1. Approach to European Wind Power markets
by Henrik Balle
Senior Project Manager
Markets & Acquisitions – Wind power
DONG – Danish Oil and Natural Gas

2. Longer-term production
DONG well situated between Scandinavia and Northern Europe
Oil and gas prod.
Production today
Longer-term production
Near-term production
DONG market
DONG distribution
Natural gas pipeline – owned by DONG
Transmission net – owned by the Danish state
Natural gas pipelines partly owned by DONG
Gasled natural gas transmission system
Natural gas storage owned by DONG
Ormen Lange
Trondheim
Kollsnes
Oslo
Kårstø
Stavanger
Sleipner
Göteborg
St. Fergus
Harald
Syd Arne
Nybro
Tyra
Currently 100% state-owned
IPO scheduled for 2007
State ownership to stay above 50%
København
Lübeck
Dublin
Easington
Emden
Bacton
Den Helder
ProArc
London
Zeebrugge
Dunkerque
250 km

3. Integrated energy company with revenue of EUR 3.6 billion*
E&P
Generation
Renewables
Infrastructure
Sales
INTERGAS SUPPLY
Offshore Wind
Onshore Wind
Hydropower
Electr. & gas customers
Gas customers
Electr. distribution
Gas distribution
Reserve base of more than 350 million boe
Hereof 40 bcm gas
Three focus areas
The Danish part of the North Sea
Mid-Norway
West of the Shetland Isles
Effective and diversified conventional electricity production
6,200 MW capacity (coal, gas, and bio mass)
Large wind capacity in Denmark and abroad (600 MW)
Significant wind power projects in Denmark and abroad
Hydropower in Norway and Sweden (500 MW)
Two natural gas storages (760 million m3)
Gas distribution
100,000 customers
Electricity distribution
900,000 customers
International gas infrastructure (Sweden, Holland and Germany)
Sale of approx. 8 bn m3 natural gas and significant volume of power
1,000,000 customers in Denmark
Market leader in Denmark and Sweden
Niche player in Germany and Holland
ProArc
* DISCLAIMER: Based on arithmetic calculations. Figures include unaudited figures and DONG’s own estimates
and serve for illustration purpose only. Figures assume all agreed DONG acquisitions are successfully completed

4. Wind assets following merger with Energi E2/Elsam
As part of the purchase of Elsam shares from Vattenfall DONG will swap assets, including wind farms
ProArc
Vattenfall will take over a number of wind energy assets, but the new wind business will remain a major player

5. Portfolio of development projects in European growth markets
Off-shore pipeline for – around 2,300 MW (est.)
Offshore projects under development:
DE: Borkum Riffgrund MW
UK: Scarweather Sands MW
Walney MW
London Array MW
Shell flats MW
West of Duddon Sands 167 MW
Burbo Bank MW
DK: Nysted II MW
Horns Reef II MW
Existing pipeline is focused on European growth markets
On-shore pipeline for 2006 only – around 200 MW (est.)
Onshore projects under development:
Pipeline consists of several medium to large scale projects (>20 MW)
ProArc

6. Strategic Market Approach / Risks
Basis will be a perception of markets in North West Europe:
A Central Nordic Footprint
ProArc
Home market
1. priority
2. priority

7. Relevant market overview ~ Risk perspective
Factor
Market
Offtake
Onshore/Offshore
Wind
Permitting process
Denmark +
Market based – terms not attractive at the moment ++
Only option is offshore
Good and well known regime
Known procedure – understanding authorities UK
+++
Market based – terms attractive at the moment
Onshore and offshore potential
Good wind conditions in general
Many interests involved
Germany
Feed-in tariff by law – Fixed price for 20 year
Expensive developments
Onshore short term and offshore long term. Potential for both
+/++
Onshore/-Offshore
Known procedure, but depending of local influence
Norway
Only potential for limited nos. of onshore
Good wind conditions
Known procedure for concessions
Sweden
Few large onshore-projects and only few single offshore-projects
Offshore wind will be more attractive
Very cumbersome procedure – more than 12 MW to high level decision
Total rating
Risk rating
7 +
9-10 +
9 +
4 +
Medium
/high
Medium/low
Low
High
ProArc

8. Other markets ~ Risk perspective
Factor
Market
Offtake
Onshore/Offshore
Wind
Permitting process
France ++
Feed-in tariff - with correction factor
Only real option is onshore – so far
Regionally good, but new regime +
New procedures for authorities – bureaucracy?
Spain
+++
Feed-in tariff by law – Choice of regime High entry costs
Only onshore – but large potential
Regionally good
Recognised, but regional proces
Greece
Feed-in tariff by law
Only onshore
Regional differences
Known procedure, but locally influenced
Total rating
Risk rating
7 +
9 +
Medium
/low
Low
ProArc

9. WACC – Weighted Average Cost of Capital / Hurdle rates
Risk assessment
Systematic/generic risks (external risks)
Non-systematic / Project specific risks (internal risks)
Define WACC for each market
Build into cash-flow projections
To what extent does project survive relevant hurdle rate – if at all??
IRR
ProArc No
Yes

10. Definition of WACC/Hurdle rate
The definition of WACC for each market includes :
Impact of generic wind risk
Impact of Offtake/market risk (income)
General/average O&M risk (costs)
Relation/sensitivity between fixed and variable costs
General construction/completion risk
Average lending to investments (50-80%)
Long term interest risk impact
Credit risk margin
ProArc

11. Stages of Project and relevance of risks
Off-take
Technology
Grid interconnection
Construction offshore
O & M
Construction onshore
Grid interconnection
Counterpart/-Credit
O & M
Wind
Technology
Technology
Wind
Political
Political
Off-take
Counterpart/-Credit
Phase 1
Early Development
Phase 2
Late Development
Phase 3
Construction
Phase 4
Operation
ProArc
Photo by Gunnar Britse:
Nysted Offshore Wind farm, Denmark

12. Examples of WACC/Hurdle rates
IRR/Return on relevant markets - Risk assessment/WACC = CREATION OF VALUE on investment !!
Country
Project
Phase
IRR
(Total investment)
WACC
Creation of Value
 (IRR-WACC) UK
Onshore
II/III
pre-construction
8.5-9% %
+++
Offshore %
8-9%
Germany % ++ IV
in operation
7-8%
6-7%
8-10%
Norway
9-9.5% +
Sweden
ProArc

13. Thank you for listening! ?
Henrik Balle Senior Project Manager DONG Renewables Tel Mob Fax
ProArc