1. October 2004 Wind Power in Denmark How did it start?

2. 2 Wind Power in Denmark 1st Oil crisis in 1973-74 Denmark in 1974 100% import of oil, gas & coal 0% domestic hydro, wind and nuclear Denmark in 2004 Net export of oil & gas 20% wind penetration

3. 3 Wind Power in Denmark Federal Authorities – guidelines for permitting Building, environmental, grid connection, tax TRANSPARENCY AND PREDICTABILITY Avoid local interpretation and unclear rules NO special rules for wind – unless required Regional Authorities Develop regional plans for deployment of WTG Grid connection Within designated area = owner’s cost Outside designated area = utility cost Cost of balancing, substation & transmission is shared by all consumers

4. 4 Wind Power in Denmark Power Purchase Agreement Guaranteed right to dispatch PPA on take or pay basis Fixed price throughout lifetime – Later only for full load hours (=debt repayment period) After full load – normal tarif plus green premium Tax depreciation No incentives – normal rules for depreciation of industrial equipment Do not invest for tax – keep focus on generation

5. 5 Alternative Finance Structures Emerging Markets Down Payment and full recourse loan based on Owner’s balance sheet Officially Supported Export Credits Markets conditions ECA insurance cover is key for availability of credits Soft loan Grant from donor country Developed Markets Equity and non-recourse loan based on project cash flows

6. 6 Alternative Finance Structures Export Credit: Full recourse loan Flexible loan documentation Acceptable credit rating of guarantor and/or buyer Project should be commercially viable Project Finance: Non-recourse loan Complex security package No guarantor required - only project cash flow Project must be bankable Expensive and time- consuming due diligence. Expensive and time- consuming documentation

7. 7 Soft Loans Improves Project Viability (IRR) Government bureaucracy Time consuming reports, documentation and delays Project Viability Full recourse loan Acceptable guarantor required

8. 8 Alternative Finance Structures Vestas Buyer/Borrower Vestas Bank Danida AfDB Contract Loan Guarantee Grant Payments Recourse Agreement

9. 9 Alternative Finance Structures VestasBuyer/Borrower Euro Fund Vestas bank AfDB Local Bank EKF Contract Loan On-lending Payments Risk Sharing Insurance cover