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Africa Needs Power

Vestas Market Entry Study South East Africa

By Hans R. Vestergaard, Senior Vice President Sales, Vestas Central Europe

Copenhagen, Beyond BRIC Conference -- 8th December 2010

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Topics

o Africa needs power

o Why Africa? Why now?

o Situation in brief

o Potential in Africa

o Emerging markets in Africa

o Regional hub Strategy

o Local commitment

o Partner Network

o Competition

o Wind is…

o Coega Turbine – Port Elizabeth

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“AFRICA NEEDS POWER”…and we are going to bring just that!

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Until recently, the wind market in South-East Africa has been non-existent. This will soon change dramatically, as several governments in the region have publicly announced their renewable energy strategies and wind projects are gradually emerging.

This presentation summarizes the wind energy potential of South-East Africa and the need to support the development of these emerging markets. It has formed part of the decision-making basis for Vestas’ strategy to further develop its market presence in this part of the world.

Ngong Hills Kenya, 5.1 MW, In operation since Aug 2009

Why Africa? Why now?

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Vestas’ experience

Zafarana wind farm, Egypt

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Vestas’ experience

Klipheuwel wind Farm, South Africa

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• Strong economic growth in the region

• Prerequisite for social and economical growth is access to power

• Eyes are on Africa (World Cup 2010, COP 17)

The situation in brief

Huge need for electricity: ≤ 25% of population has daily acces to power

Local Political will to move forward

International financial support is growing

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Wind Resource map

North AfricaWestern SaharaMauritianiaMoroccoAlgeriaTunesiaEgypt Chad

South-East AfricaNamibiaSouth AfricaBotswanaMozambiqueTanzaniaKenyaEthiopia

Africa can – from a wind perspective – be looked at in two regions:

Africa has tremendous untapped wind potential

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Emerging markets in Africa Pink - Vestas Mediterranen Green - Vestas Central Europe:

• South Africa

• Namibia

• Uganda

• Botswana

• Tanzania

• Madagascar

• Zambia

• Kenya

• Rwanda

• Burundi

• Djibouti

• Ethiopia

• Malawi

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Regional Hub Strategy for South East Africa

Benefitting from distinct cultural heritage and ties

Region 1:EthiopiaKenyaTanzaniaUganda

Hub: Nairobi

Region 2:BotswanaZambiaNamibiaMalawiSouth Africa

Hub: Johannesburg

Anglo-Saxon- Jurisdiction- Culture- Economic ties- Gov‘t interest

Dutch-German- Jurisdiction- Culture- Economic ties- Gov‘t interest

Johannesburg

Nairobi

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Markets need time… and local commitment

Screening

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Project Development

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Financial Strategy

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Due Diligence

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Contract Signed

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Availability of:• Wind• Land• Grid

Discussing with:• Private Investors• Development Banks• Commercial Banks• Utilities

Agreeing with the right partners

Political Willingness

Financial Feasibility

Bankability

Communicating with:• Nat. Governments• Reg. Governments• Communities• Other stakeholders

Land Lease Subcontractors

Involving:• Legal advisors• Technical advisors• Financial advisors

Gradually increasing local presence…

BUSINESS SENSE LOCAL SUPPORT LOCAL EXPERTISE LOCAL PROJECT SUPPORT

LOCAL PARTNERS

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Partner network in the region is crucial for success

* politicians, regulators, grid operators and power off takers

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Financial Challenges

- Bankability- Banks are not interested in project upside / dividends

- Banks are focussed on down-side risks (stress tests)

- For debt sizing banks use conservative assumptions; prefer to underestimated income stream and overestimate O&M expenses

- Banks are willing to provide more debt in exchange for more dependable income.

- Availability guarantee and warranties are essential for bankability – backed by financial penalties

What is Business Case Certainty?Predictable costs and revenues over the project life time

Vestas’ approach

be ambitious

focus on key areas

focus on activities close to our core business

We walk the talk

Competition

Other renewable energy sources i.e. hydro, biomass, solar

Other wind turbine manufactures

Conventional Energy sources

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Vestas’ High Five: Wind is…

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Coega turbine had very short lead time

V90 2MW. The biggest turbine in Africa

Installed in Port Elizabeth, South Africa in June 2010

Supply about 2500 South African households with clean energy every year*

*based on average 2005 data (Winkler et al. 2005).

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Thank you for your attention

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