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Importance of longer-term perspective in Romanian Wind Energy Market

Importance of longer-term perspective in Romanian Wind Energy Market. ČEZ 7th September 2012 Filip Strohwasser– Long-term Originator. AGENDA. PART I Introduction of CEZ Group PART II Importance of longer-term perspective in Romanian Wind Energy Market PART I+II

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Importance of longer-term perspective in Romanian Wind Energy Market

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  1. Importance of longer-term perspective in Romanian Wind Energy Market ČEZ 7th September 2012 Filip Strohwasser– Long-term Originator

  2. AGENDA PART I Introduction of CEZ Group PART II Importance of longer-term perspective in Romanian Wind Energy Market PART I+II CEZ Group and its potential on longer-term Romanian Wind Energy Market

  3. CEZ GROUP IS AN INTERNATIONAL UTILITY WITH A STRONG POSITION IN CEE Energy Assets Active subsidiary Trading Activities Source: CEZ, national statistics, data for 2011, CZK/EUR 24.59 2

  4. PL CZ SK HU RO BG Fantanele Cogealac Resita CEZ GROUP IN ROMANIA MAINLY FOCUSES RENEWABLES FOLLOWED BY DISTRIBUTION AND ELECTRICITY SUPPLY • Romania • Fantanele & Cogealac (600 MW) • Largest wind farm project in Europe • 300 MW in operation at the end of 2011, additional 300 MW by end of 2012 • Total investment is estimated at € 1.1 bn • Support through green certificates (GC) – price range set by law at € 27-55 per certificate, 2 GCs are received for each MWh since November 2011 until 2017, 1GC per MWh afterwards • Hydro power plants in Resita • TMK Hydroenergy Power S.R.L. acquired in 2011 • 4 small hydro plants with total capacity of 18 MW

  5. AGENDA PART I Introduction of CEZ Group PART II Importance of longer-term perspective in Romanian Wind Energy Market PART I+II CEZ Group and its potential on longer-term Romanian Wind Energy Market

  6. HIGHLIGHTS • Romanian wind energy market is growing only in terms of capacity due to several projects, but there are not many new important entities operating wind farms • Romanian wind energy market needs to develop its longer-term market • Investors willingness of low risk/low profit scheme; convenient legislative environment and sufficient number of credible counterparties will bring desired longer-term perspective to the market

  7. ROMANIA WIND MARKET SEEMS TO BE ATTRACTIVE HOWEVER JUST FEW NEWCOMERS ENTERED WITHIN LAST YEAR • Pipeline in Romania counts over 8 GW (234 projects) of wind projects • Capacity of 3-3,5 GW to be sustainable from grid perspective • Majority of the projects promises interesting ROIC(if properly financed) Wind dispatchable capacity installed (MW) Number of entities • 1/6/2011 • 1/1/2012 • 1/6/2012 As 234 projects on pipeline, where are the others? Source: Transelectrica SA - http://www.transelectrica.ro/

  8. PROJECTS AND THEIR INVESTORS ARE STRUGGLING WITH PROJECT FINANCING AND PPA • Struggling Investor in Romanian Wind Farm • has all the permissions for further development and construction • is unsuccessfully looking for Project financing and a PPA buyer Details “…not a lot/none buyers available” • Potential PPA Buyers will be available, when • Investors share project value to get significant market risk mitigation • Legislation will officially allow PPAs (mainly power issue), … • Bank needs to see credible counterparty „Market risk of green certificates/scheme support is huge” Note.: 1) PPA – production purchase agreement (offtake agreement on power and green certificates)

  9. REQUIRED PPA STRUCTURE SHOULD BE SUFFICIENTLY LONG, WITH RELIABLE COUNTERPARTY AND COVER MARKET RISKS Duration& off-taker: • 5-15 years • Credible counterparty Risks to be mitigated: • Green certificate market risk • Power market risk • Balancing market risk • Structure: • PWR market reference + floor / fixed price • GC market reference + floor / fixed price • Balancing fixed balancing / pass through • Currency RON/EUR

  10. CONCLUSION • Once part of Struggling Strategic Investors in Romanian Wind Farm • Investors share project value to get significant market risk mitigation • Legislation will officially allow PPAs • Available credible counterparty then ramp up in terms of operating wind farms entities will come Wind dispatchable capacity installed (MW) Number of entities • 1/6/2012

  11. AGENDA PART I Introduction of CEZ Group PART II Importance of longer-term perspective in Romanian Wind Energy Market PART I+II CEZ Group and its potential on longer-term Romanian Wind Energy Market

  12. CURRENT CEZ GROUP POSITION IN ROMANIA CREATES MANY OPPORTUNITIES WITHIN WIND MARKET AND SUCH SITUATION MAY CONTRIBUTE TO DESIRABLE DEVELOPMENT CEZ GROUP – credible counterparty Sell Production Purchase Agreements Wind Farm Fantanele&Cogealac + others 1 Buy Production Purchase Agreements 2 Supplier/distribution CEZ Vanzere/CEZ Distributie Short/long term Power and GC supply 3 Weather forecast Tomis Team SRL Production Forecast / Balancing 4 Trading entity CEZ TRADE Romania Market gate / brokerage 5 Hydro Resita Buy/sell flexibility/ power plant tolling 6

  13. Thank you for your attention Filip Strohwasser Origination CEZ a.s. Duhova 1/1444 140 53 Prague 4 Czech Republic Phone: +420 211042766 Mobile: +420  725628297 E-mail: filip.strohwasser@cez.cz 

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