Disruptive trends & Enel Green Power Strategy

30th October 2015

Disruptive trends & Enel Green Power Strategy

Amoroso RiccardoHead of Innovation and Sustainability at Enel Green Power

2 Renewable energy outlook

3 EGP Strategic View

1 Overview on current market trends

Agenda

1

Tcf

Source: EIA, Annual Energy Outlook 2015, Dry Natural Gas Production

US will become a net exporter of natural gas in the near future

Shale gas on total gas production is forecasted to increase up to 55% Up to 2040

Shale gas leads the gas production in US

Na

tura

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as

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Share of

shale gas

2

US oil and gas production

Source: World Energy Outlook 2012

The surge in unconventional oil & gas production had

implications well beyond the US

The Shale Revolution

3

Shale VS Conventional production

Source: The Economist

4

Oil and gas collapsed in the last year losing almost the 50% of their 2014 value

In August 2015 oil and gas prices reached respectively 43$/Bar and 2,8 $ per Mill. Btu

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WTI Oil Spot Price Henry Hub Gas Spot Price

Oil Price

($ per Barrel)Gas Price

($ per Mill. Btu)

Source: EIA

Impact on Oil and Gas prices...

Prices strongly impacted by commodities’ abundance

V ?orL

5

Oil-51%

Coal-60%

Copper-25%

Silver-14%

...and on other relevant commodities prices

Prices reduction in last 12 months

Note: Prices reduction refers to the Sep 2014-Sep 2015 period

Source: Stowe Global Coal Index, Bloomberg Oct. 2015

Fateful combination: abundance of resource supply and economic downturn

6

Mil. of barrels per day

Consumption

Production

Since 2006 oil consumption steadily declined

This is likely the beginning of a long-term trend

Source: EIA

An unexpected demand trend

The US case (1980-2014)

7

Historical demand

GDP

0,8

0,9

1,0

1,1

1,2

1,3

1,4

1,5

1,6

1,7

150

170

190

210

230

250

270

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024

Source: Bloomberg New Energy Finance, Apr 2015

TWh AUD trillion

New trends in Electricity Market

Australian national electricity market actual vs forecast electricity demand FY2004-FY2025

8

Historical demand

2010 Forecast

GDP

0,8

0,9

1,0

1,1

1,2

1,3

1,4

1,5

1,6

1,7

150

170

190

210

230

250

270

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024


TWh AUD trillion



9

Historical demand

2010 Forecast

GDP

0,8

0,9

1,0

1,1

1,2

1,3

1,4

1,5

1,6

1,7

150

170

190

210

230

250

270

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024


TWh AUD trillion

2011



10

Historical demand

2010 Forecast2011 Forecast

GDP

0,8

0,9

1,0

1,1

1,2

1,3

1,4

1,5

1,6

1,7

150

170

190

210

230

250

270

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024


TWh AUD trillion



11

Historical demand


GDP

0,8

0,9

1,0

1,1

1,2

1,3

1,4

1,5

1,6

1,7

150

170

190

210

230

250

270

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024


TWh AUD trillion

2012



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Historical demand


2012 ForecastGDP

0,8

0,9

1,0

1,1

1,2

1,3

1,4

1,5

1,6

1,7

150

170

190

210

230

250

270

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024


TWh AUD trillion



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Historical demand


2012 ForecastGDP

0,8

0,9

1,0

1,1

1,2

1,3

1,4

1,5

1,6

1,7

150

170

190

210

230

250

270

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024


TWh AUD trillion

2013



14

Historical demand


2012 Forecast

2013 Forecast

GDP

0,8

0,9

1,0

1,1

1,2

1,3

1,4

1,5

1,6

1,7

150

170

190

210

230

250

270

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024


TWh AUD trillion



15

Historical demand


2012 Forecast

2013 Forecast

GDP

0,8

0,9

1,0

1,1

1,2

1,3

1,4

1,5

1,6

1,7

150

170

190

210

230

250

270

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024


TWh AUD trillion

2014



16

Historical demand


2012 Forecast

2013 Forecast

2014 Forecast

GDP

0,8

0,9

1,0

1,1

1,2

1,3

1,4

1,5

1,6

1,7

150

170

190

210

230

250

270

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024


TWh AUD trillion

The “New Normal”: electricity demand and GDP are following two different

trajectory, is that a separation or a divorce?



17


Electric consumption per unit of GDP versus GDP per capita, 1980-2012

GDP and Electricity demand increase correlation is breaking

and new energy paradigms are emerging

Source: Bloomberg New Energy Finance, Aug 2015

18

Green Revolution - Electrical Vehicles

“Prices on electric cars will continue to drop until they’re within reach of the average family”,

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Green Revolution - Electrical Vehicles

“Prices on electric cars will continue to drop until they’re within reach of the average family”,

The Washington Post, 1915

20

Green Revolution- Energy Storage

TESLA: Power Wall and Gigafactory

Increasing efforts and appetite in storage technology to drive costs down and

deliver solutions in several market segments

21

HIVE home heating controls

Residential energy storage

Smart thermostats to reduce churn

BEMS for DR and energy efficiency

Digital Life connected

home service

1m connected home customers

Smart home platform (AT&T)

Smart home hubs

???

Bundled electricity, entertainment and home automation

HEMS platform

DR and retail services

Energy supply and services

Virtual mobile operator – 80k

customers

Registered energy supplierBundled telecoms and

energy supply

Smart home partnerships/investment

Smart lighting / home

automation

Bundled telecoms, electricity supply beginning in 2016

Bundled insurance, telecoms and energy

Bundled electricity telecoms services

HEM tools and DR

IHD and smart thermostat

program

Home energy management


New Players and Energy Services

The Energy retail battlefield

Market focus is moving from generation to other segments of the value chain

22

World GDP Growth Outlook

2014-2020 CAGR, April 2015

Strong> 5%

Mid~ 4%

Low< 2,5%

Global GDP will decline because of stagnating mature economies

and slowing down of emerging economies

Source: IMF Apr 2015

6%

4%

Historical(2004-2014)

Forecast(2014-2020)

World’s GDP

Historical Vs. Forecasted

Growth (CAGR)

23

Emerging market indices - August 2015

Half of all emerging market indices were in bear territory,

Emerging market stocks have fallen significantly, in many cases more than those in

Europe and the US Source: BNEF October 2015

24

A Decade of Change

From the old model…

A simple and linear model

Generation Transmission Distribution Retail Customer

25

A Decade of Change

…to a new energy market paradigm

Bulk Generation

Transmission

Distribution

Retail

Customer

Distributed generation

Demandresponse

Storage

Micro grids

New entrants

Link supply to load

Focus on baseload

Customer becomes producers

Customers become active consumers

Storage used to manage grids

Customers go or remain off-grid

Offer new products and services

Become an active partcipant

Engage with customers

Actively manage the grid

New market

paradigm

26

Note: PWC Report: “The road ahead - Gaining momentum from energy transformation”, 2014

Agenda




27

The Renewable Energy escalation

The evolution of renewable energy over the past decade has surpassed all expectations. Global installed capacity and production from all renewable technologies have increased substantially, and supporting policies have continued to spread to more

countries in all regions of the world

Source: REN 21, The first decade: 2004 – 2014; IRENA; BNEF; Enerdata; GlobalData; TSOs

2014 record year in additional Wind capacity (~ 50 GW)

Record year in terms of PV additional capacity (~40 GW)

Record year in terms of geothermal additional capacity (~ 1 GW)

Increasing n. of Countries with installed capacity higher >100MW: 37 for PV and 55 for Wind

2014 Key Facts

Hydro Wind PVBiomass Total

850 GW

1.165 GW

370 GW

90 GW

175 GW950 GW

1.815 GW

45 GW 3 GW50 GW

2004

2014

Renewable Installed Capacity by Technology, 2004 – 2014

28

Global electricity demand evolution (2014-2020) Changes in the power production mix until 2035

Renewable role in demand growth

Source: Bloomberg New Energy Finance, “New Energy Outlook 2015”, Jun 201529

• Renewables are expected to grow steadily all over the World

• Developing countries will account for over 60% of the global growth of electricity generation in 2035

• Renewables are expected to account for about 50% of future energy supply growth

-1.000 0 1.000 2.000 3.000 4.000 5.000

Coal Gas Nucleare Rinnovabili

Note: Countries are clustered based on average annual growth of electricitydemand :Negative – demand decreases; Low – growth < 0.5% ; Medium – growth between 0.5% and 4%; High – growth > 4%.

Cina

India

USA

EU

M.East

Africa

30

Evolution of incentive schemes in areas of interest

2010 – EGP Countries 2015 – EGP Countries/Areas of Interest

16 EGP countries of which6 Tender/PPA

48 EGP Countries of Interest of which 29 with Tender/PPA

Fixed Incentive Schemes (GC, Tariffs)

Competitive Incentive Schemes (tender/PPA)

Note: analysis based on EGP countries. Remuneration mechanisms refer to RES Utility-scale plants.

Renewable Energies

NEX Clean Energy Index 2013-15 YTD

Clean energy companies delivered a profit to their shareholders equal to 50%

Note: Values as o 01 April 2015; Stowe, NEX and S&P 500 rebased to 100 on 01 Jan 2013Source: Bloomberg New Energy Finance, Apr 2015

31

Source: IEA, Apr 2015; BNEF Apr 2015

Wind: 69-120 $PV: 75-120 $

Europe

PV: 85-89 $

Chile

Wind: 48 $PV: 75 $

US

Wind: 54 $PV: 81 $

Brazil

PV: 88 $

India

Wind: 52 $PV: 66 $

South Africa

Global prices reference (recent auctions outcome, $/MWh)

Bid auction results are driving downwards RES costs making them

increasingly competitive compared to fossil fuels

Renewable Energies

Increasing competitiveness of Renewable Sources

32

Wind: 36-40$

Egypt

PV: 58 $

UAE

Job creation

Energy independence and reduction of prices volatility

Scalability and modular approach

Environmental SustainabilitySimplicity in Installation and

Operation

Competitiveness

1

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The Green Revolution

Success factors

33

The Energy field

A competitive scenario

34

A complex scenario in which EGP

competes with large utilities,

YieldCos and new types of players

RenewablesGeneration

Competition between big utilities

Entry of YieldCosThe new competitive

scenario

Big Utilities launch new companiescommitted to develop renewable

energy projects

Focused on managing existing assets rather than creating true

value

http://www.enveco.de/grafiken/referenzen/rwe-innogy.gif

http://www.enveco.de/grafiken/referenzen/rwe-innogy.gif

The Energy field

YieldCos role

35

• Spin-off listed in stock exchange constituted by operating plants and characterized by a stable cash flow and high dividend

• Yields exposed to rising interest rates and regulatory risks

• Business focused more on financial management of existing assets than on creating value

North America

• From 2013 to 1H2015 YieldCos have collected $12bn in IPOs and increased their market value by 84 %

• High volatility of their value: negative performance in recent months with falling securities up to 50 % of its value

PerformanceYieldCos

Europe

Source: Bloomberg New Energy Finance, July 2015; Bloomberg platform

Agenda




36

Global player with a diversified footprint

2.1 GW in operation0.4 GW in execution0.1 GW contracted

North America

10 MW in operation0.5 GW in execution0.7 GW contracted

Africa

5.8 GW in operation0.2 GW in execution

Europe

2.0 GW in operation1.8 GW in execution0.6 GW contracted

Latin America

Expertise across 5 technologies

Operations across 17 countries

Industry leading load factor at 40%

Highly efficient operations

Enel Green Power today

0.2 GW in operation

Asia

37

Deploying a global business model...

…with a differentiated local approach

Growth momentum

and synergies with

the Enel Group

Latin America

Steady growth with

low risk profile

North America

Opportunities for divestment and

aggregation

Europe

Prospective growth

opportunities

Asia-Pacific

South Africa as a

platform for growth

in the Sub-Saharan area

Africa

Country of interestCountry of presence Country under screening

38

Identification of projects

Screening of opportunities

Development and evaluation

CAPEX allocation

Realization of approved projects

Technology development

Acquisition integration

CAPEX expenditure

Operation of plants

Production optimization

Operational improvement

Generation of EBITDA

Integrated business model

Industrial and commercial approach to the value creation

Business Development

EPCIntegrazione M&A

Operation & Maintenance

Financing

Commercial offering

39

Financing

Development Cost

Opex (incl. Tax)

Modules & BOP

31%

21%

45%

4%

Solar

31%

19%

46%

4%

Wind

Turbines & BOP

Opex (incl. Tx)

Financing

BO

P2

2%

Mo

du

les

23

%

Turb

ine

35

%B

OP

11

%

Note: approximate values

Development Cost

Wind and Solar projects: NPV of cost breakdown

40

Competitive scenarios on the innovation field

41

New RES technologies

Electrification in emerging markets

Storage to improve RES dispatching

Applying Storage to retail markets

GeoHydroWind BiomassSolar

Ocean High altitude wind

MINIMIZZAZIONE

SBILANCIAMENTI

ENERGY SHIFTING

CAPACITY BESS

LIMITATA

Ollagüe

Powerhive

Marcona

Currentportfolio

Possible newentries

D

A B

C

42

EGP currently operates 5 technologies…

GeoHydroWind

BiomassSolar

… and might add new ones

Wave energy

Thropospheric wind

ANew possible generation technologies from renewables

Clear sky dayCloudy day

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16/03/2014 19:12 17/03/2014 00:00 17/03/2014 04:48 17/03/2014 09:36 17/03/2014 14:24 17/03/2014 19:12 18/03/2014 00:00

Average Output Power [kW] Maximum Output Power [kW] Minimum Output Power [kW]

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21/03/2014 19:12 22/03/2014 00:00 22/03/2014 04:48 22/03/2014 09:36 22/03/2014 14:24 22/03/2014 19:12 23/03/2014 00:00

Average Output Power [kW] Maximum Output Power [kW] Minimum Output Power [kW]

PV power plant:

• Large Variation in few minutes in case of cloudy days

• Good average forecast

Wind power plant:• Large amount on power changing within minutes • Potential On-Off behavior in case of strong wind• More challenging forecast compared to PV

Time-window for energy

release

0

100

200

300

400

500

600

700

800

900

1000

1 21 41 61 81 101 121 141 161 181 201 221 241

43

BRenewables: threat or opportunity

44

BGlobal Market is expected to rapidly grow for utility scale

ESS

• Primary regulation

• Secondary regulation

• Terziary regulation

• Reactive supply and Voltage control

Ancillary services

• Curtailments: due to transmission:

• constraints and generator flexibility, energy

• storage helps to increase grid flexibility and

• reduce curtailment.

• Day/night

Price Arbitrage (Energy-shift, peak-shaving)

• Mitigate RES generation unbalance and reduce relevant penalties together with the improvement of weather forecast:

• Day-ahead market

• Intra-day market

Unbalance

45

BPossible business models enabled by battery storage

systems

UNBALANCINGREDUCTION

ENERGY SHIFTINGNight Production

46

BCatania 1 Bess project – RES dispatchability

10 MW PV plant

1MW / 2MWh Battery

Storage System

Operative since Q3

2015

47

LatAm

Africa

• OFF-GRID VILLAGES• SOLAR HOME SYSTEM• SOLAR LANTERN• NO ACCESS TO ELECTRICITY

Example market

Area Pacific

USA, EU• HIGHLY CONNECTED ADVANCED GRID

∙∙

• MILDLY CONNECTED GRIDS∙

Energy ‘Ladder’Examples of EGP’s applications at the bottom of the piramid

OLLAGÜE - ChileSTATUS: IN OPERATIONSSIZE:• PV, 200 kWp 3Sun thin film modules• WIND TURBINE vertical axis, 30kWp• STORAGE NaNiCL2, 250 kW 520kWh• Diesel Generator as backup, 250kW

Microgrids - KenyaSTATUS: under negoziationSIZE:• 100 microgrids• Project size (PV only) 950 kW • Average generation capacity per site 9.5 kW • Max output capacity (PV + batteries) 2,400 kW

MARCONA - PerùSTATUS: approval at Inn. CommitteeSIZE• PV fix modules (crystalline): 63 kWp• Mini Wind system: 60 kW• Electrochemical Storage system (Li-ion): 70kW/70kWh • Diesel generator: 2x72 kWel

Still today, 1.4 billions of people do not have adequate access to electricity therefore relying on oil lamps or, in the best cases, diesel

generators.

These conditions offer emerging business opportunities for green sustainable solutions, that can be tailored to meet specific

requirements.

CInnovative off-grid applications: electrification in emerging

markets

MAIN EVIDENCES

A full charge of the battery allows to sustain the community load during night in real operation conditions

Possible further optimizations of the Energy management system, advanced weather forecast

and nowcast technologies the real time monitoring of

the loads looking to possible

improvements of the generation set.

18:302:30

2 21

Typical day of operation (in wintertime)

COllagüe Project -PERFORMANCE ANALYSIS

49

Clients are beginning to seek energy independence trough stand-alone, cheap and green systems.

This driver, coupled with an attractive design, is the base for the development of a residential market for batteries.

Technological Partners

TeslaSamsung

LG

Innovative Li-Ion storage systems for domestic usage are designed to maximize the self consumption from photovoltaic systems, but they can as well provide services such as back-up or, in the future, grid services through Virtual Power Plants

DRetail storage technologies: selecting the most advanced

solutions…

50

General plant data

Historical/real time production analysis

Weather forecast

Alerts

Energy Saving

New offers

General plant data:

Activation date

Last access

App functionalities

Production monitoring:

Historical and real time production analysis (plant capacity)

Predictive analysis of plant production within 36/72 hrs

Weather forecast: Real time weather forecast to support predictive analysis on

plant production

Alerts:

Alerting system to inform the user about plant malfunctioning,

production trend, battery level, etc.

Customer support

Customer support:

Customer assistance and quick response to the user through

call centre and instant messaging with available operators

Energy Saving: Main suggestions on plant energy saving

New offers: Section that includes new commercial offers for the client

PV Panel

& storage

Client

App

Usage/Consumption monitoring:

Historical and real time consumption information

Benchmark with other users’ consumptionProduction/Consumption monitoring

PU

LLP

USH

D… and implementing innovative mobile applications for

monitoring the system’s production and consumption

51

EGP First mover in key emerging markets

High quality of its pipeline

Strategic partnerships along the entire value chain

Commercial synergies with Enel

Development of Innovative Solutions

Geographical and technological diversification

EGP Industry Leader able to increase its own competitive advantage

Final remarks

Enel Green Power strengths

Investor Relations

Disruptive trends & Enel Green Power Strategy