1. 1 Pure Energy Professionals The Renewables Obligation A commercial perspective

2. 2 "The current economics of the project are marginal at best - with rising steel prices, bottlenecks in turbine supply and competition from the rest of the world all moving against us.” Paul Golby, chief executive of E.On UK, 2 May 2008

3. PEP’s Credentials

4. 4 Structure of the presentation 1.The RO is a “market based” approach to renewables – What does the market want? 2.Has the RO delivered? 3.Conclusions

5. 5 What does the market want? Growth in UK renewables will happen if investors consider the UK a good place to invest in.

6. 6 What does the market want? Growth in UK renewables will happen if investors consider the UK a good market to invest in. What makes a “good market”?

7. 7 What does the market want? Predictable capital costs Predictable income Stable regulatory regime

8. 8 What does the market want?

9. 9 How can an investor predict forward ROC prices?

10. 10 What does the market want?

11. 11 What does the market want? How can an investor predict forward electricity prices?

12. 12 What does the market want?

13. 13 What does the market want? Current market good for equity, less good for leveraged finance Growth towards 2020 target will require both – competing for capital in a global market Managing political risk lowers value

14. 14 “There’s no doubt that the Obligation has been successful in stimulating growth in the utilisation of the UK’s considerable renewable energy resources. Total generation from renewable sources eligible for the Obligation was around 4% in 2005, up from 1.8% in 2002” Malcolm Wicks, Minister for Energy, 2007 White Paper

15. 15 Has the RO delivered?

16. 16 Has the RO delivered?

17. 17 Has the RO delivered?

18. 18 Has the RO delivered?

19. 19 Has the RO delivered?

20. 20 Has the RO delivered?

21. 21 Has the RO delivered?

22. 22 Has the RO delivered?

23. 23 Has the RO delivered?

24. 24 Conclusions RO has stimulated more investment in UK renewables Favours more mature technologies BUT UK is competing for global capital

25. 25 Conclusions Current pricing favours equity over debt ROC banding should stimulate investment in next stage technology – biomass, then marine/tidal