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Istanbul 20 September 2011 BORUSAN EnBW Enerji Wind Power Turkey - 2011

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Page 1: BORUSAN EnBW Enerji

Istanbul 20 September 2011

BORUSAN EnBW Enerji

Wind Power Turkey - 2011

Page 2: BORUSAN EnBW Enerji

APR 09

Partnership Agreement

JUL 09

Closing

BORUSAN AND ENBW PARTNERSHIP FIRST CONTACT DURING 2008 DAVOS SUMMIT – PARTNERSHIP WAS FOUNDED IN 2009

1

50% 50%

Borusan Holding A.S. EnBW Holding A.S.

Borusan Enerji was established in 2007 as the energy arm of Borusan Holding, one of the leading business conglomerates in Turkey active mainly in steel, logistics distributorship sectors.

EnBW Holding A.S was founded in 2009 in Ankara as a 100% subsidiary of EnBW AG which is the third-largest energy company in Germany active in electricity generation, trading, grid, gas & environmental services.

Page 3: BORUSAN EnBW Enerji

STRATEGIC FOCUS AND TARGETS JV HAS A PREDEFINED TARGET: 2000 MW INSTALLED CAPACITY BY 2020 WITH A RENEWABLE FOCUS

Critical Year to lay the

foundations of the

company

2009 1000 MW licensed projects

2014 1000 MW installed capacity

2016 2000 MW installed capacity

2020

Target activity area includes all energy sources particularly renewable energy

43% 57%

50%

25%

25%

Hydro Wind Others

Current Portfolio (611 MW)

Target Portfolio (2.000 MW)

2

Page 4: BORUSAN EnBW Enerji

GW

TURKEY – WIND INSTALLED CAPACITY CURRENT SITUATION

3

0

10

20

30

40

50

60

2008

41,8

2007

40,8

2006

40,6

2005

38,8

2004

36,8

2003

35,6

2002

31,8

2001

28,3

2000

27,3

2011

51,0

2010

49,9

2009

44,8

Other Thermal

Lignite

Coal

Natural Gas

Hydro

Geothermal

Wind

217

428

537

1919191919

235

0

500

1.000

1.500

2.000

2001 2000 2011

1.564

2010

1.329

2009

792

2008

364

2007

146 87

2006

59 39

2005

20 1

2004 2003 2002

MW

Wind installed capacity has been increasing slowly over the years accounting for 3 % of the total installed capacity by Sept 2011. Yet, with the finalization of tendering process a visible increase is likely to be observed in 3 - 4 years period.

• TEIAS statistics as of September 2011 Multiple fuels (solid & liquid) included in the thermal heading except liquid natural gas which is placed under natural gas heading

36,70%

33,08%

0,18% 3,07%

7,09%

3,91% 15,96%

INSTALLED CAPACITY DEVELOPMENT BY RESOURCES CAPACITY – 2011 (50.985 MW)*

INSTALLED CAPACITY DEVELOPMENT - WIND

Added Wind

Page 5: BORUSAN EnBW Enerji

TURKEY – WIND INSTALLED CAPACITY REACHING THE TARGET OF 20 GW SEEMS AS AN AMBITIOUS OBJECTIVE

Energy Market and Supply Security Document stipulated 2023 targets in the Turkish energy sector including the target of wind installed capacity - 20 GW

2010 - 2011 has been a crucial period for the wind energy investors (adoption of FIT & completion of evaluation of long-awaited 1st of November applications)

4

Installed WEPP Capacity1 1.564 MW

Other Licensed WEPP Capacity ~ 1.700 MW

Single WEPP applications2: ~ 1.500 MW

Multiple WEPP applications3: 5.513 MW

TOTAL ~ 10.000 MW

Still half of the way to go…

1) as of September 2011 2) licensed capacity 3) total capacity to be allocated in 13 packages

Page 6: BORUSAN EnBW Enerji

Source: EWEA Wind in Power 2010 European Statistics

Spain 20.676 Portugal

3.898

France 5.660

UK 5.204

Ireland 1.428

Germany 27.214

Poland 1.107

Norway 441

Sweden 2.163

Finland 197

Russia 9

Ukraine 87

Romania 462

Bulgaria 375

Switzerland 42

Austria 1.011

NL 2.245

Belgium 911

Czech Rep 215 Slovakia

3

Lithuania 154

Latvia 31

Estonia 149

Crotia 89

WIND INSTALLED CAPACITY (MW)

Turkey 1.329

European Union 84.278

Candidate Countries 1.418

Total Europe 86.279

TR 1.329

EUROPE - WIND INSTALLED CAPACITY BY THE END OF 2010

GR 1.208

5

Renewable Energy Directive

EU has target to reach:

a 20% share of energy from renewable sources by 2020

a 10% share of renewable energy specifically in the transport sector

Envisages national support mechanisms:

investment aid,

tax incentives

green certificates

direct price support schemes including feed-in tariffs and premium payments

Page 7: BORUSAN EnBW Enerji

FEED-IN TARIFF FOR WIND ENERGY IN EUROPE - I GERMANY WILL APPLY EEG 2012 AS OF JANUARY 2012

6

GERMANY

Scheme Description

EEG – 2012

FIT – based on specific electricity generation costs -plant operator receives FIT from the grid operator

Bonuses

Low-cost loans

Legal Basis: Renewable Energy Sources Act – EEG (adopted 19.03.2000 – revised on 01.08.2004 & 01.01.2009 – to be revised in 01.01.2012)

Duration: 20 years (15 years for large hydro plants) plus start-up year

Caps: No caps as to the amount generated or installed capacity

On–Shore Scheme:

8,93 € cent/kWh – initial compensation (first 5 years of commissioning)

4,87 € cent/kWh – basic compensation applicable after 5 years

System service bonus (0,48 € cent/kWh)

Off-Shore Scheme:

15.00 € cent/kWh – initial compensation (12 years) prolongation:

0.5 months for each mile > 12 nautical miles

1.7 months for each meter water depth (ground) > 20 meters

19 € cent/kWh – optional shrinking model: Initial FIT increases but for a duration of 8 years

3.50 € cent/kWh – basic compensation > 12years (20 years) Begin of commissioning before January 1st, 2018)

Page 8: BORUSAN EnBW Enerji

FEED-IN TARIFF FOR WIND ENERGY IN EUROPE - II SPAIN OFFERS TWO ALTERNATIVES FOR THE WIND INVESTORS

7

SPAIN

Scheme Description

FIT or

Premium on the Wholesale Market Price floor and ceiling prices

Legal Basis: Royal Decree 667/2007

Duration: Whole project life time

Caps: No caps as to the amount generated

On–Shore Scheme:

≤ 25 years - 7,7471 € cent/kWh OR reference premium floor – 7,5405; ceiling 8,9866 € cent/kWh

> 25 years - 6,4746 € cent/kWh

Off-Shore Scheme:

ONLY Reference premium - 8,918 € cent/kWh ceiling 17,3502 € cent/kWh

Page 9: BORUSAN EnBW Enerji

FEED-IN TARIFF FOR WIND ENERGY IN TURKEY FIT FOR WIND ENERGY INCENTIVE REVITALISED THE SECTOR COUPLED WITH THE DOMESTIC MANUFACTURING ADDITION

8

FIT was introduced in 2005 as a unique tariff btw 5 – 5,5 €cents, applicable for defined renewable energy sources

Implementation Regulation of FIT was not adopted at that time.

New RES Law was adopted in Dec 2010

It proposes below mentioned FIT at differentiated rates (7,3 10,5 – 13,3 $ cents) for different renewable energy sources.

Implementation Reg. is adopted & Domestic Manufacturing incentive introduced.

50

60

70

80

90

100

110

120

Jan Feb March April May June July Aug

$/MWhPrice Development

2011 Day Ahead Price , FIT & 2010 Day Ahead Price

FIT Tariff Price Day Ahead System Price 2011 Day Ahead System Price 2010

Page 10: BORUSAN EnBW Enerji

EVALUATION OF FIT SCHEME IN TURKEY

Currency Difference:

New FIT stipulates incentives over dollar cent

Main turbine manufacturers are European-based companies

Investors are exposed to the euro/dollar parity risks

9

Domestic Manufacture Incentive:

Positive development – additional incentives for 5 years

Tower and blades can be locally manufactured (thus max. 8.7$cent/kWh.

Even if there was an investment for locally produced wind turbines by today, the time frame is too tight for the generation companies to get benefit from domestic production incentive.

Unfair competition for projects and plants already in operation or under construction

Feed-in Tariff:

Euro-incentive converted to dollar-based incentive

Investors’ expectations are closer to European levels (i.e. Greece, Germany, Spain)

Page 11: BORUSAN EnBW Enerji

RECOMMENDATIONS FOR FURTHER INVESTMENTS SEVERAL HINDERANCES EXIST AGAINST WIND ENERGY INVESTORS

Incentive System

FIT still not a real incentive, should be reconsidered in relation to system prices and be above this reference price to be regarded as an “incentive”

Alternatively an incentive scheme should be considered also by defining system prices

Legislative

Indexation of Wind Pennies with inflation by stagnating, even decreasing electricity prices

Tenders held for substations, for which there is no investment budget. Proposal: effective reimbursement mechanism, when the WEPP investors need to build the substation

10

Page 12: BORUSAN EnBW Enerji

RECOMMENDATIONS FOR FURTHER INVESTMENTS SEVERAL HINDERANCES EXIST AGAINST WIND ENERGY INVESTORS

Administrative

Coordination within MENR needed to solve overlapping of mining areas with WEPP’s

Project Financing, Purchasing & Social issues

Project design should be made to facilitate international financing which will be a major issue for the coming years.

Long term purchasing agreements with turbine suppliers is important to assure ROI.

Projects should be developed by taking into account environmental and social impacts

Non-investors

Entrance to the market should be more difficult for non-investors, protecting real investors.

11

Page 13: BORUSAN EnBW Enerji

Thank you…