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Renewable Energy Investments from Financial Investor Perspective
- Introduction to Copenhagen Infrastructure Partners
4 October 2019, Presentation to Energy Law Group Event
Content
2
▪ Introduction to CIP and the thinking of a financial investor
▪ Case example – Veja Mate
▪ Development in Offshore Wind – US as an upcoming new market
The history of CIP- Significant growth in a short period of time
4 51 32
1 Including CI Artemis (appendix fund to CI I) 2 Source: Infrastructure Investor, PEI MediaInvestor
2017-2018: CI III (third fund)
▪ Largest renewable energy fund ever raised2
▪ Largest financial investor within offshore wind
▪ Presence in four continents (Europe, North America, Asia, Australia)
▪ Team of 80 people and 4 offices
2012: Establishment of CIP
▪ Invention of new investment product making utility scale energy projects accessible to financial investors
▪ EUR 1.4bn in commitments from the largest labour market pension fund in Denmark
▪ Team of 4 people in Copenhagen
3
2019: CI New Markets Fund (fourth fund)
▪ Fundraising ongoingfollowing First Close inQ2 2019
▪ Focus on renewableenergy investmentsprimarily in Asia and Latin America
▪ Team of 100 people and 6 offices (currently expanding)
6
Timeline of CIP
2007-2012: DONG Energy (now Ørsted)
▪ Instrumental in successful implementation of one of the first energy transitions of a large utility
▪ Pioneering offshore wind, responsible for some of the largest projects in the world
▪ Industrialization of the offshore wind supply chain and inventing new financing models
2012-2014: CI I (first fund)
▪ EUR 1.4bn1 committed in less than two years
▪ Offshore Wind, Onshore Wind, Biomass and Transmission investments in Northwestern Europe
▪ Team of 15 people
2014-2016: CI II (second fund)
▪ Investor base now comprising group of prominent Nordic institutional investors
▪ Strong position established in the US solar and onshore wind market
▪ Team of 30 people
Nykredit Alpha
Current investors in CIP funds
4
CI III investors
CI II investors
CI I and CI Artemis investor
DK
K Alternativ
Infrastruktur I K/S
Zhinfra K/S
(Danish family office)
Total CI III commitment : EUR ~3.5bn.
Swiss Pension Scheme
(name disguised)
(On behalf of a UK pension fund)
Total CI I commitment: EUR ~1.0bn
Total CI A commitment: EUR ~0.4bn
Total CI II commitment: EUR ~2.0bn
(Taiwan Life Insurance Co)
SE
Taiwan Life Insurance
company
(name disguised)
Key ”take aways” regarding CIP’s investment focus
5
• CIP has a team with ~80 people primarily with an energy sector background
• Value creation through optimization of projects rather than “financial engineering”
Industrial value creation approach
• CIP almost entirely invest in greenfield projects, which provides the best opportunity for de-risking the projects and highest value creationGreenfield focus
• The CI Funds are 20 funds with possibility of extending with 5 yearsLong term funds
– 20 years
• The CI Funds will as a starting point build the projects with a view of holding them through the majority of their life time
• No need for a quick exit“Build and hold”
• Often potential for optimizing joint value creation in cooperation between suppliers, developer and sponsor investor.
• We do not do ”tire kicking” – and do not participate in structured sales processes
Focus on joint optimization – no
auctions
• Proven industrial partnership model: cooperation, risk allocation and flexibility
• Network of leading global and local companies
Industrial Partnerships
• Due to investor composition, CIP can take very patient positions – focus on stable return rather than stable yield Very flexible and “patient” capital
Competitive Landscape- CIP is one of the only fund managers investing in greenfield utility scale energy infrastructure projects
6Source: Preqin and CIP analysis
>85% Brownfield
<15% Energy Infrastructure
100% Energyinfrastructure
BlackRock Global Renewable Power Fund II
Global Infrastructure Partners III
Brookfield Infrastructure Fund III
ISQ Global Infrastructure Fund II
Macquarie European Infrastructure Fund 5 (MEIF 5)
Stonepeak Infrastructure Partners III
Energy Capital Partners III
Antin Infrastructure Partners III
EQT Infrastructure III
DIF Infrastructure V
Partners Group Direct Infrastructure 2016
Capital Dynamics Clean Energy and Infrastructure Fund V
Starwood Energy Infrastructure Fund III
InfraRed Infrastructure Fund III
CI III (EUR 3.5bn)
7
CIP: Investments and development projects- Geographical location of CI I, CI Artemis, CI II and CIII projects
Misae
240 MW
US Solar
255 MW
Blue Cloud
150 MW
Mitchell
23 MWac
Kontiki I
250 MW
Bearkat I+II
197 + 162 MW
Fluvanna I+II
155 + 169 MW
Vineyard Wind I
800 MW
Magellan
600 MW
Liberty Wind
Up to 2 GW
Vineyard Wind RoZ
Up to 1.6 GW
Sage I-III
58 MW
Monegros
374 MW
Borea
273 MW
UK WtE
34 MW
Brigg & Snetterton
40 MW
UK WtE
35+20 MW
Brite
42 MW
Lostock
80 MW
German geothermal
4 x ~7 MW
Artemis
Kent
28 MW
Beatrice
588 MW
Veja Mate
402 MW
Star of the South
2,000 MW
Xidao & Changfang
600 MW
Zone 29
300 MW
Offshore wind
100 MW
Onshore windOffshore wind GeothermalSolar Biomass and waste-to-energy Transmission
7
Soo Green
Storage
Gordon Butte
Examples of experience from the largest offshore wind projects in the world- The combined experience from CIP and COP within offshore wind is unparalleled
8Note 1: Very early stage development projects are not included
Source: 4C Offshore
Overview of involvement in construction and operation stage projects1
CIP Project
Past experience, CIP partners and COP
1
2
5
6
7
9
11
12
13
16 15
17
Wind farm CountryCapacity
(MW)Current Status Turbine Supplier
Hornsea Project 1 1,218 Under construction Siemens
East Anglia 1 714 Pre-construction Siemens
Walney Extension 659 Under construction Siemens/Vestas
London Array 630 Fully commissioned Siemens
Kriegers Flak 605 Under construction Siemens
Gemini 600 Fully commissioned Siemens
Beatrice 588 Under construction Siemens
Gode Wind 1 & 2 582 Fully commissioned Siemens
Gwynt y Môr 576 Fully commissioned Siemens
Race Bank 573 Fully commissioned Siemens
Greater Gabbard 504 Fully commissioned Siemens
Hohe See 497 Pre-construction Siemens
Borkum Riffgrund 2 450 Under construction Vestas
Horns Rev 3 407 Under construction Vestas
Veja Mate 402 Fully commissioned Siemens
Dudgeon 402 Fully commissioned Siemens
Rampion 400 Under construction Vestas
Anholt 400 Fully commissioned Siemens
3
4
8
1418
2
1
4
7
8
9
10
11
12
13
15
16
17
18
14
3
5
6
10
CIP is active within offshore wind globally- CIP is looking to leverage offshore wind competences globally, including in Taiwan
9Note 1: CIP at the moment considers it less likely that CI III will move forward with Beothuk following the election of a new government in New Brunswick, and the project is currently on hold
Note 2: Including Vineyard wind (800MW), Rest of Zone (up to ~1.6GW) and a new lease area in MA with a potential capacity up to ~2GW
Taiwan projects
▪ CIP is currently
developing 900MW
offshore wind
projects
▪ The projects have
secured grid
connection and
PPA
Beatrice
▪ CIP has constructed the 588MW
offshore wind project Beatrice, a
partnership with SSE and Red Rock.
Beothuk1
▪ CIP is currently developing the
Beothuk offshore wind projects, with
a total capacity of up to 600MW
Star of the South
▪ CIP is currently developing the Star
of the South offshore wind project in
Victoria with a capacity of ~2GW
▪ Star of the South is a CI-III Devex
Investment
Vineyard Wind + Liberty Wind
▪ CIP is currently involved in the
development of up to 4.4GW2 of
offshore wind and have a PPA for the
800MW Vineyard Wind
Magellan
▪ CIP has partnered up with Magellan
Wind to develop floating offshore
wind projects offshore California
▪ Magellan is a CI-III Devex Investment
World map of current CIP offshore wind activities
Japan projects
▪ A number of
opportunities are being
investigated in Japan
Veja Mate
▪ CIP has constructed the 402MW
offshore wind farm Veja Mate
Other new markets
▪ CIP is currently investigating potential
opportunities in China, India and
Vietnam
South Korea projects
▪ A number of opportunities are
being investigated in South Korea
CIP focuses on creating de-risked and long term stable cash flows - Investment structuring for an energy infrastructure project
10
10-20 years fixed price tariff period
(limited power price exposure)
5-10 years market price period
(power price exposure)
1-3 years
construction
period
FID COD
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 251 2 3
3-8%
8-10%
Majority of IRR realised
in regulated regime
period
Investment is typically
paid back 7-9 years
from FID
Accumulated project cash flow
IRR build up
ILLUSTRATIVE
C
Unlevered project cash flow and IRR profile
11
Significant focus on de-risking projects and investments
Least attractive type of risk from financial investor perspective due to correlation with financial markets
Main mitigants:▪ Focusing primarily on regulated assets▪ Choosing the most attractive
markets/sub-segments▪ PPA-arrangements, etc.▪ Capital structure
Regulatory risks are inherent in regulated energy infrastructure investments
Main mitigants:▪ Choosing stable and attractive
regimes/countries▪ Choosing favourable regulatory sub-
segments▪ Attention to regulatory/political regime
development▪ Contractual protection (off-take
arrangement, capital structure, etc.)
Project specific risks can be diversified and managed by CIP
Main mitigants:▪ Choosing the right projects▪ Working with industrial partners▪ Secure proper planning▪ Contractual protection (EPC, O&M,
capital structure, etc.)
Project
- Main Types of Risks in Energy Infrastructure Projects
Regulatoryrisks
Project specific
risks
Commodity & Volume risks
Content
12
▪ Introduction to CIP and the thinking of a financial investor
▪ Case example – Veja Mate
▪ Development in Offshore Wind – US as an upcoming new market
The asset
▪ Offshore wind located in the German North Sea with capacity of 402 MW, water depths of 40m and a distance of 94 km from shore
▪ 67 state-of-the-art Siemens SWT-6.0-154 turbines and monopile foundations
▪ Mean wind speed of ~9.9 m/s
▪ Total project investment of EUR 1.9bn
Timeline
▪ The project started offshore foundation installation on schedule in April 2016
▪ In accordance with the accelerated program, the project delivered first power in January 2017
▪ Turbine commissioning started in mid-January 2017, with full commissioning completed in August 2017, ~4 months ahead of schedule and below budget
▪ Net pre-commissioned revenues of EUR ~216m
▪ Official COD achieved on 5 February 2018 with a number of commercial upsides implemented
Introduction to Veja Mate- 402 MW offshore wind project in the North Sea
13
Key investment factsProject location
▪One of the largest German offshore wind projects (402 MW)
▪Located in the German North Sea ~95km from shore on ~40m
water depths and ~9.9m/s wind speeds (one of Europe’s best wind
regimes)
▪Stable regulatory environment in Germany for offshore wind,
offering fixed feed-in tariff for +12 years
▪De-risked construction set-up through four EPCI contracts with experienced contractors
▪15-years O&M agreement with Siemens
Overview
Veja Mate
Germany
Netherlands
Denmark
Tariff
▪ 8-years feed-in tariff of 194 EUR/MWh
▪ 4.7 years feed-in tariff of 154 EUR/MWh
▪ Floor price of 39 EUR/MWh after tariff and until year 20 after COD
Regulation▪ Germany has a very stable investment environment for regulated
assets and has a fundamental need for new electricity production capacity
Case example (Veja Mate): Capital structure
Illustrative structure overview
Note 1: Charlestown, Nevis (Federation of Saint Kitts and Nevis)
Note 2: In the event that CI-II has not converted Tranche B into equity at COD + 9 months, CI-II will lose its 1 share in the Project Company
Details on capital structure
Ownership
Debt
Senior
debt
(67%)
Mezzanine loan
(13%)
Common
equity
(20%)
▪ Highland provided EUR 258m common
equity
▪ Siemens (“SFS”) provided EUR 150m
common equity
▪ CI-II provided EUR 250m in mezzanine loan− Tranche A: EUR 150m (non-convertible)
− Tranche B: EUR 100m (convertible)
▪ Senior debt provided by commercial banks
and export credit agencies
EUR
150m
EUR
258m
EUR
150m
EUR
100m
EUR 1,361m
Veja Mate Offshore
Project GmbH
Holds all rights and permits relating
to the Project
Highland Group
Holdings Ltd1
(“Highland”)
100%
Uther Property S.à
r.l.CI-II
Siemens Financial
Services GmbH
(“SFS”)
Senior debt
CI-II
mezzanine
Loan
59.3%
(118,660 shares)
0.0005%(1 share)
40.7%(81,339 shares)
2
14
Video of the Veja Mate case
Construction of the Veja Mate offshore wind farm
15
Content
16
▪ Introduction to CIP and the thinking of a financial investor
▪ Case example – Veja Mate
▪ Development in Offshore Wind – US as an upcoming new market
Significant and fast growth expected within offshore wind- Asia is expected to account for an increasing share of installed offshore wind capacity in the future
Source: “New Energy Outlook 2018”, Bloomberg New Energy Finance
5 7 8 12 13 18 2127
3341
4958
6578
93
112
130
147
167
184
200
214
227
240252
264274
287298
311321
330338 343 346 350
355365 369
0
50
100
150
200
250
300
350
400
2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 2032 2034 2036 2038 2040 2042 2044 2046 2048 2050
10% CAGR2025-2038
Installed
Capacity
(GW)
3% CAGR2038-2050
24% CAGR2012-2025
17
Significant opportunities within offshore wind with +300GW additional capacity expected to be installed by 2050
Expected development in offshore wind capacity towards 2050 (GW)
East Coastal states drive offshore development in the U.S.- Comparison with the Continental North Sea shows clear potential for U.S. offshore wind
Source: Bureau of Ocean Energy Management (BOEM), European Wind Energy Association, UK Department for International Trade18
US Atlantic and North Sea offshore wind facilities
Coastal
population
Coastline
(NM)
Distance from shore
(NM)
Water depth Wind speed # of active
projects
Active
production (MW)
Anticipated
production by
2030 (MW)
U.S. Atlantic 51,607,259 750 Up to 30 miles Up to 60m 9-10 m/s 14 30 9,500
North Sea 83,411,495 1100 More than 60 miles Up to 70m 9-10m/s 62 15,010 67,500
Strong similarities on key geographical parameters but the US is far behind Europe regarding active and anticipated production, and with
current cost levels for offshore wind this is expected to change
BOEM Lease Areas
BOEM Planning Areas
In operation
Planned
U.S. Atlantic North Sea
UK
DE
DK
NL
USA
Source: The New York State Energy Research and Development Authority
Note 1: Brackets indicate investment required assuming a price of 4m USD/MW 19
Overview of wind sites on US East Coast Ongoing and potential solicitations for offshore wind in the USA1
New Jersey
▪ The Governor of NJ has signed in 2018 an executive order directing
the state towards the goal of generating 3.5 GW of offshore wind by
2030
▪ First RFP for offshore energy expected to be issued in 2019
3.5 GW by 2030
(USD 14.0bn)
New York
▪ The State of New York released in early 2018 the New York State
Offshore Wind Master Plan, which will guide the development of
2.4GW of offshore wind by 2030
▪ NY to procure at least 800 MW of offshore wind capacity by 2019 –
RFP expected in Q4 2018 for 800-1200 MW
2.4 GW by 2030
(USD 9.6bn)
Massachusetts
▪ In mid-2016, the Massachusetts State Legislature voted on and
passed an energy bill which includes a requirement that utilities
enter into long-term contract for 1.6 GW of offshore wind power no
later than 30 June 2027
▪ July 2018: An energy bill was passed in both Senate and House to
investigate for another 1.6 GW by 2030. Senate had passed 3.4GW
but House reduced it to 1.6 GW
▪ Vineyard Wind has been awarded 800 MW in the first RFP
1.6 GW by 20273.2 GW by 2030(USD 12.8bn)
Connecticut
▪ The state of Connecticut has procured 200 MW of offshore wind to be
installed by 2025
▪ Given the successful RFPs, it is expected that the state might procure
additional capacity in the next years
▪ 2.3 GW zero carbon procurement ongoing – pivotal is state nuclear
plant (Millstone 40-50 years old) with 1.6 GW size and potential
closure if not extended
No specific targets
Maryland▪ The Maryland Public Service Commission awarded in 2017 368 MW of
offshore wind to two projects
0.4 GW by 2022
(USD 1.6bn)
Other states
▪ Rhode Island has awarded 400 MW of offshore wind in 2018 and it is
expected to procure additional capacity in 2019
▪ West Coast states are also looking at the potential of offshore wind,
but will require floating foundations due to deeper waters
+2 GW(USD +8bn)
Offshore wind in the USA- US East Coast states committed to +9.5 GW of offshore wind by 2030
APPENDIX
20
Development in offshore wind turbine size- Iberdrola’s and CIP combined experience covers almost all of offshore WTG technologies
Vindeby Horns Rev 1 West of Duddon
Wikinger Beatrice / East Anglia 1
Vineyard Wind
1991 2002 2012 2019/202017
450 KW
2.0 MW
3.6 MW
~20x
~4.5x
7.0 MW
2021/22
8.0-10 MW
12+ MW
Future
5.0 MW
30 years of WTG development
Source: Danish Energy Agency (Danish Experiences from Offshore Wind Development)
BonusB35-450
Vestas V80-2.0
SiemensSWT-3.6-120
AdwenAD5-135
SiemensSWT-7.0-154 Siemens / MVOW
Comments
▪ Vindeby was the first offshore
wind farm in the world,
reaching COD in 1991 in
Denmark. The farm used 11
WTGs of 450 kW for a total
nameplate capacity of 4.9 MW
▪ Vindeby was decommissioned
after 25 years of operation for
commercial reasons, not
technical reasons
▪ Since Vindeby, the WTG
technology has developed
significantly with current
turbines having a nameplate
capacity of 8-10 MW and wind
farms of more than 1,000 MW
▪ It has already been announced
that GE will deliver a 12 MW
WTG in 2023 with further
upgrades expected in the
following years – other OEMs
are expected to follow
▪ Vineyard Wind will either
use SWT-8.4-154 or V164-
9.5MW which are both
versions of existing models
with a proven track record
21
Development of projects - Significant difference in size, water depth and distance from shore
Source: U. S. Department of Energy, Fraunhofer IWES
Note 1: The chart includes both projects in the permitting, approved, contracted, under construction and installed stage 22
0
10
20
30
40
50
60
70
80
90
100
110
120
0 4 8 12 16 20 24 28 32 36 40 44 48 52 56 60 64 68
Dis
tance to s
hore
(km
)
Early monopile technology with limited depth capacity
Technological advances and buildout of low-depth offshore
New offshore markets causing varying average levels
Past offshore wind projects & US prospects
▪ Initially, projects were small in size, at low
water depths and close to shore allowing for cheaper construction costs
▪ The depths seen for Vineyard Wind allow for
the installation of monopile foundations, which is currently the most cost-effective
foundation
▪ In contrast, the West Coast has much higher water depths requiring the implementation of
floating turbine technology which is not a
proven technology anywhere in the world
2018 and onwards
▪ As options at low water depths and close to
shore are exhausted, the next phase will show projects further from shore and at
higher water depths of 40+ meters, made
possible by significant technological advances
▪ Vineyard Wind places itself close to
shore and at an average water depth
similar to the average water depth of European projects that are currently
being constructed
▪ With offshore wind farms on the West Coast starting to be developed, floating foundations
will be required
1,000 MW
CommentsOffshore wind farm project site characteristics1
Bubble size indicates project size:
Vineyard Wind
Offshore wind projects with COD in
the future will lie further towards the northeastern corner
New turbine installation by average distance from shore and water depth
Water depth (m)
Under constructionInstalled
Contracted
Permitting
Approved
0
10
20
30
40
50
1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018
Water depth (m) Distance to shore (km)
Vineyard
Wind