The strategies of 50 leading companies in the global renewable industry - Alessandro Marangoni, Althesys

IREX MONITOR The renewables think tank

IREX MONITORIREX MONITORIREX MONITORIREX MONITORThe The renewables think tank renewables think tank

The strategies of the 50 leading companies in the global renewable industryin the global renewable industry

The global renewable energy industry:

Alessandro MarangoniThe global renewable energy industry: companies’ strategy and market trends

Roma, October 9th 2012

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The challenges of the RES sectorThe challenges of the RES sectorIREX MONITOR The renewables think tank

The challenges of the RES sectorThe challenges of the RES sector

European psovereigndebt crisis

SECTOR STILL VIBRANT

$ 257 billion of investmentsDecline in selling prices

Reductions-cuts

$ 257 billion of investments Emerging countries

are gaining ground In estment in solar energof subsidies

Consolidation of the industry

Overcapacity

Investment in solar energy exceeded those in wind US caught up with China

Overcapacity

Crisis technology

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manufacturers

Gl b li ti pyrig

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Globalisation

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The renewable energy industry worldwide isThe Top 50 players: the key to understandingThe Top 50 players: the key to understandingThe renewable energy industry worldwide is a complex scenario The Top 50 players: the key to understanding The Top 50 players: the key to understanding trends in the sector as a wholetrends in the sector as a whole

The largest in RES industry(Revenue/MW installed) globalglobal

The most international

(Revenue/MW installed) global global competitive competitive

arenaarena(% revenue outside domestic market)

20 PV8 Wind • 33 technology companies s

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5 Solar + Wind

• 17 power generation companies 12 Utilities

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p g p5 Pure Renewable

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The strategies of the 50 leading companies in the The renewable energy industry worldwide isg g pglobal renewable industry

Th t t i f th 50 l di i i th

The renewable energy industry worldwide is a complex scenario The strategies of the 50 leading companies in the global renewable industry

The top 50 players’ major deals

Performance of the renewable energy industry

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Strategic trends and future perspectives

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Performance of the renewable energy industryPerformance of the renewable energy industry


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The Top 50 deals: main RES segmentsThe Top 50 deals: main RES segmentsThe Top 50 deals: main RES segmentsThe Top 50 deals: main RES segments572 major operations done by the Top 50

$ 69 3 billi 27% f th ld’ i t t d 63 171 MW$ 69.3 billion = 27% of the world’s investments and 63.171 MW RES segments by number of operations

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Wind onshore and PV leaders Biomass/WTE more local

Offshore wind: 9,048 MW of plants operational or in construction in 2011

CSP: 11 7% of the total amounted invested pyrig

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CSP: 11.7% of the total amounted invested Development of the solar combined cycle ©

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Where are the top players investing …Where are the top players investing …Where are the top players investing …Where are the top players investing …

Europe

Offshore wind: 34% of the MWEastern E ropean co ntries

45% of the operations

Emerging markets

Eastern European countries: new key markets

g g

Huge potential for wind in India - BrazilGrowing share: 19.4%

ChinaLeader in wind: 18 GW of new capacity, b t l di l f j l s

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but low disclosure of major players Growing solar sector: 2.2 GW of power installed and 2.7 GW of deals closed by

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the Top 50 in the home market

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The playersThe playersThe playersThe players

Most active players in terms of

39.5% technology providers

number of operations:

26.5% pure renewable 20.8% utilities

Key trendsKey trends Business development in power generation is the main way: 55.2% MW The expansion of equipments’ manufacturing capacity is the 2nd: 17.8% s

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p q p g p y Vertical and horizontal Integration: 12.8% Increasing importance of geographical and market diversification

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Type of operations done by the Top 50Type of operations done by the Top 50Type of operations done by the Top 50 Type of operations done by the Top 50 The construction of new power plants was the dominant type of operation

250

37.9%

200

27.8%

100

150

13.7%%

6.3%4.2%

5.9%3.7%

50

100

0.5%0

New Plant TK Plant Supply Agreements

Collaboration Partnership

Joint Venture Acquisition Merger Disposal

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Corporate finance operations: 16.9%

M&A: 35% of the corporate finance operation

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Financial performance, a doubleFinancial performance, a double--sided picturesided pictureFinancial performance, a doubleFinancial performance, a double sided picturesided pictureEuropean

financial crisis

General poor financial lt f RES i d t

Overcapacity6 2 GW (P T )

Increased titi

financial crisis

results of RES industry

Cuts in

6.2 GW (Pv-Top) competition

Cuts in subsidies

Technology providers ...

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... lost a lot of money!

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Financial performance, a doubleFinancial performance, a double--sided picturesided pictureFinancial performance, a doubleFinancial performance, a double sided picturesided picture

Utilities & Pure Renewable ...

%Var. 2011‐2010

Utilities Pure

Renewable Total

Revenue 33.5% 0.2% 21.7%

EBITDA 125.0% 14.0% 95.4%

EBIT 32.1% 14.0% 27.0%

Net income 18.3% 5.3% 13.1%

... profited of subsidies and falling tech costs

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Utilities stronger than Pure renewables, paying the friction of take-off Utilities already restructuring in the past Increase of revenue for utilities mainly outside Europe pyrig

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Increase of revenue for utilities, mainly outside Europe

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TheThe photovoltaicphotovoltaic industryindustryThe The photovoltaicphotovoltaic industryindustryPV segment suffered the most during 2011

Drop by 60% in ASP for PV ˃ decline in manufacturing costs Revised subsidies in key markets Chi i ’ d i i

Market cap decreased Chinese companies’ dumping prices ... decreased by 68.1%

Western companies: EBIT - 586.6% Chinese companies:EBIT - 167.3%

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Bankruptcies of renowned solar PV

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companies

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TheThe wind industrywind industryThe The wind industrywind industry

Average 41.1% drop in operating income

CHINESE COMPANIES WESTERN COMPANIESCHINESE COMPANIES Three largest wind companies:

25.2% drop in revenue New installations: 930 MW

WESTERN COMPANIESEBITDA down 29.3% over 2010Technological leadership

New installations: 930 MW lower than in 2010

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Cooling government support

E t f f i l i th Financial troubles, difficult to Market close to maturity

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Entry of foreign players in the domestic market

Financial troubles, difficult to carry out large plant projects ©

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Power generationPower generation segmentsegmentPower generation Power generation segmentsegmentUtilities and pure renewable outperformed the overall sector

Market cap slipped just 2%

S l f 5 tilitiSample of 5 utilities with a full mix of sources: EBITDA of the RES segment 62 7%segment 62.7%EBITDA of the group overall performance: 19.4%

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RES less volatile than Oil&Gas, subject to geopolitical risk

For utilities operating both in renewable and in traditional generation the

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RES segment exceeded the performance of the company overall

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Size is a competitive advantageSize is a competitive advantageSize is a competitive advantageSize is a competitive advantageThe Top 50 index outperformed the other green indexes

Global players better than small-mid cap

Economies of scale

Vertical integration

Diversified geographic g g pportfolio

Mix of sources

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A challenging environment...A challenging environment...A challenging environment...A challenging environment...

RES industry is Companies are New markets & ychanging quickly

preorganizying their business

opportunities are rising

INTERNATIONALIZATION

INTEGRATION

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RESTRUCTRING - M&A

INNOVATION

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RESTRUCTRING - M&A

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Restructuring and ConsolidationRestructuring and ConsolidationRestructuring and Consolidation Restructuring and Consolidation

RESTRUCTURING: the priority to manage the overcapacity and to stop price falling

No further drop in the technology price is expected in the near future ?

Financial pressure + competition are driving CONSOLIDATION i th t PV i d d ti tin the upstream PV, wind and power generation segments

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Companies are likely to continue acquiring market share through M&A operations to survive

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GlobalisationGlobalisationGlobalisationGlobalisation

ALL THE PLAYERS ARE FOLLOWING INTERNATIONALIZATION STRATEGIES

Decrease in technology price Windy-sunny regions with strong economic growth are profitable also without subsidiesgy p growth are profitable also without subsidies

Target of investments from developed Emerging countries

g peconomies

Home to world class competitors

PV market Delocalisation of the production into emerging and low-cost regions

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WIND market Western companies are entering Asian k t i th Chi t E py

right

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WIND market market easier than Chinese enter Europe

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TheThe integrationintegration strategiesstrategiesThe The integrationintegration strategiesstrategiesARE COMMON TO SURVIVE THE CONSOLIDATION OF THE MARKET

Raw material Equipment & components

Development, Plant construction, EPC

Power generation

O&M + servicesVALUE CHAIN

Wind WIND CONSTRCUTORS

IES

URE

REN

W

PV

Hydro

CES

PV MANUFACTURERS

TIES

UTILITPU

BiomassWTE SO

URC

UTILIT

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CSP

GeotherIn the future the distinction between

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Marine traditional energy and renewable will fade

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Innovation strategiesInnovation strategiesInnovation strategiesInnovation strategies

The Top 50 maintened R&D spending even during the hardest time in 2011

Western companies: 2% of their revenue in R&D˃ Chinese companies

NEW TECHNOLOGY WILL GAIN GROUND IN THE FUTURE

OFFSHORE WINDOFFSHORE WIND HYBRID CSP GEOTHERMAL

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MORE INVESTMENT WILL FOCUS ON INTEGRATING RES INTO pyrig

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MORE INVESTMENT WILL FOCUS ON INTEGRATING RES INTO POWER SYSTEM: STORAGE AND SMART GRID WILL BE THE KEY ©

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The strategies of 50 leading companies in the global renewable industry - Alessandro Marangoni, Althesys