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

2. 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.
Energy Industry

3. 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:
T.: 089/
Energy Industry

4. 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)
Energy Industry

5. 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
Energy Industry

6. 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
Energy Industry

7. 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
Energy Industry

8. 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
Energy Industry

9. 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
Energy Industry

10. 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
Energy Industry

11. Transmission Networks
Expansion of transmission networks by 2020
Investment volume of approx. €6 billion (for a route of about 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 MW
Energy Industry

12. 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.
Energy Industry

13. 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
Energy Industry

14. 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
Energy Industry

15. 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
Energy Industry

16. 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
Energy Industry

17. 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 %
(for investments after 2006)
Interest rate on debt capital %
(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
Energy Industry

18. 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, – 17.00
Energy Industry

19. Contact Person: Jürgen Gold, Auditor, Tax Advisor