Horns Rev 3 When opportunity knocks… Mattias Sjöberg Project Director, Horns Rev 3 Project Management Summit December 2 nd, 2015

The challenge and the opportunity Strategy  A core pillar in Vattenfall’s new strategy is to grow significantly in wind power - pace to be MW p.a. Challenge  Vattenfall’s existing project pipeline is substantially smaller than the growth target, and the wind power market is increasingly competitive. Opportunity knocked..  In 2013, the Danish state invited interested parties to participate in a competitive tender for the right to build and operate 400 MW offshore wind power at Horns Rev 3. 2

The project Horns Rev 3, 400 MW (Orange area) Project location overview. 3 The site Horns Rev 3  400 MW  Production: 1,7 TWh/year  Export cable and Offshore Substation in Energinet.dk scope  Wind farm owner to install foundations, inter-array cables and wind turbines  Investment: € 1,1 bn

The Horns Rev 3 tender conditions  The Danish state performed initial project development (securing permit, initial site surveys etc.)  The site was then put up for auction through an EU tender run by the Danish Energy Agency (DEA)  4 bidders prequalified:  The winner to be awarded the construction permit and a feed-in tariff for 20 TWh (~12 years) and to reimburse development costs of 10 m€  Single award criteria: Lowest requested feed-in tariff per kWh  Penalty for non-construction (40 m€) and for late commissioning 4

The HR3 timeline and process Nov 2013 Official publication Feb-Jun 2015 Project award From Jan 2017 Guaranteed connection to the grid Jan 2020 Full operation of offshore farm Feb 2015 Binding bid 3 March 2014 Pre-qualification Jan 2017-Dec 2019: 3 years commissioning window 3 m€ m€ m€ The Vattenfall process The DEA process 5 TG2TG3

The initial challenges 6 1. The fundamentals  How to reach a sufficiently secure business case that allows Vattenfall to make a ~100 m€ bet for a > €1 bn investment?  How to reach a sufficiently aggressive business case to have a good chance of winning? => How to tick both boxes within the 14 months available? 3. Project team and steering  Project kick-off simultaneous with Vattenfall’s reorganisation – Wind business was split in two regions – the project ended up in Nordic – and all offshore experienced staff in Continental.  Team members distributed over 5 countries and 8 offices. => How to manage a team in 5 countries and 2 line organizations? 2. Internal process and deliverables  There is no VPMM Tollgate for “submitting a binding bid”  No guidance was given from EGM/BoD regarding their expectations on decision material or business case certainty. => What is the project to deliver for decision making?

Challenge 1: The fundamentals The challenge How to reach a sufficiently secure and aggressive business case? How it was addressed:  EU procurement process started for all major parts of capex/opex  Wind turbines  Foundations  Cables  Vessels  High focus on risk identification and internal transparency in risk communication Trade offs in focus  Maintaining high optionality vs making supplier/technology decisions to reduce complexity  Finalise negotiations pre-DEA bid to maximise security vs keeping competitive pressure open for period when owning project 7

Challenge 2: The internal deliverables The challenge What is the project to deliver for decision making? How it was addressed:  Relevant parts of TG3 requirements used to create a “TG 2,5”  The DEA tender process and our own EU tender processes used as “fixed framework”.  Frequent internal discussions on trade offs, risks and strategic options. Trade offs in focus  Project to define the actual decision material through its work vs awaiting guidance from above 8

Challenge 3: Project team and steering The challenge How to manage a team in 5 countries and 2 line organizations? How it was addressed:  Small, dedicated and empowered team  High trust environment and decisions taken at lowest possible level  Frequent sound boarding between project manager and line manager  Monthly Project SteerCo for strategic topics, resourcing and anchoring Trade offs in focus  Frequent and “all team members” meetings to keep holistic view vs allowing sufficient time for actual work.  How big decisions could the project team be entrusted to make without escalation? 9

And what happened? The project outputThe tender outcome 10 …but the project had not yet met the Definition of Success… 77,0 øre per kWh

Resulting reflections on project management agility  Define overall purpose and definition of success – i.e. clarify the “Why”, discuss the “What” and delegate the “How”.  Set a few top level stable frameworks/processes to support the overall project purpose, as to allow the rest of the project to be very “process light”.  Keep project organisation flat and empowered – all team members having holistic view of project.  Spend a lot of time analysing the difference between the really important items that make or break the project, vs “smaller” items that are “just work”. Sometimes the conclusions are surprising.  Have the strength to maintain optionality on all items that are important - “by when do we really need to make this decision?”. A decision made is an option killed – and will make it harder to adapt when circumstances change.  Challenge common view that quick decision making is a sign of strength and slow one of weakness. Agility – “the ability to move about quickly and easily” 11 Reflections

Final thought The agile project manager’s prayer “…grant me the empowerment to make quick decisions when needed, the strength to make slow decisions when preferable, and the wisdom to know the difference” 12

Thank you for your attention! Any questions?