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DONG Energy – from coal and oil to competitive offshore wind -the story of a global leader's transformation

April, 2017Benj Sykes, Vice President, Head Asset Management & UK Country Manager DONG Energy Wind Power

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Headquarters in Denmark

6,200 employees

Revenue in 2016 ~ £7bnEBITDA in 2016 ~£2.2bn

80%*

Wind Power

1

4%* Bioenergy & Thermal Power

4%* Oil & Gas(discontinued operations)

12%* Distribution & Customer Solutions

DONG Energy at a glance

* Share of the Group’s capital employed

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224

462

2006 2016

2

Significant transformation of DONG Energy over the past decade

Business transformedShare of capital employed1

%

Operating profit tripledDKK Bn

International expansionShare of operating profit (EBITDA)%

19.1

5.3

20162006 20162006

16%

60%

24%

2006 2016

0%16%

84%

1. Excluding unallocated capital employed on DONG Energy group level

-50% 3x >5x

CO2 emissions halvedg/kWh

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Leading the charge to decarbonisation

*We ensure this by having our suppliers of wood pellets and wood chips document their compliance with our sustainability requirements. **This is the most ambitious target among our European peers.

1,000th

turbine installed

Our innovation is not limited to offshore wind power

REnescience Norwich

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Our innovation is not limited to offshore wind power

When I heard about Site Optimisation at

a seminar, it was a real ‘light bulb’

moment. It’s unique – I’d never come

across anything like it before, but it was

the perfect fit for our needs.

David Jeans, Energy Manager, Kodak Alaris

“Site Optimisation” is helping our power customers to cut costs

Kodak Alaris has achieved 11% savings on annual energy costs at it’s UK manufacturing site.

1. INPUT: MARKET & PLANT DATA

3. OUTPUT: OPTIMISED RUN SCHEDULES

2. ANALYSIS

We have developed a new product to assist our power customers with flexibility

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Unparalleled experience and track recordDONG Energy Wind Power geographical footprint

6

21 offshore wind farms in operation

7 offshore wind farms under construction

14 Partnerships

25+ years of experience and track record in the offshore wind sector1991 2017

3.8 GWunder

construction

2,000 Dedicated employees

3.6 GW Constructed

capacity

7.5 million Europeans with clean electricity

3.3 GWWorld's leading operator

Taipei office

DONG Energy Wind Power overview

Under construction

In operation

Under development

Decommissioned after 25 years

Asia Pacific

Boston office

USA Europe

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DONG Energy pioneered the offshore wind industry and is today the global leader

3,591

1,285 1,225 1,273

270 336 294 288 158

3,840

849 785 668

588 497 370600 311 111 121

7,431

2,134 2,010 1,941

1,064858 833 664 600 472 399 279

We’re the largest global offshore wind playerGlobal offshore wind capacityMW

Our scale enables cluster synergies

7

29% 10% 10% 10% 2% 1% 2%

Source: Bloomberg New Energy Finance, March 2017, DONG Energy analysis

0%

% share of global installed capacityInstalled2 Under construction

3% 2% 0%

Operational offshore wind farmsOffshore wind farms under construction

Cluster

Synergies Lower logistics costs Fewer technician hours Fewer facilities needed Lower inventory levels

E.ON

InnogyVattenfall

Iberdrola EnBW

Van Oord

Northland Power

Statoil

WPD

SSE

1. Statkraft has decided to scale down their activities in offshore wind. Current assets will be built and development projects will be brought forward to allow divestment before FID2. If a project is executed on behalf of a lead developer managing the construction, then 100% of capacity is allocated to the lead developer. If construction is executed by an integrated joint

venture, capacity is allocated in proportion to the JV share

Statkraft 1

1%

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1991

World’s first offshore wind farm

Vindeby, Denmark. 5MW

DONG Energy is building on 25 years of offshore wind experience

2002

World’s first largescale offshore wind farm

Horns Rev1, Denmark. 160MW

20162012 2013 20152014

2,143 MW

1,416 MW

2000 20051995 2010

1,049 MW

476 MW

1990

50 MW5 MW

2015

First commercial use of 6MW turbines

Westermost Rough, 210MW

2013

World’s largest offshore wind farm

London Array, 630MW

Total constructed capacity by DONG Energy, (MW)

2016

Hornsea FID

Borkum RiffgrundFID

First commercial 8MW turbines installed at Burbo Bank Extension.

2,478 MW

3009 MW

3600 MW

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How have we financed the green transition? Proven track record in developing long-term partnerships

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Major institutional investors are partners in DONG Energy's offshore wind projects

Walney I & II (50.1%) 367 MW (2009 / 2010)

(KIRKBI)

West of Duddon Sands (50%) 389 MW (2010)

Burbo Bank Extension (50%) 258 MW (2016)

Lincs (25%) 270 MW (2017)

Gunfleet Sands (50.1%)173 MW (2011)

Anholt (50%) 400 MW (2011)

Horns Rev 1 (40%) 160 MW (2006)

Nysted (42.7%) 166 MW (2010)

Gode Wind 2 (50%) 252 MW (2014)

Gode Wind 1 (50%)330 MW (2015)

Westermost Rough (50%)210 MW (2014)

London Array (25%)630 MW (2009 / 2014)

Borkum Riffgrund 1 (50%)312 MW (2012)

(KIRKBI)

( ) represents DONG Energy ownership interest

Race Bank (50%)573 MW (2016)

Drawing of Siemens facility in Hull

MHI Vestas facility at Isle of Wight

Offshore Structures Britain facility near Middlesbrough

DONG Energy’s long-term frameworks with developers have helped supply chain companies to invest

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Levelised revenue of electricity, incl. transmission costs£/MWh1, 2016-prices

In 2012, DONG Energy set an ambitious target for cost reduction for 2020 and industry is well ahead of plan

11

606069

90

108110

128138

Walney ExtensionUK

2014

Borssele I & IINL

2016

Borkum Riffgrund II

DE2015

Horns Rev IIIDK

2015

Kriegers FlakDK

2016

East AngliaUK

2015

Race BankUK

2015

Borssele III & IVNL

2016

Different national scope leads to differences in the cost of electricity from offshore wind

138

60

Borssele III & IVNL

2016

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A turbine a day has contributed to current cost developments

12

0

100

200

300

400

500

600

700

800

2,500

3,000

3,500

0

2,000

500

1,000

1,500

20112010 20162009 2013

365 turbines/year

2012 20152014

Number of new installed turbinesNew installed capacity MW

MW Number of turbines

SOURCE: WINDEUROPE

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Scale is key

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1 /day creates the scale that will unlock further cost reductions in European market.

• Repay the investments in the next turbine platform

• Scale in production

• Scale in installation

• Scale in operation and maintenance

• Investments (and innovation) throughout the supply chain5 wind farms

of 300 MW5 wind farmsof 600 MW

5 wind farmsof 800-1.200 MW

~1.5 GW/yr ~3 GW/yr

European market

~4 – 6 GW/yr-2014FID year 2014 - ~2019 ~2019 - 2030

3-4 MW 7-8 MW 10 – 15+ MW

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Support free offshore wind is within reach in the coming decade

14

46

2030Projected LROE

Offshore wind energy

43 - 51

2030Electricity price

GermanyBNEF, 2017 Q1

Policy risks

Commercially viable

investments are within reach,

however a hedge through a

CFD may remain necessary to

lower the cost of capital

SOURCE: LEVELISED REVENUE OF ELECTRICITY APPROACH BASED ON AUCTION RESULTS AND PUBLIC AVAILABLE PRICE PROJECTIONS. ELECTRICITY PRICES: BNEF FOR 2030

Average price, excl. downlift for wind

£/MWh, 2016-prices*

* Converted at a 1.17 GBP/EUR exchange rate

Cost competitive within a decade

Source: Offshore wind, delivering more for less (BVG associates for Statkraft, 2015)

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Rapid technological developmentWind turbine rotor diameter, year of commissioning

Multiple levers to drive down cost in offshore wind

2002 2005 2007 2011 2014 2016 2020 1

80m90m

107m120m

154m164m

180m

Boeing 747, 76m

Scale1

Innovation2

Industrialisation3

At the forefront of making the industry cost competitive

1. Currently there are no turbines available on the market with a rotor diameter of 180m, however Adwen has announced that they expect to bring such a turbine to market in 2020.

The world needs power

52%

2020 20301990 2000 2010

59%

21%

EU

ChinaChinaUS

MToE, 2015

The UK needs offshore wind

The 2050 carbon challenge Committee on Climate Change, Fifth Carbon Budget

The 2030 capacity challenge Committee on Climate Change, Power Sector Scenarios for the Fifth Carbon Budget

To meet it’s carbon budget To fill the capacity gap

Source: CCC (October, 2015), DECC 2015, Final UK Greenhouse gas emission national statistics 1990-2013.

DECC (2015) Energy Trends; DECC (2015) Digest of UK Energy Statistics; DECC (2014) Updated Energy Projections; CCC calculations.

167

568

2013 2050

-71%MtCO2e

80% vs 1990

308273

379

2030202520202014

+11%341

+11%

Generation Gap

TWh

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GW addition/year

Strong growth in established and new offshore wind marketsInstalled Capacity, GW

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By 2025 offshore wind power will be truly global…

11.0

27.2

45.5

12.5

33.4

2005 2015

11.90.9

2020

+1 GW

78.9

2025

+6 GW

+8 GW

39.7

0.7

%#New marketsEurope

CAGR

33%

27%

14%

Source: Bloomberg New Energy Finance (BNEF), H2 2016 offshore wind market outlook

What have we learnt as a company?

Risk

International

Innovation

Efficiency

Safety

Ambition