Onshore wind financing landscape in France and Germany

12 November 2019

OFATE – DFBEW

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An unparalleled track record in successfully closing deals for our clients

Active in 46 countries, including 18 in Europe

Involved in over 150 renewable energy transactions or projects with a total capacity of circa 35 GW

Close to EUR 25 billion funding raised for renewable energy projects in 9 years

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• Strong and stable macroeconomic fundamentals, supportive political dynamics for renewable energy

• Three onshore wind regimes providing production diversity

• The recently enacted PPE aims at doubling the share of renewables in electricity generation to reach 40% by 2030

French onshore wind market

4 CONFIDENTIAL

Positive momentum for the French onshore wind sector

Ambitious political agenda for renewable energy

25.5 25.7 26.4 26.7

15.1 24.6 34.1 35.68.5

20.6

35.644.5

2.4

4.75.2

1.1

1.1

1.21.2

0

20

40

60

80

100

120

2018 2023e 2028e (low) 2028e (high)

Hydro Onshore wind Solar PV Offshore wind Other

Source: 2019-2028 Programmation Pluriannuelle de l’Energie (PPE) Source: CRE, Bundesnetzagentur

Strong market fundamentals for onshore wind

Planned renewables installed capacity increase (PPE)

65.4 66.9 63.0 66.5

0.00

20.00

40.00

60.00

-

200

400

600

800

1,000

Q1 2018 Q3 2018 Q2 2019 Q3 2019

French onshore wind tender results

MW bid MW awarded Average tariff (FR)

MWEUR/MWh

0

5

10

-

1

2

Q2 2

019

Q3 2

019

Q4 2

019

Q1 2

020

Q2 2

020

Q3 2

020

Q4 2

020

Q1 2

021

Q2 2

021

Q3 2

021

Q4 2

021

Q1 2

022

Q2 2

022

Q3 2

022

Q4 2

022

Q1 2

023

Q2 2

023

Q3 2

023

Q4 2

023

Q1 2

024

Q2 2

024

Q3 2

024

Q4 2

024

PPE onshore wind tendered capacity (GW)

Cumulative tendered capacity Tendered capacity

GW

Market premium

The operator receives a feed-in premium from EDF OA, calculated ex-post, topping-up the sale of electricity on the wholesalemarket or to an aggregator

French onshore wind market

5 CONFIDENTIAL

Since 2016, the contract for difference has replaced the feed-in-tariff support mechanism

The feed-in premium is calculated as

The sum of

• Market premium, difference

between the strike price and the

M0 (the monthly average of

market prices in the sector)

• Management premium,

compensation for the costs of

direct marketing

Less

• Capacity revenues (except for

projects under a tender CfD)

received separately to remunerate

the ability to generate electricity

during peak-demand periods

Capacity revenues

Management premium

Revenues

Strike price

Feed-in premium

Capacity revenues

Project revenues Feed-in premium calculation

+

-

Sources: Official decrees

M0Market revenues

0 50 100 150 200 250

TTR

Nordex

Boralex

Total Quadran

Volkswind

An avel braz

Valeco EnBW

WPD

H2AIR

RES

Valorem

Eurowatt

Vents du Nord

Nethys

JPEE

Escofi

Enertrag

Voltalia

EDPR

Neoen

David Energies

Akuo

WEB Energies

Epuron

VSB Energies Nouvelles

SE Haute-Vienne

Engie

Baywa r.e

ABO Wind

ENO Energy

EDF EN

French onshore wind tenders (MW)

#1 Q12018 #2 Q3 2018 #3 Q2 2019 #4 Q3 2019

French onshore wind market

6 CONFIDENTIAL

11.5 GW pipeline to fall out of 2016 CfD Developers/IPPs still dominate tenders

A total of 13.0 GW of onshore wind projects had applied fora 2016 CfD with signing pending (at mechanical completion)

DGEC confirmed early October that only the first 1.5 GW ofprojects will be able to sign their 2016 CfD (EC notification)

• ca. 1.0 GW of projects already signed their 2016 CfD,

leaving room for only the first next 500 MW of projects

• Amongst the 11.5 GW that will fall outside the 2016 CfD

scheme, some will look for 2017 CfD and not all others

are expected to bid into the upcoming tenders as some

permitting/procurement work is still needed

Source: Green Giraffe

13.0 11.5

1.5 1.0 0.52016 CfDvolume

Fruitless volume Cap for 2016CfD

Signed 2016CfD

2016 CfDvolume open

2016 CfD capacity breakdown (GW)

2017 CfD

CfD tender

0.0

4.0

8.0

12.0

16.0

0.0

0.5

1.0

1.5

2.0

Q219

Q319

Q419

Q120

Q220

Q320

Q420

Q121

Q221

Q321

Q421

Q122

Q222

Q322

Q422

Cumulative tendered capacity Tendered capacity

Local and small developers have been the most active in thepast decade and shaped the German onshore wind market

• Many projects were developed by local communities,

farmers and other land owners (“Bürgerwindparks”)

• The sharp decrease of costs combined with the introduction

of auctions in 2017 led to an increased competition

• The decrease of developers’ returns pushed them to look for

new drivers of growth and to develop internationally

German developers are now facing new challenges

• Developing internationally comes at a cost and local lenders

and investors are not always able to fund the projects abroad

• Amidst concerns around land scarcity and increasing

number of appeals against projects, the high new capacity

addition in 2018 and 2019 hide disappointing auctions

• The end of the EGG tariff for the first operating projects and

the pipeline of stranded projects is increasing

German onshore wind market

CONFIDENTIAL

German onshore wind market snapshot

7

Source: Bundesverband WindEnergie

EEG future tender volume from 2019 to 2022 (in GW)

Onshore wind past capacity addition in Germany (in GW)

Source: Bundesverband WindEnergie

0

20

40

60

0.0

2.0

4.0

6.0

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

H1

201

9

Capacity addition Cumulative capacity (right axis)

0

10

20

30

40

50

60

70

-

500

1,000

1,500

2,000

2,500

3,000

May. 17 Aug. 17 Nov. 17 Feb. 18 May. 18 Aug. 18 Oct. 18 Feb. 19 May. 19 Aug. 19 Sep. 19 Oct. 19

German onshore wind tender results

MW put to auction MW submitted MW awarded Average bid (weighted average)

MW EUR/MWh

German onshore wind market

8 CONFIDENTIAL

Success of tenders is at risk since 2019

After promising and heavily oversubscribed auctions in 2017, the pace rapidly decreased to reach a worrying level in 2019

• When 2 GW of projects were bidding in each of the three auctions in 2017, less than 500 MW have bid in the last four auctions

• The absence of competition in 2019 led to bid price stabilizing close to 62 EUR/MWh, i.e. the maximum price allowed

• Germany would have accumulated a backlog of 11 GW of stranded projects according to public sources

• Decision makers are calling for an update of the spatial development plan and unlocking of permitting hurdles

Source: Bundesnetzagentur

Senior debt market trends

9 CONFIDENTIAL

How we see the current debt market for onshore wind assets with CfDs

Germany France

Margin 85–95 bps 105–115 bps

Sizing min. P90 DSCR 1.15x–1.20x 1.15x–1.20x

Max. gearing 90% 90%

Debt tenor CfD + 3 years CfD + 3 years

Non-recourse debt financing in European onshore wind

Source: WindEurope

20

15

20

16

20

17

20

18

20

19

20

20

20

21

20

22

20

23

20

24

20

25

20

26

20

27

20

28

20

29

20

30

20

31

20

32

20

33

20

34

20

35

20

36

20

37

20

38

20

39

20

40

20

41

20

42

Shareholder loan - repayment Shareholder loan - interests paid Dividends paid (after taxes on dividends)

Senior debt - principal repayment Senior debt - interest payment Corporate taxes

Operating costs Operating revenues

End of tariff period

Typical project cashflows for debt financed onshore wind assets with CfDs

Total capital expenditures

Construction

Turbines

Or EPC wrap

Equity and quasi equityFoundations

Electricals

Installation

Insurance

Construction managementSenior debt

Development costs

Finance

MLA and DD costs

Debt fees (arranging & commitment)

Interest during construction

DSRA/DSRF costs

Senior debt market trendsRevenue side constraint – Low/no tariff Capex constraint – Current tariffs

P90 DSCR constraint on fixed-price revenues: 1.15x–1.20x

• No or very limited price risk on revenue side

• Net availability number in the 95-97% range

• Contracted O&M & insurance cost assumptions

Higher DSCR constraint for merchant price revenues

Debt : Equity < 90:10

• No tolerance for junior debt mechanisms

• General preference for equity to be paid upfront

O&M costs

Insurance costs

DSCR/cash available for dividends

Cash used for senior debt service

Buffer

15 years tenor senior

debt

20 years project life

time

Gross revenues

10 CONFIDENTIAL

All-in interest rates have decreased since 2014

• Were relatively stable until 2014, base rate and margins

being compensated by ECB rate

• Have decreased since 2014 to an all-time low today

• Onshore wind risk margin remained around 70 bps

11 CONFIDENTIAL

In Germany, most projects are small projects

-1

0

1

2

3

4

5

6

7

8

9

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

ECB rate Euribor Swap Swap fee Germany with KfW France premium Italy premium

Source: BloombergNEF

Germany France

Small projects< 30 MW

Landesbanks

Sparkassen

KfW funding program

French regional banks• CIC• CEPAC• Natixis Energeco• Crédit Agricole

regional banks• Auxifip• Crédit coopératif

German banks• Saar LB• Nord LB• Hamburg CB

Big projects> 30 MW

Commercial banks• CommerzBank• DekaBank• Unicredit

French banks• Natixis• Société Générale • BNP Paribas• Crédit Agricole

International banks

All-in interest rate is plummeting Active lenders

Onshore wind all-in interest rate

Senior debt market trends

Project M&A market

12

Various investor profiles

CODFC/FIDShovel ready

Equi

ty IR

R

Stage 1:Early & mid development

Stage 2: Late development

Stage 3:Construction

Experienced financial investors

Pure developers

Independent power producers

Turbine contractors

Pension funds

Stage 4:Operation

CONFIDENTIAL

Utilities & oil majors

Infrastructure funds

Asian trading houses

Corporate M&A market trends – France

13 CONFIDENTIAL

Today, utilities are the most active buyers of renewable energy developers

Market consolidation by utilities has sped up since 2017 in France

2005 2006 2007 2008 2011 2012 2014 2015 2017 2018

PHASE 1 PHASE 2 PHASE 3

Saméole

ENGIE

Albioma

Uniper

Perfect Wind

Iberdrola

Uniper

E.ON Energie

Nass & Wind

GdF

Voltalia

Mulliez family

Aerowatt

JMB Energie

Enel

Boralex

SolaireDirect

ENGIE

EREN RE

Total

Langa

ENGIE

InnoVent

AES Corp

Cie du Vent

Electrabel

Enel

Axenne

Target

Buyer

Quadran

Direct Energie

Cie du Vent

ENGIE

Epuron

ERG

Direct Energie

Total

Eneco France

Undisclosed

Maïa Eolis

ENGIE

2019

Valeco

EnBW

Urbasolar

AXPO

Vol-V

CNR

InnoVent

Ongoing

Vent d’oc

Total

Luxel

EDF

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