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Renewable Energy Investments from Financial Investor Perspective

- Introduction to Copenhagen Infrastructure Partners

4 October 2019, Presentation to Energy Law Group Event

Content

2

▪ Introduction to CIP and the thinking of a financial investor

▪ Case example – Veja Mate

▪ Development in Offshore Wind – US as an upcoming new market

The history of CIP- Significant growth in a short period of time

4 51 32

1 Including CI Artemis (appendix fund to CI I) 2 Source: Infrastructure Investor, PEI MediaInvestor

2017-2018: CI III (third fund)

▪ Largest renewable energy fund ever raised2

▪ Largest financial investor within offshore wind

▪ Presence in four continents (Europe, North America, Asia, Australia)

▪ Team of 80 people and 4 offices

2012: Establishment of CIP

▪ Invention of new investment product making utility scale energy projects accessible to financial investors

▪ EUR 1.4bn in commitments from the largest labour market pension fund in Denmark

▪ Team of 4 people in Copenhagen

3

2019: CI New Markets Fund (fourth fund)

▪ Fundraising ongoingfollowing First Close inQ2 2019

▪ Focus on renewableenergy investmentsprimarily in Asia and Latin America

▪ Team of 100 people and 6 offices (currently expanding)

6

Timeline of CIP

2007-2012: DONG Energy (now Ørsted)

▪ Instrumental in successful implementation of one of the first energy transitions of a large utility

▪ Pioneering offshore wind, responsible for some of the largest projects in the world

▪ Industrialization of the offshore wind supply chain and inventing new financing models

2012-2014: CI I (first fund)

▪ EUR 1.4bn1 committed in less than two years

▪ Offshore Wind, Onshore Wind, Biomass and Transmission investments in Northwestern Europe

▪ Team of 15 people

2014-2016: CI II (second fund)

▪ Investor base now comprising group of prominent Nordic institutional investors

▪ Strong position established in the US solar and onshore wind market

▪ Team of 30 people

Nykredit Alpha

Current investors in CIP funds

4

CI III investors

CI II investors

CI I and CI Artemis investor

DK

K Alternativ

Infrastruktur I K/S

Zhinfra K/S

(Danish family office)

Total CI III commitment : EUR ~3.5bn.

Swiss Pension Scheme

(name disguised)

(On behalf of a UK pension fund)

Total CI I commitment: EUR ~1.0bn

Total CI A commitment: EUR ~0.4bn

Total CI II commitment: EUR ~2.0bn

(Taiwan Life Insurance Co)

SE

Taiwan Life Insurance

company

(name disguised)

Key ”take aways” regarding CIP’s investment focus

5

• CIP has a team with ~80 people primarily with an energy sector background

• Value creation through optimization of projects rather than “financial engineering”

Industrial value creation approach

• CIP almost entirely invest in greenfield projects, which provides the best opportunity for de-risking the projects and highest value creationGreenfield focus

• The CI Funds are 20 funds with possibility of extending with 5 yearsLong term funds

– 20 years

• The CI Funds will as a starting point build the projects with a view of holding them through the majority of their life time

• No need for a quick exit“Build and hold”

• Often potential for optimizing joint value creation in cooperation between suppliers, developer and sponsor investor.

• We do not do ”tire kicking” – and do not participate in structured sales processes

Focus on joint optimization – no

auctions

• Proven industrial partnership model: cooperation, risk allocation and flexibility

• Network of leading global and local companies

Industrial Partnerships

• Due to investor composition, CIP can take very patient positions – focus on stable return rather than stable yield Very flexible and “patient” capital

Competitive Landscape- CIP is one of the only fund managers investing in greenfield utility scale energy infrastructure projects

6Source: Preqin and CIP analysis

>85% Brownfield

<15% Energy Infrastructure

100% Energyinfrastructure

BlackRock Global Renewable Power Fund II

Global Infrastructure Partners III

Brookfield Infrastructure Fund III

ISQ Global Infrastructure Fund II

Macquarie European Infrastructure Fund 5 (MEIF 5)

Stonepeak Infrastructure Partners III

Energy Capital Partners III

Antin Infrastructure Partners III

EQT Infrastructure III

DIF Infrastructure V

Partners Group Direct Infrastructure 2016

Capital Dynamics Clean Energy and Infrastructure Fund V

Starwood Energy Infrastructure Fund III

InfraRed Infrastructure Fund III

CI III (EUR 3.5bn)

7

CIP: Investments and development projects- Geographical location of CI I, CI Artemis, CI II and CIII projects

Misae

240 MW

US Solar

255 MW

Blue Cloud

150 MW

Mitchell

23 MWac

Kontiki I

250 MW

Bearkat I+II

197 + 162 MW

Fluvanna I+II

155 + 169 MW

Vineyard Wind I

800 MW

Magellan

600 MW

Liberty Wind

Up to 2 GW

Vineyard Wind RoZ

Up to 1.6 GW

Sage I-III

58 MW

Monegros

374 MW

Borea

273 MW

UK WtE

34 MW

Brigg & Snetterton

40 MW

UK WtE

35+20 MW

Brite

42 MW

Lostock

80 MW

German geothermal

4 x ~7 MW

Artemis

Kent

28 MW

Beatrice

588 MW

Veja Mate

402 MW

Star of the South

2,000 MW

Xidao & Changfang

600 MW

Zone 29

300 MW

Offshore wind

100 MW

Onshore windOffshore wind GeothermalSolar Biomass and waste-to-energy Transmission

7

Soo Green

Storage

Gordon Butte

Examples of experience from the largest offshore wind projects in the world- The combined experience from CIP and COP within offshore wind is unparalleled

8Note 1: Very early stage development projects are not included

Source: 4C Offshore

Overview of involvement in construction and operation stage projects1

CIP Project

Past experience, CIP partners and COP

1

2

5

6

7

9

11

12

13

16 15

17

Wind farm CountryCapacity

(MW)Current Status Turbine Supplier

Hornsea Project 1 1,218 Under construction Siemens

East Anglia 1 714 Pre-construction Siemens

Walney Extension 659 Under construction Siemens/Vestas

London Array 630 Fully commissioned Siemens

Kriegers Flak 605 Under construction Siemens

Gemini 600 Fully commissioned Siemens

Beatrice 588 Under construction Siemens

Gode Wind 1 & 2 582 Fully commissioned Siemens

Gwynt y Môr 576 Fully commissioned Siemens

Race Bank 573 Fully commissioned Siemens

Greater Gabbard 504 Fully commissioned Siemens

Hohe See 497 Pre-construction Siemens

Borkum Riffgrund 2 450 Under construction Vestas

Horns Rev 3 407 Under construction Vestas

Veja Mate 402 Fully commissioned Siemens

Dudgeon 402 Fully commissioned Siemens

Rampion 400 Under construction Vestas

Anholt 400 Fully commissioned Siemens

3

4

8

1418

2

1

4

7

8

9

10

11

12

13

15

16

17

18

14

3

5

6

10

CIP is active within offshore wind globally- CIP is looking to leverage offshore wind competences globally, including in Taiwan

9Note 1: CIP at the moment considers it less likely that CI III will move forward with Beothuk following the election of a new government in New Brunswick, and the project is currently on hold

Note 2: Including Vineyard wind (800MW), Rest of Zone (up to ~1.6GW) and a new lease area in MA with a potential capacity up to ~2GW

Taiwan projects

▪ CIP is currently

developing 900MW

offshore wind

projects

▪ The projects have

secured grid

connection and

PPA

Beatrice

▪ CIP has constructed the 588MW

offshore wind project Beatrice, a

partnership with SSE and Red Rock.

Beothuk1

▪ CIP is currently developing the

Beothuk offshore wind projects, with

a total capacity of up to 600MW

Star of the South

▪ CIP is currently developing the Star

of the South offshore wind project in

Victoria with a capacity of ~2GW

▪ Star of the South is a CI-III Devex

Investment

Vineyard Wind + Liberty Wind

▪ CIP is currently involved in the

development of up to 4.4GW2 of

offshore wind and have a PPA for the

800MW Vineyard Wind

Magellan

▪ CIP has partnered up with Magellan

Wind to develop floating offshore

wind projects offshore California

▪ Magellan is a CI-III Devex Investment

World map of current CIP offshore wind activities

Japan projects

▪ A number of

opportunities are being

investigated in Japan

Veja Mate

▪ CIP has constructed the 402MW

offshore wind farm Veja Mate

Other new markets

▪ CIP is currently investigating potential

opportunities in China, India and

Vietnam

South Korea projects

▪ A number of opportunities are

being investigated in South Korea

CIP focuses on creating de-risked and long term stable cash flows - Investment structuring for an energy infrastructure project

10

10-20 years fixed price tariff period

(limited power price exposure)

5-10 years market price period

(power price exposure)

1-3 years

construction

period

FID COD

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 251 2 3

3-8%

8-10%

Majority of IRR realised

in regulated regime

period

Investment is typically

paid back 7-9 years

from FID

Accumulated project cash flow

IRR build up

ILLUSTRATIVE

C

Unlevered project cash flow and IRR profile

11

Significant focus on de-risking projects and investments

Least attractive type of risk from financial investor perspective due to correlation with financial markets

Main mitigants:▪ Focusing primarily on regulated assets▪ Choosing the most attractive

markets/sub-segments▪ PPA-arrangements, etc.▪ Capital structure

Regulatory risks are inherent in regulated energy infrastructure investments

Main mitigants:▪ Choosing stable and attractive

regimes/countries▪ Choosing favourable regulatory sub-

segments▪ Attention to regulatory/political regime

development▪ Contractual protection (off-take

arrangement, capital structure, etc.)

Project specific risks can be diversified and managed by CIP

Main mitigants:▪ Choosing the right projects▪ Working with industrial partners▪ Secure proper planning▪ Contractual protection (EPC, O&M,

capital structure, etc.)

Project

- Main Types of Risks in Energy Infrastructure Projects

Regulatoryrisks

Project specific

risks

Commodity & Volume risks

Content

12

▪ Introduction to CIP and the thinking of a financial investor

▪ Case example – Veja Mate

▪ Development in Offshore Wind – US as an upcoming new market

The asset

▪ Offshore wind located in the German North Sea with capacity of 402 MW, water depths of 40m and a distance of 94 km from shore

▪ 67 state-of-the-art Siemens SWT-6.0-154 turbines and monopile foundations

▪ Mean wind speed of ~9.9 m/s

▪ Total project investment of EUR 1.9bn

Timeline

▪ The project started offshore foundation installation on schedule in April 2016

▪ In accordance with the accelerated program, the project delivered first power in January 2017

▪ Turbine commissioning started in mid-January 2017, with full commissioning completed in August 2017, ~4 months ahead of schedule and below budget

▪ Net pre-commissioned revenues of EUR ~216m

▪ Official COD achieved on 5 February 2018 with a number of commercial upsides implemented

Introduction to Veja Mate- 402 MW offshore wind project in the North Sea

13

Key investment factsProject location

▪One of the largest German offshore wind projects (402 MW)

▪Located in the German North Sea ~95km from shore on ~40m

water depths and ~9.9m/s wind speeds (one of Europe’s best wind

regimes)

▪Stable regulatory environment in Germany for offshore wind,

offering fixed feed-in tariff for +12 years

▪De-risked construction set-up through four EPCI contracts with experienced contractors

▪15-years O&M agreement with Siemens

Overview

Veja Mate

Germany

Netherlands

Denmark

Tariff

▪ 8-years feed-in tariff of 194 EUR/MWh

▪ 4.7 years feed-in tariff of 154 EUR/MWh

▪ Floor price of 39 EUR/MWh after tariff and until year 20 after COD

Regulation▪ Germany has a very stable investment environment for regulated

assets and has a fundamental need for new electricity production capacity

Case example (Veja Mate): Capital structure

Illustrative structure overview

Note 1: Charlestown, Nevis (Federation of Saint Kitts and Nevis)

Note 2: In the event that CI-II has not converted Tranche B into equity at COD + 9 months, CI-II will lose its 1 share in the Project Company

Details on capital structure

Ownership

Debt

Senior

debt

(67%)

Mezzanine loan

(13%)

Common

equity

(20%)

▪ Highland provided EUR 258m common

equity

▪ Siemens (“SFS”) provided EUR 150m

common equity

▪ CI-II provided EUR 250m in mezzanine loan− Tranche A: EUR 150m (non-convertible)

− Tranche B: EUR 100m (convertible)

▪ Senior debt provided by commercial banks

and export credit agencies

EUR

150m

EUR

258m

EUR

150m

EUR

100m

EUR 1,361m

Veja Mate Offshore

Project GmbH

Holds all rights and permits relating

to the Project

Highland Group

Holdings Ltd1

(“Highland”)

100%

Uther Property S.à

r.l.CI-II

Siemens Financial

Services GmbH

(“SFS”)

Senior debt

CI-II

mezzanine

Loan

59.3%

(118,660 shares)

0.0005%(1 share)

40.7%(81,339 shares)

2

14

Video of the Veja Mate case

Construction of the Veja Mate offshore wind farm

15

Content

16

▪ Introduction to CIP and the thinking of a financial investor

▪ Case example – Veja Mate

▪ Development in Offshore Wind – US as an upcoming new market

Significant and fast growth expected within offshore wind- Asia is expected to account for an increasing share of installed offshore wind capacity in the future

Source: “New Energy Outlook 2018”, Bloomberg New Energy Finance

5 7 8 12 13 18 2127

3341

4958

6578

93

112

130

147

167

184

200

214

227

240252

264274

287298

311321

330338 343 346 350

355365 369

0

50

100

150

200

250

300

350

400

2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 2032 2034 2036 2038 2040 2042 2044 2046 2048 2050

10% CAGR2025-2038

Installed

Capacity

(GW)

3% CAGR2038-2050

24% CAGR2012-2025

17

Significant opportunities within offshore wind with +300GW additional capacity expected to be installed by 2050

Expected development in offshore wind capacity towards 2050 (GW)

East Coastal states drive offshore development in the U.S.- Comparison with the Continental North Sea shows clear potential for U.S. offshore wind

Source: Bureau of Ocean Energy Management (BOEM), European Wind Energy Association, UK Department for International Trade18

US Atlantic and North Sea offshore wind facilities

Coastal

population

Coastline

(NM)

Distance from shore

(NM)

Water depth Wind speed # of active

projects

Active

production (MW)

Anticipated

production by

2030 (MW)

U.S. Atlantic 51,607,259 750 Up to 30 miles Up to 60m 9-10 m/s 14 30 9,500

North Sea 83,411,495 1100 More than 60 miles Up to 70m 9-10m/s 62 15,010 67,500

Strong similarities on key geographical parameters but the US is far behind Europe regarding active and anticipated production, and with

current cost levels for offshore wind this is expected to change

BOEM Lease Areas

BOEM Planning Areas

In operation

Planned

U.S. Atlantic North Sea

UK

DE

DK

NL

USA

Source: The New York State Energy Research and Development Authority

Note 1: Brackets indicate investment required assuming a price of 4m USD/MW 19

Overview of wind sites on US East Coast Ongoing and potential solicitations for offshore wind in the USA1

New Jersey

▪ The Governor of NJ has signed in 2018 an executive order directing

the state towards the goal of generating 3.5 GW of offshore wind by

2030

▪ First RFP for offshore energy expected to be issued in 2019

3.5 GW by 2030

(USD 14.0bn)

New York

▪ The State of New York released in early 2018 the New York State

Offshore Wind Master Plan, which will guide the development of

2.4GW of offshore wind by 2030

▪ NY to procure at least 800 MW of offshore wind capacity by 2019 –

RFP expected in Q4 2018 for 800-1200 MW

2.4 GW by 2030

(USD 9.6bn)

Massachusetts

▪ In mid-2016, the Massachusetts State Legislature voted on and

passed an energy bill which includes a requirement that utilities

enter into long-term contract for 1.6 GW of offshore wind power no

later than 30 June 2027

▪ July 2018: An energy bill was passed in both Senate and House to

investigate for another 1.6 GW by 2030. Senate had passed 3.4GW

but House reduced it to 1.6 GW

▪ Vineyard Wind has been awarded 800 MW in the first RFP

1.6 GW by 20273.2 GW by 2030(USD 12.8bn)

Connecticut

▪ The state of Connecticut has procured 200 MW of offshore wind to be

installed by 2025

▪ Given the successful RFPs, it is expected that the state might procure

additional capacity in the next years

▪ 2.3 GW zero carbon procurement ongoing – pivotal is state nuclear

plant (Millstone 40-50 years old) with 1.6 GW size and potential

closure if not extended

No specific targets

Maryland▪ The Maryland Public Service Commission awarded in 2017 368 MW of

offshore wind to two projects

0.4 GW by 2022

(USD 1.6bn)

Other states

▪ Rhode Island has awarded 400 MW of offshore wind in 2018 and it is

expected to procure additional capacity in 2019

▪ West Coast states are also looking at the potential of offshore wind,

but will require floating foundations due to deeper waters

+2 GW(USD +8bn)

Offshore wind in the USA- US East Coast states committed to +9.5 GW of offshore wind by 2030

APPENDIX

20

Development in offshore wind turbine size- Iberdrola’s and CIP combined experience covers almost all of offshore WTG technologies

Vindeby Horns Rev 1 West of Duddon

Wikinger Beatrice / East Anglia 1

Vineyard Wind

1991 2002 2012 2019/202017

450 KW

2.0 MW

3.6 MW

~20x

~4.5x

7.0 MW

2021/22

8.0-10 MW

12+ MW

Future

5.0 MW

30 years of WTG development

Source: Danish Energy Agency (Danish Experiences from Offshore Wind Development)

BonusB35-450

Vestas V80-2.0

SiemensSWT-3.6-120

AdwenAD5-135

SiemensSWT-7.0-154 Siemens / MVOW

Comments

▪ Vindeby was the first offshore

wind farm in the world,

reaching COD in 1991 in

Denmark. The farm used 11

WTGs of 450 kW for a total

nameplate capacity of 4.9 MW

▪ Vindeby was decommissioned

after 25 years of operation for

commercial reasons, not

technical reasons

▪ Since Vindeby, the WTG

technology has developed

significantly with current

turbines having a nameplate

capacity of 8-10 MW and wind

farms of more than 1,000 MW

▪ It has already been announced

that GE will deliver a 12 MW

WTG in 2023 with further

upgrades expected in the

following years – other OEMs

are expected to follow

▪ Vineyard Wind will either

use SWT-8.4-154 or V164-

9.5MW which are both

versions of existing models

with a proven track record

21

Development of projects - Significant difference in size, water depth and distance from shore

Source: U. S. Department of Energy, Fraunhofer IWES

Note 1: The chart includes both projects in the permitting, approved, contracted, under construction and installed stage 22

0

10

20

30

40

50

60

70

80

90

100

110

120

0 4 8 12 16 20 24 28 32 36 40 44 48 52 56 60 64 68

Dis

tance to s

hore

(km

)

Early monopile technology with limited depth capacity

Technological advances and buildout of low-depth offshore

New offshore markets causing varying average levels

Past offshore wind projects & US prospects

▪ Initially, projects were small in size, at low

water depths and close to shore allowing for cheaper construction costs

▪ The depths seen for Vineyard Wind allow for

the installation of monopile foundations, which is currently the most cost-effective

foundation

▪ In contrast, the West Coast has much higher water depths requiring the implementation of

floating turbine technology which is not a

proven technology anywhere in the world

2018 and onwards

▪ As options at low water depths and close to

shore are exhausted, the next phase will show projects further from shore and at

higher water depths of 40+ meters, made

possible by significant technological advances

▪ Vineyard Wind places itself close to

shore and at an average water depth

similar to the average water depth of European projects that are currently

being constructed

▪ With offshore wind farms on the West Coast starting to be developed, floating foundations

will be required

1,000 MW

CommentsOffshore wind farm project site characteristics1

Bubble size indicates project size:

Vineyard Wind

Offshore wind projects with COD in

the future will lie further towards the northeastern corner

New turbine installation by average distance from shore and water depth

Water depth (m)

Under constructionInstalled

Contracted

Permitting

Approved

0

10

20

30

40

50

1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018

Water depth (m) Distance to shore (km)

Vineyard

Wind