windfarm

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Middle East bid competitive success factors

1. “First past the post” tariff readout

2. Turnkey EPC:• PRICE• Plant configuration• Availability• Heat rate (fuel cost?)• Commercial T&Cs

3. Operations:• LTSA/maintenance• G&A

4. Equity & financing

5. Equity returns:• Hurdle rate• Financial structuring/fees

6. Tax & other

Fujairah F2 2,000 MW CCGT, 100 MIDG IPWP commissioned in 2011

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Morocco – Tarfaya wind project

One the largest wind

farms in the world – wind

data

IPP competitive tender issued by ONE in February 2008

Bidder to finance, build, own and operate windfarm and HV

connection facilities for a term of 20 years and transfer to

ONE at the end of the term (BOOT)Tender award based on

most competitive tariff

IPR and Nareva pre-qualified as a team (IPR is the lead)

Bidder to enter into an exclusive PPA with ONE

Government guarantees required

Equity shared 50% IPR, 50% Nareva

EPC in 2 contracts. Siemens supplies wind turbines (SWT-

2.3-93 131 x 2.3 MW) and electrical works. Separate

contract with a local Moroccan Civil Works contractor

Comprehensive 5 year O&M contract with obligation on

them to train staff

Bid wind data vs outturn is key – 60m vs 80m wind

masts (~8% optimism factor)….

Tarfaya

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Unlike PV, CSP requires direct solar irradiation – reliability of irradiation data (as for wind) is a key

issue – MENA advantages for CSP where DNI > 2,000 kWh/m² pa

Best sites offer Direct Normal Irradiation (DNI) > 2,000 kWh/(m2.y) – like wind data, efficiency and cost of electricity of a

CSP power plant is highly dependent on DNI)

Roadmaps exist for solar electricity generation in solar regions and evacuation of the produced electricity to elsewhere

via HVDC lines.

Potential:

2020: 414 TWh/year; 2030: 1,147 TWh/year, with appropriate support

(compared to PV: 2020: 298 TWh/year, 2030: 1,200 TWh/year)

By 2050, CSP could provide 11 .3% of global electricity, with 9.6%

from solar power and 1.7% from backup fuels (fossil fuels or biomass).

Which technology is preferred for MENA solar …?

Source: IEA Solar Roadmaps, 2010

Solar resource for CSP technologies (DNI)Source: Breyer & Knies, 2009 based on DNI data from DLR-ISIS

(Lohmann, et al. 2006).

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Equipment suppliers for CSP parabolic trough projects:

Equipment suppliers for CSP Fresnel systems: Ausra, Solar Power Group, Novatec

Project Developers and EPC contractors: Abengoa Solar (+Abener), SolarMillennium (+Ferrostaal),

Solel Solar Systems (+Sacyr Vallhermoso), Torresol Energy (+SENER)

2009-2010: AREVA acquired AUSRA (FRESNEL system supplier), Alstom invests in Brightsource (solar power towers),

SIEMENS acquired SOLEL (parabolic receiver supplier).

Which equipment? CSP has seen a high uptake...

Reflector

Panels

Absorber

Tubes

(HCE)

Steel

Structure

Source: EER, 2009

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Utility technology selection is based on experience…1

Four technologies, different level of maturity, Parabolic Trough far ahead

1 According to BEEI MENA research, based on various publically available documents2 Commercial application, excluding pilots

Parabolic

Trough

1983

871MW

21

80MW

25

100MW

Power

Tower

2007

38MW

5

20MW

5

17MW

Linear

Fresnel

2003

10MW

4

5MW

2

30MW

Dish

Stirling

2007

1.8MW

3

1.5MW

2

1MW

Maturity

First Project2:

Installed Capacity:

Plants in Operation:

Of which largest:

Plants in Construction:

Of which largest:

Site selection: solar technology requires more space….

Site selection: like thermal, most solar technology

needs water for cooling (unless ACC….)

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Regulatory risk is reduced with to feed-in tariff systems CAPEX

Parabolic trough(*): 4,000 €/kWe (without thermal storage)

6,000 €/kWe (including thermal storage capacity for 7.2h full load electricity production)

Fresnel trough: start of the learning curve. Estimated: 3,000 – 4,000 €/kWe for large scale, no storage. Expected

CAPEX reduction of 10 up to 30% compared to parabolic trough.

OPEX: no reliable data available yet. Estimated 50 – 70 €/MWhe(*)

Cost of electricity(**): 190 – 260 €/MWhe(*)

(*): Figures based on a 2008 visit to Andasol 1 and 2 plants in Spain. Full load equivalent operating hours: 3,600 h.

(**): Definition: the levelised cost of electricity is the cost of the electricity-generating system including all the costs over its lifetime: initial investment, operations and

maintenance and cost of fuel. The LCOE is the minimum price at which the produced electricity must be sold for an energy project to break even.

CSP may reach grid parity in countries where DNI > 2600 kWh/m²/y (see slide 13) potentially by 2020

CSP may reach grid parity in countries where DNI > 2000 kWh/m²/y (see slide 13) potentially by 2030

CSP offers interesting business

cases due to incentives via feed-in

tariffs or premiums. In southern

European countries feed-in tariffs

of 250 – 300 €/MWh are in place

(e.g., approx. 270 €/MWh in Spain

and 280 €/MWh in Italy)

Pressure to reduce FiTs (SA and Spain).

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Who are the best partners for CSP?

Only a handful developers own plants that have reached commercial operations

• Abengoa Solar, Acciona, ACS Cobra and Solar Millenium are leading the pack

• NextEra owns the long established SEGS plants in the USA, but has not by themselves

brought a plant to commercial operation to date

1 NextEra’s subsdiary, Florida Power & Light, owns the SEGS plant in USA, developed from 1983 until 1989 by LUZ, purchased by Solel in 1993 and by FP&L in 20052 2x50MW projects Andasol 1 and 2 were initially developed by Solar Millenium. ACS Cobra joined at FC and bought 100% of the shares at PCOD.

1

2

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Not easy to assess as:

• Few international tenders to analyse an achievement trend / track record

• Spanish developments made on own account to benefit from generous FiT

• USA developments have been limited (though many projects announced)

Some indication from regional projects awards*:

1. UAE Shams I CSPP (100MW) > Abengoa Solar / Total JV

2. Morocco Ain Beni Matar Booster (20MW) > Abengoa Solar

3. Algeria Hassi-R‟mel Booster (20MW) > Abengoa Solar

4. Egypt Kuraymat booster (40MW) > Solar Millenium

Who (or what) is most competitive?

* Whether private or public tenders. Note: it could not be determined if the Rajasthan Solar Power (10MW Power Tower) and Rajasthan Solar One (10MW parabolic trough) projects were awarded after a competitive tender or developed for the developers own account. The projects are therefore not mentioned.

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Developer/Contractor Dilemma3 possible scenarios given the particulars of CSP market

1. Partner with a CSP developer, who is not a CSP contractor / EPC

2. Partner with a CSP developer, who is also a CSP contractor / EPC

3. No CSP partner, but a CSP-capable EPC, with appropriate OE support

1• Clear scope split between

development and contracting• Absence of conflict of interest• Flexibility in choosing CSP contractor• Operator experience with some CSP

partner (though limited)

2 3

+

-

• Largest choice of CSP partners/ contractors

• Possible partners are amongst the most qualified/experienced

• Operator experience with CSP partner

• Clear scope split between development and contracting

• Absence of conflict of interest• Flexibility in choosing CSP equipment• Flexibility for partnership structuring

• Limited availability of experienced CSP players ready to take act as partner without being a contractor

• Limited availability of CSP contractors willing not to be developers, little or no operating experience

• Conflict of interest• Limited flexibility for partnership

structuring• No Flexibility in choosing CSP

contractor

• CSP support not at partnership level• Limited availability capable OE• Limited availability of contractors

who do not wish to be developers• No access to operating experience,

though could hire external Operator

CSP tendering lessons learned…

EPC/Technical:

• “New industry” may have different contracting solutions (eg technology partners and EPC as equity…)

• RfP must not be too prescriptive – developer to be able to optimise technology, within fuel restrictions

• Site: irradiation and solar data must be from exact site/location and may not be as good as expected (eg

dust/pollution impacts)

• Site topography key to dust issue: burden to be considered in site selection/cost (eg polymer spraying)

• Adequate irradiation data, substantial solar monitoring >1 year, plus satellite data (+/- 15% : not to be

• relied on alone…!)

• Transmission: code needs to take into account renewable energy features eg response times, eg “must

dispatch”, also autogeneration control not possible

• Significant water/demin required: ACC cooling works power/efficiency power cost to be considered

• Significant tariff impact if data /scope adjusted subsequently - go for utility scale now.

Commercial:

• Ideally tendering agency should be the same as offtaker (no mismatch on contract or tariff negotiations)

• Use standard form contracts (PPA), should be similar to fossil fuel (albeit energy payment based)

• Support required for greens payment agreement (may be approx 90% through this agreement) OR ideally

FiT structure (see European successes) - although some MENA markets do not favour this…

• Schedule needs to accommodate limited production capacity and lead time for equipment ordering.

CSP summary/conclusions (cont)

Partnerships:

• Limited partners with experience of operating track record

• Inherent commercial conflicts in EPC contractor and/or technology provider partnerships (eg sponsor vs

EPC returns, performance LDs, warranties & testing)

• High risk to contractual operational obligations given limited track record – cost of OEM risk-taking?

• Is access to finance more important than technology?

Financial:

• CSP Load factor assumptions (as for wind) are critical to tariff (may be > 10x conventional PPA project) -

is this fully understood by the tendering authority (and how will tariff-cost gap be bridged)?

• Currently CSP costs require subsidised project finance or tariff required (eg MASDAR or Clean Tech

(WB) Funding)

• If provided, EPC draft contract to meet lender norms for non-recourse project financing ….

• Tender authority to lay down key term summary (rather than full form contracts), do not be over

prescriptive.

Conclusion: “the solar IPP market is in early stages, but by

using conventional thermal and wind development experiences, it is

possible for rapid expansion in the MENA region in the near term”….

Thank you for listening…..

Lessons for solar development from

conventional and wind plant IPP experiences

Alex Katon, Head of Strategy & Communications

International Power-GDF Suez META region

4th May 2011

Annex

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With high solar irradiation, MENA region is ideally located to develop CSP

solar projects*

Highest project pipeline currently in Spain (thanks to favorable legislation) and the USA

Ramping up across MENA (Abu Dhabi, Oman, Morocco, Egypt, Algeria, …)

Pursuing solar projects in MENA is consistent with META’s “4*400 MW”

region-wide 2017 renewable target

CSP opportunities in MENA

* source: AT Kearney, Solar Thermal Energy 2025 Roadmap, July 2010, prepared for ESTELA (European Solar Thermal Electricity Association

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Synthesis & recommendations

CSP technologies:

•One of the most reliable and controllable renewable technologies (with storage).

The only solar technology with both thermal storage and steam applications.

•Turbine-CSP technologies are the solar technology for utilities with high entry

barriers: large scale deployment (50 MWe minimum), financial barrier,

technological barrier (need to master thermodynamic competencies) and assets

barrier (to integrate it in (existing) power plants).

•High potential but limited to areas with direct irradiation and sufficient land

space. However development (TWh) should be similar to those of PV

technologies.

•Now gaining momentum. Cost reduction potential seen for Fresnel sub

technology (hence GDFS 5MW pilot).

•Should be rapidly developed within the Group as commercial projects (parabolic

trough) or pilot (Fresnel trough).

•Future technology watch for central receiver tower and Stirling dish

•Water resources and cooling availability are key for plant efficiency/merit order.

What is CSP? - Concentrated Solar Power

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Proposed Fresnel Pilot in Mejillones (Chile)

1. Steam production by a solar boiler using a 6 module CSP-Fresnel system

2. Injection of the steam into the steam cycle of the GDF SUEZ 150 MW coal plant

Solar measurement station in

operation since march 2009

2 coalplants

Distance:~ 500 m

1 Fresnel

module

Configuration

solar boiler

Steam

conditions

Annual

production

Peak

production

Production

hours

6 modules 344 °C; 38 bar 6690 MWh (th)/y 5.2 MW (th)

7.9 ton/h

2550 h

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Parabolic trough

Fresnel trough

Parabolic trough Fresnel trough with direct steam generation

Entire system of absorber tube, mirror and

supporting structure rotates with the sun

Fixed absorber tube

Structure = small flat mirrors that rotate individually

Standard heat transfer fluid: oil.

Need for heat exchangers to feed steam

cycle.

Standard heat transfer fluid: water / steam.

No need for heat exchangers.

Heavy wind loads, heavy foundations Simple foundations

Cleaning: distilled water, manual Cleaning: potable water, automatic

Fresnel trough plants have important advantages over parabolic trough plants, but are in pre-commercial stage

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Annual operating hours of a CSP plant can be increased by using thermal storage to produce electricity during off-solar

hours. Thermal storage is very efficient and much cheaper than electric storage solutions (batteries, pumped hydro , ...)

CSP plants combined with thermal storage are more predictable and controllable than PV and wind.

Two-tank molten salt storage is currently the only commercially available option to include thermal storage. It requires a

high extra investment (for the storage system itself, auxiliary boilers to keep the salt warm and increase of the solar field

to generate the excess heat to be accumulated) and safety measures (which may be decisive for „go‟ / „no go‟ of a CSP

project), but increases the competitivity of the plant.

CSP plants can also be combined with gas-fired or coal-fired power plants (hybrid systems) to increase output of

existing capital equipment, reduce fuel consumption and obtain a more controllable production pattern. The increase of

net annual efficiency is to be investigated.

Only few commercial plants include storage: 50 MW Andasol 1&2 using the only available commercialised technology of

molten salt: pre-commercial. Abengoa uses Andasol 1 configuration for all its plants.

Low-cost efficient thermal storage and hybridisation to

match solar cycle to the demand cycle can increase

competitiveness.

Heat & Store

molten salt Use stored

heat

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Power assets:

IPR - GDF SUEZ Middle East, Turkey & Africa

Country Asset FuelGross

capacity MW

IPR

ownership

Net

capacity MW

Bahrain Al Ezzel Gas 954 45% 429

Bahrain Hidd Gas 954 30% 286

Bahrain Hidd Gas 1,006 40% 402

Oman Al Rusail Gas 665 47% 316

Oman Barka 2 Gas 678 47% 322

Oman Sohar Gas 585 45% 263

Oman Al Kamil Gas 276 65% 180

Qatar Ras Laffan B Gas 1,055 40% 422

Saudi Arabia Marafiq Gas 2,012 20% 402

Saudi Arabia Tihama Gas 1,076 60% 646

Turkey Baymina Enerji AS Gas 763 95% 725

Turkey Uni-Mar (Marmara) Gas 488 33% 162

UAE Shuweihat S1 Gas 1,572 20% 314

UAE Umm Al Nar Gas 2,450 20% 490

UAE Taweelah A1 Gas 1,592 20% 318

META TOTAL IN OPERATION (1) 15,126 5,678

(1) Gross capacity of 16,126GW is adjusted by 1GW (relating to Al Hidd power plant jointly owned by GDF SUEZ Energy International (30%) and

International Power (40%). => total META in operation = 15.126MW.

(2) Figures based on combined asset table IPR – BEEI (Source Prospectus).

Power assets in operation:

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Power assets:

IPR - GDF SUEZ Middle East, Turkey & Africa

Country Asset FuelGross

capacity MW

IPR

ownership

Net

capacity MW

Bahrain Al Dur Gas 1,234 45% 555

Oman Sohar 2 Gas 744 46% 342

Oman Barka 3 Gas 744 46% 342

Qatar Ras Laffan C Gas 2,730 20% 546

Saudi Arabia Marafiq Gas 729 20% 146

Saudi Arabia Riyadh IPP Gas 1,730 20% 346

UAE Shuweihat 2 Gas 1,510 20% 302

UAE Fujairah F2 Gas 2,000 20% 400

META TOTAL UNDER CONSTRUCTION 11,421 2,980

Power assets under construction:

Country Asset DescriptionIPR

ownership

Turkey Izgaz 2,270km gas transportation/distribution network 90%

Other assets in operation:

Figures based on combined asset table IPR – BEEI (Source Prospectus)

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Position of CSP in the Renewable power generation mix according to the IEA BlueMap scenarioSource: SolarPaces 2009

What is the future role of CSP in renewable energy?

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IEA: Position of CSP in the Power Generation mix

Power generation mix – different IEA

scenarios for 2050

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IEA Blue MAP Scenario: growth of CSP

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IEA technology roadmaps