Infrastructure and new energies from planning to realization_Value Partners

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9th Italian Energy Summit: the opening speech of the roundtable devoted to “Infrastructures and new energies: from support plans to projects realization”. By Ruggero Jenna, director of Value Partners and leader of the Singapore office.

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Infrastructure and new energies from planning to realization_Value Partners

  1. 1. ITA-SOLne-090928-P0 The information contained in this document belongs to Value Partners S.p.A and to the recipient of the document. The information is strictly linked to the oral comments which were made at its presentation, and may only be used by attendees of that presentation. Unauthorized copying, disclosure or distribution of the material in this document is strictly forbidden and may be unlawful. Milan, 28 September 2009
  2. 2. ITA-SOLne-090928-P1 Finance & Objectives Plan Authorize realize • Definition of long- • Assessment of • Screening/ • Financing of term objectives possible areas of approval of approved projects for the Country, intervention and projects -Project finance e.g.: priorities setting: -Approval at schemes -System security -New generation national/local level -Special Purpose -Energy costs capacity (Title V devolution) Vehicles -Share of -Improvement of -“Conferenza dei -Infrastructural renewable system efficiency servizi” Funds generation (existing plants, -VIA/VAS -Emission reduction interconnectors,…) procedures • Realization of -Consumption -Improvement of -Regional projects reduction (“energy energy efficiency Administrative -Build efficiency”) • Definition of Court rulings -Start-up -… incentive/ penalty (TAR) -Operate & schemes Transfer Focus of EU Directive • Definition of (20-20-20) national/regional energy plans 1
  3. 3. ITA-SOLne-090928-P2 Italy targets at 2020 20% renewable generation 20% emission reduction 20% energy efficiency Today • 5% of 340 TWh • ~600 Mio tons CO2/y • Italy today: ~170 Mio TEP 2020 • 17% of 470 TWh • -20% to reach ~500 Mio • -20%: -34 Mio TEP (European target tons/y 20%) • -13% for sectors not covered by EU Emission Trading Scheme (ETS) Possible • Incentives to • Zero emission • Building efficiency Levers renewable sources: generation: nuclear? certificates . Solar . Wind • CCS: Carbon Capture & • Process efficiency . Biomass Storage .… • Co/ Tri generation • New transport technologies (new modal •… transport, hybrid cars, mass transport, …) Source: GSE, 2007 Energy Report, AEEG, Bocconi IEFE, RIE Bologna, Value Partners Estimates 2
  4. 4. ITA-SOLne-090928-P3 ! FOR DISCUSSION 1 • Which are the interventions on the generation mix required to balance cost/environmental objectives? 2 • Which interventions on infrastructures (particularly on the grid) are needed to optimize system efficiency in the new scenario? 3 • Which types of incentive systems are more appropriate to promote the evolution towards the desired scenario? 4 • Which initiatives should be taken to ensure that incentives contribute to the development of national industries? 3
  5. 5. ITA-SOLne-090928-P4 " ! 1 ESTIMATES Hydro + renewables Nuclear Fossil fuels Generation mix Italy vs. EU27, Possible future developments Percentage of production • Further push on renewables (in Renewables* 5% 5% progress) 12% Hydro 13% 9% 12% • Increase of gas supply through Oil 13% the introduction of new LNG 7% 30% terminals Coal 14% 14% 4% • Selective introduction of nuclear plants? 31% • Further development of “clean Gas coal”? 55% 55% Italian CCGT efficiency higher • Increase of electricity imports than OECD avg. 21% from neighbouring countries (51% vs. 45%) through new interconnections? Italy, 2007 Italy, 2020 EU27, 2007 (projected) •… * Wind, solar, bio-mass, waste,… Source: SAFE, Value Partners analysis 4
  6. 6. ITA-SOLne-090928-P5 2 Removal of internal Increase of international Development of bottlenecks connections “Smart Grids” Critical sections • Congestions among different • Strong price differentials • Change of paradigm: from few areas do not allow the most between Italy and neighbouring large-size plants to distributed efficient plants to operate and countries (France, Austria, generation result in price differentials CEE, …) but international links • Development of domestic • South and Islands are generally still limited systems (solar, micro- disadvantaged • June 2008: new UCTE plan turbines,…) which need to • Congestions bound to increase envisions several new lines with exchange energy with the grid in with new plants if no measures France, Switzerland, Austria, both directions taken Slovenia, Croatia and Tunisia Source: SAFE; UCTE; Value Partners analysis 5
  7. 7. ITA-SOLne-090928-P6 # ! 3 Billion Euros Estimated Estimated cost Possible areas Examples incentives to reach 2020 of intervention 2000-2010 (total) targets Need to re-balance • Conto Energia the incentive New (80 Mln € in ‘08) schemes: • CIP6 generation ~30 ~60 (~5 Bln € in ’07) . Carry on the effort capacity • Green certificates on generation, • Tax exemptions focusing it on • Trans EU networks “real” renewables Improvement • Green book on interconnections ~2 . Invest in network of system ~40 •… efficiency and efficiency security of supply . Strongly promote • White certificates energy efficiency Improvement market on end users and of energy • 55% tax reduction ~5 ~100 not only on efficiency on energy saving distributors investments •… Source:GSE, 2007 Energy Report, AEEG, Bocconi IEFE, RIE Bologna, Value Partners Estimates 6
  8. 8. ITA-SOLne-090928-P7 $% & 4 ' MW Old incentive schemes Thanks to "Conto Energia" “Conto Energia” New "Conto Energia" • Feed-in tariff to re- Existing photovoltaic plants Expected evolution launch development of photovoltaic ~2.000 generation introduced in July 2005 ~1.400 • The tariff rewards production, is granted for 20 years and is ~800 about 0,4 €/kWh ~500 produced with a 2% ~300 reduction per year ~40 ~120 ~40 ~50 ~40 ~260 ~30 ~32 • Rates increase with ~40 ~10 ~80 2009E 2010E 2011E 2012E level of architectural 2003 2004 2005 2006 2007 2008 integration and varies In 2011 the 1.200 MW, cap of the existing with power installed "Conto Energia“ will be reached Source: Politecnico di Milano, Solar Energy Report 2008; Value Partners analysis 7
  9. 9. ITA-SOLne-090928-P8 ' ! 4 EXAMPLE: PHOTOVOLTAIC Italian companies Italian companies Foreign companies Foreign companies with subsidiary in Italy % on total 50-60% 30% 10% investments Components/ Silicon & Cells & control EPC/ Wafer Modules Installers systems Distributors producers producers producers Presence of 2% 23% 26% Italian 40% 38% 52% companies 25% 74% 98% 22% Typical ~50% ~18% ~15% ~10% ~20% EBITDA Source: Politecnico di Milano, Solar Energy Report 2008, Press clippings 8
  10. 10. ITA-SOLne-090928-P9 Initiatives taken so far Open issues Further improvements needed • “Autorizzazione Unica” • Different implementation by Regions • Implement homogeneously in all • Often an “on-top” procedure Regions making it really the • +20-25% extra costs and +10-15% “only” authorization needed extra time with respect to EU standards • “Conferenza dei servizi” • Authorization doesn’t mean • Sanctions to plaintiffs in case of realization (minorities can rely on unjustified/ unproven legal TAR and State Counsel suspension) actions • Regional Energy Plans • Different application by Regions • Create PEAR in all the regions, (PEAR) using the same guidelines • VIA procedure for larger • Lack of national guidelines • Create a “VIA - Autorizzazione plants Unica” valid for all plants • DIA procedure for smaller • Separate procedures for plant and • Parallel procedure for plant + plants in some Regions feed-in-point connection (especially connection if expropriation is needed) 9
  11. 11. ITA-SOLne-090928-P10 Italian context • Public institutions and private investors Implications on funding of energy with limited experience in infrastructural projects investments • The Italian context “as-is” is not able to mobilize the size of investments • Limited use of “innovative” financial which is needed to support the instruments (e.g. bonds for financial evolution of the system investors, asset backed securities) • As a result, many projects already • Credit market crunch increasing approved/ ”quasi approved” fail to caution from lenders and investors start because of lack of capitals • Institutional investors interested mostly • To fill the infrastructural gap, Italy in “brown field” equity investments needs a strong evolution in terms of financial culture of the institutions • Complexity, uncertainty of times and operating in the market unclear authorization procedures strongly influence investors’ interest 10
  12. 12. ITA-SOLne-090928-P11 $( & ) FOR DISCUSSION Finance & Objectives Plan Authorize realize • System security • New energy plan: • More agile • Extension of new • Energy cost reduction -Nuclear authorization project financing • Renewable energy -Renewables procedures for schemes • Emission reduction generation and grid -SPV involving utilities • Energy efficiency • New infrastructure connection -SPV promoted by plan: financial companies -Energy corridors • Improved cooperation -Securitization -Gas hubs between central and schemes to create -Smart grids local authorities new financial -Reduction of local veto products • New incentive power, particularly for • Optimal resource schemes strategic investments • Involvement of other allocation -Renewables -Introduction of local financial subjects: • National industry -System efficiency benefits linked to -PE funds creation -Energy efficiency investment realization -Infrastructural funds • R&D -“Fondazioni” • New industrial policy • Central monitoring of -… -Promotion of R&D on project new technologies implementation times -Promotion of national and analysis of critical industrial chains cases 11
  13. 13. ITA-SOLne-090928-P12 % Milan Rome London Via Vespri Siciliani, 9 Via di Porta Pinciana 1 Greencoat House Energy experts worldwide 20146 Milan 00187 Rome Francis Street Italy Italy SW1P 1DH - London Ruggero Jenna Tel. +39 02 485 481 Tel. +39 06 697 6481 UK Director Tel. +44 (0) 20 7630 1400 Singapore office ruggero.jenna@valuepartners.com Munich Istanbul Dubai Enrico Lanzavecchia Maximilianstrasse 35a Sunplaza Business Central Towers Director 80539 Munich Dereboyu Sk. No:24 Maslak Suite 1304 A Shanghai office Germany 34398 Istanbul P.O. Box 503025 - DMC 9 enrico.lanzavecchia@valuepartners.com Tel. +49 (0) 89 24218 445 Turkey Sheikh Zayed Road Tel. +90 212 276 98 86 Dubai, U.A.E. Alessandro Leona Tel +971 4 4335628 Senior Engagement Manager Milan office São Paulo Rio de Janeiro Buenos Aires alessadro.leona@valuepartners.com Rua Padre João Manuel 755 Rua da Candelária 60 Alicia Moreau de Justo 550 1°e 2°andares – cjs. 11, 12 e 21 10ºandar Centro 4 Piso Alberto Calvo Cerqueria Cesar Rio de Janeiro – RJ C1107AAL Senior Engagement Manager São Paulo Brazil Buenos Aires Milan office Brazil CEP 20091-020 Argentina alberto.calvo@valuepartners.com CEP 01411 - 001 Tel. +55 21 2213 9191 Tel. +54 11 4314 4222 Tel. +55 11 306 809 99 Andrea Pappalardo Finance Specialist Shanghai Beijing Hong Kong Milan office Fortune Gate office building, Tower A, Suite 1702, 1806 Vicwood Plaza andrea.pappalardo@valuepartners.com Unit 02, 25/F Vantone Centre 199 Des Voeux Road Central 1701 Beijing Rd (W) Jia 6 Chaoyangmenwai Avenue Sheung Wan Marco Venneri 200040 Chaoyang District Hong Kong Engagement Manager People’s Republic of China 100020 Beijing Tel. + 852 2103 1000 Singapore office Tel. +86 21 6132 4230 People’s Republic of China marco.venneri@valuepartners.com Tel. +86 10 5907 0616 Mumbai Singapore 8°floor, C block 7 Temasek Boulevard Devchand House, Shiv Sagar Estate Suntec Tower One #26-04 Dr. Annie Besant Road 038987 Worli, Mumbai 400 018 Singapore India Tel. +65 6820 3388 Tel. +91 22 6611 9700 valuepartners.com 12

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