EVN
Hydropower Development
in Albania
The River Devoll Project
Dr. Michael Laengle, CFO
Agenda
> EVN – Overview and strategy
> Albania – Electricity market in SEE
> The River Devoll project
Company profile – fact sheet 2007/08
EVN
EVN is a leading integrated energy and environmental service group serving customer in Lower Austria and Central and Eastern Europe
Business areas Electricity, gas, heating, water, waste incineration
Countries
Austria, Albania, Bulgaria, Croatia, Cyprus, Denmark, Estonia, Germany, Hungary, Latvia, Lithuania,
Macedonia, Montenegro, Poland, Russia, Slovakia, Slovenia, Turkey
Employees 9,342 (–2.0%) thereof ~ 75% in abroad
Revenue 2,397.0 EUR m (+7.3%)
EBITDA 362.3 EUR m (+3.3%)
EBIT 166.6 EUR m (–15.6%)
Net results 186.9 EUR m (–17.7%)
Credit Rating
Moody’s: A1, stable
Standard & Poor’s: A, negative
EVN currently active in 18 CEE countries
Highlights Energy supply
> About 1 m electricity, gas, heat and water customers in Lower Austria
> 1.6 m electricity, 40,000 heating customers in Bulgaria
> 720,000 electricity customers in Macedonia Electricity generation
> 1,829 MW generation capacity (gas, coal, hydro, wind and biomass)
> Construction of a coal-fired power plant of 790 MW in Duisburg-Walsum, Germany
Networks
> 127,294 km electricity networks, 10,650 km gas pipelines and 540 km heating networks
Environmental services
> Waste incineration plants of 300,000 tons p.a.
in Lower Austria, 360,000 tons p.a. in Moscow
> More than 80 drinking and waste water plants for more than 10 m people
EVN presence Energy supply
Drinking and wastewater project Waste incineration
Power station under construction/project Group headquarters
Regional location
EVN’s strategy - Focus on Energy and Environmental Services
>Benefit from strategic advantages:
>Common customer basis („one-stop shop“)
>Know-how-transfer primarily in generation and networks
>Regional synergies in operation and supply (currently mainly in Austria)
>Benefit from administrative functions of head office for non-domestic activities
>Optimisation of financial resources
Traditional EVN core activities …
>
Energy
> Generation
> Networks
> Supply
> Waste incineration
> Drinking water
> Waste water
… complemented by related
infrastructure and environmental services
>
Environment
EVN – important energy market player in SEE
> EVN assets:
- Network operator / supplier - District heating plant in
Bulgaria
- Hydro power plants in Macedonia
> Bulgaria: Fully liberalised
electricity market starting on July 2007 Æ fully negotiable prices versus long-term electricity supply agreements and limited
generation capacities
> Macedonia: Single-buyer model, some eligible customers,
electricity prices amount to only one-third of the level in WE
> Electricity prices amount to only 30-50% of the Western European level
EVN’s strategy:
> Vertical integration Æ increase of production capacities
> Modernisation of grid networks
> Active electricity trading
Black Sea Western
Bulgaria
North Eastern Bulgaria
South Eastern Bulgaria Sofia
Plovdiv
Greece
Turkey Romania
Serbia
Bulgaria
Macedonia
Albania
Skopje
Electricity sales and generation
> Strong growth and high exposure in electricity supply
> Coverage ratio of the Group: ~20%
> Coverage ratio excl. Bulgaria and Macedonia: 60-70%
> Mid-term target:
- Increase of coverage ratio to min. 40%
- Vertical integration in SEE 18,043
19,372 15,641
4,022 4,556
3,451
0 5,000 10,000 15,000 20,000
2005/06 2006/07 2007/08 Electricity sales
Electricity generation
Agenda
> EVN – Overview and strategy
> Albania – Electricity market in SEE
> The River Devoll project
Albania: Transition economy
> Strong GDP growth:
- 2003–2008: ~ 6.0%
> Best GDP forecast among transition economies in Europe
- 2009–2011e: 3.0 – 6.0%
> Strong expected economic development Æ significant increase in electricity demand
> Bottlenecks in the whole electricity sector:
production, interconnection and transformers
> Population: 3.2m
> GPD/capita (2008): 6,400 EUR - 25% of EU-27
- 44% of EU-12
> Huge potential for basic infrastructure investment
Black Sea Sofia
Plovdiv
Greece
Turkey Romania
Serbia
Bulgaria
Macedonia
Albania
Skopje Tirana
Challenging electricity situation in Albania
>
Electricity demand: 6,700 GWh
- Domestic production: 4,100 GWh
- Import: 2,400 GWh
>
High dependency from electricity import
>
Current energy production
represents only one-third of total hydro power potential
>
Hydro power potential:
- River Drin: two HPP - River Vjosa: seven HPP - River Devoll: three HPP
>
Bottleneck in interconnections
Electricity demand scenarios for Albania
5,000 10,000 15,000 20,000 25,000
1980 1990 2000 2010 2020 2030
historic demand high forecast
medium forecast low forecast GWh/a
>
Electricity demand will triple until 2030 from 7GWh to ~ 20 GWh
>
Expected growth rate:
5% p.a. with high volatility:
- Winter period: 4%
- Summer period: 7%
>
Peak hour is at 9:00 p.m.
and a strong increase
again in the morning
Electricity market reform
> Attract strategic investors in the sector through implementation of privatisation
> Establish a competitive electricity market consistent with EU requirements:
- 2006: Ratification of The Energy Community Treaty - 2007- 2008: new market model
• Restructuring of the national electricity company
• Unbundling of transmission and distribution system operators
• Separate wholesale and retail supply function
Energy sector Albania - Current situation
> A free energy market (wholesale, balancing,…) is not established Æ market liberalisation expected in mid-term
> Agreements between market participants are subject for approval and enforcement by the Energy Regulatory Commission
> Future development could be assumed similar to other more developed markets in the region or in the EU
> Energy shortage and therefore energy outages are common
> The whole region is not supplied adequately with energy
> Further demand due to high growth of economy and population in Albania expected
> Interconnection with the high-voltage electricity network enable
export possibilities
Grid connection
> Good integration into the
Albanian network
Agenda
> EVN – Overview and strategy
> Albania – Electricity market in SEE
> The River Devoll project
1. Project description
2. Concession Agreement
3. Business and financing model
4. Risks and challenges
> Concession for three large hydro power plants on the River Devoll in
Albania
> Capacity: 320 MW
> Electricity production:
1,000 GWh p.a.
> Investment: EUR 950m
> 50:50% joint venture with Statkraft (Norway)
> Excellent opportunities for peak energy due to flow conditions
1. The River Devoll Project
1. Planned powerhouse locations
2. Conclusion of Concession Agreement
> December 19, 2008
- Signing Concession Agreement with the Ministry of Economy, Trade and Energetics
- Signing Transmission Network Agreement with the
Transmission System Operator
> January 21, 2009
- Ratification of the Concession Agreement by Albanian Council of Ministers
> February 23, 2009
- Ratification by Albanian Parliament
> April 1, 2009
- Effective date
2. Main elements of the Concession Agreement
> BOOT concession
> Joint venture with Statkraft (Norway)
> Flexibility and optimisation of applied technology
> Stepwise realisation of the three plants
> Free marketability of electricity generated
> Strong commitment from authorities and governmental institutions
3. Business model
Supply
Statkraft EVN AG
Joint venture project company
Hydro power plants River Devoll
50% 50%
Power purchase agreements
3. Financing model
> Raising of the funding after pre-construction phase
> Project financing structure envisaged on a „limited recourse“-basis with a respective share of equity
> Project-specific securities including:
• Completion guarantee for completion risks which are not transferable to the EPC-contractor during construction phase
• Appropriate sponsors support to mitigate economic risk during operation phase
> Involvement of multilateral financial institutions and export credit
agencies (ECAs) to cover political risks (e.g. EBRD, IFC, EIB, MIGA,
OeKB)
4. Project challenges and opportunities
> Challenges
- Sophisticated technology (long diversion tunnels, high dams, existing dam structure)
- Geological challenges - Environmental challenges - Social challenges
- Approval procedure
> Opportunities
- Long-term investment
- Growth market (shortage of electricity in SEE) - Renewable energy
- Peak electricity
- Free marketability on the whole region
- Strong commitment from authorities / political institutions in Albania
4. Benefits for Albania
> Increase of the domestic electricity production by ~ 20%Æ state-of- the-art hydro power storage system, highly flexible peak-load
> Financial income for the budget at estimated cumulative EUR 1,000m through increased government's revenues
> Increase of GDP growth rate by 2%, stimulation of the economy
- Construction phase
• Directly: ~ 5,000 people for 6 years (= 30,000 men year)
• Indirectly: >2,500 people for 6 years (= 15,000 men year)
• Salaries directly: EUR 120m
• Salaries indirectly: EUR 60m
• Decreasing of the unemployment rate (currently: 13%) - Operating phase
• 300 permanent new jobs for joint venture company and suppliers
• Salaries (estimated on real terms): EUR 50m
Disclaimer
Certain statements made in this presentation may constitute „Forward-Looking Statements”
within the meaning of the U.S. federal securities law. Forward-looking information is subject to various known and unknown risks and uncertainties. These include statements concerning our expectations and other statements that are not historical facts.
The Company believes any such statements are based on reasonable assumptions and reflect the judgement of EVN’s management based on factors currently known by it.
No assurance can be given that these forward-looking statements will prove accurate and correct, or that anticipated, projected future results will be achieved.
For additional information regarding risks, investors are referred to EVN’s latest annual report.
