CLP and Renewable Energy in Asia May 2010 Andrew Brandler CEO CLP - - PowerPoint PPT Presentation

CLP and Renewable Energy in Asia

May 2010 Andrew Brandler CEO CLP Holdings

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Disclaimer

This presentation contains some comments about future events including our expectations about the performance of CLP Group's

• business. The comments are not audited and are based on a number of

factors that we cannot control. We cannot be certain that the comments will be accurate or complete and so they should not be relied on. As circumstances change we will update our website at www.clpgroup.com and, where relevant, notify the Hong Kong Stock Exchange.

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Global Energy Challenge

How to provide energy necessary for social and economic development, yet avoid serious environmental impacts?

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CHINESE MAINLAND – 6,579 MW

• Largest external investor in electricity industry
• Diversified portfolio
• Coal
• Nuclear
• Hydro
• Wind
• Biomass

INDIA – 2,421 MW

• Largest foreign investor in

electricity industry

• Top investor in wind
• Diversified portfolio:
• Coal
• Gas
• Wind

AUSTRALIA –3,188 MW

Largest foreign investor in electricity industry

• No. 2 Private Generator
• No. 3 Private Retailer

SOUTHEAST ASIA – 853MW

Largest shareholder in EGCO, Thailand after EGAT JV with Mitsubishi in Thailand and Taiwan Development of 2 coal projects in Vietnam

HONG KONG – 6,908 MW

Vertically integrated power company

• Generation
• Transmission & Distribution
• Retail

Largest HK Power Utility

• 2.2 million customers
• Supplying 80% of HK’s population

CLP Group Portfolio – Cross Regional Presence

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CLP’s Climate Vision 2050

CO2 Emissions Intensity

0.8

(kg CO2/kWh)

0.7

(kg CO2/kWh)

0.45

(kg CO2/kWh)

0.2

(kg CO2/kWh)

0.83

(kg CO2/kWh)

Towards The Future

Energy Efficiency & Conservation Renewable Energy Natural Gas Nuclear Clean Coal

By

Non-carbon Emitting

20%

Non-carbon Ongoing Review of Target

2009 2010 2020 2035 2050 2004

>75% >45% ~5%

<1% RE 11% RE 15% Non-carbon

Our Manifesto to Climate Change

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Five major initiatives to implement our climate commitment

Renewable Energy

− Largest external investor in RE both in China and India − Exploring solar energy projects – with first project in Thailand to start construction in June − Secured Environmental Permit to develop a 200MW offshore wind farm in Hong Kong

Natural Gas

− Participating in measures to bring additional, long-term supplies of natural gas to HK to move to a +/- 50% target for Hong Kong electricity supply − Commissioned a new 420MW CCGT plant in Australia which is amongst the most efficient fossil-fuelled power station in Australia

Nuclear Power

− Obtained approval to extend the Daya Bay joint venture through to 2034 − Looking to extend our involvement in nuclear energy in China

Clean Coal Technology

− Using latest efficient technology for any new coal-fired plant that we build − Looking at ways to reduce emissions at Yallourn in Victoria, Australia through experimental coal drying and CCS projects

Energy Efficiency and Conservation

− Carried out over 800 energy audits for large customers in Hong Kong and extended such services services to Hong Kong-owned manufacturers in Guangdong − Offer energy efficiency services to our customers in Hong Kong and Australia

Climate Vision 2050

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…Different Energies, Different Markets

Different Energies

− Wind and hydro power making the major contribution to the growth

• f RE capacity in Asia

− Solar gradually moving into commercial scale deployment − Large-scale deployment of clean coal technology, absent significant policy and technological development, is unlikely in the near to medium future

Powering Asia Responsibly

Different markets offer different

• pportunities

− Wide variances in national or local policy support

• There are no national feed-in tariffs for Solar in China at present
• Indonesia and Hong Kong do not offer feed-in tariffs for renewable generation at

present

• In Australia, wholesale tariff in Victoria, South Australia, Queensland, New South

Wales and Tasmania is determined by National Electricity Market

20% 20% 2% 10.60% 10% 10% 50 100 150 200 250 300 350 400 450 China India Thailand Australia Hong Kong Indonesia Maximum Feed-in Tarrif Available (USD/MWh 0% 5% 10% 15% 20% 25% Renewable Energy Targets (various deadlines) Solar Tariff Wind Hydro Bioenergy Renewable Energy Targets

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Renewables Portfolio ~2,000 Equity MW

Our Footprints

Australia India China Thailand

AUSTRALIA – total 142 MW

Operational Bluff Point 65/33 MW (w) Cathedral Rocks 66/16 MW (w) Studland Bay 75/37 MW (w) Construction Waterloo 111/56 MW (w)

INDIA – total 446 MW

Operational Khandke Wind 50/50 MW (w) Samana Wind-I 50/50 MW (w) Samana Wind-II 38/38 MW (w) Saundatti 21/21 MW (w) Theni 21/21 MW (w) Construction Samana Wind-II 12/12 MW (w) Saundatti 62/62 MW (w) Andhra Lake 114/114 MW (w) Theni 78/78 MW (w)

THAILAND – total 60 MW

Operational Small Biomass 33/3 MW (b) Construction Solar project 55/21 MW (s) Nam Theun 2 1,087/36 MW (h) Changdao 27/12 MW (w) Weihai I & II 69/31 MW (w) Nanao II 45/11 MW (w) Shuangliao I&II 99/49 MW (w) Rongcheng 49/24 MW (w) Datong 49/24 MW (w) Laizhou 41/18 MW (w) Changling II 50/22 MW (w) 3 Shandong 149/73 MW (w) Qujiagou 49/12 MW (w) Mazongshan 49/12 MW (w) CGN Wind 246 MW (w) Huaiji 125/106 MW (h) Dali Yang_er 50/50 MW (h) Boxing Biomass 15/12 MW (b) Rongcheng II /III 99/49 MW (w) 3 Shandong 149/73 MW (w) Qian’an 50/50 MW (w) Nanao III 15/4 MW (w) CGN Wind 170 MW (w) Jiangbian 330/330 MW (h)

• Station Name Gross MW / CLP Equity MW

Solar project (s) Hydro projects (h) Biomass projects (b) Wind projects (w)

Operational Wind 534 MW Hydro 156 MW Biomass 12 MW Construction Wind 346 MW Hydro 330 MW

CHINA – total 1,378 MW

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Geographical and fuel diversity

Wind (1,468 MW)

22 wind farms in China (464 MW) Strategic investor in CGN Wind in China (416MW) 4 wind farms in Australia (142 MW) 6 wind farms in India (446 MW) Equity Capacity

Hydro (522 MW)

• 3 hydropower projects in

China (486MW)

• 1 hydropower project in

Laos (through EGCO) (36MW)

Biomass (15 MW)

• 1 plant in China (12MW)
• 3 plants in Thailand

(through EGCO) (3MW)

CLP Group Renewables Portfolio

Solar (21 MW)

• 1 solar project in

Thailand (21MW)

• Various solar
• pportunities in Australia

and India

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Our Portfolio

Largest external investor in the RE sector in China Repositioning of our portfolio towards low carbon generation CLP has 1,378 Equity MW in

• peration or under construction

− 31 Mar 10 cumulative investment of ~HK$3.9 billion with total commitment

• f ~HK$4.4 billion

− Included strategic stake in CGN Wind

Policy Target

Renewable Energy Law provides for robust regulatory framework and ancillary infrastructure facilitation NDRC targets increase in renewable consumption to 15% by 2020

China

• Hydro projects

Biomass project Wind projects

Disciplined growth in wind energy

Continue to develop majority-owned projects Build out expansion of existing minority-

• wned project sites

Strategic acquisition in CGN Wind

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Our Portfolio

• Largest wind investor / developer in India (foreign
• r domestic)
• A portfolio of 446MW wholly-owned wind projects

and significant development pipeline

− 180MW in operation − 152MW commissioning by 2010 − 114MW commissioning by 2011

• 31 Mar 10 cumulative investment of

~HK$1.3 billion with total commitment of ~HK$1.8 billion

Government policies

• RE Law – nationwide review of industry with

long-term targets for Renewable Purchase Obligations, Tariff-Fixing mechanisms, inter-state trading

• New Generation Based Incentive Scheme

provides additional top up tariff for wind projects

• National Solar Mission to provide attractive

framework for Solar Thermal and PV projects

India

Wind projects

Theni

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Australia

• Established R40s with Hydro Tasmania
• A portfolio of 142 Equity MW
• 3 operational wind farms and 1 wind farm

under construction Policies

• The Government implemented the

Renewable Energy Target Scheme to ensure that 20% of Australia’s electricity supply will come from renewable sources by 2020

• Legislative change to split target between

large RE projects and small RE projects pending

Thailand

• Formed a joint venture with EGCO and

Mitsubishi Corp to build a 73MWdc (55MWac) solar project in Thailand

• The project is one of the largest solar

photovoltaic projects in the world Policies

• Renewable energy policy with an aim to

increase the use of renewable energy to end user to 20% of total energy consumption by 2022

• Tariff based on energy payment with

adder tariff given for 7 to 10 years from COD

• Income tax incentives and preferential

treatment on import and export duties

Australia and Thailand

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Massive amounts of stable funding needed for the development and demonstration of technologies

Expensive; solar PV has low capacity factor Costs expected to reduce over medium term Energy storage under development Solar Appropriate as baseload generation Heat-to-electricity conversion efficiency lower than conventional generation High exploration costs and resource uncertainties Geothermal CCS can help reduce emissions significantly Construction costs 5 times more than conventional plant Inconceivable without government support / high and firm price of carbon Carbon Capture and Storage More appropriate for managing agricultural waste – too many challenges to make it suitable for electricity generation on a widespread basis Biomass Small to medium (up to ~300MW) better option Challenges: Sites, safety, remoteness of location, grid connection Hydro Best renewable energy option for now Price of wind turbine are commoditised, technology continuing to improve Challenges: Sites, grid connection, grid capacity Wind

Technologies

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100 200 300 400 500 600 Biomass Hot Dry Rock Conventional Geothermal Small Hydro Large Hydro Solar PV Wind offshore Wind onshore Wave Tidal Current Tidal Barrage Coal Gas Nuclear Levelized Cost (USD / MWh) 100 200 300 400 500 600 Biomass Hot Dry Rock Conventional Geothermal Small Hydro Large Hydro Solar PV Wind offshore Wind onshore Wave Tidal Current Tidal Barrage Coal Gas Nuclear Levelized Cost (USD / MWh)

• Conventional generation technologies remain competitive in short to medium term
• Some RE such as onshore wind are close to competitive under favourable conditions such

as good resources

• In general RE are more expensive than conventional generation today and they

need appropriate policy and technology advancement to support their deployment in coming years

• In particular, solar photovoltaic (PV) could become attractive vs conventional generation

between 2015 and 2020, depending on the actual cost reduction and technological advancement path achieved by the industry

Generation Cost – Today & 2030

Today 2030

Source: IEA Energy Technology Perspectives 2006 & 2008, IEA Energy Technology Essentials – Nuclear Power

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Market Uncertainty

• Practical difficulties in the CDM process
• CER prices are volatile

− CER Dec 10 contract prices fell from c. €24 to

• c. €8 between Jul 08 and Feb 09 and now stand

at c. €13

• As a consequence of the price volatility, the

CDM has not been a reliable source of revenue

• Uncertainty on whether there will be any

CDM program post 2012

• Carbon Markets

Carbon Price

• Currently there are benchmarks for CERs

up to 2012. These can easily be sourced from the European Climate Exchange (ECX) or BlueNext

• But there are no post 2012 futures

contracts on ECX or BlueNext

• Market signs are bearish

− E.g. the EUA-CER spread for Dec 12 futures contract are sharply higher than those for spot − E.g. the Dec 12 contract spread continues be higher than that of Dec 10

• As at 27 April’s close the EUA vs. CER

spread for:

− the Dec10 CERs was €1.72 (€15.59 vs €13.87) − the Dec11 CERs was €2.43 (€16.03 vs €13.60) − the Dec12 CERs €3.35 (€16.77 vs. €13.42)

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Supplementary

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3.0 4.0 5.0 6.0 7.0 8.0 9.0 10.0 11.0 12.0 13.0 14.0 15.0 16.0 17.0 18.0 19.0 20.0

1.0 1.2 1.4 1.6 1.8 2.0 2.2 2.4 2.6 2.8 3.0 Australia Wholesale Tariff Thai Wholesale Tariff PRC Wholesale Tariff

Tariff and cost spectrum for projects

Project Cost in USD Mn. / MW Tariff in US¢ / kWhr PRC Wind

Solar Projects still far to compete with wind

Project Cost ~ US$ 3 – 4 Mn per MW Feed in Tariffs at US¢ 30-35 per kWhr

India wind Thai Wind Australia Wind Note: No CDM benefits are included India Wholesale Tariff India current short-term merchant tariffs

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General Observations & Ending Remarks

Regulations drive RE - not markets

− Wind tariffs are not at “grid parity” Cost reduction for wind has slowed Less attractive onshore sites and cost of offshore installation is still very high − Cost of solar power is “off the chart” - literally... Downward cost trajectory is not infinite Even if cost of cells/silicon goes to zero - there is still the 20%-25% cost of steel/fixtures

Market mechanisms do not produce more RE

− RE is only possible through government regulatory regime that is Predictable Simple And, of course, has a high enough tariff

Designing RE regulatory support through artificial markets is not very efficient

− REC market in Australia Uncertainty on REC supply and demand, and the future price of RECs Limits the number of eligible developers − CER/CDM markets by UNFCCC Uncertainty on registration process and post-2012 value - could be zero! Numerous inefficiencies (cost of consultants, etc)

General Observations