Energy Industry - Business Opportunities arising Venice, 23.09.2013 Jürgen Gold, Auditor, Tax Advisor

About us BBH has been operating as a law firm since 1991. We are a partnership of lawyers, auditors and tax consultants – with engineers and further (IT-)experts in our Becker Büttner Held Consulting AG. A staff of over 500 employees, including more than 250 professionals, are at your service. We provide advice to more than 3,000 clients. We are the leading firm for the energy and infrastructure industry. BBH is known as „the“ law firm of public utilities, which we really are. But we are far more than that, in Germany and in Europe. IKEM: Institute for Climate Protection, Energy and Mobility – Law, Economics and Policy The decentralized utilities, the industry, investors, intermediaries and political bodies, like the European Commission, the Federal Government, the Federal States and public corporations and many more appreciate BBH’s work. 22.11.2018 Energy Industry

Jürgen Gold, Auditor, Tax Advisor 1982 - 1987 studies of business administration at the University of Frankfurt 1987 master degree in business administration 1987 Iona College, New Rochelle, New York 1987 - 1988 accountant at Dr. Grewe & Partner LLP, New York 1989 - 1990 accountant at BDO Deutsche Warentreuhand AG, Munich 1991 - 2001 accountant, tax advisor and auditor at AWT Horwath GmbH, Munich since 1994 tax advisor since 1997 auditor since 2002 auditor and tax advisor at BBH Munich and managing director of INVRA Treuhand AG Wirtschaftsprüfungsgesellschaft since 2005 partner at BBH since 2011 lecturer at Weserbergland University Areas of practice: segment reporting, regulation of grid charges, incentive regulation, audits of financial and consolidated financial statements, special audits, business valuations and business taxes Jürgen Gold Auditor, Tax Advisor Partner (since 2005) Contact: juergen.gold@bbh-online.de T.: 089/23 11 64-401 22.11.2018 Energy Industry

Worldwide: Top 10 Consulting Service Providers´Revenue, and Market Share 2009 (Millions of Dollars) Rank Vendor 2009 Market Share (%) 2009 1 Deloitte 4,354 6.2 2 IBM 3,958 5.6 3 PricewaterhouseCoopers 3,225 4.6 4 Accenture 2,590 3.7 5 Ernst & Young 2,327 3.3 6 CSC 1,769 2.5 7 KPMG International 1,689 2.4 8 Fujitsu 1,473 2.1 9 HP 1,313 1.9 10 Gapgemini 1,291 1.8 Other Service Vendors 46,147 56.9 Total Market 70,136 100.0 Source: Gartner (April 2010) 22.11.2018 Energy Industry

Consulting Service Providers Common attributes of Consulting Service Providers Scale: Global business Scope: Broad scope of the advisory services - from accounting, auditing, assurance, business and tax to transaction advisory services Skills: Broad skill base together with a deep business process understanding 22.11.2018 Energy Industry

Projects & infrastructure investment How we can help Projects & infrastructure investment The scale of capital project investment in the utilities sector is immense. Many companies are managing the biggest capex programmes they have ever undertaken. Deciding on the right finance and the right contract Keeping projects on course or getting them back on track Planning, (project) reporting, risk management Audit and compliance 22.11.2018 Energy Industry

Investment in energy sustainability How we can help Investment in energy sustainability There has been an increased focus on reducing emissions and transitioning to a lower carbon economy Solar power On- and offshore wind generation Smart grids E-mobility … Leveraging tax incentives 22.11.2018 Energy Industry

Anticipate regulatory changes Managing rates of return How we can help Regulation From approval of future investment plans all the way through to how energy is sold to customers, regulation plays a central part in power and utility companies´life. Anticipate regulatory changes Managing rates of return Evaluating the impact of regulatory regimes Ensuring compliance with regulatory requirements 22.11.2018 Energy Industry

Implementing trading processes and systems Risks policies How we can help Commodity trading Companies are increasingly engaging in trading to improve and add more flexibility to their asset position. Implementing trading processes and systems Risks policies Tax & accounting issues Regulation & compliance 22.11.2018 Energy Industry

Energy Transition in Germany Key topics concerning the energy transition (Energiewende): Challenges of the network expansion Security of supply ensured by power plants Development of renewable energies 22.11.2018 Energy Industry

Transmission Networks Expansion of transmission networks by 2020 Investment volume of approx. €6 billion (for a route of about 3.600 km) Connection of the offshore wind parks to the transmission network by 2020 Investment volume of approx. €3.7 billion (according to a study by DENA) for the connection to the grid of wind parks with a capacity of 7.000 MW 22.11.2018 Energy Industry

Case Example The investment is made for a period of 4 years; The investment is financed by 40% equity capital and 60% debt capital (loan); Based on provisions made as a result of regulatory requirements, the project company has a positive annual result starting in year 10; The loss carry forward arising due to the negative annual result until year 9 will be eliminated until year 13; Starting from year 14, the annual results will be distributed in full to the investors; In the phase in which no distribution is allowed because of the loss carry forward, about 2/3 of the free cash flow are used to settle the loan and about 1/3 is distributed to the investors out of the capital reserve. 22.11.2018 Energy Industry

Development of Liquidity and Result* (20) (10) - 10 20 30 40 50 60 70 80 90 100 1 2 3 4 5 6 7 8 9 11 12 13 14 15 16 17 18 19 21 22 23 24 25 Accumulated investment (right-hand axis) Annual profit Operating Cash Flow * Assumption: Financing with EC / DC = 40 / 60 Accumulated Investment in million euros Term in years Figures in million euros 800 400 480 560 640 720 320 Distribution ban due to loss carry forward 800 720 640 560 480 400 320 Dividends blocked by losses carried forward 22.11.2018 Energy Industry

Figures in million euros Development of Assets in View of Financing with Equity Capital/Debt Capital* Figures in million euros Return on equity in % Term in years 0,0% 5,0% 10,0% 15,0% 20,0% 25,0% 30,0% 35,0% 40,0% 45,0% - 100 200 300 400 500 600 700 800 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Interest-bearing debt capital (loan) Equity capital Assets Total debt capital (loan + provisions) Return on equity capital (right-hand axis) * Assumption: financing with EC / DC = 40 / 60 22.11.2018 Energy Industry

Financing of Network Expansion A massive network expansion does not enable financing from the transmission system operator‘s operating cash flow The legal framework has not been designed for the reconstruction of networks Companies need a massive inflow of equity and debt capital 22.11.2018 Energy Industry

Financing of Network Expansion Funding by the financial market Prerequisite: simple business model risks must be calculable and comprehensible stable cash flow Complex and to some extent incomprehensible regulation system  massive intervention by the government Development of a product that attracts investments in order to finance the network expansion 22.11.2018 Energy Industry

Long-term Fixed Rate of Return on Capital To date The rates of return on equity capital and debt capital are re-determined every five years, also for old investments Interest rate on equity capital 9.05 % (for investments after 2006) Interest rate on debt capital 3.55% (estimated value) Necessary Long-term (> 10 -year) fixed interest rate on total capital Ongoing adjustment of the interest rate for new investments Return on the total capital based on the WACC approach Calculation of the rate of return based on the CAPM method 22.11.2018 Energy Industry

What can we do within the AGN group? Conclusions What does the Big 4 have? Focus on energy Global energy institutes Global energy conferences on a yearly basis What can we do within the AGN group? Energy Industry - Business Opportunities arising – Follow UP Thuesday, September 24, 16.30 – 17.00 22.11.2018 Energy Industry

Contact Person: Jürgen Gold, Auditor, Tax Advisor