Understanding the global picture for renewables and opportunities for mine partnerships

Transcription

1 Understanding the global picture for renewables and opportunities for mine partnerships June 29-30, 2017 Pan Pacific, Perth Javier Vaquerizo Head of Commercial Office, Business Development

2 let us introduce Enel Green Power to you 2

3 Enel Group today 40 bn Regulated Asset Base 62 mn distribution end users #1 in Italy, Spain, Chile, Peru #2 in Argentina, Colombia 36 GW renewable capacity Global leadership in renewables 17.5 mn free retail customers #1 in Italy and Spain 48 GW thermal capacity Highly flexible and efficient generation fleet Global and diversified operator

4 Enel Group today countries of presence Global and diversified operator

5 Enel Green Power Positioning and key figures operating capacity capacity under execution/construction Expanding and consolidating our footprint

6 Enel Green Power Positioning and key figures Capacity Production Consolidated Capacity Additions ,5GW 36 GW 86 TWh 6,6 GW WIND 1,2 GW SOLAR 0,8 GW GEO 0,02 GW BIOMASS 27,4 GW HYDRO Wind 57% Solar 35% Hydro 6% Geo 2% Latam 48% Africa/Asia 23% America 15% Iberia 6% Italy 5% Europe 3% Leadership position supported by very strong track record

7 Global transition to renewables

8 Expected trends in Energy and Renewables Growth Global power demand grows by 58% between now and 2040 Game changers 2040* Investment Market Prices Batteries $10.2 trillion to be invested in new power generation and 72% goes to renewables Wind and solar account for 48% of installed capacity and 34% of electricity generation The levelized cost of new electricity from solar PV drops by 66% Batteries for energy storage to become a $20 billion per year market Australia Australia s electricity system becomes one of the most decentralized in the world Renewables will be getting more competitive *Source: BNEF New Energy Out 2017

9 Australia Power Sector Trends* Cumulative Installed Capacity LCOE projections Challenges 65% Renewables in the matrix with PV at 72GW and wind at 15GW 16GW expected of Storage Coal will reach 9GW and gas 10GW On-shore Wind costs will fall 42% and 63% Solar PV 45% of total power capacity is located behind-the-meter in 2040 Most diverse matrix in the world by 2040 *Source: BNEF New Energy Out 2017

10 How Enel Green Power can meet your needs

11 How we view renewable supply partnerships Local Contexts Regulation Power and energy markets Local resources Commodities Interests & needs Increase RES capacity Secure future revenues Geographical and technological diversification Promote and develop new innovative solutions Creating shared values (CSV) Client interests & needs Predictable energy pricing Cost savings Carbon footprint reduction Secured supply Limited or no upfront capital No operating risks Corporate image improvement Designing together tailor-made solutions according to respective interests

12 How we view renewable supply partnerships Short term solutions Medium & Long term solutions Existing Portfolio Conventional supply and/or Existing renewable Certificates (RECS, GoO, ) Mature RES technologies No upfront capital Off site plant financial or physical PPA Innovative value solutions Equity Partnerships On site plant - physical PPA Designing together tailor-made solutions according to respective interests

13 ENEL main competitive advantages multiple solutions from a single provider Enel Green Power is a reliable and credible partner 13

14 Enel Green Power Business Model Innovating for value in Mature Technologies 1. Energy sources mix 100% renewable energy sources Five energy production technologies across the world to design the best energy solution that fits corporate needs 2. Financing Competitive cost of financing Hedging and risk control strategy 3. Development Strategic partnerships Flexible co-development agreements High quality pipeline of projects 4. Engineering & Construction Economies of scale, global procurement Design-to-value to increase reliability production and minimize costs 5. O&M Economies of scale Big data and predictive maintenance Performance excellence at lower costs 6. Energy management Integrated management of generation portfolio with retail operations Commercial synergies at Group level Our 6 key levers to value the chain optimization

15 Structuring and pricing Solutions for Mines 15

16 Mining + Renewables Bilateral challenges to consider Mining Partner Obstacles and needs Electricity and fuel prices, Gensets Emission reduction Lifetime and load profile of the mine Country risk and interest rates Transportation costs and logistics Stakeholders. Internal governance Accounting treatment Grid Connection and stability External Factors Market matching Regulatory framework Available Projects/Products Market Price evolution Market Rules. Grid Code Available Primary resource Solution Proposal Financial Structures. Stakeholders. Ownership Risks identification and assessment Sustainability. Certificates PPA (Physical, Sleeved, Virtual Financial) Role of energy retailer On-site/off-site. On-grid/Off-grid Technology. Hybrid. BESS Contract specifics Agreement term Counterparty Risk Credit Support Operation Products. Volume. Price Allocation if risks. Flexibilities Breaches and remedies Change in Law/Tax DEAL

17 Structuring and pricing renewables for mines Off-Grid Mine On-Grid Mine On-Site--Off-Grid RE plant On-Site--Off-Grid RE plant Off-Site--On-Grid RE plant Deal Drivers Savings: avoided Diesel, carbon tax Other Benefits: CSV, sustainability targets Risk management: reliable supply, hedge vs fuel volatility Savings: vs regulated tariff/market price, carbon tax, network tolls Other Benefits: CSV, sustainability targets, Risk Management: reliable supply, hedge vs tariff/market price volatility Structuring Challenges Bankability: country risk, volatility of incomes, curtailments, take or pay, termination, credit support PPA structure: volume, fix vs variable price, price indexation, currency, green certs, accounting treatment Risk allocation: Construction, operative, credit & counterparty, FX volume&price, out of the money PPA vs stranded asset protection, Operative: O&M and dispatching rules, intermittency management, integration w/ existing Gensets Equity partnerships? Bankable minimum term? Storage? Optimal size/tech? Deployable-portable plant approach? Storage? Optimal size/tech? Net metering? Behind the meter? Wheeling rules in place? Land lease term vs PPA term? Cost of Off-Grid -> On Grid? Physical or Financial PPA? Fix or variable price? Indexation to commodity/spot/tariff? FX hedge? Volume tracking account? take into account both parties risk aversion through proper risk allocation always assuring project bankability 17

18 Focus on the Off-taker s incentive to buy Understanding value-risk trade off high Project incentive to sell zone high Project must fit the Offtaker s price driver: - More options, solar, wind, geographically diverse, several partners - Most competitive one in terms of performance and capex - Feasibility study. Design to cost Risk Project is willing to take Agreement zone Mine incentive to buy zone Risk Mine is willing to take - Economies of scale benefits (Procurement, E&C, O&M value chain) And always try to match our respective risk aversion levels - Rappel price installments through PPA term - Tailor made indexations (metals, diesel, FX, CPI, combination) low low PRICE high low - Collar structures (price flexibility between a floor&cap levels) - Tracking account sharing downsides or upsides at the end of the term - Basis risk on project side or risk premium sharing - Flexibilities to meet accounting requirements Working together on best PPA price risk sharing structure definition

19 Focus on the Off-taker s incentive to buy Understanding value-risk trade off high Risk Project is willing to take Project incentive to sell zone Agreement zone Mine incentive to buy zone high Risk Mine is willing to take Off-taker targets - Additionality Additionality Low price -Positive Low price Net Present Value Simplified contracts -Flexible Simplified terms contracts Reliable output - Positive Net Present Value - Flexible terms Off-taker concerns Project targets Secure long term revenue Lower Merchant exposure Reasonable asset profitability Create shared value Project concerns low low PRICE high low Off-taker demand not enough to find a competitive project for a standalone PPA Contract out of the money during term: Better future alternatives Market evolving better than PPA price Stuck in a long term agreement Project performance Project owner default and credit support Project bankability: Volume take or pay and term Remaining merchant exposure Easy termination by the Off-taker Buyer default and credit support Force Majeure Change in law Development and construction risks Unexpected future costs It is key to understand interlinkages between commercial terms, price and financing cost

20 Some practical ideas Bankability, term and price-risk trade off Duration Credit Support Termination PPA Price Project Bankability Project Development PPA Commercial Terms Credit Support and Termination amounts Fear of Long Term Agreements Potential synergies with tailor made indexations Trialogue interaction IPP-Lenders-Mine: Higher guarantees and termination amounts lead to lower required returns for the equity partners and lower financing cost from the lenders The price reduction due to better financings could compensate (by far) the higher guarantee financial cost for the mine Squeezing every last drop out of flexibility Any of these flexible pricing help the mine to embrace longer PPA terms?: Rappel price installments through PPA term Collar structures (price flexibility between a floor&cap levels) Tracking account sharing downsides or upsides at the end of the term Exploring potential savings in Mine s hedging strategy Does make sense a partial PPA price indexation to metals or diesel price?: Potential synergies with existing mine s commodity hedging strategy Could steady the percentage impact of energy cost on net results Could be a good proxy for FX hedging and improve project finance It is worth exploring together in an iterative manner whether different PPA structures could improve deal feasibility

21 Enel Green Power microgrids initiatives

22 Innovation meets sustainability Microgrid, Storage and Hybrid Pilot projects Alignment with Enel Commitment to UN global goals for Sustainable Development Testing Technology for future commercial deployments FORMULA E microgrid 55 plug and play smart meters, storage capacity of of 12kWh, a 5kWp photovoltaic plant and four rapid charging stations Ollagüe Chile 200kW PV, 30kW Wind, Diesel 250kW/752kWh (Fiamm) Re-deployable PV plant proyect (implementation end 2017) Energy management optimization software (BESS+Diesel backup+res) Smart metering and mobile biling (Smartphone prepayment) Cerro Pabellon construction camp Plug and Play micro-grid powered by solar pv and hydrogen-based storage in Chile Energy management optimization software (BESS+Diesel backup+res) Alternative Storage hydrogen power to power system (H2ESS) Enel Green Power is getting the experience to deploy onsite solutions for Mines

23 Innovation meets sustainability Cerro Pabellon Microgrid (partnership with EPS) Cerro Pabellon CAMP : Offices and accommodation for manpower in charge of Geo Plant construction In operation (Off-grid) until 2018 Altitude: m.a.s.l. Minimum Ambient temperature: -28 C Energy supply by Diesel generators: 2x550 KVA and 2x660 KVA Waste-water purification plant (TAS Plant) was disconnected from main supply and feeds 24-7 by Hybrid EPS plant. TAS Plant Daily LOAD Profile Waste-water purification plant (TAS) 09/06/

24 Innovation meets sustainability Cerro Pabellon Microgrid (partnership with EPS)

25 Innovation meets sustainability Ollague Microgrid (partnership with Freeport Mining) Case Study: Ollagüe UN Goal: N.7 Access to electricity Plant: Hybrid Technologies: 30 kw WIND TURBINE 200 kw SOLAR PV 200 kw STORAGE 250 kw DIESEL (Back Up) Energy management system: Advanced weather forecast and nowcast technologies Real time monitoring of the loads (for Load forecast) Modeling improvements of the genset management strategy Rightsizing equipment modular additions according to demand increase Integrate meters and provide innovative billing system Isolated town in the border of Bolivia in Chile that now has 24h Electricity and was a Hybrid pilot project for Enel Green Power

26 Thank you Javier Vaquerizo Head of Commercial Office, Business Development Enel Green Power Please contact me for any further inquiries 26