Challenges and Opportunities in the            Photovoltaic (PV) Markets                            Martin SupancicExterna...
Presentation Overview     About Sojitz1.   Global & European REN/PV Growth2.   Focus on German PV3.   Current Market Situa...
The History of Sojitz Group          Nissho Company                                    Iwai Sangyo Company                ...
Corporate DataCompany Name              Sojitz CorporationEstablished               April 1, 2003Capitalization        ...
Financial Information Consolidated Financial Highlights(Year ended March 31, 2011)                      (As of March 31, ...
Sojitz Groups Global Network   The Sojitz Group is a general trading company with a worldwidenetwork comprising over 500 g...
Sojitz Group Snapshot                                                   Japan                                 China       ...
Sojitz Corporation IPP Experiences (Conventional)                                                    China         Egypt  ...
Sojitz Corporation IPP Experiences (Renewable)                         Mixdorf Ground-mounted                             ...
SOJITZ CREDENTIALS ~ Oil and Gas            Client                          Client                         Client         ...
SOJITZ CREDENTIALS ~ POWER              Client                                 Client                            Client   ...
Place                Sunshine Hours/Year         Sunshine                                                           Hours/...
Yuma, Arizona, USA Source: THE GEORGIA MINERAL SOCIETY, INC.   Source: Rah Tours                                          ...
Phoenix, USASource: blog.flickr.net/en/2011/07/08/phoenix-haboob/                                                        C...
Source: CENTER FOR GLOBAL DEVELOPMENT                                        Copyright © Sojitz Corporation 2004   15
1.1 Global PV Capacity                       Annual Newly Installed Global PV Capacity (MWp) 100%  90%  80%  70%          ...
1.2 Comparative Growth Rates of REN in EuropeAnnual average growth rates in renewable energy consumption (%), EU-27       ...
1.3 REN Contribution to Energy Consumption in EuropeContribution of renewable energy sources to primary energy consumption...
1.4 Germany’s PV Market Remains Buoyant                      German Solar Market 2010 vs. 2011                            ...
1.5 Analyzing the German PV “Juggernaut”              • Registered added capacity used to determine FiT                app...
1.2 Current Market Situation - Europe                                        Copyright © Sojitz Corporation 2004   21
1.6 Current Market Situation - Europe                                                  European                      FiT  ...
1.7 Current Market Situation - USA                                     Budgetary                                      cutb...
1.2 Current Market Situation - Europe                                        Copyright © Sojitz Corporation 2004   24
1.8 Current Market Situation - Asia                                        Off-grid                                2012?  ...
2.1 Shift in value chain towards local suppliers                    EPC Price Germany - BSW-Solar Rooftop PV Price Index  ...
2.2 Price Performance of PV Modules and Outlook                     Pricing of Different PV module types, according to Ori...
2.3 German FiT on a Diet                German Feed-in-Tariff (FiT) Evolution for Installed Capacity of                   ...
2.4 The German PV “Fest” is Over    FiT for electricity fed into the grid from PV plants with an installed capacity    <=3...
2.5 Strategic options post-nuclear era for European utilitiesand shift in investment focus  Change in nuclear policy   New...
2.6 Difficulties in obtaining leveraged finance in certain markets:            Alternative Financing                   Opt...
3.1 Opportunities in Off-grid PV Generation                           • Advances offer new viable solutions     Technology...
3.2 Delivering Strategic Partnerships     Project Developers     • Identify suitable projects     • Liaison to local autho...
3.3 Strategic partnerships - Morocco                                                   2020                               ...
3.3 Strategic partnerships - Morocco                                    Kingdom of              ONE           25%      Mor...
3.3 Strategic partnerships - Morocco MASEN invited interested parties to competitive tender process for the Design,Constr...
3.3 Strategic partnerships - Morocco 1st PPA for MASEN  • Current PPAs in Morocco drafted by ONE  • Hope that MASEN PPA wi...
3.3 Strategic partnerships - Morocco       Financial Requirements - Bidder must demonstrate:      • invested in 2 infrastr...
3.4 Strategic partnerships - IndiaJawaharlal Nehru National Solar Mission – part of Climate Change effortsCountry endowe...
3.4 Strategic partnerships - India      Central Electricity Regulatory Commission (Terms and      Conditions for Tariff de...
3.4 Strategic partnerships - India2nd auction: state-owned power trading company (NTPC Vidyut Vyapar Nigam) set price of s...
3.4 Strategic partnerships - India      Dec. 2010: India‟s PV capacity 17.8 MW     • 2011 PV capacity x 20 => 356 MW (targ...
3.5 Strategic partnerships - South Africa                   • IPP PP targets: 2016=3,725 MW, 2030=17,800 MW   Renewable   ...
3.5 Strategic partnerships - South Africa              • Evaluated based on: price & economic development.              • ...
3.5 Strategic partnerships - South Africa                                                    Biomass         Biogas       ...
3.5 Strategic partnerships - South Africa                                                              Dec. 7, 2011      2...
3.5 Strategic partnerships - South AfricaFirst BidFirst Bid Submission Date                                               ...
3.5 Strategic partnerships - South Africa Third Bid Submission Notification by the Department of the Third Bid Submission ...
3.5 Strategic partnerships - South Africa Fourth Bid Submission Notification by the Department of the Fourth Bid Submissio...
3.6 Strategic partnerships - Malaysia               • Dec. 2011 Malaysian government passes law installing PV tariff      ...
3.6 Strategic partnerships - Malaysia  Description of Qualifying Renewable Energy            2012     2013     2014  Insta...
3.6 Strategic partnerships - Malaysia Description of Qualifying Renewable Energy             2012      2013          2014 ...
3.6 Strategic partnerships - Malaysia                                   • Ensures fair competition & transparency in      ...
Copyright © Sojitz Corporation 2004   54
Thank youMr. Masayoshi Hirose            Deputy General Manager, Assistant to Division General            Manager Machiner...
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Challenges and Opportunities in the Photovoltaic (PV)

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Sojitz Presentation &quot;Challenges and Opportunities in the Photovoltaic (PV)
Markets&quot; prepared for &quot;Strategic M&amp;A and Portfolio
Management for the Energy Industry&quot;, organized in Amsterdam, the Netherlands, Jan. 23-24, 2012 by Marcus Evans.

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Challenges and Opportunities in the Photovoltaic (PV)

  1. 1. Challenges and Opportunities in the Photovoltaic (PV) Markets Martin SupancicExternal Financial Advisor, Machinery Division of Europe, Russia & NIS Strategic M&A and Portfolio Management for the Energy Industry Amsterdam, the Netherlands 23rd – 25th January, 2012 Sojitz Europe plc Düsseldorf Branch Copyright © Sojitz Corporation 2004 1
  2. 2. Presentation Overview About Sojitz1. Global & European REN/PV Growth2. Focus on German PV3. Current Market Situation: Europe, USA, Asia4. Shift in value chain towards local suppliers5. Price history of PV modules and outlook6. Strategic options post-nuclear era for European utilities and shift in investment focus7. Difficulties in obtaining leveraged finance in certain markets8. Geographic and strategic opportunities: 1. Off-grid PV generation 2. Strategic partnerships (Morocco, South Africa, India, Malaysia) Copyright © Sojitz Corporation 2004 2
  3. 3. The History of Sojitz Group Nissho Company Iwai Sangyo Company Nichimen Corporation 1892 Japan Cotton Trading Co., Ltd. 1902 Suzuki & Co., Ltd. established 1896 Iwai & Co., Ltd. established established Nissho Iwai Corporation 1982 Company name changed to 1968 Nissho Company and Iwai Nichimen Corporation Sangyo Company merged2003 Nissho Iwai-Nichimen Holdings Corporation established through the transfer of shares by Nichimen Corporation and Nissho Iwai Corporation, which become its subsidiaries 2004 Subsidiaries Nichimen Corporation and Nissho Iwai Corporation merged to form Sojitz Corporation Name of holding company changed to Sojitz Holdings Corporation 2005 Sojitz Holdings Corporation merged with subsidiary Sojitz Corporation and company name changed to Sojitz Corporation 2006 New Stage 2008 medium-term management plan announced 2009 Shine 2011 medium-term management plan announced 33 Copyright © Sojitz Corporation 2004
  4. 4. Corporate DataCompany Name Sojitz CorporationEstablished April 1, 2003Capitalization 160,339 million yenPresident & CEO Yutaka Kase 1-20, Akasaka 6-chome, Minato-ku,Head Office Tokyo 107-8655, JapanTEL +81-3-5520-5000FAX +81-3-5520-2390URL http://www.sojitz.com/enCorporate Board of Corporate Auditors Governance ModelStock Exchange Listings Tokyo, Osaka (As of July 1, 2011) 44 Copyright © Sojitz Corporation 2004
  5. 5. Financial Information Consolidated Financial Highlights(Year ended March 31, 2011) (As of March 31, 2011) Total assets 2,117.0 billionNet sales 4,014.6 billion Net assets 355.5 billionOrdinary income 45.3 billion Equity ratio 15.6% Net interest-bearing debt 700.6 billion Net income 16.0 billion Net DER 2.1 times 55 Copyright © Sojitz Corporation 2004
  6. 6. Sojitz Groups Global Network The Sojitz Group is a general trading company with a worldwidenetwork comprising over 500 group companies and operations in some 50 countries. Number of Branches & Offices Domestic: 7 Overseas: 91 Number of Subsidiaries & Affiliates Domestic: 143 Overseas: 358 Number of Employees Non-consolidated: 2,313 Consolidated: 16,270 (As of June 30, 2011) 66 Copyright © Sojitz Corporation 2004
  7. 7. Sojitz Group Snapshot Japan China Asia & Oceania The Americas Europe, Russia & NIS Middle East & Africa Machinery Division  Smart city development  Export of automobiles  Smart city development  Transportation infrastructure  Industrial machinery  Water business  Solar power  Automobile distribution  Smart city development  Commercial aircraft sales  Transportation infrastructure  Automobile assembly, sales  Industrial machinery  Solar power representative  Water business  Automobile assembly, sales, and distribution; automobile  Plants  Water business  Sales and brokerage of  Automobile dealerships dealerships and distribution  Newbuilding orders, ship  Automobile dealerships ships, ship chartering, sale  Industrial machinery  Industrial machinery  Industrial machinery chartering  Plants and IPP of ship equipment  Plants  IT infrastructure and service  Plants and IPP  Solar power  Sales of IT and related  Business jets  IPP equipment; solutions and service; data centers  Sales of various types of Energy & Metal energy (LNG, petroleum  Coal mines and coal trading  Oil and gas, including products, coal, etc.)  Sales of coal  LNG unconventional oil and gas  Service station and tank Division  Trading of petroleum  Production of bioethanol;  Oil and gas  Oil and gas storage operation  Sales of industrial minerals products biopower generation  Nuclear fuel enrichment  LNG  Sales of steel-making  Sales of various rare metals  Rare metals (nickel, cobalt)  Nonferrous metals (copper)  Sales of biofuel  Rare metals (vanadium, materials (iron ore, coal,  Sales of iron ore etc.)  Nonferrous metals (alumina)  Rare metals (molybdenum,  Rare metals (tungsten) ferrochrome)  Development of iron mines niobium)  Sales of various rare metals and industrial minerals and iron ore trading  Iron ore trading  Steel productsMaterials Division  Sales and import of rare  Manufacture and sales of Chemicals & earths, lithium compounds methanol  Manufacture and sales of Functional and industrial salt  Rare earth mines dicyclopentadiene  Manufacture and sale of  Sales of solvents and  Procurement of rare earths  Manufacture and sales of  Manufacture and sales of packaging materials thinners  Sales of organic chemicals marine chemicals (potash, Metton® resins  Sales of solvents  Plastic resins  Sale of resin compounds industrial salt)  Sales of butadiene  Sales of industrial films  Sales of electronic materials  Sales of flat-panel display  Manufacture and sales of  Sales of plastic resins  Sales of cellulose materials packaging materials  Sales of cosmetics  Sales of plastic resins  Sales of various foodstuffs Consumer Lifestyle Business Division and food materials  Chemical fertilizers  Sales of grain and feed  Agriculture  Wholesaling of foodstuffs  Sales of processed seafood  Meat processing and  Flour mills, port silos  Fish farming  Foodstuff logistics packing  Feed  Tobacco  Manufacture and sales of  Fish farming  Shoe purchasing  Import of brand sundries Grain Woodchips apparel  Woodchips and afforestation  Production of ingredients for  Airport retail  Sales of lumber  Industrial park development bread  OEM textiles  Sales of grain  Consolidation and sales of  Apparel brands  Bread production  Condominium development specialized grain  Rice bran oil  Import and sale in Japan of timber, plywood, etc. 77 Copyright © Sojitz Corporation 2004
  8. 8. Sojitz Corporation IPP Experiences (Conventional) China Egypt Tiansi (Coal/50MW) Gas Fired Power Sojitz 12% (1500-2250MW) Japan Shajao C (Coal/1,980MW) Sawada (Diesel/14MW) Sojitz 3% Sojitz 99% Mexico Trinidad Tobago Merida 3 (Gas/484MW) Trinity (Gas/225MW) Sojitz 25% Sojitz18% Vietnam * AES Saudi Arabia Phu My 3 (Gas/740MW)Riyadh PP11(Gas/1730MW) Rosalito 3(Gas/541MW) Sojitz 6.7% Sojitz 15% Sojitz 50% •BP, SembCorp, Kyushu * GDF Suez Monterrey 2(Gas/484MW) Sojitz 50% Vietnam Oman •Gas Fired Power Barka 3 (Gas/750MW) (2,000MW ) Sohar 2(Gas/ 750MW) Sojitz 11% * GDF Suez / Yonden Vietnam Nghi Son 2 (Coal/1200MW) Sri Lanka Sojitz 16% Asia Power(Diesel/51MW) * IP, Kyushu, Kansai Sojitz 48.5% In Operation Indonesia Coal Fired Power Awarded/ Under Development (200MW) Under Bid Preparation * Main Partner/s Copyright © Sojitz Corporation 2004 8
  9. 9. Sojitz Corporation IPP Experiences (Renewable) Mixdorf Ground-mounted 24MW (100%)Betzweiler Solar 3MW (100%) Hirokawa Wind 16MW (49%) On Wind Energy 4.2MW (50%) Eco Energy Japan 1.25MW (75.5%) East Winds 4.2MW (50%) Hayama Wind 20MW (51%) ETH Bioenergia 600MW+Steam (25%) Namibia – Luderitz 44MW - under development Wind Power Waste-to-Energy Solar Power Biomass Copyright © Sojitz Corporation 2004 9
  10. 10. SOJITZ CREDENTIALS ~ Oil and Gas Client Client Client Client Petrobras Petrobras Petrobras Petrobras Petróleo Brasileiro SA Petróleo Brasileiro SA Petróleo Brasileiro SA Petróleo Brasileiro SADescription Description Description DescriptionUltra Deep Ocean Exploration Ultra Deep Ocean Exploration Albacora Oil Field Development Frade Oil Field DevelopmentPlatforms P-18/25/26 FPSO P-31/37 Sojitz Function Sojitz FunctionSojitz Function Sojitz Function U$170MM Equity Investment + Investment through FJPL,Lease Financier Lease Financier ECA Finance Arrangement 18.26% stake holder(total U$650MMl) (total U$450MM) Year of Award Year of AwardYear of Award Year of Award 2000 20011991~1994 1995~1997 Country CountryCountry Country Brazil BrazilBrazil Brazil Client Client Client Client Mobil Producing Nigeria Tangghu LNG Project Rasgas company ltd. Petrobras Petróleo Brasileiro SADescription Description DescriptionNGL recovering LNG production LNG production Description REFAP HDT/RFCC/Coker/UtilitySojitz Function Sojitz Function Sojitz Function E&P Contract Amount U$311MMU$200MM Investor, EPC funding InvestorProject funding arrangement Sojitz Function Year of Award ECA Finance ArrangementYear of Award Year of Award 19981995 2001 Year of Award Country 2001Country Country QatarNigeria Indonesia Country Brazil Strictly Confidential Copyright © Sojitz Corporation 2004 10
  11. 11. SOJITZ CREDENTIALS ~ POWER Client Client Client Client CFE CFE CFE Comisión Federal de Electricidad EVN Comisión Federal de Electricidad Comisión Federal de Electricidad Electricity of VietNamDescription Description Description Rosarito-III 541MW Combined DescriptionMerida-III 484MW Combined Monterrey-II 484MW Combined Phu My 3 717MW CombinedCycle Power Plant BOO Project Cycle Power Plant BLT Project Cycle Power Plant BLT Project Cycle Power Plant BOO Project Sojitz Function Sojitz FunctionSojitz Function Equity Investment (50%), Project Sojitz FunctionEquity Investment (25%) & Equity Investment (50%), Project Equity Investment (1/3 under Development & Development &ECA Finance Arrangement Sponsor Loan consortium with Japanese Utility) & Sponsor Loan ECA Finance ArrangementYear of Award Year of Award1998 Year of Award Year of Award 1998 1999 2001Country CountryMexico Country Country Mexico Mexico Vietnam Client Client SCECO-SAUIDI ELECTRICITY Client Client CEB PowerGrid ALBA Ceylon Electricity Board COMPANY- Western Region Aluminium Bahrain B.S.CDescription Description DescriptionAsia Power (Private) Ltd. Shoaiba 1 & 2 380kV Substation 400kV Oil Filled Cable Description51MW Diesel Generating Power EPC Contract Underground Transmission Line Pot Line No.5 Rectifier TransformerPlant BOO Project Project & Substation EPC Contract Sojitz FunctionSojitz Function EPC Coordination & Sojitz Function Sojitz FunctionEquity Investment (38.4%), Contract Management EPC Coordination & EPC Coordination &Finance Guarantee & Contract Management Contract ManagementLubrication Oil Supply Agent Year of Award 1999 & 2004 Year of Award Year of AwardYear of Award 1999 & 2001 20041997 & 2006 Country Saudi Arabia Country CountryCountry Singapore BahrainSri Lanka Strictly Confidential Copyright © Sojitz Corporation 2004 11
  12. 12. Place Sunshine Hours/Year Sunshine Hours/DayYuma, Arizona, USA 4015 11Phoenix, USA 3872 10.6Asswan, Egypt 3863 10.6Las Vegas, USA 3825 10.5Dongola, Sudan 3814 10.4Tucson, USA 3806 10.4Faya-Largeau, Chad 3792 10.4Kharga, Egypt 3791 10.4Abu Hamed, Sudan 3763 10.3El Paso, USA 3763 10.3 Source: CurrentResults.com Copyright © Sojitz Corporation 2004 12
  13. 13. Yuma, Arizona, USA Source: THE GEORGIA MINERAL SOCIETY, INC. Source: Rah Tours Copyright © Sojitz Corporation 2004 13
  14. 14. Phoenix, USASource: blog.flickr.net/en/2011/07/08/phoenix-haboob/ Copyright © Sojitz Corporation 2004 14
  15. 15. Source: CENTER FOR GLOBAL DEVELOPMENT Copyright © Sojitz Corporation 2004 15
  16. 16. 1.1 Global PV Capacity Annual Newly Installed Global PV Capacity (MWp) 100% 90% 80% 70% 3,238 60% 1,923 5,396 13,108 1,402 50% 40% 30% 20% 2,930 10% 590 1,861 3,521 179 0% 2006 2007 2008 2009 2010 Large-scale PV power plants (>500 kWp) Small scale PV power plants (<500 kWp) Source: Renewables Insight – Energy Industry Guides, Denis Lenardic, pvresources.com/EPIA Copyright © Sojitz Corporation 2004 16
  17. 17. 1.2 Comparative Growth Rates of REN in EuropeAnnual average growth rates in renewable energy consumption (%), EU-27 Data source: Eurostat. Energy statistics: Supply, transformation, consumption • all products - annual data. • renewables and wastes (total, solar heat, biomass, geothermal, wastes) - annual data. • renewables (hydro, wind, photovoltaic) - annual data. Copyright © Sojitz Corporation 2004 17
  18. 18. 1.3 REN Contribution to Energy Consumption in EuropeContribution of renewable energy sources to primary energy consumption inthe EU-27 Note: The contribution of renewable energy sources to gross energy inland consumption (GEIC) increased in the EU-27 from 4.4 % in 1990 to 8.4 % in 2008. For the EU-15, the share of renewables in total gross inland consumption accounted for 8.6%, in 2008, falling substantially short of the indicative target set in the White Paper on renewable energy (COM(97) 599 final) of 12 % by 2010 Data source: Eurostat 2010. Energy statistics: Supply, transformation, consumption, annual data: • All products • Renewables and wastes (total, solar heat, biomass, geothermal, wastes) • Rrenewables (hydro, wind, photovoltaic) • Renewables (hydro, wind, photovoltaic) Copyright © Sojitz Corporation 2004 18
  19. 19. 1.4 Germany’s PV Market Remains Buoyant German Solar Market 2010 vs. 2011 40% 2011 3,000 7,500 Year 2010 7,400 0 2000 4000 6000 8000 New Installed Capacity (MW) Source: Bundesnetzagentur für Elektrizität, Gas, Telekommunikation, Post und Eisenbahnen Copyright © Sojitz Corporation 2004 19
  20. 20. 1.5 Analyzing the German PV “Juggernaut” • Registered added capacity used to determine FiT applicable 1.7.2012 Oct‟11- April „12 • Oct-Dec ‟11: 4,150 MW capacity added • Current results (details available @March ‟12) => degression of -12% as of 1.7.2012 Q4 2011 • PV installation costs dropping more rapidly vs. FiTs • Added capacity >= 225 MW => -15% FiT Jan- • If current growth maintained, 2022 target reached end of April‟12 2015 cap on newly installed German PV parks German Economy Minister Philipp Roesler Copyright © Sojitz Corporation 2004 20
  21. 21. 1.2 Current Market Situation - Europe Copyright © Sojitz Corporation 2004 21
  22. 22. 1.6 Current Market Situation - Europe European FiT markets cutbacks reaching maturity 2012? Reduction Political Reverse in EPC pressures bidding costs Grid parity Fierce price Legal competition Insecurity Credit (e.g. (retroactivity) crunch / Chinese) Higher Lending Costs Copyright © Sojitz Corporation 2004 22
  23. 23. 1.7 Current Market Situation - USA Budgetary cutbacks Fierce price Situation competition varies from (e.g. Chinese) State to State Import duties? 2012? Political Election Year pressures Copyright © Sojitz Corporation 2004 23
  24. 24. 1.2 Current Market Situation - Europe Copyright © Sojitz Corporation 2004 24
  25. 25. 1.8 Current Market Situation - Asia Off-grid 2012? Copyright © Sojitz Corporation 2004 25
  26. 26. 2.1 Shift in value chain towards local suppliers EPC Price Germany - BSW-Solar Rooftop PV Price Index 6,000 5,000 4,000 (€/kWp) 3,000 2,000 1,000 - Average Residential Customer Price for completely installed Source: BSW-Solar 8/2011 rooftop PV modules up to 100 kWp (excl. VAT) Copyright © Sojitz Corporation 2004 26
  27. 27. 2.2 Price Performance of PV Modules and Outlook Pricing of Different PV module types, according to Origin 3 2.5 2 € / Wp 1.5 1 0.5 0 Mar-11 Jul-09 Jul-10 Sep-11 Nov-11 Jul-12 Jan-10 Jan-12 Mar-10 Mar-12 Sep-09 Nov-09 Sep-10 Nov-10 Jan-11 Jul-11 May-09 May-10 May-12 May-11 Crystalline Germany (up to Jan. 11 Europe) Crystalline China Crystalline Japan Explanatory notes: 1) Only prices for PV modules are published. 2) No prices for Thin film CdS/CdTe endcrystalline modules must average turnkey solar PV 1.5 - 1.9, the price for thin for customers listed. For an be multiplied by approx. power system, the price Thin film a-Si film PV modules by 1.8 – 2.5. 3) The listed prices represent the average Thin film a-Si/µ-Si quotations in the international PV spot market.Source: www.solarserver.com, www.pvXchange.com Copyright © Sojitz Corporation 2004 27
  28. 28. 2.3 German FiT on a Diet German Feed-in-Tariff (FiT) Evolution for Installed Capacity of >100kW € 0.5000 € 0.4500 € 0.4000 € 0.3500 FiT € 0.3000 € 0.2500 € 0.2000 € 0.1500 Ground-Mounted Conversion & Sealed Sites All other Ground-mounted SitesSource: German Renewable Energy Law (“EEG”) Copyright © Sojitz Corporation 2004 28
  29. 29. 2.4 The German PV “Fest” is Over FiT for electricity fed into the grid from PV plants with an installed capacity <=30kW as a function of operation start-up year Cents / kWh Reduction of FiT through successive REN Law Amendments Source: Abendblatt Copyright © Sojitz Corporation 2004 29
  30. 30. 2.5 Strategic options post-nuclear era for European utilitiesand shift in investment focus Change in nuclear policy New Generating Capacity Challenges faced • Plant Shut-Downs • Flexible operation & rapid • Electricity transmission: • New energy sources start-up (e.g. pumped- wind energy (north) to required storage hydro, coal, gas…) consumption (south) • Renewables • Construction Time • Price mismatch: gas • Delays in coal and lignite purchase (oil-price-indexed plant construction (T24 procurement) & sales steel alloy =>cracks in boiler contracts (declining spot casings) prices) • Growing intermittent generation Pan-European Energy Strategy Required – Germany Spearheading Copyright © Sojitz Corporation 2004 30
  31. 31. 2.6 Difficulties in obtaining leveraged finance in certain markets: Alternative Financing Options State-sponsored Entities Multilateral Lending (e.g. ECAs, Overseas Entities Private Investment Corporation (OPIC), (e.g. European Pension funds Netherlands Investment Bank, Asian Sovereign funds Development Bank, Development Finance (e.g. European, (e.g. oil exporting Company (FMO), IFC,Inter-American North American…) nations, BRIC, Asian) Institution Financière Development Bank, de Développement African Development (PROPARCO), KfW Bank, regional Entwicklungsbank, renewable energy Japan Bank for funds…) International Cooperation (JBIC)…) Copyright © Sojitz Corporation 2004 31
  32. 32. 3.1 Opportunities in Off-grid PV Generation • Advances offer new viable solutions Technology • "Plug-N-Play“- solar modules & storage solutions • No need for state-sponsored FiTs Legal Framework • PPA (Diesel Parity of PV energy) • Good fit between electricity generation & peak consumption (e.g. air conditioning, water heating…) Applications • Electricity fed into grid or consumed directly by client • Financing in emerging markets • Local regulation Challenges • Lack of experience with PV (need for special LT PPAs: 20-25 years): need technology/EPC partners • Environment (e.g. temperatures, salt, seawater…) • Ideally close to the equator (LatAm, SE Asia…) • Maldives: PV project slashed electricity price from Projects US$ 0.35 – 0.77/kWh (diesel generators with far greater capacity than necessary=> costly!) to US$0.25/kWh. Amortization: 5-6 years Copyright © Sojitz Corporation 2004 32
  33. 33. 3.2 Delivering Strategic Partnerships Project Developers • Identify suitable projects • Liaison to local authorities (accelerate licensing/permitting process) EPC Contractors • Much experience in mature markets • How to hedge risks in new geographies (e.g. local subsidiary, domestic contractors…) Financial Entities • Commercial banks, multilateral lending entities, state-owned banks (e.g. German KfW, Japanese JBIC), ECAs (e.g. Japanese NEXI, Hermes…), Governments • Electricity boards/commissions • State-owned utilities, grid operators, e.g. Masdar, Morocco’s MASEN Sovereign Funds • “Door openers” to their home markets, promote government policies, co-invest outside domestic market Co-Investors • Banks, pension funds, insurance companies, family offices, trading companies, high net-worth individuals, strategic partners (utility companies), renewable energy funds, trading companies Technology Suppliers • Ready supply, favorable procurement conditions, access to newest technology Copyright © Sojitz Corporation 2004 33
  34. 34. 3.3 Strategic partnerships - Morocco 2020 2,000 MW 2,000 MW 42% 2,000 58% MW Renewable Energy Kingdom of Morocco’s Solar Program introduced Nov. 2009 - Moroccan Conventional Energy Agency for Solar ENergy (MASEN) Copyright © Sojitz Corporation 2004 34
  35. 35. 3.3 Strategic partnerships - Morocco Kingdom of ONE 25% Morocco Moroccan R&D Law 57/09 PPA 1 MASEN Training Interconnection PPA 2* agreement SPV PPA 2* = PPA 1 – SPV tariff Local Industry Copyright © Sojitz Corporation 2004 35
  36. 36. 3.3 Strategic partnerships - Morocco MASEN invited interested parties to competitive tender process for the Design,Construction, Operation, Maintenance and Financing Any solar technology is acceptable Target COD: March 2015 500 MW Copyright © Sojitz Corporation 2004 36
  37. 37. 3.3 Strategic partnerships - Morocco 1st PPA for MASEN • Current PPAs in Morocco drafted by ONE • Hope that MASEN PPA will be similar to ONE PPA (bankable) ONE PPA Snapshot • Bidder is responsible on long-run basis for design, financing, construction, O&M • Financial closing risk assumed by bidder. In case of failing to close by X date, loss of development security & PPA termination, perhaps also compensation payments to ONE. • Retroactive changes risk in PPA model assumed by offtaker • PPA termination provisions in case of SPV default: if ONE exercises right to terminate PPA following SPV default (after construction completion) => termination payment obligation. Will MASEN maintain policy? • Project commercial operation date: ownership of plant will transfer from SPV => ONE => grants SPV “right of quiet enjoyment” on plant => SPV operates asset. Lenders do not enjoy physical asset security, although accepted by market on other Moroccan power projects. • MASEN has already “secured” the site. • SPV normally owned by successful bidders, however ONE reserves right to participate in equity. “Instructions for Pre-Qualification” state MASEN‟s right “to participate in the financing” of SPVs (whether debt or equity is unclear). If equity, perhaps requirement to shareholder agreement in RFP. Copyright © Sojitz Corporation 2004 37
  38. 38. 3.3 Strategic partnerships - Morocco Financial Requirements - Bidder must demonstrate: • invested in 2 infrastructure projects in <= 10 years + total amount of equity & debt >= US$800m • a net worth >= $200m. • Consortium bid: the lead member must satisfy criteria. Technical Requirements - Bidder must: • demonstrated development of thermal power plants Σ accumulated capacity >= 500MW <= 10 years, minimum 1 thermal power plant (>= 100 MW, <=7 years) • operated & managed thermal power plants Σ accumulated capacity >= 500MW, minimum 1 thermal power plant (>= 100 MW, 1 plant operating >= 3 years) • Consortium bid: the lead member must satisfy criteria. Copyright © Sojitz Corporation 2004 38
  39. 39. 3.4 Strategic partnerships - IndiaJawaharlal Nehru National Solar Mission – part of Climate Change effortsCountry endowed with 4-7 kWh/m2/dayProposed RoadmapApplication segment Target for Target for Target for Phase I (2010- Phase 2 Phase 3 13) (2013-17) (2017-22)Solar collectors 7 million m2 15 million m2 20 million m2Off grid solar 200 MW 1000 MW 2000 MWapplicationsUtility grid power, 1,000-2000 4000-10,000 20,000 MWincluding roof top MW MWSource: Central Electricity Regulatory Commission Copyright © Sojitz Corporation 2004 39
  40. 40. 3.4 Strategic partnerships - India Central Electricity Regulatory Commission (Terms and Conditions for Tariff determination from Renewable Energy Sources) Regulations, 2012 • Effective as of 1.4.2012 & remain in force for 5 years commencement date • PV / Solar thermal Tariff Period = 25 years. Single part tariff comprising following fixed cost components: • (a) Return on equity; (20% p.a. first 10 yrs, 24% p.a. 11th year onwards) • (b) Interest on loan capital; (loan tenure 12 yrs, 70% Debt/30% Equity) • (c) Depreciation; • (d) Interest on working capital; • (e) Operation and maintenance expenses; • Normative capital cost of PV projects: ` 1000Lakh/MW for FY 2012-13; Commission has right to deviate from norm => project specific tariff determination Capacity utilization factor PV project => 19% O&M Expenses:` 11 Lakhs/MW for 1st operating year, escalated at the rateSource: Central Electricity Regulatory Commission of 5.72% p.a. Copyright © Sojitz Corporation 2004 40
  41. 41. 3.4 Strategic partnerships - India2nd auction: state-owned power trading company (NTPC Vidyut Vyapar Nigam) set price of solar-generated electricity for national grid • Average winning bid = 8.77 rupees (US$0.165/kWh) => ≈ 2x price of coal-generated power, ≈ - 27% compared to winning bids at 1st action (1 year ago) • Germany pays ≈ € 0.1794 (≈ US$ 0.23/kWh)Gujarat – India’s Largest Solar Program (so far 186 MW of 933 MW PV plants by 1/28/12 built) • Electricity regulator pledges to pay 15 rupees (US$ 0.28/kWh for 12 yrs), ≈ 3 x wholesale electricity market rate, PV plants meeting deadline. • Promotes solar parks promising supply of: sites, distribution infrastructure, quick approval to projects built in designated areas. • Developers of projects under construction in India’s largest solar program granted extension until Jan. 28, 2012 to complete plants without losing their premium rates (completion failure = loss of FiT). • Deposit of 5 mill. rupees (€ 75k)/MW of awarded capacity, forfeited if investors failed to build plants on time. • Investors asked for extension due to delays land acquisition, heavy rains blocking access to sites. One company’s PV park location was changed three times by authorities, delaying shipment of components due to lack of LoC (required secured land) • GMR Energy Ltd. announced commissioning of first 25-MW solar power plant Gujarat’s Patan district. • Following 28/1/12 deadline: Gujarat plans rate ≈ - 30%, based on draft proposal Copyright © Sojitz Corporation 2004 41
  42. 42. 3.4 Strategic partnerships - India Dec. 2010: India‟s PV capacity 17.8 MW • 2011 PV capacity x 20 => 356 MW (target @1,233) due to transmission infrastructure problems, rains, and delays in financial closure PV energy in India: generating employment opportunities, preventing more rapid urbanization • 60% of rural households in India do not have access to electricity Rajasthan awarded 873 MW of PV under National Solar Mission phase: Jodhpur, Jaisalmer, Bikaner, Barmer • Rajasthan‟s advnatages: abundant land availability, solar radiation of 6-7 kWh/m2, raw material availability (e.g. zinc, molten salt, solar glass) Copyright © Sojitz Corporation 2004 42
  43. 43. 3.5 Strategic partnerships - South Africa • IPP PP targets: 2016=3,725 MW, 2030=17,800 MW Renewable • Socio-economic & environmentally sustainable growth, Energy • Kick-start & stimulate the renewable industry in South Africa. generation in • Eligible technologies: onshore wind, concentrated solar thermal, IRP 2010-2030 solar PV, biomass solid, biogas, landfill gas, small hydro • Department of Energy, Republic of South Africa • Bid on tariff (bid > price cap = disqualified) + identified socio- economic development objectives of Energy Department • Tariff payable by Buyer pursuant to PPA between Buyer & Project Company of a Preferred Bidder. • Generation capacity allocated to each Technology Characteristics • Max tariff that Bidders may bid based on IPP Procurement Programme (IPP PP)=>RFP. • Facility procured required to achieve commercial operation by dates set out in RFP. • Intention to introduce separate ‘Small Projects IPP PP’ for electricity generation projects <5MW • Pay non-refundable fee R15 000 / Bidder, complete the RFP Access registration form. Copyright © Sojitz Corporation 2004 43
  44. 44. 3.5 Strategic partnerships - South Africa • Evaluated based on: price & economic development. • Price => formula to calculate “equivalent annual tariff” for submitted MWh Accepted price => Points awarded based on 2nd formula Bids • Economic development: bidders must state their commitment to economic development requirements • Job creation, local content (special focus on local manufacturing), rural community development, skills development and education, business development, socio-economic development, inclusion of historically marginalized Evaluation • Price / Economic Development point allocation: 70 / 30 Criteria • Preferred Bidders = ranked highest, best placed bidders to satisfy maximum allocation MW/technology. • Selected Preferred Bidder: regularly reporting required on compliance “price/economic development”, as stated in their bid, during project life • Non-compliance: could result in eventual cancellation of PPA. • Draft PPA, Implementation Agreement, Direct Agreement & Connection Agreements = non-negotiableAgreements • DoE reserves right=> revise draft agreements during IPP PP • Bids must be accompanied by bid guarantee (R100,000/MW submitted in bid) issued by 1st class South African bank Copyright © Sojitz Corporation 2004 44
  45. 45. 3.5 Strategic partnerships - South Africa Biomass Biogas 12.5 MW 12.5 MW PV Landfill Gas PC: 1,070 PC: 800 1450 MW 25 MW PC: 2,850 PC: 600 Concentrated Small Hydro Solar Thermal 75 MW 200 MW PC: 1,030 PC: 2,850 3,725 MW Small Onshore IPP Projects 1850 MW Procurement Programme 100 MW PC: 1,150 Eskom Holdings SOC Ltd. supplies ≈95% Price cap (PC) in R/MWh S.A.’s electricity. Owns total capacity 41,200 Source: Department of Energy, Republic of South Africa MW ≈ 85% coal-fired power stations. Copyright © Sojitz Corporation 2004 45
  46. 46. 3.5 Strategic partnerships - South Africa Dec. 7, 2011 28 bidders renewable energy tender Diversify away from coal Σ 1,416 MW submitted by preferred bidders Close financing: June ‘12 Construction Start: June ‘12 Pending Allocation in Remaining Phases: 2,209MW 4 Phases Pending 1st Phase Allocation ≈ 632 MW 150 MW 634 MW (818 MW pending) (50 MW pending) ((1216 MW pending) Source: Department of Energy, Republic of South Africa Copyright © Sojitz Corporation 2004 46
  47. 47. 3.5 Strategic partnerships - South AfricaFirst BidFirst Bid Submission Date 4-Nov-11Selection of Preferred Bidders in respect of First Bid Submission Date 25-Nov-11Signing and effective date of PPAs, Direct Agreements, Implementation 19-Jun-12Agreements, and Connection Agreements and Financial CloseSecond BidNotification by the Department of Second Bid Submission Date in 25-Nov-12accordance with clause 9.5 of Part A of the RFPSecond Bid Submission Date 5-Mar-12Signing and effective date of PPAs, Direct Agreements, Implementation 13-Dec-12Agreements and Connection Agreements and Financial Close Source: Department of Energy, Republic of South Africa Copyright © Sojitz Corporation 2004 47
  48. 48. 3.5 Strategic partnerships - South Africa Third Bid Submission Notification by the Department of the Third Bid Submission Date in 14-May-12 accordance with clause 9.5 of Part A of the RFP Bidders to notify the Department of the information required pursuant to 14-Jun-12 clause 9.7 of Part A of the RFP if submitting a Bid Response in respect of Third, Fourth or Fifth Bid Submission Dates Third Bid Submission Date 20-Aug-12 Signing and effective date of PPAs, Direct Agreements, Implementation 31-May-13 Agreements and Connection Agreements and Financial Close Source: Department of Energy, Republic of South Africa Copyright © Sojitz Corporation 2004 48
  49. 49. 3.5 Strategic partnerships - South Africa Fourth Bid Submission Notification by the Department of the Fourth Bid Submission Date in 29-Oct-12 accordance with clause 9.5 of Part A of the RFP Second Bidders Conference 3-Dec-12 Fourth Bid Submission Date 4-Mar-13 Signing and effective date of PPAs, Direct Agreements, Implementation 13-Dec-13 Agreements and Connection Agreements and Financial Close Fifth Bid Submission Notification by the Department of the Fifth Bid Submission Date in 13-May-13 accordance with clause 9.5 of Part A of the RFP Fifth Bid Submission Date 13-Aug-13 Signing and effective date of PPAs, Direct Agreements, 26-May-14 Implementation Agreements and Connection Agreements and Financial Close Source: Department of Energy, Republic of South Africa Copyright © Sojitz Corporation 2004 49
  50. 50. 3.6 Strategic partnerships - Malaysia • Dec. 2011 Malaysian government passes law installing PV tariff system • PV FiTs (in EUR/kWh): 0.1807 (large PV) to 0.30895 (small PV) • Duration: 21 years from Commencement Date • Commencement Date: date installation is completed, grid Legal connected & ready to produce energy for commercial sale Framework • Max Size: 30 MW (Ministerial exceptions) • Additional Bonus FiT => Criteria! • Future FiT rates will subject to annual degression rates (similar to Germany), applicable only to new installations as of 2013+. FiT will not be reduced retroactively, but are valid over 21-years. • Degression rate: costs expected to drop as technologies advance. Regulatory • Sustainable Energy Development Authority Malaysia (SEDA) Authority • Evaluates projects & assigns FiT Average • 1400 - 1900 kWh/m² p.a. Global Irradiation • Germany: 1000 kWh/m², Spain: 1800 - 2300 kWh/m² Copyright © Sojitz Corporation 2004 50
  51. 51. 3.6 Strategic partnerships - Malaysia Description of Qualifying Renewable Energy 2012 2013 2014 Installation FiT Rates (RM per kWh) (a) Basic FiT rates having installed capacity of : (i) <= 4kW 1.2300 1.1316 1.0411 (ii) >4kW <= 24kW 1.2000 1.1040 1.0157 (iii) >24kW <= 72kW 1.1800 1.0856 0.9988 (iv) >72kW <= 1MW 1.1400 1.0488 0.9649 (v) >1MW <= 10MW 0.9500 0.8740 0.8041 (vi) >10MW <= 30MW 0.8500 0.7820 0.7194 Copyright © Sojitz Corporation 2004 51
  52. 52. 3.6 Strategic partnerships - Malaysia Description of Qualifying Renewable Energy 2012 2013 2014 Installation FiT Rates (RM / kWh) (b) Bonus FiT rates having the following criteria (one or more): (i) use as installation in buildings or building +0.2600 +0.2392 +0.2201 structures (ii) use as building materials +0.2500 +0.2300 +0.2116 (iii) use of locally manufactured or assembled solar +0.0300 +0.0276 +0.0254 PV modules (iv) use of locally manufactured or assembled solar +0.0100 +0.0092 +0.0085 inverters Copyright © Sojitz Corporation 2004 52
  53. 53. 3.6 Strategic partnerships - Malaysia • Ensures fair competition & transparency in implementation of FiT system as stipulated under Section 3 of Renewable Energy Act 2011 • Provide opportunity for many players to secure share of limited PV energy quota Category Rules for Solar PV (FiA) application Category 1 : Individual (≤ 12 kW) maximum 12 kW per application; normally for residential / households (rooftop). Multiple FiA applications on same installed site prohibited. Category 2 : Non-individual (≤ 500 kW) maximum 500 kW per application Category 3 : Non-individual (> 1 MW ≤ 5 MW) maximum 5 MW per application Professional Investors – 2 Rules: 1) Applicants may apply for max. 500 kW/application for small PV system, or 2) Max. 5 MW for larger PV systems. Copyright © Sojitz Corporation 2004 53
  54. 54. Copyright © Sojitz Corporation 2004 54
  55. 55. Thank youMr. Masayoshi Hirose Deputy General Manager, Assistant to Division General Manager Machinery Division of Europe, Russia & NIS hirose.masayoshi@sky.sojitz.com +49 (0) 211 3551 ext. 131Mr. Thomas Riess Sales Manager riess.thomas@sky.sojitz.com Environment & Infrastructure Dept. +49 (0) 211 3551 ext. 128 Machinery Division of Europe, Russia & NISMr. Martin Supancic Sojitz Europe plc, Düsseldorf Branch External Financial Advisor Am Wehrhahn 33, 40211 Düsseldorf supancic.martin@sky.sojitz.com Germany +49 (0) 211 3551 ext. 190, Mobile: +49 (0) 173 671 8698 +49-(0) 211-3551-0 Copyright © Sojitz Corporation 2010 55

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