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Alternative Energies

VIEWS: 22 PAGES: 81

  • pg 1
									         Alternative Energies                                                                                                         9 November 2007

                                                                                                                                                        Europe




Companies Mentioned
Ticker                Rating               Price              TP
EKT GR                NEU                  €4.40            €4.70
PNE3 GY                BUY                 €2.75            €4.80


Sector performance                                                                                                         TAKE OFFshore
-1M 9.2%                -3M 16.0%               YTD 59.5%


462
                 The WilderHill New Energy Global
                                                            462     s   Massive offshore wind development is ready to take off and we see this subsector
                 DJ Euro Stoxx
                                                                        as one of the most promising ways to combat climate change. Most European countries
420                                                         420         are reaching maturity in their onshore wind expansion since the most attractive
                                                                        locations (highest wind speed areas) have been occupied yet. However, wind power is
378                                                         378
                                                                        still the only large scale alternative able to meet EU targets (20% from renewables by
                                                                        2020) and therefore it will force operators to keep investing in the sector. By 2015 we
336                                                         336
                                                                        expect at least 10GW offshore wind capacity to be installed across Europe against less
294                                                         294         than 1GW at present. The EWEA even targets 150GW by 2030 with the North Sea and
                                                                        the Baltic Sea as most attractive areas.
         D   J    F    M   A   M   J   J    A   S   O   N

                                                                    s   Momentum in the European renewables area is moving offshore. Offshore wind
                                                                        will be highly competitive to gas and coal by 2020 (€55/MWh) upon technical
                                                                        improvements and larger scale of the farms (300MW on average). The benefits of
                                                                        offshore wind are numerous: a lot larger than onshore farms, more advantageous wind
                                                                        resources resulting in improved load factors (3,400 hours against 2,100 hours onshore)
                                                                        and a more generous remuneration.

                                                                    s   Regulatory support for offshore wind to gain momentum. Most European countries
                                                                        with strong offshore wind potential are currently setting advantageous tariffs and
                                                                        speeding up the consenting process. In Germany a new law will increase the feed-in
                                                                        tariff for offshore from € 91/MWh to € 110-150/MWh while developers won't need to pay
                                                                        anymore for grid connection. Also in the UK offshore wind is highly subsidized as
                                                                        operators receive 1.5 green certificates per MWh opposed to 1 for onshore wind farms.
                                                                        We value an average offshore project in Germany at € 2.66m/MW once operational
                                                                        implying an added Equity Value of € 0.68m/MW. These economics are almost double
                                                                        the value of onshore wind farms.

                                                                    s   We initiate coverage on Plambeck Neue Energien (Buy, € 4.8) and Energiekontor
                                                                        (Neutral, € 4.7). In Europe, Germany will be one of the lead movers with an actual
                                                                        pipeline of 24.5GW. This is a country where Plambeck and Energiekontor have high
                                                                        exposure to and we think especially Plambeck will attract lots of bargain/value hunters
                                                                        with its over 2,500MW pipeline. We have used a € 110/MWh German feed-in tariff in
                            Analyst: Dieter Furniere
                                                                        our models, although a shift to € 150/MWh would inflict a rise of our TP by over 100%
                                     +32 2 222 55 45
                           dieter.furniere@dexia.be                     to € 11.0/share for Plambeck and € 12.0/share for Energiekontor. We furthermore
                                                                        discuss and value four offshore wind projects in the Benelux: C-Power, Eldepasco,
                                                                        Belwind and Q7.




                                                                        Please refer to important disclosures and analyst certification on pages 78 - 80 of this report.
Renewables                                                                                                                                       2



             I.      CONTENT

             I.      CONTENT ...................................................................................................... 1


             II.     OFFSHORE - THE NEXT ERA ...................................................................... 3
                     II.1.    Differences offshore – onshore ........................................................................3

                     II.2.    About Kyoto and EU targets.............................................................................4

                     II.3.    Renewable energy by 2025..............................................................................5


             III.    CLEAR SKIES AHEAD FOR OFFSHORE WIND .......................................... 7
                     III.1. Feeling windy ...................................................................................................7

                     III.2. Remuneration favors offshore wind..................................................................8

                     III.3. New technology: sales top service flop? ..........................................................9

                     III.4. Taking a deeper look into capex, especially the grid ......................................10

                     III.5. Environmental constraints ..............................................................................11


             IV.     THE OFFSHORE WIND DEVELOPMENT PROCESS: GERMANY .......... 13


             V.      SCRUTINIZING EUROPE’S OFFSHORE WIND POTENTIAL ................... 17
                     V.1.     Wind energy output gains scale .....................................................................17

                     V.2.     Using offshore to realize Europe’s renewable targets ....................................18

                     V.3.     Germany: still room to grow in wind but moving offshore ...............................20

                     V.4.     Belgium, any way the wind blows...................................................................24

                     V.5.     The UK, in the vanguard of the European offshore league ............................25

                     V.6.     The Netherlands, still blowing in the wind ......................................................27

                     V.7.     France is rolling in wind..................................................................................28

                     V.8.     Portugal, virtually locked to new entrants .......................................................29

                     V.9.     Italy: strong incentives, onshore wind is booming ..........................................29

                     V.10. Spain, can countryman Don Quixote swim?...................................................30

                     V.11. Poland, regulation to be revisited ...................................................................31

                     V.12. Denmark, taking some time off.......................................................................32


             VI.     THE OFFSHORE WIND PLAYERS ............................................................. 33
                     VI.1. European wind farm ownership evolution.......................................................33

                     VI.2. The next step is offshore ................................................................................35


             VII.    VALUATION AND ECONOMICS ................................................................. 37
                     VII.1. What does it cost?..........................................................................................37

                     VII.2. Valuation of a reference offshore wind project per country ............................38


             VIII.   LOOKING AT THE BELGIAN PROJECTS .................................................. 41
                     VIII.1. C-Power, the first Belgian offshore wind project.............................................41




                             Equity Research
Renewables                                                                                                                                         3



                    VIII.2. Eldepasco.......................................................................................................47

                    VIII.3. Belwind...........................................................................................................49


             IX.    Q7, OFFSHORE IN THE NETHERLANDS .................................................. 52
                    IX.1. Positioning......................................................................................................52

                    IX.2. Shareholders and management background..................................................52

                    IX.3. Q7’s project portfolio ......................................................................................53

                    IX.4. P&L and valuation ..........................................................................................53


             X.     PLAMBECK: A ROCKY ROAD TO OFFSHORE SUCCESS ...................... 55
                    X.1.     Regaining unconsciousness...........................................................................56

                    X.2.     Finding PNE’s position in the wind value chain ..............................................57

                    X.3.     Shareholders and management background..................................................58

                    X.4.     Plambeck’s project portfolio............................................................................59

                    X.5.     Financials: Focus on guidance .......................................................................62

                    X.6.     All eyes on the offshore division .....................................................................64

                    X.7.     Financial Profile..............................................................................................66


             XI.    ENERGIEKONTOR, TAKING ON THE OFFSHORE CHALLENGE............ 67
                    XI.1. A little history lesson not to be proud of..........................................................68

                    XI.2. Wind development, from the cradle to the grave ............................................68

                    XI.3. Shareholders and management background..................................................69

                    XI.4. Energiekontor’s project portfolio .....................................................................70

                    XI.5. Financials, taking on some operation .............................................................72

                    XI.6. Valuation ........................................................................................................73

                    XI.7. Financial Profile..............................................................................................75


             XII.   ROUND-UP: PNE VS. ENERGIEKONTOR .................................................. 76
 Renewables                                                                                                                                                           4



                                              II.      OFFSHORE - THE NEXT ERA

                                              II.1. Differences offshore – onshore
 Higher capex for offshore wind               Throughout this report, we will illustrate the huge potential of offshore wind. Not only will the
 countered by better wind                     installed base enjoy exponential growth, also the economics are to favour offshore wind
 quality and growth potential                 development, in spite of high initial costs. Looking at the full cost of existing power plants, offshore
                                              wind is not competitive yet to gas, coal, nuclear and not even to onshore wind as it still stands in its
                                              infancy. However, we are confident that, just like for onshore wind, strong capex reductions are
                                              possible going through the learning curve. Taking into account estimates from GWEC on capital
                                              cost reduction, offshore wind will be fully competitive to gas and coal by 2020.

Graph 1: Historical onshore capex evolution (€/ kW)                               Graph 2: Projected offshore capex evolution


  3,500                                                                            2,600
                             Learning curve
  3,000                                                                            2,400
                                                              Higher cost of       2,200
  2,500                                                          materials
                                                                                   2,000
  2,000
                                                                                   1,800
  1,500
                                                                                   1,600
  1,000                                                                            1,400

    500                                                                            1,200

      0                                                                            1,000
          1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006                 2000   2003   2006   2009   2012   2015   2018    2021    2024   2027   2030


                                  Source(s):          UK parliament, Dexia Est.                                         Source(s):          UK parliament, Dexia Est.




                                                      The advantages of offshore
                                                    Larger in scale: While onshore wind parks have a typical size of 15MW, offshore on average
                                                    reaches 60MW while this will go up to 300MW in the future. We have even identified German
                                                    projects of 1,000MW (~ 1 nuclear plant). As a result grid connection costs and O&M costs can
                                                    be spread more easily.

                                                    Higher load factor: Given the higher wind speed on sea, offshore wind parks are
                                                    characterized by improved running hours at 3,400x p.a. against 2,100x p.a. for onshore.

                                                    More favourable remuneration: In Europe’s main wind countries the offshore premium over
                                                    onshore stands at € 20-40/MWh. For Germany we have pencilled in a feed-in tariff of €
                                                    110/MWh while we acknowledge negotiations are still ongoing to raise current tariff of €
                                                    91/MWh towards the range € 110-150/MWh.


                                              Graph 3: Tariffs offshore versus onshore

                                                                                            € 167/MWh
                                                                                  € 132/MWh
                                                                                                                                             € 130/MWh
                                                                 € 110/MWh                                       € 116/MWh
                                                          € 89/MWh                                        € 93/MWh
                                                                                                                                € 83/MWh




                                                                   Germany                   UK                    Spain                    France

                                                                                       Onshore                          Of f shore


                                                        Source(s): Dexia Est.,* Our expectation for Germany is € 110/MWh out of the range € 110-150/MWH
Renewables                                                                                                        5



             Table 1: European offshore vs. onshore wind
                                                             Onshore             Offshore             Comment
             Wind speed (m/s)                                   4-8+               8-12+
             Average plant scale                               15MW               300MW
             Technical availability                             98%                 95%
             Capex € / kW                                  1,200 - 1,600       2,200 - 3,000
             Operating hours                                  ~ 2,100             ~ 3,400
             Capacity factor                                    29%                 40%
             Opex per kW                                       30,000              75,000
             Lifetime (years)                                    25            25 (unproven)
             Installed capacity in Europe MW (end '06)         47,072                904            98% onshore
             Installed capacity in Europe MW (end '15)        115,919              10,444           92% onshore
             CAGR 06-‘15E                                       10%                 30%
             Installed capacity in Europe MW (end ’30)        150,000             150,000           50% onshore
             CAGR 06-’30E                                        5%                 24%
             Debt factor                                       75/25                65/35
             Project credit spread (bps)                      150-200             200-250
                                                                                               Source(s): Dexia Est.


             II.2. About Kyoto and EU targets

             We cite the vice president of Total’s renewable energies division: “wind power is currently the only
             alternative energy form capable to meet EU targets and to boost the share of renewables in total
             energy consumption from 14 to 22%. This should be achieved primarily by developing offshore
             wind farms.” And he is not alone. A read across the renewable energy (RE) sector demonstrates
             that offshore wind is capital in meeting Europe’s RE targets and has tremendous potential to
             secure supply and to reduce greenhouse gases.

                    Kyoto protocol, achieving 2012 targets


             The EU adopted the Kyoto protocol through the introduction of burden sharing targets of -8% by
             2012. Still lots of work needs to be realized since by 2005 only a reduction of 2% was achieved. To
             achieve these targets severe investments are needed like the extension of nuclear plant lifetimes,
             the use of CDM/JI, CHP, clean coal, CO2 power plants and especially renewables. This will take
             place through the NAP 2008’12 scheme.

                    Long term planning through the EU’s Renewables Directive


             The Green Paper “A European Strategy for Sustainable, Competitive and Secure Energy”
             proposed the preparation of a renewable energy roadmap. The Green Paper also foresaw the
             preparation of a European Strategic Energy Technology Plan that aims at moving Europe towards
             a low carbon energy system, e.g. by permitting a sharp increase in the share of lower cost
             renewables, including the roll-out of offshore wind. In December 2006, the European Parliament
             voted on the issue of renewables targets. It adopted, in its resolution, a 25% overall renewable
             energy target and a sector target for renewable electricity of 35% by 2020 (including hydro). Wind
             could contribute 12% of EU electricity by 2020. One third of this will more than likely come from
             offshore installations. This is feasible, for example, currently 18% of electricity consumption is
             covered by wind in Denmark. In Spain and Germany this is 8% and 6% respectively.

             The Energy Package released in January 2007 is the Commission’s follow up on the consultation
             and has led to the adoption of a binding 20% target for renewables by 2020 (excl hydro).
 Renewables                                                                                                                            6



                                      Graph 4: GHG emissions (base year = 100)




                                                                                                           Source(s): European Commission


                                             Taking a look at national targets


                                      Differentiated national overall targets are derived with Member States’ full involvement with due
                                      regard to a fair and adequate allocation taking account of different national starting points and
                                      potentials, including the existing level of renewable energies and energy mix. These steps consist
                                      of agreeing on the contribution that the 27 EU Member States have to make in order to reach the
                                      target and adapting the legislative framework to allow an adequate monitoring of the new
                                      commitments. Most European countries are lagging far behind their initially targets set.

 Graph 5: EU burden sharing targets 2008-’12 vs. 1990 (%)             Graph 6: % change in emissions between 1990-2005




                         Source(s):     European Environment Agency                           Source(s):     European Environment Agency




                                      II.3. Renewable energy by 2025

Offshore wind, renewable of the       The question on the type of renewable energy that will be the most durable by 2025 was studied by
future                                our renewable energy team. In this study a conclusion was made on the basis of the Boston
                                      Consulting Group matrix (BCG), used for analyzing business units or product lines. Based on the
                                      terms cash cow, dogs, question marks and stars Tidal wave, PV, Geothermal, Biomass, Onshore
                                      wind, offshore wind and Fuel Cells were compared. On the axes we range the renewable energy
                                      types based on the growth potential and market share. As a result of this study, wind at sea is a
                                      star and shows the largest potential.
Renewables                                                                                                       7



             Graph 7: Dexia Renewables matrix, renewable energy by 2025


                                                                            Tidal wave
                            Offshore wind
                G
                r    H
                o    i
                     g
                w    h                                                      Photovoltaics
                t
                h                            Biomass
                                                                                                    Geothermal

                P
                o            Onshore wind
                t
                e
                n
                     L
                t    o
                i    w
                a
                l                                 Hydro                                     Fuel Cells



                                     High                                         Low
                                                             Market share


                                                                                            Source(s): Dexia Est.
 Renewables                                                                                                                              8



                                     III. CLEAR SKIES AHEAD FOR OFFSHORE WIND

                                     III.1. Feeling windy
                                     Superior quality of wind resources on sea drives the offshore wind business. The North Sea and
                                     Baltic Sea in particular are good wind areas with speeds of 8-12m/s at open sea wind vs. 4-8 m/s
                                     on land. The widely available sea area furthermore offers opportunities for larger farms, close to the
                                     scale of gas, coal and even nuclear plants.

           Graph 8: European wind resources at 50 metres above ground level




                                                                                                          Source(s):   European Wind Atlas

Extremely good wind quality in the   In Germany, Belgium, France and the Netherlands wind speed on land is 4.5-6.5m/s against 6-
North and Baltic Sea                 7m/s at the sea coast and 8-9m/s in open sea. The UK seems to be an exception as with speed
                                     ranging up to around 9.5m/s at hub height (50-60 metres above sea level) often higher than
                                     offshore wind farm at 5km from the shore that are in the range of 8.3-9m/s. The UK is characterized
                                     as an extremely windy region with both tremendous onshore and offshore potential. In general wind
                                     speed offshore is approximately 40% higher than onshore boosting load factors with offshore plants
                                     running 3,400hours p.a. against 2,100 onshore.

                                     Graph 9: Beaufort wind scale




                                                                                                           Source(s): Macfarlane Generators

                                     Production of wind energy usually starts at about 4 m/s (Beaufort Force 3) and increases more or
                                     less linearly until 13m/s (Beaufort Force 6/7). Many machines halt operations at about 20m/s.
 Renewables                                                                                                                                9



                                     III.2. Remuneration favors offshore wind

Graph: Remuneration scheme
                                     In Europe two standard mechanisms have been determined to remunerate green electricity
                                     producers. Feed-in tariffs are used in Germany, Denmark and Spain, the countries with the largest
                                     amount of onshore wind installed. Green certificates and quotas were introduced in Belgium, the
                                     UK and the Netherlands. A feed-in tariff system is the most attractive for green electricity producers
                                     as it creates cash flow visibility within a sustainable framework.

                                            Feed-in tariff
                                     A feed-in tariff is a mechanism designed to promote the uptake of renewable energy through
                                     government legislation. The regional or national electricity utilities are obligated to buy green
                                     electricity (electricity generated from renewable sources) at the market rates set by the regulator.
                                     Feed-in tariffs have been demonstrated to be the most effective way to promote the use of
                                     renewable energy.

Feed-in tariffs, the best way to
                                     Graph 10:         Feed-in Tariff standard mechanism
support wind energy




                                                                                                                    Source(s):         Dexia

                                     (1) The regulator or government will set the feed-in tariffs taking into account the extra costs for
                                     producing renewable energy. In addition renewable energy will in most cases get priority access to
                                     the grid. (2) The renewable energy producers like wind operators can sell their green electricity at a
                                     fixed minimum price to the Transmission System Operator who will (3) sell the electricity to
                                     electricity suppliers. (4) The electricity supplier will charge the higher costs for renewable energy to
                                     its clients. The cost for green electricity will in this way be spread over all the customers.

                                            Quotas and green certificates
                                     A green certificate is a tradable commodity proving certain electricity is generated using renewable
                                     energy sources. It is a market based mechanism aimed at promoting the use of renewable energy
                                     sources in electricity production.

  Green certificates encompass       (1) The regulator or government will allocate a certain amount of green certificates to green
  more risks than feed-in tariffs,   electricity producers. Typically one certificate represents generation of 1 MWh (Megawatt hour) of
  although still strongly
                                     electricity and represents the environmental value of renewable energy generated. (2) Additionally
  supportive
                                     electricity suppliers will in general have a sort of buying obligation usually indicated as a
                                     percentage of electricity supplied that needs to be green electricity. These are the quotas set by the
                                     regulator. Not achieving this quota will result in penalties, the fictive reference price. (3) The green
                                     electricity produced will be sold on the power market like other electricity and (4) the green
                                     certificates on a separate green certificates market where the transmission system operator (TSO)
                                     or electricity provider short of green certificates can buy green certificates at current market prices.
                                     (5) The electricity can finally be sold to the customer.
Renewables                                                                                                                            10



                                 Graph 11:          Green certificates standard mechanism


                                                                     Sell green certificates on
                                                                             the GCM                  Green
                                                                                                    certificates
                                                                                                      Market
                                                                                                      (GCM) 4


                                                                                                                           TSO
                                    - Allocation of green
                                    certificates (1/MWh)
                                    - Prove to be green                        Electricity                     Buy green
                                                               1                                               certificates on the
                                    Electricity supplier                         Power     3                   GCM (market based
                                                                                Market                         sometimes with
                                                                                                               minimum price)


                                                                                 2
                                            Regulator
                                           Government                                              Electricity Supplier
                                         Licensed entitiy           Sets quota for electricity
                                                                    suppliers                          5        Sell electricity to
                                                                    Penalize when amount of                     customers
                                                                    GC not reached

                                                                                                        Customer

                                                                                                            Source(s):            Dexia

                                 Such national trading schemes are in use in the Netherlands, Belgium, Sweden, the UK and Italy. It
                                 is our view market based schemes like quotas offer less protection than feed-in tariffs. The
                                 fundamental problem with the quota scheme is that there is no long term certainty. When a quota is
                                 set either for a period of time or for a quantity of power, once that goal is reached there is no
                                 reason to support the green power producers.

                                        A variety of support for offshore wind


                                 In Germany extra support is offered to offshore wind farm operators by obliging the TSO’s to pay
                                 for the grid infrastructure. The grid infrastructure represents about 25-30% of the total investment
                                 cost, proving the strong support Germany is giving to offshore wind. In addition, countries like
                                 Germany and Belgium offer higher incentives for offshore than onshore wind energy. In Germany
                                 feed-in tariffs for onshore wind are € 91/MWh and the expected feed-in tariffs for offshore wind
                                 energy are expected to be in the range of € 110-150/MWh. More in-depth information of
                                 remuneration and targets per country can be found in chapter 5: scrutinizing the European offshore
                                 wind potential.


                                 III.3. New technology: sales top service flop?

Be aware of the risks, as only   Nothing is without danger and this isn’t different for offshore wind. On average an onshore wind
limited experience has been      farm operator has to expect damage to his facility every four years. In case of rotor mount
gained, yet                      breakage it sometimes takes 18 months to get a new one, which means turbines stand still for a
                                 long time. Problems still exist in onshore wind while offshore wind projects are already knocking on
                                 the door. One of the first projects in Denmark in 2004 had already resulted in a disaster where
                                 Vestas had to remove the turbines from an entire wind park because the turbines were not
                                 sufficiently resilient to withstand the local sea and weather conditions. Similar problems were
                                 encountered off the British coast in 2005. This forced German wind turbine manufacturer Enercon
                                 to step away from offshore wind projects. They believe the potential is tempting although they don’t
                                 want to lose its good standing on the high seas. The insufficient experience with offshore wind
                                 farms to evaluate their technical availability is one of the disadvantages offshore wind developers
                                 currently have to address. Maintenance access to offshore turbines can be difficult leading to the
                                 potential for increased down times. This can be minimized both through provision of helicopter
                                 access and sound predictions of offshore weather, which allow better planning of maintenance
                                 through innovative design solutions. Preventative maintenance and development of smart wind
                                 farms which include component monitoring to predict failures would also be very useful.
Renewables                                                                                                                                                                                                                 11



                                                                                       III.4. Taking a deeper look into capex, especially the grid
Table: Offshore wind Capex (€/kW)
                                                                                       The investment cost for offshore wind projects currently is around € 2,400/kW throughout Europe
 2,600
                                                                                       compared to € 1,200-1,400/kW for onshore wind farms. The grid connection cost takes a big bite
 2,400

 2,200                                                                                 out of the investment budget for offshore wind farm developers compared to 5-10% for onshore
 2,000

 1,800                                                                                 wind. In addition the stronger foundations are needed to sustain underwater pressure. In this way
                                                                                       the turbine cost only represents 40% of the total investment costs where for onshore wind farms
 1,600

 1,400

 1,200

 1,000
                                                                                       this represents over 70% of the investment. Since the total investment cost for onshore wind farms
                                                                                       has been decreasing thanks to renovations in technology we also foresee this to happen for
         2000   2003    2006   2009   2012   2015   2018   2021   2024   2027   2030




                                                                                       offshore wind farms although to a lesser extent given the already available know-how and onshore
                                                                                       expertise. Therefore we foresee the investment cost, currently estimated at € 2,400/kW to drop to
                                                                                       € 1,800/kW by 2025. Economies of scale will play an important factor in this context with offshore
                                                                                       wind farms of 300MW and more against onshore wind farms of 15MW. Especially fixed O&M costs
                                                                                       will be more easily spread.

Graph 12:                                    Onshore wind farm cost split-up                                                              Graph 13:           Offshore wind farm cost split-up

                                                                     5%                                                                                           10%
                        17%

                                                                                                                                            24%                                                                         43%




         8%

                                                                                                                       70%

                                                                                                                                                                     24%


                       Turbines (tow er; nacele; rotor)                                Grid           Foundations      Other                      Turbines (tow er; nacele; rotor)       Grid       Foundations    Other




                                                                                                 Source(s):             Dexia Est.                                      Source(s):              Dexia Est., Wind-Kraft Journal



                                                                                       For the moment we can’t omit looking at the investment cost what is being one of the biggest
                                                                                       culprits for offshore wind farm development. The accompanied shortage in turbines and moreover
                                                                                       the cost to produce turbines is strongly correlated with metal prices which have been increasing
                                                                                       heftily over the past few years. In the US, FPL Energy (one of the biggest and first projects offshore
                                                                                       in the US) for this reason backed out from previous plans to build a US$ 700m offshore wind park
                                                                                       for 140MW on New York’s Atlantic coast. When LIPA first announced its plans for the project costs
                                                                                       were estimated between US$ 150 and US $200m. FPL’s winning bid finally was US $356m in
                                                                                       2003. Later on costs increased to US$ 650m and to nearly US $700m summer 2007.

                                                                                       Graph 14:                     Investment cost (€ /kW) vs. distance from coast for offshore wind farms (excl. UK)

                                                                                                      4,500
                                                                                                      4,000
                                                                                                                                                                        y = 24.1 07x + 1635.4
                                                                                                      3,500                                                                  R 2 = 0.7198
                                                                                                      3,000
                                                                                              € /KW




                                                                                                      2,500
                                                                                                      2,000
                                                                                                      1,500
                                                                                                      1,000
                                                                                                              5                      15                    25                     35                      45
                                                                                                                                                                km


                                                                                                                  Source(s): Offshore wind projects, Dexia Est. *Scale of bubble based on wind farm scale in MW
Renewables                                                                                                        12



             Obliging Transmission System Operators to stand in for the grid infrastructure, as in Germany and
             Denmark, is one of the strongest incentives a government can give to lower the investment costs
             and to support offshore wind development. Unfortunately this is not the case in other European
             countries although negotiations are ongoing between the Belgian TSO monopolist Elia and Belgian
             offshore wind developers to take the offshore grid for their account. C-Power was given a € 25m
             grid subsidy and based on company data the grid represents € 170m of the € 800m investment
             cost. If Elia would buy back the grid this would give a serious incentive to other offshore wind
             investments in Belgium and maybe a signal towards other European countries. As an example we
             have outlined the costs for submarine cabling and the component cost for offshore grid
             installations.

             Table 2: Submarine and offshore grid component costs

             Submarine cable         Capacity (MW)         € m/km       Component                               €m
             AC 132/150kV                  200-250             1.5      Platform for convertor (transformer)     20
             AC 400 kV                          700            2.7      Extra cost for HVDC-VSC platform          7
             DC 400 kV                          600            0.6      260 MVA transformer (150kV)               2
             DC (VSC) 400 kV                    550            0.3      HVDC convertor (600MW)                   65


                                                                                           Source(s): RECaBS, Dexia

             Table 3: Representative European offshore wind energy project list

             Project name                   Costs (€/kW)      MW     Hours        Capacity Factor     Distance coast
             Butendiek (GE)                        2,000      240     3,300                37.7%               34km
             Horns Rev (DE)                        1,900      160     3,820                43.6%            14-20km
             Thornton Bank (BE)                    2,667      300     3,460                39.5%            27-30km
             Borkum West (GE)                      2,300    1,000     4,300                49.1%               45km
             Q7-WP (NL)                            3,192      120     3,580                40.9%               23km
             Borkum Riffgrund (GE)                 1,736      576     3,646                41.6%               38km
             Thanet Offshore (UK)                  2,417      300     3,700                42.2%               11km
             Eldepasco (BE)                        2,778      216     3,403                38.8%            37-38km
             Belwind (BE)                          2,424      300     3,636                41.5%            46-48km
             Average                               2,336      315     3,574                40.8%               31km
                                                                                         Source(s): Companies, Dexia

             Only a limited amount of projects are installed, totalling 904MW end ‘06. The projects listed above
             are projects under construction as most of the previously built projects are nearshore wind farms
             and thus not representative for future buildings.

             From these projects, located in the Northern Sea and Baltic Sea we can conclude the average cost
             is ~ € 2,400/kW (excluding the countries with grid cost exception) with ~3,700 operating hours p.a.
             or a capacity factor of 42%. No projects have been currently built outside Northern Europe and no
             information is available on Mediterranean projects. We estimate, based on the lower wind speed in
             open sea (8m/s against >9m/s), the operating hours in Spain, Italy and Portugal at 3,100. Studies
             point at an enormously rich wind resource in the North Atlantic, with at least two thirds of Europe’s
             offshore wind potential in the North Sea. Also a distinction needs to be made between countries
             separately. Thanks to the exclusion from grid connection costs and the in-house know how,
             average offshore capex in Germany comes in notably lower than for our € 2,400/kW average
             throughout Europe. The UK represents the other side of the coin, with an investment cost over €
             2,700/kW something we also witness for onshore wind farms in the country.


             III.5. Environmental constraints

             Prior to be granted public approval, wind farm developers need to carry out an Environmental
             Impact Assessment (EIA). In this way the potential effects on the environment are mapped. The
             EIA provides information on the potential environmental impacts from installation till dismantling.
             The process is lengthy and can easily take several years. Thanks to pilot projects, necessary
             environmental experience has been gained and the timeline to set-up an offshore wind farm has
             shortened. However, due to these environmental constraints a variety of wind farms won’t reach
             approval. One of the reasons we apply a 5-10% probability rate for offshore wind farms that are
             only in the planning phase and still exploring the environmental capacity and measuring the wind
Renewables                                                                                                    13



             speed. We have only limited visibility with a merely 904MW offshore wind parks which entered
             service throughout Europe end ‘06, and environmental studies in most cases lack profundity. With
             this as a remark it seems better to remain cautious when new offshore wind projects are
             announced. In Germany for instance a pipeline of over 24,500MW is under development, with 4.7-
             6.5GW consented, while the 2025-‘30 target ranges between 20,000-25,000MW. Since every year
             new projects are initiated, it is understandable that not all projects are to reach completion. Wind
             farm developers are furthermore strongly dependent on regulations, making them decide whether
             or not to proceed with their project.
 Renewables                                                                                                                               14



                                      IV. THE OFFSHORE WIND DEVELOPMENT PROCESS:
                                          GERMANY
                                      Two thirds of Europe’s offshore wind energy potential is situated in the North Sea, positioned
                                      adjacent to densely populated countries like the UK, the Netherlands, Belgium and Germany. Wind
                                      speeds run up to 12m/s, providing capacity factors of ~50%. The average capacity factor of
                                      offshore wind turbines in the North Sea is estimated at 42% (3,700 operating hours) against an
                                      average European onshore capacity factor of 23%. The German North and Baltic Sea area should
                                      be able to supply 15% of the German electricity demand by 2030.

                                             Pre-Project Planning and environmental impact assessment


Lengthy pre-project planning due      First, areas potentially suitable for offshore wind energy use are screened. This is done on the
to the novelty of offshore wind       basis of the offshore installations ordinance using all collected data with the participation of the
                                      concerned ministries. The low-conflict areas are selected first and used for the initial phase and the
                                      first expansion phase of offshore wind farms in the Exclusive Economic Zone (EEZ, >12nm from
                                      the coast). On average one wind turbine can be built per km². The developers will look at the wind
                                      speed expressed in m/s. Before permitting starts, before turbines are ordered and before
                                      construction commences, wind park developers use wind maps and maps with suitable areas for
                                      offshore wind farms in both the North as the Baltic Sea. Compared to onshore wind, the land or sea
                                      bed where the wind farm will be constructed can’t be leased. The sea bed falls under the
                                      jurisdiction of the law and permission will be needed from the government to build a wind farm.
                                      Developers will also look whether grid connection and attaining permissions is possible or not.

 Graph 15:        North Sea, offshore projects                            Graph 16:         Baltic Sea, offshore projects




                Online    Consented       Under Consideration                         Online     Consented       Under Consideration
                                                    Source(s):     dena                                                     Source(s):   dena



                                      Larger offshore wind farms (> 20 turbines) need an environmental impact assessment (EIA),
                                      investigating the marine environment in the project area and predicting the impact of the projected
                                      wind farm. Furthermore the BSH examines whether the project constitutes a hazard to navigation.
                                      Where a wind measurement and EIA takes around 2 years on average for an onshore wind farm,
                                      several European cases give an indication of 3 to 5 years between the start of the project and the
                                      actual project planning and authorisation.

                                             Detailed Project Planning and authorisation


                                      An important part of each approval is the supplementary provision which, in a largely standardised
                                      form, is part of each notification of approval issued by the BSH for an offshore wind farm project.
                                      For example, wind farm approvals expire after 25 years and after the end of their regular service
                                      life an extension of approval can be re-considered. Also, to prevent that areas are reserved for
                                      future use, construction of the turbines has to be started within 2.5 years after notification of the
                                      approval.
 Renewables                                                                                                                                       15



Table 4:       Overview consents procedure, assessment application
                       Project       Business                                   Efficient      Technical quality    Financial quality      Grid
     Country                                        Decommissioning
                     Development       Plan                                    space use           project              project         connection
Belgium                  yes           yes                  yes                                      yes                  yes
Denmark                                                                                              yes                  yes
Germany                  yes                                yes                    yes               yes                  no                no
Netherlands                             yes                                        yes               yes                  yes
United Kingdom           yes            yes                 yes                                      yes                  yes               yes
                                                                                                  Source(s): Netherlands Ministry of Economic Affairs

                                      Before developing an offshore wind farm, the developer needs the legal rights to use part of the
                                      national or international water. The licensing of offshore wind farms is dependent on the location
                                      the wind farm is placed, more in specific a distinction needs to be made between wind farms in
                                      coastal waters (less than 12 nautical mile zone off the coast) and wind farms in an Exclusive
                                      Economic Zone (EEZ).

Licenses needed, depend on the        In the German territorial waters all federal government provisions and those of the adjoining coastal
location of the wind farm             states are applicable. The German coastal states govern the licensing and construction of wind
                                      farms in coastal waters. German territorial waters only play a minor role in offshore wind
                                      development such as with the Wadden Sea national park and the routing of shipping channels. In
                                      countries like Denmark, offshore wind energy deployment near shore (territorial waters) is common,
                                      while in Germany in specific focus is on the deployment of wind energy in the EEZ.

                                      Approval for EEZ projects is given by the Federal Maritime and Hydrographic Agency (BSH) on a
                                      “first come first serve” basis weighted for the quality and focussed on the objective. The procedure
                                      is based on the Law of the Sea of 10 December 1982 and the German Seeaufgabengesetz
                                      (Federal Maritime Responsibilities Act), implemented by the Seeanlagenverordnung (Marine
                                      Facilities Ordinance), which is the basis for the approval procedure. Additionally separate approval
                                      is needed for the sea cables. Germany only applies a one-stop-shop system to the application
                                      procedure for the EEZ. Additional licenses from the different regions (Länder) are required for the
                                      cable crossing through the coastal waters.

                                      Table 5: Required permissions for the sea cable
                                      Approval                                                                  Responsible Authority
                                      Building permission for the pilot phase                                   BSH
                                      Permission for laying and operating the cable in the seabed by the        Federal Water and Shipping Authority
                                      authorizing agency for river and navigation specific policy approval
                                      Lease contract to use the 12-nm zone for laying a sea cable               Federal Water and Shipping Authority
                                      Water and Dike Permission, approval to cross dikes and waters             Regional Administrative Board
                                      Exemption from the prohibitions of the National Park                      Regional Administrative Board
                                      Permission for laying the sea cable in the EEZ                            BSH
                                      Consent for grid connection                                               Network Operator
                                                                                                                                    Source(s): dena

                                      The issue of building permits for offshore wind turbines will furthermore depend on a large number
                                      of different agencies and institutions. There will be licenses needed for the connection of offshore
                                      wind farms to the onshore grid, especially for the placement of the sea cables. This can result in
                                      additional licenses when connection is needed within the coastal waters. In the case cables will
                                      cross shipping routes and tideways, a permit is required from shipping authorities, as well as for the
                                      land lease of the seabed in the 12 nm zone. Furthermore permits are needed to cross dikes and
                                      small waters from regional authorities, as well as for the crossing of environmental areas/parks.

                                      The licensing usually takes 2 years given the scale, the impact and the often longer procedure due
                                      to grid licensing.
 Renewables                                                                                                                                         16



                  Table 6:   Cable licensing
                  country            cost connection to the grid                      licenses in EEZ                 Licences in coastal waters
                                                                                                                      Act on the Exploration and
                                                                                                                      Exploitation of Non-Living
                  Belgium            Wind farm operators
                                                                                                                      Resources of the Territorial Sea
                                                                                                                      and the Continental Shelf
                  Denmark            TSO (preferred area's), or windfarm operator
                  Germany            TSO (Transmission System Operators)              Seeanlagenverordnung            Länder
                  Netherlands        Wind farm operators                              PWA license & Electricity act   PWA license
                  Sweden             Wind farm operators                              Electricity Act                 Electricity Act
                  United Kingdom     Wind farm operators                              Electricity Act                 Electricity Act
                                                   Source(s): Netherlands Ministry of Economic Affairs, Infrastrukturplanungsbeschleunigungsgesetzes

                                               Financing/construction phase


Construction usually takes             Given farm’s scale and accompanied high costs, most offshore wind developers look for financing
18months, however, is strongly         before commencing construction. Large investment costs lead to more prudence and in this
dependent on the scale of the wind     context, banks do not want to take any permitting risk and will only on a fully developed, fully
farm
                                       permitted basis and with clear understanding of the applicable regulatory framework step in the
                                       project. Banks will accept the regulatory change risk, but need an existing legal framework that
                                       makes the projects economically viable to start with. The permitting phase needs to be financed
                                       through equity from the developer (pre-project financing) whereas banks and investors will only
                                       step in once fully permitted.

                                       Once financing is completed the construction phases on average take 2 years until completion. The
                                       construction will in most cases go through several phases to gain first experience, especially on the
                                       environmental impact. The commissioning and installation of an offshore wind farm is more
                                       complicated than at an onshore wind farm. In a first phase piles (1) are driven into the seabed once
                                       a suitable place for the wind farm is found. At this place erosion protection are placed at the base to
                                       prevent damage to the sea floor. At the moment the turbine is assembled, sensors on the turbine
                                       detect the wind direction and turn the head (nacelle) to face into the wind, so that the blades can
                                       collect the maximum amount of energy. The movement of the wind over the aerodynamically
                                       shaped blades (2) makes them rotate around a horizontal hub, which is connected to a shaft inside
                                       the nacelle (3). This shaft, via a gearbox, powers a generator to convert the energy into electricity.
                                       Subsea cables (4) take the power to an offshore transformer (5) which converts the electricity to a
                                       high voltage (33kV) before running it back 5 -10 miles to connect to the grid at a substation on land
                                       (6).

                                       An offshore turbine order usually takes 18 to 24 months against 15-18 months for onshore and
                                       depends on the type of supplier and customer. German wind farm developers have an optimal
                                       position as most of the largest worldwide turbine manufacturers are German players: REpower,
                                       Nordex, Multibrid (Areva, Add, TP € 840), Siemens (Buy, TP € 120) … Nevertheless we foresee
                                       turbine delivery difficulties for at least another 2 to 3 years and also the grid connection could result
                                       in serious delays.

                                       Graph 17:           How does an offshore wind farm works




                                                                                                                                        Source(s): Bwea
 Renewables                                                                                                                                                      17



                                            Projects in operation


20 years of operation, waiting for   Once the development process is finished, project developers can choose to operate the wind farm
projects to gain experience to       themselves or sell it. In this context Babcock and Brown is a core client of Plambeck Neue
grasp the actual life expectancy     Energien for its onshore farms and Dong for the offshore Borkum Riffgrund project. In the operation
                                     phase, developers usually deliver the service of maintenance of their developed wind farms.

                                     The four above described phases: i) pre-project planning and environmental impact assessment; ii)
                                     detailed Project Planning and authorization; iii) financing/construction and iv) operation are in the
                                     best way represented in a timeframe. We apply probability rates to the different stages in the
                                     development phase. The probability rate we apply to project planning will be different country per
                                     country. The given probability rates are for Germany, taking into account the targets set by the
                                     German government, offshore wind studies and the pipeline both consented as not consented.
                                     Since after consenting initial process and construction constraints still remain high, offshore wind
                                     farms will have a lower probability rate than onshore wind projects.

                                     Graph 18:            Offshore wind project timetable and probability Germany


                                                                                                                                                100%
                                                                                                                               85%

                                                                                                                     65%




                                                                                                       25%

                                                                                              10%
                                                                                  5%
                                                              2.5%
                                             0.0%
                                                           indentified




                                                                                            pending




                                                                                                                               construction




                                                                                                                                                  In operation
                                                                                                      permitted



                                                                                                                    Turbines
                                            Project not




                                                                              Measurement




                                                                                            Permits




                                                                                                                    ordered
                                             identified



                                                             Project




                                                                                                        Fully




                                                                                                                                  Under
                                           Time schedule:                3-5 years                           two years                        2 years



                                                                                                                                Source(s): Dexia Est.
 Renewables                                                                                                                                          18



                                      V.          SCRUTINIZING                               EUROPE’S                 OFFSHORE              WIND
                                                  POTENTIAL

                                      V.1. Wind energy output gains scale
Graph: 2006 installed global          The wind industry is enjoying a tailwind thanks to government incentives in order to combat climate
                                      change which needs a global solution. In 2006, total installed capacity has been taken to 74GW
                                      worldwide, up 15GW year-on-year (+22.2%). In terms of economic value, new generation
                                      equipment installed reached US$ 23bn (€ 18bn or € 1.2m/MW). The countries with the highest
                                      total capacity are Germany (20.6GW), Spain (11.6GW), the US (11.6GW), India (6.3GW) and
                                      Denmark (3.1GW). In terms of new installed capacity, the significantly underdeveloped US market
                                      took the lead with 2.5GW followed by Germany (2.2GW), India (1.8GW), Spain (1.6GW), China
                                      (1.3GW) and France 0.8GW). This development shows that new players such as France and
                                      China are gaining ground. Europe still continues its world leadership status with 48GW installed
                                      (65% of global capacity) producing around 100TWh (on average 2,075 running hours) which is still
                                      not more than 3.3% of total EU electricity consumption. Remind that Europe has committed itself to
                                      reach 20% by 2020. This clearly demonstrates further upside for the European market but here we
                                      will see a structural shift from maturing wind markets like Spain, Germany and Denmark towards
                                      underdeveloped markets such as Italy, Greece, France and CEE countries.

                                      Estimating the precise installed capacity base by 2020 is a very challenging exercise as we have
                                      to consider different points: i. resources potential of available sites running at 2,000+ hours p.a.
                                      onshore and 3,000+ hours p.a. offshore; ii. the absence of binding targets and regulation for new
                                      assets commissioned beyond 2015; iii. the electricity consumption growth differs by area; iv. the
Source: GWEC                          potential breakthrough of new technologies like solar, tidal/wave energy, fuel cells and v. the public
                                      acceptance of nuclear energy. Whatever be the outcome of these uncertainties, minimum levels to
                                      be achieved by 2030 stand around 365GW worldwide (vs. 150GW in 2010). Industry reports even
                                      suggest this 2030 forecast could be underestimated by a factor 3.0x in a blue sky scenario. In the
                                      EU minimum levels achieved by 2030 are estimated at 250GW. The EWEA (European Wind
                                      Energy Agency) believes in 300GW by 2030 throughout Europe (150GW onshore and 150GW
                                      offshore) while being less bullish on the short term with 80GW in 2010.


                                      Graph 19:                 EU Cumulative installed capacity 2000-2030E


                                                                                                                               300.0




                                                                                                          CA GR 8%

                                                                                                                                          Offshore
                                                                                                                       175.0




                                                                                                          CA GR 10%

                                                                                                             81.9

                                                                                      48.0                                                Onshore
                                                                        34.4   40.5
                                                                                              CA GR 14%
                                                         23.2    28.6
                                           12.9   17.3



                                         2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010                        2020    2030




                                                                                                    Source(s): GWEC (2000-2006), Dexia Est. 2007-2030E

Wind power isn’t here to stay; wind   Based on the European Commission’s Energy Package, wind could contribute 12.7% of EU
power is here to grow!                electricity by 2020. Further research from Eurelectric and the European commission expects 22.3%
                                      of the total power share in 2030 will come from wind energy and in the power efficiency case as
                                      prescribed by the European Commission this could run up to 30.3%.
 Renewables                                                                                                                                              19



                                       Table 7: Wind power’s share of EU electricity demand
                                                                                                        2005           2010            2020            2030
                                        Wind power production (TWh)                                       83            179             510             978
                                        Baseline electricity demand (TWh)                              3,013          3,483           4,006           4,367
                                        Efficiency case electricity demand (TWh)                       3,013          3,314           3,250           3,218
                                        Share of wind energy (baseline)                                2.8%           5.1%           12.7%           22.4%
                                        Share of wind energy (efficiency case)                         2.8%           5.4%           15.7%           30.4%
                                                                                                           Source(s): Eurelectric, European Commission


                                       V.2. Using offshore to realize Europe’s renewable targets

Offshore wind power hasn’t been        In Europe 904MW offshore wind capacity is installed over 25 projects and 436 turbines. Currently
able to live up to the expectations,   47.5GW onshore is installed equalling an annual growth of 31% over the last 15 years. Denmark
yet                                    represents the bulk of the onshore capacity (46%) followed by the UK (34%) and The Netherlands
                                       (14%). Germany only stands at the beginning when it comes to offshore wind, while they are the
                                       world wind leader onshore. The use of offshore wind throughout Europe has been delayed due to
                                       great distances of the projects from the coasts, water depths up to 40 metres and due to the rising
                                       cost for wind turbines.


                                       Graph 20:             New installed offshore wind capacity Europe end ’06 (MW)

                                          300
                                                      Others

                                                      UK
                                          250
                                                      Sweden

                                                      Netherlands
                                          200
                                                      Germ any

                                                      Denm ark
                                          150



                                          100



                                           50



                                              0
                                                     2000           2001          2002          2003           2004           2005            2006



                                                                                                                          Source(s): Douglas-Westwood

                                       With less than 300MW offshore wind power to be added per year through 2008, Europe’s offshore
                                       wind power market growth has failed to live up to the initial hype. However, in 2009 the first
                                       impressive growth should be witnessed. In the UK, Germany and Sweden, 170MW to 225MW is
                                       expected to be installed in each country per year. Additionally, single projects are expected in
                                       Belgium, the Netherlands and France. With an expected annual growth of 1,300 MW between 2010
                                       and 2015, 10.4GW of offshore wind power capacity should be installed by 2015 accounting for 8%
                                       of Europe’s total wind power installed base.


                                       Table 8: European offshore wind development
                                       Year        Country                                Description
                                       2007        Belgium, UK, Sweden                    Single project activations, C-Power in Belgium
                                       2008        Germany                                Borkum West test field
                                       2009        Germany, UK, Sweden                    Several projects (>200MW) for each country
                                       2011        Belgium                                C-Power 207MW, in addition to 30MW
                                       2012        UK                                     Several Round 2 (500MW) projects
                                       2015        Norway, Spain                          Strong players starting offshore
                                       >2015       Italy, Russia, the Baltics and Malta   Plans for offshore development after 2015
                                                                                                                                     Source(s): Dexia Est.
 Renewables                                                                                                                                  20


  Offshore wind projects starting to   Onshore wind power will still realize stronger growth than its offshore partner, however, the
  boom as of next decade
                                       additional capacity in onshore wind is expected to decrease after reaching its top beginning next
                                       decade. Repowering and offshore wind will take over from then onwards.


                                       Graph 21:          European Offshore Wind Power, 2007-2015 (MW)


                                            140,000                                                                                 10,444
                                                                                                                            8,744
                                                                 Of f shore                                       7,144
                                            120,000
                                                                 Onshore                                  5,744
                                                                                                  4,644
                                            100,000
                                                                                          3,564
                                             80,000                               2,514
                                                                         1,409
                                                               1,139
                                             60,000    904

                                             40,000

                                             20,000


                                                   0
                                                       2006    2007     2008     2009     2010    2011    2012    2013     2014     2015


                                                                                                          Source(s): Emerging Energy Research

Denmark was the first, Germany         Most of the offshore wind capacity added comes from only a few countries (the UK, Germany,
and the UK will take the lead very     Denmark and Sweden) not by coincidence the countries where onshore wind is reaching saturation
soon                                   and is consolidating (Germany, Spain, the Netherlands, Denmark). Most of the additional offshore
                                       wind capacity will be built in Germany and the UK with countries like Sweden, Belgium and Norway
                                       on their trail.
                                       The onshore wind markets are only limitedly scaling and gradually entering the consolidation phase
                                       (the UK, Belgium, France and Sweden). Denmark was the first to enter the offshore wind front and
                                       will ease off in the next years. In the range of the big wind countries that evolved the most in
                                       onshore wind, Germany is lagging behind in offshore. The amount of projects together with strong
                                       potential of the Baltic and the North Sea and a stimulating regulation will boost construction in
                                       Germany around the start of next decade.


                                       Graph 22:          Wind Power Market Maturity in European Countries (status 2007)




                                                                                                          Source(s): Emerging Energy Research

                                       As seen some countries are still lagging behind their RES targets and are still in the growth phase
                                       with a different approach towards RE. We would like to focus on countries with the most potential
                                       on the offshore front, while taking a peak in onshore wind energy. Governmental regulations,
                                       accompanied by the different use of incentives (green certificates, feed-in tariffs), the potential of
                                       the operating area (North Sea, Baltic Sea … ), the maturity phase of onshore wind, and the players
                                       active are other important factors that play a crucial role on growth prospects and a country’s
                                       attractiveness.
Renewables                                                                                                                                 21



                                    V.3. Germany: still room to grow in wind but moving offshore
Huge offshore potential in
                                    Germany needs a shift from onshore to offshore wind. The figures can’t be clearer: 20.6GW
Germany
                                    onshore wind is installed end 2006 with a target of 36/42GW by 2030 and while no offshore wind
                                    plant is built, Germany is targeting 20/25GW by 2025-‘30 (€50bn or € 2,300/kW). This would cover
                                    around 15% of Germany’s current electricity demand and while the German onshore wind market is
                                    saturating, and good locations becoming scarce, the offshore wind market is ready to kick off.

                                    As a strong developed wind energy country (28% of the world’s total installed capacity and 43% of
                                    Europe), the question needs to be asked whether there is still enough room to grow in wind energy
                                    in Germany. Good onshore locations (> 2,000 operating hours p.a.) have become scarce while
                                    Germany’s RE targets (12.5% electricity supply coming from RE by 2010 and 27% by 2020) still
                                    need to be reached (2006: 11.8%). In Germany 30.5 TWh electricity is generated through onshore
                                    wind which represented 5% of Germany’s total electricity consumption. The wind energy share in
                                    the total final energy consumption rose 12.1% over the period 2005/’06 and is with 42% of the total
                                    RE output, still the main contributor. Electricity output from hydropower remained stable in 2006,
                                    with 21.6 TWh while electricity from biomass (without gas from landfills and sewage treatment
                                    plants, biogenic wastes) totalled 18.6 TWh in 2006 or an increase of 37% y-o-y. Other sources like
                                    photovoltaic, solar thermal power and geothermal power merely represent 3% of the electricity
                                    supply from renewables what makes them negligible.

     Table 9:     Share of RE sectors in total final electricity consumption in 2005-006 in Germany
                                Electricity
      TWh                       2005        2006      %change       % of RE                             Comment
      Hydropower                21.5        21.6         0.5%        29.7%
      Wind power                27.2        30.5        12.1%        41.9% pure onshore wind
      Biomass                   13.5        18.6        37.8%        25.5% without landfill gas, sewage treatment plants, biogenic waste
      Photovoltaic               1.3         2.0        53.8%          2.7%
      Solar thermal power          -           -             -
      Geothermal power          <0.1        <0.1             -         0.1%
      Total                     63.6        72.8        14.5%
                                                                           Source(s): BMU, Centre for Solar Energy and Hydrogen, StBA, AGEB

                                    More wind energy is required if Germany wants to reach its 2020-’30 RE targets. Especially since
                                    hydropower and solar are only modest contributors and biomass is in the first place used for
                                    heating and fuel. Wind energy on the other hand has the huge potential to produce electricity from
                                    RE in Germany.


                                    Graph 23:          Development of electricity generation from renewables in Germany



                                                                                            Inflection point
                                                                                            offshore wind




                                                                    Source(s): Bundesministerium für Umwelt, Naturschutz und Reaktorsicherheit
 Renewables                                                                                                                               22



                                     Market size and targets in Germany

18 applications consented; waiting   Of the current 18 applications consented by the Federal Maritime and Hydrographic Agency (BSH),
for the new EEG law                  15 are located in the North Sea and 3 in the Baltic Sea area. The majority of these applications
                                     concern areas out the 12nm zone and have a water depth of more than 30 metres. However, for
                                     most of these projects the license for the cable lines from the respective Federal Land is still
                                     outstanding. A gradual establishment of the licensed offshore wind farms can therefore be
                                     expected from 2008-‘09 at the earliest. In total we have a view on an offshore project pipeline of
                                     24.5GW of which between 4.76GW (3.6MW turbines) to 6.5GW (5MW turbines) has been
                                     consented.

                                     German EEG, blowing the offshore way

                                     RE makes a very substantial contribution to climate protection by avoiding emissions of
                                     greenhouse gases. 12% of Germany’s electricity generation currently comes from RE and 5% of
                                     the total electricity comes from onshore wind energy.


                                     Graph 24:         How does the EEG work




                                                                                                                            Source(s): Viertl

Onshore wind, a huge contribution    Through the Renewable Energy Act (EEG) Germany executes Europe’s RE directive and already
to renewable energy                  inflicted at doubling in the stake of RE in the total electricity production 2000-’06 from 6.3% to 12%.
                                     33.8bn kWh of electricity could in 2005 on average be generated through wind power. In 2005, this
                                     corresponded to around 5.5% of Germany’s net electricity consumption.
                                     In July 2007 there was a four-year period review where the targets of renewables in the total
                                     energy mix were increased from 20% to 27% by 2020 (of which 26% offshore wind, 50TWh or
                                     13.3GW) and 45% by 2030 (offshore wind 25GW). The German government estimates the total
                                     technical potential at 18-35GW offshore using 5MW or 10MW turbines in the North Sea area alone.
                                     Previously Germany had a renewable target of 50% of total energy consumption by 2050. The
                                     sharpening of the targets makes us feel confident regulatory support will continue especially for
                                     offshore wind, in our view the RE source with the most potential (26% of RE by 2020, 33% of RE
                                     by 2030 against 0% currently).


                                     Graph 25:         Wind capacity in Germany compared to EEG laws


                                                                                               H2’07: new EEG law
                                                                                               (focus offshore)




                                                                                                                            Source(s): BMU
 Renewables                                                                                                                                   23



                                     Through the EEG Germany intends to promote the usage of RE forms especially innovative and
                                     young RE technologies. Key findings from this law, in specific for wind, are: i) a minimum
                                     guaranteed price for electricity fed into the public mains, coming from RE sources, ii) grid operators
                                     are legally obliged to accept electricity from RE sources and to provide remuneration in accordance
                                     with the tariffs stipulated by the EEG (different depending on type of RE, the size of the system, the
                                     time of commissioning and for the wind on the location, the later the operation begins, the lower the
                                     tariff) and iii) the guaranteed compensation for supplying energy to the grid provides investment
                                     security for operators and wind power industry alike, while creating considerable pressure to
                                     reduce costs.

Higher capex for offshore wind       Furthermore through the Infrastrukturplanungsbeschleunigungsgesetzes (Infrastructure
countered by better wind quality     Planning Acceleration Act) of 17 December 2006, the German Parliament decided transmission
and growth potential
                                     system operators (TSO’s) have the obligation to connect and to pay for the grid costs of all offshore
                                     windfarms for which construction commenced prior to 31 December 2011. Especially those wind
                                     farms 30-100km away from shore will benefit. Grid connection costs (25-30% of total project cost or
                                     € 500/kW including internal cabling) will in this way be borne by the transmission system operators
                                     and create a huge advantage for the wind park developers.

                                     New lucrative offshore wind framework               € 110-150/MWh from € 91/MWh

                                     A government subsidy trade-off learns us that if onshore wind operators want to reach a IRR of 8-
                                     10%, the tariffs onshore taking 1,400 operating hours p.a. going forward (good onshore locations
                                     are becoming scarce) will need to increase to € 130/MWh. If we then again, taking into account the
                                     1,400 operating hours p.a., estimate the demanded tariff in the case an onshore developers wants
                                     to achieve the same EV they currently get (€ 1.25m/MW), this tariff would come in at € 110/MWh.
                                     The government can thus choose for a trade-off between onshore and offshore and remunerate the
                                     offshore wind developers with a feed in tariff of around € 110-130/MWh. This is in line with the €
                                     110-150/MWh suggested by the German government.


A boost in feed-in tariffs from
                                     For onshore and offshore wind the regulation and tariffs vary significantly. Onshore wind is already
€c8.74/kWh to €c11-15/kWh makes      a proven technology while offshore wind still needs to prove itself and therefore needs more
investments in offshore wind         government support. Nevertheless, the recommendation for the new EEG act was accompanied by
extremely interesting                a more supportive onshore scheme as well. As an example, the degression of the feed-in tariffs
                                     was reduced from 2% to 1% per year. The remuneration phase runs over a period of 20 years. For
                                     offshore wind (wind farms are classified as offshore if they are constructed at least three nautical
                                     miles off shore) a variety of support measures have been agreed upon: i) the wind farms that
                                     become operational from 1 October 2008 on will see a rise in feed-in tariffs from € 91.0/MWh to €
                                     110-150/MWh for the first 12 years reduced by € 35/MWh afterwards (this range will become more
                                     exact), ii) the timeframe for the beginning of the degression is prolonged from 1 January 2008 to 1
                                     January 2013; iii) the degression grade will be higher coming in at 5-7% against 2% previously (in
                                     2013 the new offshore wind farms in operation will thus receive € 110-150/MWh reduced by the
                                     degression rate) and iv) the 12 year period can be extended according to distance and water depth.

           Table 10:         EEG: onshore and offshore wind implementation (2004/2007)
                                                      EEG 2004                                               EEG 2007
                                          Onshore                Offshore                    Onshore                       Offshore
                                                                                    81.9 + 7.0 for turbines with
                                                                                                                   110-150: Operational from
           Feed-in tariffs (€ MWh)           87                     91               favorable net adaptation
                                                                                                                   October 1, 2008 onwards
                                                                                            properties
                                                                                                                    5-7% : Operational from
           Degression
                                             2%            2%: January 1, 2008                  1%                     January 1, 2013
                                                                                                                         Source(s): EEG 2007

                                     Through the EEG, the German government incentives wind power initiatives. With one of Europe’s
                                     most transparent incentive schemes, with clear visibility on feed-in tariffs, both onshore and
                                     offshore wind developers are stimulated. In 2006 alone over 2,200MW onshore has been installed.
                                     As the most important wind market in Europe (43% of current installed capacity) Germany will fully
                                     exploit its knowledge. Going forward the German market will remain a key growth engine in the
                                     region accounting for 16% of the 84 GW that are expected to be installed in Europe between 2007
                                     and 2015. Most of this growth will come from repowering (expected to take-off after 2010) and
Renewables                                                                                                                           24



                                 offshore wind. Currently a still large amount of onshore projects is in the pipeline but offshore will
                                 take over the land.


                                 Graph 26:         Market forecast wind power in Germany (installed capacity per year)




                                                                                                                         Source(s): dewi

                                 Reasons to support offshore wind instalment in Germany
                                      Wind farm operators will be able to benefit from capex savings. Over the period 2007-’15
                                      an extra 11GW in wind capacity is expected to be installed. Taking the 1,400 operating hours
                                      p.a. for onshore wind this would provide 12TWh in electricity. 11GW onshore investment at €
                                      1,200/kW gives us a total investment of € 13.2bn. To reach the same output offshore, with
                                      3,700 operating hours p.a. in Germany, extra wind capacity would come in at 3.25GW. With
                                      an investment cost of € 1,980/kW (excluding the grid connection cost), the total investment
                                      cost for wind farm operators is € 6bn, half of the cost for onshore instalment. Even including
                                      the grid connection cost, thus with an investment cost of € 2,400/MW the total investment cost
                                      still comes in lower at € 7.8bn against € 13.2bn onshore.

                                      Offshore wind instalment will also increase the grid system adequacy/stability compared to
                                      onshore and result in cost savings thanks to the prevention of paying for backup reserves. If
                                      we look at the output of offshore and onshore wind farms, one thing becomes clear, offshore
                                      wind is more stable. Especially during the winter, the season with the most wind, offshore wind
                                      is more stable, with diversions of up to 10%, while onshore output can differ over 20%.
                                      Especially the spikes are noteworthy. The onshore load factor sometimes comes in below
                                      10%, while offshore we see lows of around 15-20%. These shortages have to be backed or
                                      need to be filled up through re-firing the cold reserves in Germany. The cost for these reserves
                                      is around € 5-10/MWh, and by limiting the undercapacity costs will consequently be lower for
                                      the TSO.


    Graph 27:   Fluctuations in onshore and offshore wind power infeed




                                                                                                                Source(s):          Elia
 Renewables                                                                                                                                25



                                     V.4. Belgium, any way the wind blows

1,350MW offshore wind potential      Belgium’s onshore wind energy potential is estimated to be 1,500MW for the Walloon region and
                                     1,600MW for the Flemish region by 2030. Of the theoretical potential of 13,000MW offshore wind
                                     energy in the Belgian continental shelf, only a concession area of 270km² is approved or 2,000MW.
                                     This brings us to a total of 5,100MW total wind capacity by 2030. Industrial specialists see a lack of
                                     space to build onshore sites, while local players have been looking to set up offshore wind farms.
                                     With 194MW installed onshore end 2006, Belgium is only a small player in a growing market. By
                                     2015 around 980MW is expected to be installed, equally divided over onshore and offshore wind.
                                     Most part of the promotion of RE sources in Belgium falls within the competence of the regions
                                     (Walloon region, Flanders, Brussels). The Federal State stands in for pricing aspects and for those
                                     parts of Belgium which are not covered by the competence of any of the regions, i.e. the maritime
                                     territory over which Belgium is able to exercise its jurisdiction under Belgian maritime law. Onshore
                                     wind energy will thus fall under the jurisdiction of the regions, while offshore wind energy falls under
                                     the competence of the federal state and more in specific the Belgian maritime law.

                                     On federal level, the Electricity Order states measures are needed to ensure a minimum volume of
                                     electricity generated from RE sources. In order to do this the Electricity Decree creates a
                                     mechanism both for issuing green certificates and for minimum prices for green electricity. The
                                     issuing of green certificates presupposes the issuing of a certificate of origin by an approved
                                     monitoring body, which certifies that "the electricity actually generated is green electricity and the
                                     amount generated has been calculated according to the standards and measurements currently in
                                     force". The certificate of origin must contain certain compulsory pieces of information.

                                     The Belgian TSO Elia (Neutral, TP € 31.3 ) (Transmission System Operator) is obliged to redeem
                                     the certificates, which may be federal or regional, from producers of green electricity at a minimum
                                     fixed price (which varies depending on the generation process) over a period of ten years dating
                                     from the time when the generation installation enters service.

                                     Table 11:          Belgian offshore wind farms

                                     Project                                    Thornton Bank              Eldepasco                 Belwind
                                     Developer                                        C-Power             Elektrawinds              Econcern
                                     Size (MW)                                             300                     216                   330
                                     Nr. Of turbines                                        60                      36                    66
                                     Distance from shore (km)                            27-30                   37-38                 46-48
                                     Load factor (%)                                      38%                     39%                   42%
                                     Operating hours Company Est.                        3,350                   3,403                 3,636
                                     Operating hours Dexia Est.                          3,600                   3,650                 3,700
                                     Investment costs (€ m)                                800                     600                   800
                                     Inv. Cost €/kW Company Est.                         2,667                   2,778                 2,424
                                     Inv. Cost €/kW Dexia Est.                           2,500                   2,600                 2,700
                                                                                                           Source(s): Company data, Dexia Est.

Green certificate prices different   Each region has, within the limitations of its competency, adopted legislation on green electricity
from region to region
                                     which contains stipulations covering green certificates. The Walloon Region has adopted the
                                     decree of 12 April 2001 on the organization of the regional electricity market and the decree of 30
                                     November 2006 on the promotion of green electricity. The Flemish Region has adopted the decree
                                     of 17 July 2000 on the organization of the electricity market. The Brussels Capital Region has
                                     adopted the Order of 19 July 2001 on the organization of electricity in the Brussels Capital Region.


                                     Table 12:          Permitting procedure Belgian offshore wind farms
                                                                                                                                        Level
                                     Domain concession                                                                                Federal
                                     Building permit and exploitation permit                                                          Federal
                                     Permit for construction and exploitation permit for offshore cable                               Federal
                                     Permit for onshore cable                                                                         Flemish
                                                                                                                             Source(s): Dexia
 Renewables                                                                                                                                   26


                                           The Walloon system is based on mechanisms for the sale of physical electricity and the
                                           exchange of green certificates and on system of minimum price for the sale of green
                                           certificates. In the Walloon region green certificates are trading at €92/MWh and are issued to
                                           producers for a period of 10 years.

                                           The Flemish system is also based on mechanisms for the sale of physical electricity and the
                                           exchange of green certificates, and on a system of minimum price for the sale of green
                                           certificates. The minimum price at which the TSO is obliged to buy the green certificates is set
                                           at €80/MWh for onshore wind production. Green certificates are currently trading at about
                                           €108/MWh in Flanders. Every electricity supplier is obliged to have a minimum share of RE
                                           generated in Flanders. This minimum share was 2% in 2004 and will rise towards 6% in 2010.
                                           The electricity supplier can choose between generating green energy itself or by buying green
                                           certificates on the market. Green certificates are granted by the VREG or CREG with the
                                           exception of green electricity originated from RE source in the Belgian sea area. In Flanders
                                           green certificates are issued for a period of 10 years, except 20 years for solar power. These
                                           certificates can finally be sold on a separate basis from the electricity from which they
                                           originate. Electricity suppliers with a shortage in green certificates will need to pay a fine. From
                                           March 31 2005 this fine is € 125 per missing green certificate.

Offshore wind, regulated on federal
                                           On Federal level, the Belgian TSO Elia is obliged to pay minimum prices per MWh for
level
                                           installations younger than 10 years, depending on the applied production technology. The
                                           minimum price for green certificates origination from offshore wind energy is €107/MWh. The
                                           federal state overlooks the offshore wind instalments and is regulated by the CREG.


 Graph 28:          Belgian wind farm applications in the BCS             Graph 29:       Area foreseen for offshore wind farm installation




                                              Source(s):        C-Power                                               Source(s):      C-Power


The C-Power project, the first of      In the Belgian continental shelf (BCS) one area close to the Dutch continental shelf is free for
few large projects
                                       offshore wind turbine installation. Currently one wind farm, the C-Power project, on the Thornton
                                       Bank is under construction while some other applications are running within the BCS for a total of
                                       580MW. Together with the C-Power project this equals 810MW offshore wind.


                                       V.5. The UK, in the vanguard of the European offshore league

                                       The UK government made a firm commitment that 10% of the electricity supplies should come from
                                       renewable sources of energy by 2010 with wind energy as the main contributor. Despite this
                                       commitment the target is likely to be missed due to a logjam on the approval process of onshore
                                       wind. The British Wind Energy Association (BWEA) expects 8,000MW of capacity by the end of the
                                       decade or three quarters of the national target. Currently the UK only produces 2% of its overall
                                       energy from renewables and only 1,967 MW wind capacity is on the market yet demonstrating that
                                       the UK wind development market needs to quickly scale up with added capacity of 1,500MW
                                       expected every year through 2015. But, the market will be hard pressed to realize its potential since
Renewables                                                                                                                        27



                                growth is being capped by i. grid capacity constraints which could, on bear case assumptions, cut
                                the 2010 installed base expectations more toward 6GW rather than 8GW; and ii. a high level of
                                “not-in-my-backyard” (NIMBY) opposition from the local population driving developers more
                                offshore. The sluggish approval process for onshore wind has been at the basis of the slower than
                                expected expansion in wind, however, with the framework to support offshore wind energy through
                                two successive rounds of sea bed allocations installed, new ground is broken.
                                The construction of these offshore windfarms will make a valuable contribution to the future targets.


Graph 30:      Round 1 wind farms                               Graph 31:        Round 2 wind farms




                                         Source(s):     BWEA                                                   Source(s):     BWEA



                                Round 1 and Round 2 offshore to dominate growth on the UK wind market
Tremendous offshore wind
                                In a best case scenario, UK’s wind industry could reasonably supply 20GW (approximately 17% of
potential in the UK
                                UK's electricity capacity) by 2020 from offshore wind alone. The UK has been estimated to have
                                over a third of Europe's total offshore wind resource, which is equivalent to three times the
                                electricity needs of the nation at current rates of electricity consumption.
                                The offshore process started in 1999, when a set of guidelines were published inflicting a vast
                                amount of applications. In the end 18 of the applications were granted permission to proceed in
                                what has become known as round 1 of UK offshore wind development for a total of 1,500MW. The
                                first round 1 projects are currently completed with North Hoyle (commissioned in December 2003),
                                Scroby Sands (completed in December 2004), followed by the world's largest offshore wind farm
                                the 90 MW Kentish Flats (2005) and Barrow Offshore (90MW, finished construction in July 2006).
                                Seven of the remaining projects have received consent from the planning authorities (estimated at
                                730MW), while the remaining four are still awaiting consent (180 turbines). After round 1, where
                                particularly the difficulty in getting planning consent for offshore wind farms will be handled with,
                                round 2 was announced in December 2003 with 15 projects with a combined capacity of 7.2GW.
                                Only three (1.8GW) of the round 2 projects have the necessary permits. While round 1 project
                                benefited from capital grants these will not be available for round 2 projects.
                                The UK is expected to be the main driver of offshore growth in Europe, adding over 3GW in the
                                next eight years, or 34% of the total new capacity installed in Europe through 2015.
 Renewables                                                                                                                                    28



                                    Attractive economics thanks to high wind speeds and improved regulation
Renewable obligation certificates
supportive although not the best    Alongside the release of the UK Energy White Paper, the UK system has been revised, with the
way to support renewables           government introducing ambitious targets for renewables to exploit its status of one of the windiest
                                    regions in Europe. It adopted a 15% obligation by 2015 which requires 16.5GW by then. Under the
                                    new ROC scheme, which is expected to be effectively starting in 2009, onshore wind will receive 1
                                    ROC/MWh and offshore 1.5 ROC/MWh. These certificates are allocated by Ofgem.


                                    Table 13:         Renewable obligation UK, as of April 2009
                                    Technologies                                                                                    ROCs/MWh
                                    Sewage gas; landfill gas; co-firing of non-energy crop (regular) biomass                            0.25
                                    Onshore wind; hydro-electric; co-firing of energy crops; energy from waste with combined heat
                                                                                                                                         1.0
                                    and power; other not specified
                                    Offshore wind; dedicated regular biomass                                                             1.5
                                    Wave; tidal-stream; advanced conversation technologies (gasification, pyrolysis and anaerobic
                                    digestion); dedicated biomass burning energy crops (with or without CHP); dedicated regular           2
                                    biomass with CHP; solar photovoltaics; geothermal
                                                                                                                               Source(s): RO UK

                                    As part of the legislation, UK government will also speed up planned grid upgrades to
                                    accommodate increasing wind power penetration, especially when Round 2 offshore wind farms go
                                    online. We forecast wind farm operators to receive the ROC incentive in addition to the base-load
                                    wholesale price of € 68.4/MWh (we predict it to fall to € 52.5/MWh through-the-cycle).

                                    Table 14:          DCF input/output (from GB£ to € at price of 1.43x)
                                    UK wind farm                                     Onshore                  offshore               difference
                                    Electricity price (€ /MWh)                              68                       68                    0.0%
                                    Buy-out price (€ /MWh)                                  51                       76                   50.0%
                                    Recycle price (€ /MWh)                                  19                       29                   50.0%
                                    Climate Change levy (€ /MWh)                             5                        5                    0.2%
                                    Full price (€ /MWh)                                    144                      178                   24.3%
                                    Operating hours p.a.                                  2550                     3750                   47.1%
                                    Capex €/kW                                            1650                     2700                   63.6%
                                    Debt portion                                          75%                      65%                   -13.3%
                                    Long-run WACC %                                      8.0%                     9.8%                    22.4%
                                    Enterprise Value €/kW                                2,342                    3,631                   55.1%
                                    Added Eq. value €/kW                                   692                      931                   34.6%
                                                                                                                            Source(s): Dexia Est.

                                    The ROCs encompass a buy-out price of € 50.6/MWh and a recycle price of € 19.1/MWh during 20
                                    years. Also including a climate change levy of € 5.4/MWh, offshore wind all-in revenues are at €
                                    167.0MWh (onshore € 132/MWh). We compute a value of € 3,631/kW for new wind power plants
                                    based on the aforementioned revenues and a typically higher cost structure: opex of € 22/MWh,
                                    capex of € 2,700/kW versus € 1,650/kW onshore and higher interest costs in the country. We have
                                    used an average WACC of 9.76% based on leverage of 65% and an unlevered beta of 1.064x
                                    (versus 0.7x for countries where feed-in tariffs exist). The added equity value stands thus at €
                                    931/kW for offshore wind assets in the UK. For onshore wind, we calculate a fair EV of € 2,342/kW
                                    or an added equity value of € 692/kW


                                    V.6. The Netherlands, still blowing in the wind

                                    With the scrapping of the fixed rate wind incentive (MEP) by the Ministry of Economic Affairs, new
                                    onshore and offshore projects no longer receive support and the only option for owners is to sell
                                    electricity produced by their wind plants at market prices. Only two offshore wind farms, Egmond
                                    aan Zee (nearshore) and Q7 got an exception and get € 97/MWh for the first 10 years of operation.
                                    While the government is considering reintroducing the MEP, there is no indication as to when a
                                    new scheme would be in place or what the level of the new MEP would be. As a result, the
                                    construction of new offshore wind farms came to a halt and for the time being the Netherlands have
                                    an offshore project pipeline of 560MW, of which 120MW should come online between 2008 and
Renewables                                                                                                                                    29



                                    2009. Another project, the 300MW Scheveningen Buiten got consented in the beginning of 2007
                                    and will be build 30km offshore. The Netherlands agreed in the Kyoto Protocol to reduce the
                                    emissions of greenhouse gases in the 2008-‘12 period with 6% relative to the 1990 levels. In 2020,
                                    10% of the overall energy consumption in the Netherlands should come from RE. The share of
                                    renewables in electricity production will be approximately 25 %.


                                    Graph 32:           Target shares of RES in 2020

                                                                                                6%
                                                        23%
                                                                                                                          16%




                                                                                                                                   13%
                                          16%


                                                                                            26%
                                                Solar         Wind         Others         Biom as s           Was te       H eat pum ps


                                                                                                                Source(s): Offshorewindenergy.org

                                    Locations to construct onshore wind farms are becoming scarcer and the process of obtaining
                                    construction licenses has been very difficult over the past few years. With government plans to
                                    have installed around 7,500MW wind capacity by 2020 most of the wind capacity will need to come
                                    from offshore installations, estimated at 6,000MW by 2020 and 1,500MW to 1,700 MW onshore
                                    (especially through repowering). This makes offshore wind energy ‘the’ component in the Dutch
                                    energy policy to reach its RE target.

                                    With the installation of Exclusive Economic Zones (EEZ’s) offshore installations are possible
                                    outside the 12nm zone. In view of the intensive and growing use of the North Sea, only a part of the
                                    EEZ will be available for offshore wind farms.


                                    V.7. France is rolling in wind

                                    The overall French wind market reached 1,480MW end 2006, more than a doubling compared to
                                    the 710MW installed end 2005. The market is projected to add an average of 1,100 MW per year in
                                     the next 8 to 10 years.
Overhaul in regulation to exploit
the potential in France             The incentive scheme recently underwent an overhaul, which included lifting the project size cap of
                                    12 MW, introducing an offshore feed-in tariff of €130/MWh and €81/MWh for onshore for the first
                                    10 years accompanied with linear interpolating based on operating hours. A new permitting
                                    scheme, introducing wind power development zones, was adopted. The market shows great
                                    potential and is currently very fragmented with no wind power operator controlling more than 10%
                                    of the market and open to new players. Still we only have a view on one large offshore wind
                                    project in the pipeline, Enertrag’s 105MW farm Côte d’Albâtre, expected to be operational in 2009.

                                    Table 15:            French offshore wind feed-in tariffs
                                    Operating hours                                    1st 10 years (€/MWh)              Next 10 years (€/MWh)
                                    0-2,800                                                             130                                  130
                                    2,800-3,200                                                         130                  Linear interpolation
                                    3,200                                                               130                                    90
                                    3,200-3,900                                                         130                  Linear interpolation
                                    3,900- 8,760                                                        130                                    30
                                                                                                                           Source(s): French law

                                    France needs to get 21% of its electricity from renewable sources by 2010 and has the second
                                    most wind resources in Europe with wind power potential estimated at 50,000MW of which
                                    30,000MW offshore. Since there is still sufficient potential in onshore wind development, we believe
                                    the offshore wind market in France will await the developments in other countries like Germany,
                                    Belgium and the Netherlands, where the need for offshore is larger given the limited qualitative
Renewables                                                                                                                            30



                                 onshore wind sites available. We feel it is important to be an early mover in offshore wind in order
                                 to attain the permits in time and to get the best locations. Even though we don’t foresee a massive
                                 short term offshore expansion in France; a project pipeline will be installed in short notice in order
                                 to attain a first experience in the field. We believe that EDF EN (Neutral, TP € 50), E.ON (Add, TP €
                                 140) (through its upcoming acquisition of Snet from Endesa) and GDF-Suez (GDF, Add, TP € 42;
                                 Suez, Buy, TP € 49) will be looking with high interest to these projects. During the H1’07
                                 conference call Poweo’s (Buy, TP € 57) CEO Mr. Beigbeder demonstrated interest in this
                                 segment.

                                 Table 16:         French renewable energy targets (MW)
                                 Targets (MW)                                               2010                 2015   % of total (2015)
                                 Wind onshore                                             12,500               13,000              58.4%
                                 Wind offshore                                             1,000                4,000              18.0%
                                 Photovoltaic                                                160                  500               2.2%
                                 Geothermal                                                   90                  200               0.9%
                                 Hydropower                                                  500                2,000               9.0%
                                 Waste to Energy                                             200                  300               1.3%
                                 Biomass                                                   1,000                2,000               9.0%
                                 Biogas                                                      100                  250               1.1%
                                 Total                                                    15,550               22,250
                                                                                                     Source(s): Legifrance gouvernement


                                 V.8. Portugal, virtually locked to new entrants

                                 Portugal is a high-growth market with an attractive incentive scheme and a stable regulatory
                                 framework. Current target for wind energy is 3,750MW by 2010, as part of an overall objective to
                                 reach 9,680 MW of installed capacity from renewables. At present no offshore projects are in the
                                 pipeline and with permitted onshore capacity of on average 725 MW per year in the next five years
                                 the Portuguese wind market (currently only onshore) is fully permitted due to grid constraints, and
                                 virtually locket to new entrants.
                                 The Portuguese tariffs depend on the amount of load hours. A higher capacity factor will result in
                                 lower tariffs.


                                 Table 17:         Portuguese wind feed-in tariffs
                                 Operating hours                  Full load hours            capacity factor                      €/kWh
                                 <2,000 h                                   2,000                     22.8%                        0.079
                                 2,000-2,200 h                              2,200                     25.1%                        0.085
                                 2,200-2,400 h                              2,400                     27.4%                        0.072
                                 2,400-2,600h                               2,600                     29.7%                        0.060
                                 >2,600 h                                   2,800                     32.0%                        0.052
                                                                                                       Source(s): Agencia para A Energia


                                 V.9. Italy: strong incentives, onshore wind is booming
While onshore wind is still      With the best greenfield sites already claimed in Italy, the only way for new entrants is to team up
booming, the offshore markets
                                 with local players or acquire operational projects from developers. With most partnerships set and
will await European experience
                                 developers looking to retain a larger share in their projects, limited extra onshore possibilities are
                                 available although with the current pipeline in place, Italy has still a strong growth potential in
                                 onshore wind. In 2006 the Italian wind energy industry grew 30% and prospects are even higher for
                                 2007. Studies show a potential of at least 10,000MW. Wind energy will be fundamental to reach the
                                 EU’s RE target, what means wind energy will need to reach 8,000MW by 2010 if Italy wants to
                                 reach the target of 25% by 2010.
                                 Offshore wind farms will be located in the Mediterranean Sea, offering less wind quality compared
                                 to the North and Baltic Sea. As a results, no offshore wind farms are consented and no incentives
                                 for offshore are given. Nevertheless, Enel has an offshore project pipeline of 50 to 200MW and is
                                 the only player. If players interested in the very lucrative Italian want a piece of the pie, they will
                                 need to be quick. If the offshore wind market takes off, it won’t take long before the best sites will
                                 be taken. The very rewarding incentive scheme that is now in place for onshore wind, will more
                                 than balance the ‘lower’ wind quality in the Mediterranean Sea.
Renewables                                                                                                       31



             V.10.Spain, can countryman Don Quixote swim?

             With a total 11,615MW installed and an annual growth of 15.8% (1,587MW in 2006) Spain has a
             strong Renewable Energy Plan 2005-2010 and is the runner up in total capacity installed. Spain
             envisages 12% of RE energy consumption from renewable sources by 2010 and 20GW from wind.
             The country has the trump cards in hand to remain the most attractive European wind power
             market. The recent law revision clearly supports further wind farm development in the country. With
             offshore wind almost unexploited, Spain has the assets in hand to furthermore increase its footprint
             on the worldwide wind market. Spain is projected to experience the most growth in Europe adding
             just less than 20 GW between 2007 and 2015, the equivalent to 24% of the total capacity added in
             Europe as a whole during this time. At this moment the zones for offshore projects are defined (as
             early as 2008) and the consent process smoothened. Spain’s very lucrative incentive scheme will
             be needed to offset the minor wind quality compared to Germany and the UK. We have a view on a
             pipeline of 2,800MW while it is predicted Spain will generate between 2,000 and 3,000MW by
             2020. Operators applying for a license to build an offshore wind farm in one of the government
             designated zones will have to show that their wind park will generate at least 50 MW of electricity.
             Companies must apply for a block of seabed and must have performed studies on various aspects
             of the area, including impacts on the environment, fishing activity, historical heritage, and undersea
             cables and pipes.

             New regulatory framework from 2008 will give an extra boost to wind energy

             Through a new regulatory framework, voted May 28, 2007 and starting in 2008, new tariffs were
             issued and should give the wind energy market an extra boost. Operators of new assets that will
             enter operation after December 31 2007 may choose between two significantly improved
             remuneration regimes for onshore wind: i. a 20-year fixed tariff of € 75/MWh (falls back to €
             62.73/MWh after 20 years) with no retroactivity, and updated annually by CPI – X with CPI at 2.5%
             and X at 0.25% during 2008-12 and at 0.5% beyond 2012; or ii. a fixed premium of € 30/MWh to
             the pool price with the introduction of a floor at € 73/MWh and a cap at € 87/MWh. Operators of
                                                                                                            st
             assets that entered service prior to December 31 2007 will have to opt before January 1 2009
             whether to stay in the current RD 436/2004 regime (also here were two alternatives: fixed tariff €
             68/MWh or market option with a premium of € 38/MWh) or to move to the new assets scheme. We
             believe the latter option seems evident as the prior mechanism did not provide an actual CPI
             update neither did it include (caps &) floors.
             As for offshore wind, the new regulatory framework has given the same options as for onshore
             wind although with higher tariffs. The Council of Ministers passed the law on offshore wind parks on
             July the 20th and the law came into force officially when it was published in a State Official Bulletin
             on August 1st 2007. Again operators can choose between: i. a 20-year fixed tariff of € 73.23/MWh
             incentive price (falls back to € 61.20/MWh after 20 years) with no retroactivity, and updated
             annually by CPI – X with CPI at 2.5% and X at 0.25% during 2008-12 and at 0.5% beyond 2012; or
             ii. a fixed premium of € 30/MWh to the pool price with the introduction of a floor at € 84.3/MWh and
             a cap at € 164/MWh. We estimate the pool price at €47.5/MWh on a long-run cash cost assumption
             approach. We might be too cautious but prefer to value Spanish wind capacity starting from the
             fixed tariff scheme rather than the premium system which included uncertainties about pool prices.
             The ceiling price is set at € 170/MWh.

             Spanish utilities ready to get their feet wet

             Southern utilities with a stronger onshore presence have avoided the offshore market but some
             players are taking preliminary steps to ensure first mover status once offshore picks up in their
             markets. Endesa looks the first Spanish utilities company to explore the local offshore opportunities
             following its recently launched JV with Enerfin and we believe that Iberdrola will follow suit given
             the recently improved regulatory review in Spain regarding offshore and the expertise of Scottish
             Power in the UK offshore market.
Renewables                                                                                                               32



             V.11.Poland, regulation to be revisited

             In Poland the total wind capacity installed increased by 83% in comparison to 2005, going up to
             153MW. Poland uses a quota/green certificates based approach with a RE target of 3.6% of the
             total energy production in 2006 to 7.5% in 2010. The country targets 2,000MW in wind by 2010.
             The obligation for TSO’s to purchase green certificates (10.4% by 2010) and preferential grid
             accesses are strong incentives. On the negative side we see a lack of financial support
             mechanisms and problems with obtaining the technical conditions for connection to the grid
             together with environmental restrictions linked to NATURE 2000.


             Graph 33:             Polish green certificates remuneration


                            P enalty fo r no n
                              co m pliance

                   Standard c harge fo r no n
                        co m pliance

                     Expected m arket price
                       Green certific ates


                                  Electricity


                                                 0.0        20.0         40.0           60.0      80.0        100.0
                  Expected total income 1 MWh:                                  €/MWh
                  € 89/MWh


                                                       Source(s): Energy law amendment 2005, European Commission, Dexia Est.

             In order to meet the 2010/2020 RES targets, Poland plans an extension of the green certificates
             market which is currently in place only until 2012. 37% of the total 6,700MW of wind power by 2015
             installed in the Eastern European region is expected to come from Poland. Especially alongside the
             Northern Baltic coast a vast amount of opportunities are still available. Nevertheless, the slow
             permitting process (up to 2.5 years for onshore wind) and poor infrastructure (especially the grid as
             in so many CEE countries) puts a drag on the hefty potential of the country. These culprits don’t
             frighten Western European players from investing in the country, with Iberdrola, Greentech and
             Dong heavily investing in wind. Poland’s price/MWh is divided in two parts, black energy and a
             certificate of origin. The current black energy rate is € 31.8/MWh, while the green certificate price is
             € 57.5/MWh. This gives us a total income of ~€ 89/MWh.

             By 2020 the target is the installation of 13,600 MW wind and achieving the production of electric
             power from wind farms at the level of 30TWh (average operating hours of 2,100hours). This figure
             is without offshore wind. Due to the existing barriers resulting from establishing the Nature 2000
             area on almost the entire area of territorial waters and by the introduction of a concession for
             settling artificial island in the Exclusive Economic Zone support is negligible. Over the last years,
             there was practically no discussion concerning the development of offshore wind farms. The
             introduction of the “Strategy for development of Polish coastal regions”, but still far from its final
             form, should change the offshore wind policy. In this context, according to the Polish wind
             association, the construction of wind farms at sea creates significant possibilities for further
             development of wind energy. The use of sea area for wind energy purposes could increase the
             installed amount of wind energy by 2030 with over 30%. Recently the Polish government in this
             context decided to build three hundred wind generating units in the Baltic Sea as part of the drive to
             diversify energy supplies and to wean itself off its reliance of Russian gas. These wind farms
             estimated at 900MW in total are to be built by BOT Górnictwo and Energetyka energy company.

             Reaching their RE targets is a concern for the Polish government as they don’t agree with                  the
             demanded CO2 emission targets by the European Commission who demands a reduction of                        the
             emission by a third. Poland has a RE target of 7.5% by 2010 while RE represented 2.6% of                   the
             total energy consumption in 2005. The Polish minister of environment calls it “a threat to                 the
             development of our country and Poland does not agree to this”.
 Renewables                                                                                                                           33



                                   V.12.Denmark, taking some time off

                                   Denmark was the first to commercially develop offshore wind projects, and is the largest offshore
                                   wind market with 430MW installed end 2006. Another 400MW spread over two regions (Horns Rev
                                   and Rodsand) is expected to become operational between 2007/’12. This would bring the total
                                   offshore installed capacity at 830MW. A government document recently reported a further 4.6GW
                                   potential at 23 sites.

                                   DONG is the main offshore wind project developer and will finish Horns Rev 2 while E.ON is likely
                                   to complete Nysted 2 (Rodsand). Three consortia were bidding for the proposed extension of the
                                   Nysted offshore wind farm: i) a consortium with Energi E2, DONG and E.ON who were the original
                                   consortium for the Nysted windfarm; ii) Dutch consortium Ballast Nedam, Infra and Evelop and iii)
                                   the Horns Rev 2 consortium, comprising amongst other Vattenfall as the main shareholder.
                                   The Danish Energy Authority, however, chose Energi E2, DONG and E.ON as the building owners
                                   because it was their offer that had the lowest settling price. One other 455MW wind farm is in the
                                   pipeline although outside the tender process. In addition to the above described projects no other
                                   offshore wind projects are in the pipeline. Thanks to the current projects announced electricity from
                                   offshore wind is expected to represent ~10% of total Danish electricity consumption. It is likely that
                                   between 2010-’15 3 to 4 offshore wind farms of approximately 200MW each will become
                                   operational.

                                   Graph 34:         Projected production from offshore wind farms as % of electricity consumption

                                           10%
                                            9%                                                           Nysted 2 (E.ON)
                                            8%
                                            7%
                                            6%                                                   Horns Rev 2 (DONG)
                                            5%                      Fredrikshavn (DONG)
                                            4%                      Nysted 1 (DONG)
                                            3%    Vindeby Tuno Knob
                                                                    Sam so (DEME, ABB)
                                            2%    (Elkraft) (DONG)
                                                                    Horns Rev 1 (DONG, Vattenfall)
                                            1%
                                            0%
                                                 1991   1993    1995    1997    1999    2001    2003    2005    2007   2009



                                                                                                                Source(s): Windpower.org

Superior operating hours, ~4,000   The wind speed in Denmark offshore averages 8-9m/s against 6-7m/s onshore, or 3,500 to 4,500
p.a. depressed by low
                                   offshore operating hours p.a. (2,200 onshore and increasing to 2,400 operating hours p.a.) in line
remuneration scheme
                                   with previous installed offshore wind farms.

                                   Initially Denmark had a feed-in tariff based on turbine capacity and operation hours for onshore
                                   wind farms. The government stepped down from this approach and farms installed after 1 January
                                   2005 get a fixed premium of € 13.3/MWh on top of the spot market price (~€ 48/MWh) for 20 years.
                                   The turbine owner also receives € 0.3/MWh for balancing expenses. Further to this, the Danish
                                   regulation provides a scrapping certificate where old turbines are replaced with new ones. The
                                   scrapping certificate entitles the owner of the old turbine to obtain a subsidy for the price of
                                   electricity produced from the new turbine.

                                   The Danish offshore wind tariffs are set through a tender procedure and will fluctuate from project
                                   to project. With the second offshore wind farm located at Horns Rev a € 69/MWh feed-in tariff
                                   agreement was signed for 50,000 operating hours (12-13 years of electricity production). Once the
                                   50,000 operating hours period is finished, a ~ € 48/MWh through the cycle market place will take its
                                   place. The price determined with the consortium around the Nysted 2 wind farm located at
                                   Rodsand a € 66.5/MWh at the amount of 50.000 full load hours was agreed. This equals
                                   approximately 14 years of electricity production. The new offshore wind farm will provide
                                   approximately 200.000 households with electricity on a year basis, which roughly equals 2 % of the
                                   Danish electricity consumption.
Renewables                                                                                                                                                                                                                  34



             VI. THE OFFSHORE WIND PLAYERS
             Together with those countries’ targets, a carbon emission trading system is up and running, where
             utilities each need to cut their CO2 emissions. They can do this by producing green electricity or
             they can buy CO2 certificates on the ETS market. The most emitting utilities will need to invest
             heavily in green electricity. We believe that one of the best ways to do this, especially in Germany,
             is through offshore wind. Offshore wind offers huge potential with wind farms often in the range of
             coal, gas and nuclear power plants. RWE is one of those players who need to invest heavily in
             green electricity. They can be seen as a potential client of offshore wind farm developers, or as an
             acquirer of such companies. In this context, RWE’s CEO Juergen Grossman said: “acquisitions in
             the renewable energy sector are possible and RWE intends to boost its investment in RE sources
             and plants to set up a new business unit in that area. RWE wants to invest in RE to lower its
             exposure to the trade of CO2 emission allowances”.


             Graph 35:                    Emissions profile 2006 (kg/MWh)

              1,000

                900

                800

                700

                600

                500                                                                                                                  average for Europe 450kg/MWh

                400

                300

                200

                100

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                                                                                                                      Source(s): Dexia calculations (2006 annual reports)


             VI.1.                European wind farm ownership evolution

             The European wind energy market is on the road to consolidation, with M&A proving a key growth
             strategy. The bulk of European wind power is expected to be increasingly concentrated in the
             hands of utilities, which have amassed the largest pipelines in the region and can finance and
             digest big acquisitions. The last four years indicate a clear shift in ownership from German private
             investors, which held over 50% of MW installed in 2002, to utilities and IPPs, which controlled 57%
             of the market in 2005. Consolidation of wind plant ownership largely reflects the shift in market
             growth from Germany to other European markets where institutional investors and utilities own the
             lion's share of MW installed.


             Graph 36:                    Europe wind farm ownership evolution


                     100%
                                                                                         5%                                        20%                         41%                   German Investors
                                   24%                   10%
                     80%
                                                                                         6%                                                                    44%
                                   20%                                                                                             21%                                               Other European
                     60%                                 10%                                                                                                                         IPP's/Investors
                                                                                         6%                                                                    47%
                                   22%                                                                                             18%                                               Other Spanish
                     40%                                 7%                                                                                                                          EPP's
                                                                                         6%                                                                    49%
                                                                                                                                   19%                                               Top IPP's
                                   20%                   6%
                     20%
                                                                                         7%                                        19%                         50%
                                    17%                  6%                                                                                                                          Utilities
                      0%
                                   2002                 2003                         2004                                          2005                        2006


                                                                                                                                                                                           Source(s): Dexia
Renewables                                                                                                     35



             Utilities and top European IPPs have seen their participation in the European wind power market
             grow through consolidation in the region’s key mature and scaling markets. While the first asset
             ownership group has seen its participation increase from 17% in 2002 to 24% in 2006, the second
             group (IPPs) has seen its share increase from 6% to 10% in the same time period.


                 Utility growth will be driven largely by pan-regional players including Iberdrola, EDP, DONG,
                 EDF, E.ON, and Enel, as they realize their near-term pipelines, which currently range from
                 1,000 MW to 4,000 MW.

                 Top IPPs include Europe’s seven largest IPPs, all of which own at least 250 MW. These are:
                 Acciona, Babcock & Brown, Enerfin, Gas Natural, Eurus, International Power, and Trinergy.

                 Going forward, top IPP growth will be led by key firms Acciona and Babcock & Brown, which
                 are expected to realize between 600 MW to 1,000 MW in the near future, as well as by
                 expected new rankings entrants like Falck, RES, and Aitricity, which don’t have a large
                 installed base at the moment but have a significant number of projects at advanced planning
                 stages.


             Graph 37:         Offshore pipelines by type of player




                                                                             Source(s): Emerging Energy Research

             Smaller 100 MW to 200 MW asset owners in Europe will be acquired by expanding utilities such as
             Iberdrola, while large IPPs like Acciona Energia and Babcock & Brown are likely to pursue similar
             deals as opportunities arise. With little greenfield potential remaining in Western Europe, these
             firms will also push east and deal with smaller develop-and-sell players when possible to add
             capacity.


             Graph 38:         Utility Wind Strategy Positioning



              Global


                           A
                           P
                           P
                           R
                           O
              Pan          A
              European     C
                           H



              Local


                                                             MARKET POSITION
                                      Avoid,                      Adopt,            Leadership,
                                    not yet core               become core          early mover


                                                                                                  Source(s): Dexia
 Renewables                                                                                                                                 36



                                       VI.2.        The next step is offshore

                                       Several firms with current portfolios under 300 MW, including RWE, EDF, and ScottishPower, are
                                       set to add well over 1,000 MW, mainly from UK offshore. Other large firms banking on major
                                       additions via offshore include DONG, E.ON, Centrica, Vattenfall and Amec


       Graph 39:     Total Pipeline 2007-2010




                                                                               Source(s): Utilities, IPPs, Developers, Emerging Energy Research

Pure developers, the first players     Near term wind project pipelines of Europe’s top 30 utilities, wind developers, and IPPs indicate
to move offshore                       that together, these firms are planning to add 23GW through 2010. The ability to realize this growth
                                       potential is expected to vary across players since project realization depends on a variety of
                                       factors, from permitting to financing. Continuing with the trends observed in 2005, leading player
                                       pipelines have become increasingly international in 2006, with several firms venturing offshore. In
                                       the first phase this will be done on their local markets, only once local opportunities are fully
                                       exploited, developers will more abroad to install their offshore wind farms or to grasp the remaining
                                       onshore opportunities. Below we recapitulate a range of offshore wind players, from developers
                                       over utilities to IPP’s active in the field:

                                           Energiekontor (Neutral, TP € 4.7) and Plambeck (Buy, TP € 4.8) have secured investors for
                                           their projects, with EnergieKontor working with NIBC on Borkum Riffgrund and Plambeck on
                                           Borkum Riffgrund West with DONG. WPD is the biggest German developer with an amassed
                                           pipeline of >3,000MW spread over 6 projects.

                                           In the UK, AMEC with a pipeline of 1,250 MW, is the leading offshore developer and expects
                                           to activate its first project, the 180 MW Lynn/Inner Dowsing project, as early as 2008. Since the
                                           remaining ~1,070MW pipeline has yet to receive all required permits, these projects will likely
                                           be realized in the mid- to long-term.

                                           On the utility side, Iberdrola (Neutral, TP € 10.2) is set to continue leading the European wind
                                           power market through 2010, with a near-term pipeline of over 4,000 MW, including 1,000 MW
                                           belonging to ScottishPower in the UK.

                                           Among the most aggressive onshore players in the list are utilities EDF EN (Neutral, TP € 50),
                                           EDP, and Endesa as well as IPP Acciona and developer Gamesa Energia, all of which have
                                           pipelines of > 1,000 MW.

                                           E.ON (Add TP € 140) and RWE (Reduce, TP € 80) are almost exclusively internationally-
                                           oriented, with both utilities focusing on the UK onshore market as means of complying with
                                           renewables obligation. These two players are also moving offshore, with RWE focusing on the
                                           UK and E.ON adopting a more pan-regional approach.
Renewables                                                                                                   37



             Graph 40:        Wind Opportunities for Wind Players by Market Maturity Stage




                                                                             Source(s): Emerging Energy Research

             Looking at the maps of existing offshore developers, we still see a fragmented market which will be
             consolidated soon. Lots of smaller players own promising pipelines but have a lack of financing &
             operational capabilities to go on their own. We refer to companies like WPD, Plambeck Neue
             Energien, Warwick, Energiekontor…
 Renewables                                                                                                                                                                         38



                                  VII. VALUATION AND ECONOMICS

                                  VII.1.What does it cost?

                                  Offshore wind energy’s cost range (based on present experience and estimations) amounts €
                                  84.1/MWh for projects with an investment cost of € 2,400/kW and operating hours p.a. averaging
                                  3,400. These costs will strongly depend on the wind speed and accordingly operating hours.

                                  The main culprit so far is the high investment cost, almost double of the onshore capex. Thanks to
                                  technical improvements and experience the investment cost will drop in the years to come similar
                                  to what happened with onshore wind. Furthermore, larger turbines (5MW and more) will increase
                                  the total output and reduce the cost per MWh.

                                  Graph 41:                      The effect of wind speed on the generation costs of wind power




                                                                                                                           Source(s): Sustainable Energy Commission UK

Full cost excluding Return on     Still, for the moment offshore wind is one of the most expensive large scale energy sources
Equity                            available with € 84.1/MWh against € 66.9/MWh onshore, € 58.6/MWh for new coal fired PF and €
                                  54.1/MWh for base load gas fired CCGT. Governmental incentives will in this way be needed to
                                  support offshore wind given the large possibilities accompanied by the cost reduction potential.


                                  Graph 42:                      Full cost per energy source (MWh)


                                                                 ROE 19%

                                         100.0
                                                                                         ROE 15%

                                          80.0
                                                    € 84.1/MWh




                                                                                                                 ROE 13%
                                                                                                                                          ROE 13%
                                                                            € 66.9/MWh




                                          60.0
                                                                                                                                                                 ROE 12%
                                                                                                    € 58.6/MWh




                                                                                                                             € 54.1/MWh




                                          40.0
                                                                                                                                                      29.7/MWh




                                          20.0


                                              0.0
                                                    of f shore w ind            onshore w ind       coal-f ired new         Gas CCGT new             Nuclear EPR

                                                     fuel cost                carbon               O&M              capex                 nuclear prov.            ROE

                                                                                                                                                                       Source(s): Dexia

ROE offshore is 19% against 13%   Other than the economies of scale which vary with the size of the turbine, mentioned above, there
on average for other energy       may be economies of scale in the operation of wind parks rather than individual turbines (semi
sources                           annual maintenance visits, surveillance and administration). Minor experience is gained so far,
                                  what can again result in strong cost reductions, since currently big wind farms of over 400MW are
                                  under construction). GWEC estimates the cost of producing onshore wind to fall to € 30-38/MWh at
                                  good sites to € 40-60/MWh at a site with low average wind speeds by 2020. This is almost half of
                                  the onshore costs now and would inflict a drop in the full offshore costs to € 50/MWh, lower than
                                  coal and gas-fired plants currently operational.
Renewables                                                                                                                               39



                                 VII.2.Valuation of a reference offshore wind project per country

                                 Our generic WACC calculation is based on the following assumptions:


                                     Beta unlevered depends on the type of remuneration that is different per country. We use an
                                     unlevered Beta of 1.06x for countries using green certificates and an unlevered Beta of 0.7 for
                                     countries with feed-in tariffs given its lower asset risk. These Betas were provided by Green-X
                                     to the European commission.

                                     We use a D/E ratio of 65/35 against 75/25 for onshore wind. We also split-up the 65% debt by
                                     maturity in 60% long term and 40% short term debt.

                                     The cost of debt (COD) is calculated with an extra 175-225bps against 125-175bps for
                                     onshore wind to translate the higher risk. However banks are getting hungry for market share
                                     and are likely to go down to 140-150bps.

                                     We use a market risk of 4.5%.

                                     Our risk free rate runs from 4.5% in 2008 to 4.5-4.8% over 2009/’10 to 5.4% long term for
                                     Western European countries.


     Table 18: European offshore wind valuation per country
      Country      EV (€m/MW)    Capex (€m/MW)      Added equity Value (€/MW)                                                     Comments
      Belgium             3.23             2.55                           0.68              Green certificates, strong government support
      Germany             2.66             1.98                           0.68     No grid connection cost, upwards feed-in tariffs revision
      France              2.86             2.40                           0.46                      Split North Sea and Mediterranean Sea
      UK                  3.63             2.70                           0.93                                          High operating hours
      Spain               2.16             2.40                          -0.24        Lower wind quality, waiting for real support scheme
      Denmark             1.92             1.92                           0.00        Higher tariff first 50,000 operat. hours, tender based
      Poland              2.34             2.20                           0.14           No offshore wind regime installed, support limited
      Average             2.68             2.31                           0.38
                                                                                                                       Source(s):     Dexia

                                 Key assumptions for the generic business model per country:


                                     Assets life: We have assumed an average life of 20 years, assuming no residual value after
                                     the first 20 years. This is a conservative approach (even after dismantling costs), in line with
                                     industry standards.

                                     Development costs: The total development cost (incl. administration, permits, machinery, civil
                                     works and development) is on average € 2,300/kW throughout Europe. Due to current turbine
                                     supply chain problems, that will at least last 2 more years, this cost isn’t expected to decrease
                                     in the years to come. The grid connection cost is around ~25-30% of this total development
                                     cost against around ~10% for onshore wind.

                                     Load factor: The load factor (operating hours divided by the total number of hours in a year)
                                     typically figures around 40% or 3,400h in Europe.

                                     Tariff rate per MWh: The tariff rates depend per country and will be or green certificates or
                                     feed-in tariffs. In Germany our revised tariff rate for offshore wind is at the lower range of the
                                     proposed € 110-150/MWh.

                                     Maintenance capex (O&M): The O&M costs for an offshore wind farm are (based on previous
                                     projects in the UK and Denmark) around 3-4% of the initial development cost and >3x the
                                     onshore O&M cost expressed in MW. The fixed costs embrace amongst other things turbine
                                     maintenance and other machinery related costs while the variable cost is the costs of
                                     operation and sales management.

                                     20 years depreciation period: We have not taken into account accelerated depreciation
                                     which creates an NPV tax benefit. Accelerated depreciation is applicable in some European
                                     countries (France, UK and Italy).
Renewables                                                                                                                          40



                                         Below a generic model for a 100MW offshore wind project in Germany is given.

  Debt calculation
                                                 2007        2008      2009      2010           2015       2016          2026     2027
  Capex                             €m          198.0
  Free cash flow                    €m           -198        20.9      21.1      21.3           22.3       22.5          24.3     24.4
  Debt/(repayment)                  €m          128.7        -6.4      -6.4      -6.4           -6.4       -6.4          -6.4     -6.4
  Capital inflow                    €m           69.3
  Dividends                         €m                       14.4       14.6      14.8          15.8       16.0           17.8     18.0
  Change in cash                    €m               0          0          0         0             0          0              0        0
  Debt                              €m           128.7      122.3      115.8     109.4          77.2       70.8            6.4      0.0
  Equity                            €m              69         66         62        59            42         38              3        0
  Assets                            €m             198        188        178       168           119        109             10        0
  D/(D+E)                                       65.0%      65.0%      65.0%     65.0%         65.0%      65.0%          65.0%    65.0%

  P&L
  year                                                       2008      2009      2010           2015       2016          2026     2027
  Operating hours p.a.                                      3,700     3,700     3,700          3,700      3,700         3,700    3,700
  Output                            000 MWh                   370       370       370            370        370           370      370
  Feed-in tariff                    €/MWh                     110       110       110            110        110           110      110
  Total price                       €/MWh                     110       110       110            110        110           110      110

  Revenues                          €m                       40.7       40.7      40.7          40.7       40.7           40.7     40.7
  Opex                              €m                        6.9        7.0       7.2           7.9        8.1            9.9     10.1
  Opex/unit                         €/MWh                    18.6       19.0      19.4          21.4       21.8           26.6     27.2
  EBITDA                            €m                       33.8       33.7      33.5          32.8       32.6           30.8     30.6
  EBITDA margin                     %                      83.0%      82.7%     82.4%         80.5%      80.1%          75.8%    75.3%
  D&A                               €m                        9.9        9.9       9.9           9.9        9.9            9.9      9.9
  EBIT                              €m                       23.9       23.8      23.6          22.9       22.7           20.9     20.7
  Financials                        €m                        8.3        7.8       7.4           5.2        4.8            0.4      0.0
  EBT                               €m                       15.6       15.9      16.2          17.7       17.9           20.5     20.7
  _tax rate                         %                      30.0%      30.0%     30.0%         30.0%      30.0%          30.0%    30.0%
  Tax                               €m                        4.7        4.8       4.9           5.3        5.4            6.2      6.2
  Net profit                        €m                       11.0       11.2      11.4          12.4       12.6           14.4     14.5

  Cash flow table
  year                                           2007        2008      2009      2010           2015       2016          2026     2027
  Operating CF                      €m                       33.8      33.7      33.5           32.8       32.6          30.8     30.6
  Interest expenses                 €m                        8.3       7.8       7.4            5.2        4.8           0.4      0.0
  Taxes                             €m                        4.7       4.8       4.9            5.3        5.4           6.2      6.2
  Net operating CF                  €m                       20.9      21.1      21.3           22.3       22.5          24.3     24.4

  Sales of assets                   €m
  Investments                       €m          198.0
  CF for investments                €m          198.0         0.0        0.0       0.0           0.0        0.0            0.0      0.0

  Free cash flow                    €m          198.0        20.9      21.1      21.3           22.3       22.5          24.3     24.4

  Change in financial liabilities   €m          -128.7        -6.4      -6.4      -6.4           -6.4       -6.4          -6.4     -6.4
  Capital increase                  €m           -69.3
  Dividend payouts                  €m                      -14.4      -14.6     -14.8         -15.8       -16.0         -17.8    -18.0
  CF from financing                 €m          -198.0      -20.9      -21.1     -21.3         -22.3       -22.5         -24.3    -24.4

  Balance sheet
  year                                           2007        2008      2009      2010           2015       2016          2026     2027
  Fixed assets                      €m          198.0       188.1     178.2     168.3          118.8      108.9           9.9      0.0
  Current assets                    €m              0           0         0         0              0          0             0        0
  Total assets                      €m          198.0       188.1     178.2     168.3          118.8      108.9           9.9      0.0

  Shareholders equity               €m           69.3        65.8      62.4      58.9           41.6       38.1            3.5      0.0
  Financial debt                    €m          128.7       122.3     115.8     109.4           77.2       70.8            6.4      0.0
  Other liabilities                 €m              0           0         0         0              0          0              0        0
  =Current liabilities              €m          128.7       122.3     115.8     109.4           77.2       70.8            6.4      0.0
  Total liabilities                 €m          198.0       188.1     178.2     168.3          118.8      108.9            9.9      0.0
Renewables                                                                                                                 41



  WACC calculation
  year                                          2008      2009       2010           2015       2016            2026      2027
  Risk free                                     4.5%      4.5%       4.8%           5.4%       5.4%            5.4%      5.4%
  Beta U                                          0.7       0.7        0.7            0.7        0.7             0.7       0.7
  Beta L                                          1.6       1.6        1.6            1.6        1.6             1.6       1.6
  Risk premium                                  4.5%      4.5%       4.5%           4.5%       4.5%            4.5%      4.5%
  Tax                                          30.0%     30.0%      30.0%          30.0%      30.0%           30.0%     30.0%
  D/E                                         185.7%    185.7%     185.7%         185.7%     185.7%          185.7%    185.7%
  Cost of Debt                                 11.7%     11.7%      12.0%          12.6%      12.6%           12.6%     12.6%
  Cost of Equity                                6.8%      6.8%       6.8%           6.8%       6.8%            6.8%      6.8%
  _ST Debt                                     60.0%     60.0%      60.0%          60.0%      60.0%           60.0%     60.0%
  _LT Debt                                     40.0%     40.0%      40.0%          40.0%      40.0%           40.0%     40.0%
  D/D+E                                        65.0%     65.0%      65.0%          65.0%      65.0%           65.0%     65.0%
  E/D+E                                        35.0%     35.0%      35.0%          35.0%      35.0%           35.0%     35.0%
  WACC                                          7.2%      7.2%       7.3%           7.5%       7.5%            7.5%      7.5%

  Valuation
  year                              2007        2008       2009      2010           2015       2016            2026      2027
  NOPLAT               €m                       16.7       16.6      16.5           16.0       15.9            14.7      14.5
  + Depreciation       €m                        9.9        9.9       9.9            9.9        9.9             9.9       9.9
  -WCR                 €m                          0          0         0              0          0               0         0
  -Capex               €m          -198.0        0.0        0.0       0.0            0.0        0.0             0.0       0.0
  =Free cash flow      €m           198.0       26.6       26.5      26.4           25.9       25.8            24.6      24.4
  discount rate        €m            1.00       1.07       1.15      1.23           1.77       1.90            3.91      4.21
  discounted FCF       €m           198.0       24.8       23.1      21.4           14.7       13.6             6.3       5.8

  Enterprise value     € m/MW        2.66
  Added Equity Value   € m/MW        0.68



                            In the next chapters we will go deeper into the three Belgian offshore wind projects, the Dutch Q7
                            project and our initiating coverage reports on the two German wind developers, Plambeck Neue
                            Energien and Energiekontor.
 Renewables                                                                                                                                                                   42



                                     VIII. LOOKING AT THE BELGIAN PROJECTS
                                     As for the German case we also calculated the probability rates for Belgian offshore wind farms.
                                     Currently we have a view on three wind farms: i) C-Power; ii) Eldepasco and iii) Belwind. Of these
                                     projects, the C-Power project is the only one fully permitted with turbines secured. The other two
                                     projects are in the permits pending phase although they got a domain concession in the Belgian
                                     North Sea.

                                     Graph 43:             Offshore wind project timetable and probability Belgium

                                                                                                                                                             100%
                                                                                                                  C-Pow er                 85%

                                                                                                                             70%
                                                                                          Belw ind
                                                                     Eldepasco


                                                                                                               35%

                                                                                                15%
                                                                           7.5%
                                                        2.5%
                                           0%
                                                                            Measurement
                                        Project not




                                                                                                                permitted




                                                                                                                                                               In operation
                                                                                                 Permits




                                                                                                                              Turbines
                                                                                                 pending




                                                                                                                                              construction
                                                       indentified




                                                                                                                              secured
                                         identified




                                                         Project




                                                                                                                  Fully




                                                                                                                                                 Under
                                                                                                                                                 Source(s): Dexia Est.


                                     VIII.1. C-Power, the first Belgian offshore wind project
                                     The initiative by C-Power to build a farshore wind farm in Belgian coastal waters fits the context of
                                     the European and Belgian commitment to reduce greenhouse gas emissions. The C-Power project
                                     on the Thornton bank will have an installed capacity of 300 MW, an estimated annual electricity
                                     production of 986GWh or approximately 1 TWh.

                                     The total energy production in Belgium is approximately 87 TWh per year. At present only 3.2% of
                                     this total is generated from renewable sources. This means that Belgium must generate a further
                                     2.8% of electricity from renewables or about 2.5 TWh by 2010 to comply with. C-Power estimates
                                     its total output for the 300MW wind farm at 1TWh being 3,350 hours p.a., which we regard as
                                     cautious when comparing to other consented Belgian offshore wind farm estimates (3,650 hours
                                     p.a. on average). We therefore apply 3,600 hours p.a. which still is prudent against our more
                                     generic expectation of 3,700 hours p.a. throughout the North Sea and the Baltic Sea area.

The C-power project represents 1/3   The C-Power project on the Thornton bank represents 40% of the total Belgian obligation that has
of Belgium’s RE target by 2010       to be realised by 2010 and is particularly important for Belgium to reach its RE targets.

                                     Graph 44:             C-Power contribution to Belgium’s renewables energy target


                                                      7.0 %

                                                      6.0 %

                                                      5.0 %

                                                      4.0 %

                                                      3.0 %

                                                      2.0 %

                                                      1.0 %

                                                      0.0 %
                                                                           20 04                      20 06 -2 00 8                20 10

                                                            Exis tin g                          C -p ow e r co ntribu tion                 Obje ctive



                                                                                                                                                    Source(s): C-Power
Renewables                                                                                                                                 43



                                             Positioning
Development and operation backed      In the wind value chain, C-Power is positioned as both a developer as an operator. Through the
by shareholders expertise             expertise of its shareholders the project has clear advantages compared to other companies setting
                                      up wind farms or even operating them. EDF EN has knowledge on the operation while DEME can
                                      use its offshore expertise to construct the offshore wind farm. Since C-Power is a project set up by
                                      these shareholders, we don’t believe it will take on other projects, something we can’t say about its
                                      shareholders.

                                             Shareholders and management background
                                      The C-Power consortium constitutes of several partners:

                                          DEME (Dredging International): a world class Belgian dredging company in which Belgian
                                          construction company CFE (Neutral, TP € 1394.0) and Ackermans & van Haaren (Reduce, TP
                                          € 64.0) both have a 50% stake.

                                          EDF-Energies Nouvelles (Neutral, TP € 50.0): a leader in renewable energy (50% equity
                                          partner), with a market capitalization of € 3.4bn.

                                          Ecotech Finance (SRIW): a company ultimately owned by the Walloon region, with green
                                          focus

                                          Socofe: a Walloon municipal holding, with a focus on energy.

                                          Nuhma, an investment fund formed by municipal and district governments in the Walloon
                                          region


                                      Graph 45:         C-Power shareholder structure (estimated)

                                                          20%                                                         20%




                                         20%                                                                                         20%



                                                                                    20%

                                                       DE M E         E c otec h          S oc ofe           Nuhm a         E DF-E n


                                                                                                                              Source(s): Dexia

DEME and EDF EN have strong           Supported by three financial investment companies (Socofe, Nuhma and Ecotech Finance),
expertise in wind farm construction   dredging company DEME and RE player EDF-EN (with both strong expertise in the construction
and operation                         and the operation of wind farms), C-Power’s shareholder structure is pretty solid. DEME, the
                                      Belgian dredging company with worldwide activities, already took part in five offshore/nearshore
                                      wind projects throughout Europe. Dredging International and other companies, part of the DEME
                                      group like Hydro Soil Services (contracted to install the monopoles and to assemble the wind
                                      turbines at Utgrunden, Sweden) participated in the instalment of a total of 450MW offshore and
                                      nearshore farms. As a comparison, end 2006, 904MW offshore wind farms were operational
                                      throughout Europe.

                                      Table 19:         DEME-group offshore and nearshore project involvement
                                      Project                           MW     km of coast           Depth              Year of Construction
                                      Utgrunden (S)                     10.5              8           7-10                              2000
                                      Samso (DE)                          23           4-8           12-18                              2002
                                      Horns Rev (DE)                    160         14-20             6-14                              2002
                                      Nysted (DE)                       158           9-14           6-9.5                              2003
                                      Noordzeewind (NL)                   99          8-12           15-20                              2005
                                      C-Power (BE)                      300            27            12-24                         2007-2010
                                                                                                                            Source(s): C-Power
Renewables                                                                                                                                      44



                                              C-Power’s project portfolio
300MW offshore wind park by 2011,     C-Power is a project located on the Thornton sandbank, 27km outside the Belgian coast at a water
developed through 3 planning          depth of 12 to 24m. The project was proposed in 2002 and permissions to go ahead were received
phases                                May 2004. Initially the project was approved for construction 6km outside the Belgian coast but
                                      failed to secure approval from the local council. After negotiations the project got approval to be
                                      constructed outside the 12nm zone, where Belgium is fully authorized for operation and exploration
                                      of marine areas (Exclusive Economic Zone).

                                      The project consists of several steps: i) in the test phase, 6x 5MW windmills will be elevated and
                                      first connection will be made (2007-‘08), construction is expected to be completed 1 October 2008;
                                      ii) once the test phase has been finished, phase 2 construction starts with the instalments of an
                                      extra 18 5MW windmills (Operational 1 October 2010) and iii) in a final phase the second grid and
                                      an extra 36 5MW windmills will be installed (Operational 1 October 2011), iii) the exploitation phase
                                      finally is a 20 year concession. However, C-Power can apply for an extension of their concession
                                      period and set-up a new remuneration agreement with the Belgian government or Elia.

                                      Graph 46:          Location Thorntonbank (shipping routes in green)




                                                                                                                                Source(s): C-Power

                                      Based on data provided by C-Power, the total budget should run up to € 800m for 300MW (€
                                      2.66m/MW) with € 153m initially paid in the testing phase (€ 5.1m/MW). Projectfinancemagazine
                                      reports of an undisclosed O&M agreement with REpower who agreed with C-Power on providing a
                                      certain level of availability (> 90%) for a period of 10 years. We feel through this agreement C-
                                      Power has build up a lot of certainty towards banks, although will need to pay extra expenses by
                                      means of O&M costs. We calculate these at € 25/MWh in line with an average European offshore
                                      wind farm.

Table 20:   Planning stages
 Phase 1    2007-‘08   Demonstration phase: construction of 6 turbines, 1st wind measuring mast and the 1st electricity cable: 150 kV (40 km)
 Phase 2    2009       construction of 18 turbines and the offshore transformer station
 Phase 3    2010-‘11   construction of 36 turbines, 2nd wind measuring mast, 2nd electricity cable: 150 kV (40 km)
                                                                                                                                Source(s): C-Power

Strong governmental support           The C-Power project enjoys strong Belgian/Flemish support, with €107/MWh green certificates over
through GC of €107/MWh and grid       a period of 20 years for the first 216MW and €92/MWh thereafter. These green certificates will be
subsidy                               sold to Elia (the high voltage Belgian grid operator) through an agreement between the two
                                      companies. This contract makes C-Power less susceptible to political risk.

                                      C-Power will furthermore benefit from a grid subsidy representing 1/3 of the connection costs with a
                                      maximum of € 25m over a period of 4 years. This contract is subject to completion of the whole
                                      project.
Renewables                                                                                                         45



             Graph 47:         Time line licensing (4.5 years) and engineering (1 year)




                                                                                                  Source(s): C-Power

             Graph 48:         Time line construction and operation




                                                                                            Source(s): C-Power, Dexia

             The first phase is estimated to cost around € 153m consisting of senior debt of € 111m (15 year
             facility and € 74m short term facilities for the construction letters of credit which will be repaid from
             the senior, Euribor +100-200bps), € 20m short term debt for the grid subsidy and the equity
             invested in the first phase is estimated at € 22m. This brings the D/E ratio at 86/14. C-Power will
             get a grid subsidy of € 25m in the first phase.

             Table 21:         Belgian offshore wind farms

             Project                                 Thornton Bank                Eldepasco                  Belwind
             Developer                                     C-Power               Electrawinds               Econcern
             Size (MW)                                          300                       216                    330
             Nr. Of turbines                                     60                        36                     66
             Distance from shore (km)                         27-30                     37-38                  46-48
             Load factor (%)                                   38%                       39%                    42%
             Operating hours Company Est.                     3,350                     3,403                  3,636
             Operating hours Dexia Est.                       3,600                     3,650                  3,700
             Investment costs (€ m)                             800                       600                    800
             Inv. Cost €/kW Company Est.                      2,667                     3,333                  2,424
             Inv. Cost €/kW Dexia Est.                        2,500                     2,600                  2,700
                                                                                                        Source(s): 3E

             We estimate the total investment cost at € 750m (€ 2,500/kWh) divided over € 315m long term
             financing, short term debt of € 210 m and a total of 30% equity of € 225m. Minus the grid subsidy
             the total investment cost is € 725m (€ 2.41m/MW). The grid connection costs over the whole
             project are estimated at around € 170m (22.5% of total investment cost). Currently negotiations are
             ongoing between the Belgian offshore wind farm developers and Belgian TSO Elia on the possible
             take-over purchase of the offshore grid. Elia, the Belgian TSO monopolist previously was not willing
             to take the offshore grid on its account due to its IPO that was taking place and the, at that
             moment, limited know-how on offshore grid connections for offshore wind farms. Now most has
             become clear and offshore wind is ready to take off Elia will possibly take the grid back from C-
             Power also in the context of a BelBrit connection. Minus the already received € 25m grid subsidy
             an extra € 145m could possibly be paid back to C-Power. This would result in an investment cost of
             € 580m (€ 1.95m/MW). However, we do not expect Elia to take over the whole grid..
Renewables                                                                                                                                                                     46



                                            Note we do not take into account dismantling costs since we have also not taken into account
                                            repowering or an extension of the 20 years timeframe, what we believe to be very likely.


       Graph 49:                 Investment cost phase 1 (6WTG’s)                         Graph 50:                 Investement cost, total project (60WTG’s)


                           15%                                                                                   12%
                                                                             33%
                                                                                               23%
                                                                                                                                                                         43%




           25%
                                                       28%                                                              23%


                 W ind turbines    Grid   Infrastructure and engineering   Other                       W ind turbines   Grid    Infrastructure and engineering   Other



                                               Source(s):           C-Power, Dexia Est.                                             Source(s):           C-Power, Dexia Est.



                                                      P&L and valuation
                                  To value C-Power we use a WACC of 7.5% based on an unlevered Beta of 1.06 (green
                                  certificates), a D/E of 70/30 taking into account the 80/20 in the first phase and 65/35 on average
                                  throughout Europe for offshore wind investment. Key assumptions for our C-Power model are: i)
                                  asset life of 20 years (this is a conservative approach given the limited experience); ii) a
                                   development cost (incl. administration, permits, machinery, civil engineering and development) of €
Added value of € 186.5m and EV of 2,500/kW; iii) a load factor of 38% equalling 3,600 operating hours; iv) a € 107/MWh green
€ 625.2m                           certificate remuneration for the first 216MW produced and € 92/afterwards for a period of 20 years
                                   and v) a depreciation period of 20 years.

                                            Based on these assumptions, a WACC of 7.5% and probability adjusted for the different phases of
                                            the project, our implied DCF valuation hovers around € 173.7m added equity value. We also
                                            calculate an EV of € 612.8m.

P&L
year                                                 2007          2008       2009     2010          2011          2012         2028          2029          2030          2031
Electricity price                  €/MWh                             62         59       57            56            54           64            64            64            64
Green certificates price           €/MWh                            107        107      107           107           107          107           107           107           107
Green certificates price           €/MWh                             92         92       92            92            92           92            92            92            92
Total price                        €/MWh                            169        166      164           163           156          166           167           168           179


Revenues                           €m                                4.6       17.9     31.0       96.9           168.7         179.6        162.8         150.1           86.9
Opex                               €m                                  1          2        9         13              23            32           27            20             15
Opex/unit                          €/MWh                              21         21       49         22              22            30           28            22             31
EBITDA                             €m                                4.0       15.6     27.0       84.3           147.8         150.9        136.7         126.0           69.5
EBITDA margin                      %                              87.7%      87.2%    87.0%      86.9%           87.6%         84.0%        84.0%         84.0%          80.0%
D&A                                €m                                6.4        6.4     23.9       37.5            37.5          31.1         31.1          13.6            0.0
EBIT                               €m                               -2.4        9.2      3.1       46.8           110.3         119.8        105.6         112.4           69.5
Financials                         €m                                5.9        5.6     20.0       30.6            29.1           2.0          0.6           0.0            0.0
EBT                                €m                               -8.3        3.6    -16.9       16.2            81.2         117.8        105.0         112.4           69.5
_tax rate                          %                              30.0%      30.0%    30.0%      30.0%           30.0%         30.0%        30.0%         30.0%          30.0%
Tax                                €m                               -2.5        1.1     -5.1        4.9            24.4          35.3         31.5          33.7           20.9
Net profit                         €m                               -5.8        2.5    -11.8       11.3            56.9          82.4         73.5          78.7           48.7
Renewables                                                                                                             47



Cash flow table
year                                    2007    2008     2009     2010    2011     2012    2028     2029     2030   2031
Operating CF                      €m              4.0    15.6     27.0    84.3    147.8   150.9    136.7    126.0   69.5
Interest expenses                 €m              5.9     5.6     20.0    30.6     29.1     2.0      0.6      0.0    0.0
Taxes                             €m             -2.5     1.1      -5.1    4.9     24.4    35.3     31.5     33.7   20.9
Net operating CF                  €m              0.6     8.9     12.1    48.8     94.4   113.5    104.6     92.3   48.7


Sales of assets                   €m
Investments                       €m   -128.0           -350.0   -272.0
CF for investments                €m   -128.0     0.0   -350.0   -272.0     0.0     0.0      0.0      0.0     0.0    0.0


Free cash flow                    €m   -128.0     0.6   -341.1   -259.9    48.8    94.4   113.5    104.6     92.3   48.7


Change in financial liabilities   €m   102.4     -5.1   239.9    173.0    -26.9   -26.9    -21.8    -21.8    -9.5    0.0
Capital increase                  €m    25.6            105.0     81.6
Dividend payouts                  €m              4.5    -3.8      2.6    -67.6   -68.0    -92.8    -83.8   -72.9    0.0
CF from financing                 €m   128.0     -0.6   341.1    257.2    -94.5   -94.9   -114.6   -105.6   -82.5    0.0


Change in cash                    €m      0.0     0.0      0.0     -2.7   -45.6    -0.5     -1.0     -1.0     9.8   48.7


Balance sheet
year                                    2007     2008    2009     2010     2011    2012    2028     2029    2030    2031
Fixed assets                      €m   128.0    121.6   465.2    713.3    675.8   638.3    44.7     13.6     0.0     0.0
Current assets                    €m
Total assets                      €m   128.0    121.6   465.2    713.3    675.8   638.3    44.7     13.6      0.0    0.0


Shareholders equity               €m    25.6     24.3   128.0    203.1    192.5   181.9    13.4       4.1     0.0    0.0
Financial debt                    €m   102.4     97.3   337.2    510.2    483.3   456.4    31.3       9.5     0.0    0.0
Other liabilities                 €m
=Current liabilities              €m   102.4     97.3   337.2    510.2    483.3   456.4    31.3      9.5      0.0    0.0
Total liabilities                 €m   128.0    121.6   465.2    713.3    675.8   638.3    44.7     13.6      0.0    0.0
Renewables                                                                                                                             48



                                  VIII.2. Eldepasco
Strong shareholders pack with     Eldepasco is one of the three Belgian offshore wind projects located in the North Sea. The project
experience in wind development    is an initiative of a range of partners:
and operation
                                      Electrawinds produces, sells and distributes green power generated from inexhaustible clean
                                      energy resources such as wind, sun and organic matter.         Apart from constructing and
                                      operating windmill farms, solar farms and biomass plants, Electrawinds also investigates and
                                      develops new renewable energy possibilities and applications.

                                      Depret is a construction company active in marine construction, civil engineering and buildings
                                      for the public and private sector in Flanders and across border.

                                      Aspiravi is initiated by the Flemish intermunicipal companies without private participation like
                                      Interelectra, IVEG, PBE and WVEM. The group invests, realizes and operates projects for the
                                      production of renewable and environment friendly energy.

                                      Colruyt is a Belgian discounter in food and non-food products with more than 190 shops
                                      throughout the country.


                                  If operational by 2010, the project will represent around one third of Belgium’s 2010 objective.

                                  Graph 51:         Eldepasco contribution to Belgium’s renewables energy target



                                                  7.0%

                                                  6.0%

                                                  5.0%

                                                  4.0%
                                                  3.0%

                                                  2.0%

                                                  1.0%

                                                  0.0%
                                                                2004              2006-2008            2010

                                                    Exis ting                Eldepas co contribution            Objective


                                                                                                                     Source(s): Dexia Est.

Higher investment cost than       The Eldepasco project will be built on an area of ~ 8km² at water depth of 15-20 meters. The total
European average, awaiting full   expected installed wind capacity is targeted at 216MW and the projected electricity output 735GWh
permits                           (3,403 operating hours p.a., Dexia Est. 3,650). With a total investment cost of € 600m, € 2,777/kW
                                  (Dexia Est. € 2,600/kW) the project is higher than the € 2,400/kW on average throughout Europe.

                                  Graph 52:         Time line construction and operation

                                                   2006           2007              2008           2009            2010        2011-‘30
                                  Eldepasco                     Consenting                             Construction            Operation
                                                                               Source(s):                                 Eldepasco, Dexia

                                  Eldepasco received an area concession in 2006 although they don’t have a building permit and
                                  operation permit yet. The project intends to start construction 2009-’10 and to become operational
                                  by 2011.

                                         P&L and valuation
                                  To value Eldepasco we use a WACC of 8.8% based on an unlevered Beta of 1.06 (green
                                  certificates), a D/E of 65/35. Key assumptions for our Eldepasco model are: i) asset life of 20 years
                                  (this is a conservative approach given the limited experience); ii) a development cost (incl.
                                  administration, permits, machinery, civil engineering and development) of € 2,600/kWh; iii) a load
Renewables                                                                                                                          49



                                    factor of 42% equalling 3,650 operating hours; iv) an expected € 107/MWh green certificate
                                    remuneration for the first 216MW produced and € 92/afterwards for a period of 20 years in line with
                                    the agreement made between C-Power and Elia and v) a depreciation period of 20 years.

                                    Based on these assumptions, a WACC of 8.7% and probability adjusted for the phase the
                                    Eldepasco project is in (Permits pending) our implied DCF valuation hovers around € 56.1m added
                                    equity value.

  P&L
  year                                                        2011       2012       2013      2014            2028      2029       2030
  Operating hours p.a.                                       3,650      3,650      3,650     3,650           3,650     3,650      3,650
  Output                            000 MWh                    788        788        788       788             788       788        788
  Electricity price                 €/MWh                       53         54         54        55              64        65         66
  Green certificates <216,00 MWh    €/MWh                      107        107        107       107             107       107        107
  Green certificates >216,000 MWh   €/MWh                       92         92         92        92              92        92         92
  Total price                       €/MWh                      160        161        161       162             171       172        173


  Revenues                          €m                        126.1     126.6      127.1     127.6           135.1      135.7     136.3
  Opex                              €m                         15.1      15.4       15.7      16.0            21.2       21.6      22.0
  Opex/unit                         €/MWh                      19.2      19.6       20.0      20.4            26.9       27.4      27.9
  EBITDA                            €m                        111.0     111.2      111.4     111.6           113.9      114.1     114.3
  EBITDA margin                     %                        88.0%     87.8%      87.6%     87.4%           84.3%      84.1%     83.8%
  D&A                               €m                         28.1      28.1       28.1      28.1            28.1       28.1      28.1
  EBIT                              €m                         82.9      83.1       83.3      83.5            85.9       86.0      86.2
  Financials                        €m                         23.8      22.5       21.3      20.0             2.5        1.3       0.0
  EBT                               €m                         59.2      60.6       62.0      63.5            83.4       84.8      86.2
  _tax rate                         %                        30.0%     30.0%      30.0%     30.0%           30.0%      30.0%     30.0%
  Tax                               €m                         17.8      18.2       18.6      19.0            25.0       25.4      25.9
  Net profit                        €m                         41.4      42.4       43.4      44.4            58.4       59.3      60.3


  Cash flow table
  year                                            2010        2011       2012       2013      2014            2028      2029       2030
  Operating CF                      €m                       111.0      111.2      111.4     111.6           113.9     114.1      114.3
  Interest expenses                 €m                        23.8       22.5       21.3      20.0             2.5       1.3        0.0
  Taxes                             €m                        17.8       18.2       18.6      19.0            25.0      25.4       25.9
  Net operating CF                  €m                        69.5       70.5       71.5      72.5            86.4      87.4       88.4


  Sales of assets                   €m
  Investments                       €m           561.6
  CF for investments                €m           561.6          0.0       0.0        0.0       0.0             0.0        0.0       0.0


  Free cash flow                    €m           561.6         69.5      70.5       71.5      72.5            86.4       87.4      88.4


  Change in financial liabilities   €m           -365.0       -18.3      -18.3     -18.3      -18.3          -18.3      -18.3     -18.3
  Capital increase                  €m           -196.6
  Dividend payouts                  €m                        -51.3      -52.3     -53.3      -54.3          -68.2      -69.2     -70.2
  CF from financing                 €m           -561.6       -69.5      -70.5     -71.5      -72.5          -86.4      -87.4     -88.4


  Balance sheet
  year                                            2010        2011       2012       2013      2014            2028      2029      2030
  Fixed assets                      €m           561.6       533.5      505.4      477.4     449.3            56.2      28.1       0.0
  Current assets                    €m               0           0          0          0         0               0         0         0
  Total assets                      €m           561.6       533.5      505.4      477.4     449.3            56.2      28.1       0.0


  Shareholders equity               €m           196.6       186.7      176.9      167.1     157.2            19.7        9.8       0.0
  Financial debt                    €m           365.0       346.8      328.5      310.3     292.0            36.5       18.3       0.0
  Other liabilities                 €m               0           0          0          0         0               0          0         0
  =Current liabilities              €m           365.0       346.8      328.5      310.3     292.0            36.5       18.3       0.0
  Total liabilities                 €m           561.6       533.5      505.4      477.4     449.3            56.2       28.1       0.0
Renewables                                                                                                                             50



                                   VIII.3. Belwind
                                   Belwind is one of the three Belgian offshore wind projects located in the North Sea. The company
                                   is a project from Evelop Belgium, part of the Econcern group. Econcern is a 100% private player
                                   active in renewable energy and divided in separate business units:

                                       Ecofys: An engineering group active in 11 countries focussed on renewable energy.

                                       Evelop: A European project developer building energy installations.

                                       Ecoventures: A participation company active in financial structuring of projects with the
                                       financing of spin-offs.


                                   Econcern is furthermore active in the construction of the Dutch Q7-project, the Scira project in the
                                   UK and has several projects in the consenting phase. Marc Coenen is the Managing Director of
                                   Belwind.

                                   Graph 53:        Belwind contribution to Belgium’s renewables energy target



                                                    7.0%
                                                    6.0%
                                                    5.0%
                                                    4.0%
                                                    3.0%
                                                    2.0%
                                                    1.0%
                                                    0.0%
                                                                  2004          2006-2008            2010

                                                      Exis ting             Belw ind contribution                Objective


                                                                                                                    Source(s): Dexia Est.

Potential biggest contributor to   Would Belwind be fully operational by 2010 the project will contribute over one third of the RE
Belgium’s 2010 RE target           target set.

                                   At a capacity of 330MW (66 5MW turbines) and a company estimated total investment cost of €
                                   800m (€ 2,424/kWh) Belwind is not only the biggest Belgian offshore wind farm to be built but also
                                   one of Belgium’s biggest sustainable energy investments. The project is like Eldepasco and C-
                                   Power located in the EEZ zone off the coast of Belgium (BHS), 46km from the coast at depths of
                                   20-35 meters and will be built on the Bligh Bank. The grid connection will be made through 2,
                                   150kV offshore cables, at Slijkens Ostend.

                                   Graph 54:        Location Bligh Bank (Belwind)




                                                                                                                             Source(s): 3E
 Renewables                                                                                                                              51


Hoping to come on stream by 2010     The application for a concession to build the wind farm was submitted in April 2006 and exclusivity
although 2011 seems more likely
                                     obtained July 2006. The Belgian government granted the concession for the construction of the
                                     wind farm on the Bligh Bank June 2007 for both the wind park as the sea cables. The project also
                                     got consented by Elia to come on land in Ostend. Construction will at the earliest start in 2010 and
                                     as a consequence the project will only come on stream by 2011-‘12. Financing should start late
                                     2007 or early 2008. Dirk Berkhout, one of the directors of Econcern already indicated it will be
                                     necessary to find Belgian project partners for the Belwind project in order to finance the deal.
                                     Partners for the Q7 project in the Netherlands could come to the rescue here.

                       Graph 55:     Time line from consenting till operation

                                       2006            2007                2008        2009            2010            2011       2012-'30
                        Belwinds                              Consenting                                   Construction           Operation
                                                                                                                          Source(s): Belwind

                                     Belwind foresees to supply 345,000 household with green electricity and has an expected annual
                                     energy yield of ~1,200GWh. This represents 3,636 operating hours p.a. or a load factor of 42%.
                                     The operating hours are estimated as the highest in Belgium.

                                              P&L and valuation
 WACC calculation based on green     To value Belwind we use a WACC of 8.7% based on an unlevered Beta of 1.06 (green certificates),
 certificates and a D/E ratio of     a D/E of 65/35. Key assumptions for our Belwind model are: i) asset life of 20 years (this is a
 65/35                               conservative approach given the limited experience); ii) a development cost (incl. administration,
                                     permits, machinery, civil engineering and development) of € 2,650/kWh; iii) a load factor of 42%
                                     equalling 3,700 operating hours; iv) an expected € 107/MWh green certificate remuneration for the
                                     first 216MW produced and € 92/afterwards for a period of 20 years in line with the agreement made
                                     between C-Power and Elia and v) a depreciation period of 20 years.

                                     Based on these assumptions, a WACC of 8.7% and probability adjusted for the phase the Belwind
                                     project is in (Permits pending, although nearly close to be permitted, expected end ’07, begin ’08)
                                     our implied DCF valuation hovers around € 87.3m added value.

  P&L
  year                                                           2011         2012    2013     2014             2028      2029       2030
  Operating hours p.a.                                          3,700        3,700   3,700    3,700            3,700     3,700      3,700
  Output                            000 MWh                     1,221        1,221   1,221    1,221            1,221     1,221      1,221
  Electricity price                 €/MWh                          53           54      54       55               64        65         66
  Green certificates <216,00 MWh    €/MWh                         107          107     107      107              107       107        107
  Green certificates >216,000 MWh   €/MWh                          92           92      92       92               92        92         92
  Total price                       €/MWh                         155          155     156      157              166       167        168


  Revenues                          €m                          189.0        189.8    190.5    191.3           202.9      203.8      204.7
  Opex                              €m                           22.3         22.7     23.2     23.6            31.2       31.8       32.5
  Opex/unit                         €/MWh                        18.2         18.6     19.0     19.4            25.5       26.1       26.6
  EBITDA                            €m                          166.8        167.1    167.4    167.7           171.7      172.0      172.3
  EBITDA margin                     %                          88.2%        88.0%    87.8%    87.6%           84.6%      84.4%      84.2%
  D&A                               €m                           43.7         43.7     43.7     43.7            43.7       43.7       43.7
  EBIT                              €m                          123.0        123.3    123.6    123.9           128.0      128.3      128.6
  Financials                        €m                           37.0         35.0     33.1     31.1             3.9        1.9        0.0
  EBT                               €m                           86.0         88.3     90.5     92.8           124.1      126.3      128.6
  _tax rate                         %                          30.0%        30.0%    30.0%    30.0%           30.0%      30.0%      30.0%
  Tax                               €m                           25.8         26.5     27.2     27.8            37.2       37.9       38.6
  Net profit                        €m                           60.2         61.8     63.4     64.9            86.9       88.4       90.0
Renewables                                                                                                 52



Cash flow table
year                                    2010     2011     2012     2013     2014     2028     2029     2030
Operating CF                      €m            166.8    167.1    167.4    167.7    171.7    172.0    172.3
Interest expenses                 €m             37.0     35.0     33.1     31.1      3.9      1.9      0.0
Taxes                             €m             25.8     26.5     27.2     27.8     37.2     37.9     38.6
Net operating CF                  €m            104.0    105.5    107.1    108.7    130.6    132.2    133.7


Sales of assets                   €m
Investments                       €m   874.5
CF for investments                €m   874.5       0.0      0.0      0.0      0.0      0.0      0.0      0.0


Free cash flow                    €m   874.5    104.0    105.5    107.1    108.7    130.6    132.2    133.7


Change in financial liabilities   €m   -568.4    -28.4    -28.4    -28.4    -28.4    -28.4    -28.4    -28.4
Capital increase                  €m   -306.1
Dividend payouts                  €m             -75.5    -77.1    -78.7    -80.2   -102.2   -103.7   -105.3
CF from financing                 €m   -874.5   -104.0   -105.5   -107.1   -108.7   -130.6   -132.2   -133.7


Balance sheet
year                                    2010     2011     2012     2013     2014     2028     2029     2030
Fixed assets                      €m   874.5    830.8    787.1    743.3    699.6     87.4     43.7      0.0
Current assets                    €m       0        0        0        0        0        0        0        0
Total assets                      €m   874.5    830.8    787.1    743.3    699.6     87.4     43.7      0.0


Shareholders equity               €m   306.1    290.8    275.5    260.2    244.9     30.6     15.3       0.0
Financial debt                    €m   568.4    540.0    511.6    483.2    454.7     56.8     28.4       0.0
Other liabilities                 €m       0        0        0        0        0        0        0         0
=Current liabilities              €m   568.4    540.0    511.6    483.2    454.7     56.8     28.4       0.0
Total liabilities                 €m   874.5    830.8    787.1    743.3    699.6     87.4     43.7       0.0
Renewables                                                                                                                            53



                                    IX. Q7, OFFSHORE IN THE NETHERLANDS

                                    IX.1. Positioning
E-Connection as project initiator   In December of 1999, property developer E-Connection applied for a permit for the construction
sold the project to 3 RE groups     and operation of the wind farm. The Economic Impact Evaluation started a few months later in May
                                    2000. The permit was issued on February 18, 2002. The permits for the construction and the
                                    maintenance of the offshore and land cables were obtained in the spring of 2002.

                                    In October 2004, Econcern and Energy Investments Holding (EIH) signed a joint agreement to take
                                    over all permits and rights relating to the construction and operation of E-connection’s windpark. To
                                    this end, Econcern and EIH established a holding company called Windpark Q7 Holding. This was
                                    soon followed by talks with ENECO Energie regarding its participation in the project. Later EIH was
                                    integrated in Econcern.

                                    In March 2005 the Q7 Holding signed a declaration of intent for the construction and operation of
                                    the wind farm. First of all, an onshore 50 kV cable connection was installed. On 11 July, the
                                    investors together with Q7 Holding and the banks Rabobank and Dexia signed a term sheet for
                                    non-recourse project financing. As a result, ENECO Energie officially received a 50% stake in the
                                    wind park on 26 July. On 10 October 2006, the first foundations were laid at sea. At the beginning
                                    of 2008, the wind park expects to start generating power and it will be officially delivered in the
                                    spring of 2008.


                                    IX.2. Shareholders and management background
Econcern, Energy Investment         The offshore wind park Q7 is a joint project of energy group Econcern and utility ENECO Energie.
Holding and ENECO Energie
jointed forces
                                    Graph 56:         Q7 Shareholder structure (estimated)




                                                50%                                                                      50%




                                                                  Econcern                               ENECO

                                                                                                                         Source(s): Dexia

                                        Econcern is the holding company of Ecofys, Ecostream, Evelop and Ecoventures. The
                                        mission of these European companies is to ensure 'a sustainable energy supply for everyone.
                                        Econcern specializes in delivering expert services, products and projects in all areas of
                                        sustainable energy and energy efficiency. Besides its activities in the Netherlands, Econcern is
                                        also engaged in offshore wind farm initiatives in the United Kingdom, Belgium and Germany.

                                        ENECO Energie is one of the three leading energy companies in the Netherlands. ENECO
                                        Energie has an integrated distribution strategy and focuses on transport, trade and supply of
                                        energy (electricity, gas and heat) and related products and services
Renewables                                                                                                                              54



                                     IX.3. Q7’s project portfolio
                                     Graph 57:         Location




                                                                                                                          Source(s): Evelop

Smaller than average offshore wind   The Q7 project is located 27km outside the coast of Ijmuiden, in the Dutch continental shelf (>
farm with average operating hours    12nm) at a water depth of 19 to 24m. The project has a capacity of 120MW (60x 2MW turbines)
                                     and construction was started during the second half of 2006. The first quarter of 2008 the project
                                     should come online. With an estimated annual electricity production of 435GWh the wind farm will
                                     have around 3,625 operating hours p.a. enough stream for 125,000 households.

                                     Graph 58:         Time line construction and operation

                                                              2007                                      2008-‘27
                                     Q7                                Construction                       Operation
                                                                                                                       Source(s): Q7, Dexia

Investment cost of € 3.19m/MW        The total investment cost for the project is estimated at € 383m, while debt financing for the project
clearly higher than European         includes a € 189 million, 11-year, long-term project finance facility as well as a € 30m standby
average                              facility to cover contingencies. The D/E ratio comes in at 57/43 against our 60/40 on average
                                     throughout Europe. The investment cost is higher than average, € 3.19m/MW which can point at
                                     the lower scale of the project compared to other European cases averaging 300MW.

                                     Another unique aspect is that the financing also covers the construction phase of the wind farm.
                                     This has resolved an issue which has bogged down a number of other similar projects in Europe,
                                     where contractors have been wary of providing fully wrapped Engineering, Procurement and
                                     Construction (EPC) contracts, normally a standard requirement of project finance and sponsors. Q7
                                     furthermore has a maintenance contract with Vestas for a 5 year period, with an availability
                                     guarantee.

                                     Q7 was able to conclude an exception from the MEP (Dutch RE law) that was cancelled and gets a
                                     green certificate price of € 97/MWh for the first 10 years. A PPA with ENECO for 11 years has been
                                     set up although the price is not publicly communicated. Afterwards the project gets the electricity
                                     price in the Netherlands (€ 53.0/MWh through the cycle).


                                     IX.4. P&L and valuation
                                     To value Q7 we use a WACC of 8.6% based on an unlevered Beta of 1.06 (green certificates), a
                                     D/E of 57/43. Key assumptions for our Q7 model are: i) asset life of 20 years (this is a conservative
                                     approach given the limited experience); ii) a development cost (incl. administration, permits,
                                     machinery, civil engineering and development) of € 3,200/kWh; iii) a load factor of 42% equalling
                                     3,625 operating hours; iv) an expected € 97/MWh green certificate remuneration for the first 10
                                     years and the Dutch Electricity price from then onwards and v) a depreciation period of 20 years.
Renewables                                                                                                                      55



                                    Based on these assumptions, a WACC of 8.7% and probability adjusted for the phase the Q7
                                    project is in (Construction) our implied DCF valuation hovers around € 3.3m added equity value.
                                    We also calculate an EV of € 348.0m.

  P&L
  year                                                       2008       2009      2010      2011          2025      2026      2027
  Operating hours p.a.                                      3,625      3,625     3,625     3,625         3,625     3,625     3,625
  Output                            000 MWh                   435        435       435       435           435       435       435
  Electricity price                 €/MWh                      73         73        73        73            64        64        65
  Green certificates                €/MWh                      97         97        97        97             0         0         0
  Total price                       €/MWh                     170        170       170       170            64        64        65

  Revenues                          €m                        73.7      73.7      73.7      73.7          27.7      28.0      28.3
  Opex                              €m                         8.1       8.3       8.4       8.6          11.3      11.6      11.8
  Opex/unit                         €/MWh                     18.6      19.0      19.4      19.8          26.1      26.6      27.1
  EBITDA                            €m                        65.6      65.5      65.3      65.1          16.3      16.4      16.5
  EBITDA margin                     %                       89.0%     88.8%     88.6%     88.3%         59.0%     58.7%     58.4%
  D&A                               €m                        19.2      19.2      19.2      19.2          19.2      19.2      19.2
  EBIT                              €m                        46.5      46.3      46.2      46.0          -2.8      -2.7      -2.6
  Financials                        €m                        14.2      13.5      12.7      12.0           1.5       0.7       0.0
  EBT                               €m                        32.3      32.9      33.4      34.0          -4.3      -3.5      -2.6
  _tax rate                         %                       30.0%     30.0%     30.0%     30.0%         30.0%     30.0%     30.0%
  Tax                               €m                         9.7       9.9      10.0      10.2          -1.3      -1.0      -0.8
  Net profit                        €m                        22.6      23.0      23.4      23.8          -3.0      -2.4      -1.8

  Cash flow table
  year                                           2007        2008      2009      2010      2011           2025      2026      2027
  Operating CF                      €m                       65.6      65.5      65.3      65.1           16.3      16.4      16.5
  Interest expenses                 €m                       14.2      13.5      12.7      12.0             1.5       0.7       0.0
  Taxes                             €m                        9.7       9.9      10.0      10.2            -1.3      -1.0      -0.8
  Net operating CF                  €m                       41.7      42.2      42.6      43.0           16.1      16.7      17.3

  Sales of assets                   €m
  Investments                       €m           383.0
  CF for investments                €m           383.0         0.0       0.0       0.0       0.0           0.0       0.0       0.0

  Free cash flow                    €m           383.0       41.7       42.2      42.6      43.0          16.1      16.7      17.3

  Change in financial liabilities   €m          -218.3       -10.9     -10.9     -10.9     -10.9          -10.9     -10.9     -10.9
  Capital increase                  €m          -164.7
  Dividend payouts                  €m                       -30.8     -31.2     -31.6     -32.1           -5.2      -5.8      -6.4
  CF from financing                 €m          -383.0       -41.7     -42.2     -42.6     -43.0          -16.1     -16.7     -17.3

  Balance sheet
  year                                            2007       2008       2009      2010      2011          2025      2026      2027
  Fixed assets                      €m           383.0      363.9      344.7     325.6     306.4          38.3      19.2       0.0
  Current assets                    €m               0          0          0         0         0             0         0         0
  Total assets                      €m           383.0      363.9      344.7     325.6     306.4          38.3      19.2       0.0

  Shareholders equity               €m           164.7      156.5      148.2     140.0     131.8          16.5       8.2       0.0
  Financial debt                    €m           218.3      207.4      196.5     185.6     174.6          21.8      10.9       0.0
  Other liabilities                 €m               0          0          0         0         0             0         0         0
  =Current liabilities              €m           218.3      207.4      196.5     185.6     174.6          21.8      10.9       0.0
  Total liabilities                 €m           383.0      363.9      344.7     325.6     306.4          38.3      19.1       0.0
Renewables                                                                                                                            56



                                 X.     PLAMBECK:                  A      ROCKY            ROAD            TO       OFFSHORE
                                        SUCCESS
                                 Plambeck Neue Energien (PNE) is one of the two still remaining pure wind development plays,
                                 listed on the German stock exchange. The company is active in onshore wind development and
                                 turbine blade manufacturing and is shifting its model to exploit the vast offshore wind potential in
                                 Germany. A total offshore wind pipeline of over 2,500MW has been secured of which 565MW is
                                 already fully consented.
                                                                                                                    th
                                      Q3’07 results to disappoint again, but does it matter? On Monday 12 of November the
                                      company will provide their 3Q’07 results, which we believe to disappoint on guidance
                                      expectations. PNE has set a sales guidance of € 160-180m full year ’07 and an EBIT target in
                                      the range € 12-16m. Looking at the H1’07 results and taking into account the limited onshore
                                      pipeline to be handed over this year, it is unlikely guidance will be met. It will be necessary for
                                      PNE to improve its communication as they already disappointed investors on several
                                      occasions and a we feel a revision and more in depth view on the 2007-’08 guidance to be
                                      necessary.

                                      Impression of cheap valuation: Once the company has restored investor confidence (read:
                                      reaching guidance), we think PNE shares will attract lots of bargain/value hunters. Anyway the
                                      company is not yet at the stage to meet its expectations. But we can not ignore the long term
                                      value in offshore which is a business not well known yet by the market. We feel this fallen
                                      angel could become a new darling through offshore growth. In spite of likely Q3’07
                                      disappointment, we would recommend to buy now as i) upwards potential with offshore feed-in
                                      tariff increase in Germany (€ 110/MWh           € 4.8/share while € 150/MWh     € 11.0/share); ii)
                                      PNE could find a financial partner regarding the Gode Wind project and secure offshore wind
                                      turbines and iii) big utilities, especially in Germany are eying the offshore wind market. E.ON
                                      indicated already “the future of wind is off our coasts”, has a € 3bn RE capex plan and is
                                      known for several RE M&A deals in the past. Also RWE just last week stated it intends to act
                                      before year-end ’07 in the RE market and knows the only way to reduce its CO2 output is
                                      through CDM/JI or renewable energies.

                                      In the coming period good news could come from the announcements of deals such as
                                      finding a financial partner for its Gode Wind offshore wind project or securing wind turbines for
                                      its offshore development. Last year PNE signed a contract with Babcock and Brown for the
                                      sale of 300MW onshore in Germany, and a deal with Dong on its Borkum Riffgrund offshore
                                      wind project. These deals provided financial security for the group and together with the
                                      onshore turbine order from Vestas will be of key importance in the next years. As a result we
                                      initiate coverage on PNE with a Buy rating and TP of € 4.8.



  Strengths:                                                           Weaknesses:

         Strong offshore wind pipeline of over 2,500MW with                     No operational model      misses part of the full value
         565MW consented.
                                                                                History with loss of investors trust. Not reaching
         Babcock & Brown deal of € 400m creates -together with                  guidance for several times in a row.
         the Vestas turbine order- both financial and operational
                                                                                Exposure to low profitable German onshore wind
         security.
                                                                                market.

  Opportunities:                                                       Threats:

         EEG revision for offshore wind from € 91/MWh to a range                Not reaching their 2007 guidance.
         of € 110-150/MWh.
                                                                                Setting up onshore joint ventures in early
         Taking equity stakes in offshore wind farms it developed.              development phase creates little short term value

         Takeover candidate, comparing to a similar trend in the                The Hungarian market where Plambeck wants to
         onshore wind market.                                                   develop onshore wind farms has to endure grid
                                                                                constraints.
         SSP, blade manufacturing business turns out profitable
         and can in the end result in an IPO or divesture.                      Difficulties to repay their debt and continuation of
                                                                                capital increases that create dilution.
Renewables                                                                                                                                                 57



                                    X.1.            Regaining unconsciousness

A long history of financial and     To grasp Plambeck Neue Energien (PNE) in full we must become aware of its history. Founded in
corporate governance difficulties   1995 and IPO’ed in 1998, PNE’s history wasn’t what one can call a panacea. It all started with the
                                    takeover of SSP Technology, a Danish rotor blade manufacturing company, mid 2003. The
                                    company was acquired from previous shareholder Plambeck Holding, with Norbert Plambeck as
                                    chairman of the supervisory board, in the meantime also the principal shareholder of PNE. From
                                    corporate governance point of view, several criticisms arose and the capital increase of 5.5m
                                    shares that went hand in hand with the acquisition furthermore created a huge dilution effect.

                                    Mid 2004, PNE increased its 50.1% stake in SSP to 90%, leading to goodwill of € 57m against
                                    around € 65m equity. In no time it became clear the value paid for SSP was too high and shortly
                                    afterwards difficulties at SSP eventually resulted in a write-off at the rotor blade subsidiary.
                                    Accompanied with the write-off due to a not favourable Renewable Energy Law (EEG) revision, the
                                    company posted a net loss of -€ 148.3m. On top, over the period 2003-‘04 quarter after quarter
                                    PNE posted disappointing results due to a weak German onshore wind market. And last but not
                                    least in June 2005 BaFin (the German financial services regulator) started an investigation on
                                    insider trading at Plambeck. Norbert Plambeck shortly afterwards, announced to step down from
                                    the supervisory board due to personal reasons. PNE also needed to adjust its 2003 figures due to
                                    changes in the financial statements at Plambeck Norderland. This resulted in an extra € 6m loss in
                                    2003.

                                    Due to the heaping up of both financial and corporate difficulties PNE decided to sell its French
                                    division Ventura to Theolia in H1’05 and previously disposed off its other renewable energy
                                    branches (i.e. Solar Technik H2’04). By far and large a history PNE can not be proud of.

                                    Graph 59:           Plambeck Neue Energien price evolution 2003-2007

                                           8.25                                              Inv es tigation f or ins ider dealing,
                                                                                             Norbet Plambec k announc es to s tep
                                           7.50           A cquis ition of SSP
                                                                                             dow n, tw o new board members
                                           6.75                                              appointed
                                           6.00                                                                        Firs t order f or SSP, f ramew ork
                                                                               Increas e s take in
                                           5.25                                                                        w ith Babc oc k and Brow n, signed,
                                                                              SSP, negative EEG
                                                                                                                       s trong FY '05 f igures
                                           4.50                                   law revision
                                           3.75
                                           3.00
                                           2.25
                                           1.50
                                           0.75
                                           0.00
                                                          03




                                                                                 04




                                                                                                        05




                                                                                                                               06




                                                                                                                                                      07
                                               03




                                                                       04




                                                                                              05




                                                                                                                     06




                                                                                                                                            07
                                             y-




                                                                     y-




                                                                                            y-




                                                                                                                   y-




                                                                                                                                          y-
                                                       ly-




                                                                              ly-




                                                                                                     ly-




                                                                                                                            ly-




                                                                                                                                                   ly-
                                           ar




                                                                   ar




                                                                                          ar




                                                                                                                 ar




                                                                                                                                        ar
                                                     Ju




                                                                            Ju




                                                                                                   Ju




                                                                                                                          Ju




                                                                                                                                                 Ju
                                         nu




                                                                 nu




                                                                                        nu




                                                                                                               nu




                                                                                                                                      nu
                                       Ja




                                                               Ja




                                                                                      Ja




                                                                                                             Ja




                                                                                                                                    Ja




                                                                                                                                      Source(s): DataStream

A new era begins with new board     From the moment of the aforementioned disposals, a new era was introduced. August 2004 Martin
members and improved visibility     Billhardt, previously in charge for private equity investments at holding level was appointed as CFO
through Babcock & Brown             of the company and mid 2005 two new members joined the supervisory board (Mr. Kunkel and Mr.
                                    Kuprian) filling in for Norbert Plambeck and Martin Billhardt. These appointments have already
                                    proved positive to the company, which now can fully focus on onshore and offshore wind
                                    development. In the first half of 2006 the first order for SSP was received and several capital
                                    increases secured the financial position of PNE. In addition a framework signed with Babcock &
                                    Brown Wind Partners for the realisation and operation of 30 wind parks over 300MW, and the
                                    turbine order with Vestas, has led to financial and operational security. The offshore wind projects
                                    currently in the pipeline, of which two with in total 157 turbines (565MW) consented, show PNE is
                                    back on the rails and is regaining unconsciousness.
Renewables                                                                                                                             58



                                     X.2.         Finding PNE’s position in the wind value chain

                                     Plambeck’s current core business is twofold: i) the development, financing, sale and operation of
                                     onshore and offshore wind farms and ii) the manufacturing of rotor blades and moulds.
                                     Supplementary PNE has a current generation business, embracing hiring people to and selling fuel
                                     to biomass plants, the operation of one wind farm and setting up businesses before developed
                                     wind farms change hands.

                                     Throughout the wind value chain PNE is active in the development, the financing the construction
                                     and the service of wind farms. They only don’t take part in the operation of the wind farms, although
                                     we believe the company should take this in consideration. Operating wind farms would create
                                     constant sales revenues, which PNE tries to find through managing/servicing the wind farms sold.
                                     As for now their balance sheet doesn’t allow them to take participations, although once the
                                     restructuring progress succeeds and PNE achieves its aforementioned guidance, a participation
                                     strategy could be a next step. On the financing side the company usually looks for a partner like
                                     Babcock & Brown onshore and Dong for the Borkum Riffgrund project. The large scale of offshore
                                     wind farms, together with the accompanied need for huge financing, results in the need for PNE to
                                     find partners for its other offshore wind farms.

      Graph 60:   Value chain




                                                                                                        Source(s): Plambeck Neue Energien

German onshore wind market gets      Due to long delivery times for wind turbines, over one and a half year, planning the development
saturated, time to move abroad and   process becomes difficult. Furthermore the investment cost in Germany rose from € 1m/MW to
play the offshore game               around € 1.2 m/MW end 2006. As a result, onshore projects in Germany are reaching a marginal
                                     point where the number of extra additions is expected to tail of.

                                     The German draft experience report suggests remuneration to be raised by € 7/MWh if wind energy
                                     systems are used that can contribute to an increase of network stability due to their technical
                                     design. Degression would drop from 2% to 1%. It will be important for wind developers to diversify
                                     its portfolio by moving abroad or by moving offshore. This perfectly mirrors PNE’s strategy of
                                     exploiting their remaining German onshore pipeline through the Babcock & Brown deal, targeting
                                     the local offshore market through 5 projects and by moving abroad to Hungary by means of a joint
                                     venture. We expect PNE to target other countries through Joint Ventures with local developers as
                                     in Hungary. A move to France, previously left with the sale of Ventura, would in our view be a
                                     possible next step for the company, given the vast potential France still has to offer as the country
                                     with the second most wind potential in Europe. But first things first.
Renewables                                                                                                                             59



                                  Graph 61:          Installed capacity onshore

                                         700                                                                                 645
                                                                                                                     628
                                         600
                                                                                                             528
                                                                                                      493
                                         500
                                                                                              419

                                         400                                            360


                                         300                                      254
                                                                        180
                                         200

                                         100                     52
                                                   18      41

                                              0
                                                  1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007


                                                                                                       Source(s): Plambeck Neue Energien

                                  In this context PNE purchased 112 (probably 2MW) wind turbines from Vestas in 2006 (300MW
                                  needed for framework agreement with B&B, or 150 turbines if 2 MW). Given the long delivery times
                                  of wind turbines, this contract is of key importance to PNE. Last year the company commissioned
                                  and participated in the commissioning of German onshore wind farms with 50 wind turbines and an
                                  installed capacity of 100 MW. In the first half of 2007, 3 other wind farms reached completion, with
                                  9 turbines and 17MW installed. This brings PNE’s total installed onshore capacity to 645MW.

SSP Technology A/S finally on     In 2003 PNE acquired Danish SSP Technology a rotor blades manufacturing company. This
track                             subsidiary takes on the design, development and the mould construction for rotor blade production.
                                  After years of difficulties SSP got its first order in 2006 and in the first half of 2007 already posted
                                  sales revenue of € 4m and has orders for another € 6m. In 2007 a capital increase at SSP went
                                  ahead and New Energies Invest took a stake of 25% in SSP after the capital increase. This brings
                                  Plambeck’s stake at 70% while the remaining 5% stays in hands of SSP’s management. With this
                                  new capital injection the equity level of SSP is strengthened and the growth strategy can proceed.
                                  PNE itself values SSP at € 16m or € 11.2m for its 70% stake. End 2007 sales should be able to
                                  reach €10m, with a 15-20% EBIT margin.

                                  Through the current generation business, containing the operation of the Laubuseschbach wind
                                  farm on the one hand, this division entails Plambeck Biomasse AG holding company, which hires
                                  employees to the Silbitz timber fired power station. The hiring is done on the basis of a contract for
                                  services. This contract includes the delivery of fuels to the timber power station operating company.
                                  Through the current generation business, limited commercial partnerships are made with other
                                  companies, which act as its support company until the implementation of a wind farm project, which
                                  is then sold to investors.


                                  X.3.            Shareholders and management background
New management needs to restore   With PNE’s history in mind, investors became somewhat sceptic towards management and the
confidence                        supervisory board. Since the investigation carried out by the public prosecutor from 2005 on was
                                  discontinued in February 2007 following a payment of charges the case was closed, a new
                                  direction is set (the majority of the investigation procedures were already discontinued in 2006
                                  without payment of any charges). Several new appointments at PNE with a new CFO (Mr. Martin
                                  Billhardt) and 2 new supervisory board members (Mr. Dieter K. Kuprian and Mr. Horst Kunkel),
                                  were a first move to win back investors trust.

                                  Mr. Dr. Wolfgang von Geldern (chairman) and Mr. Martin Billhardt (CFO) are now in charge of
                                  management of PNE. Mr. Dr. Wolfgang von Geldern is furthermore a member of PNE Biomasse
                                  and DEWI (Deutsches Windenergie-Institut). Mr. Martin Billhardt on his turn was previously
                                  member of the supervisory board and in charge of private equity investments. He joined the
                                  management board August 2004 and an active member of PNE Biomass, SSP and Deutsche
                                  Rohstof.
Renewables                                                                                                                        60



                               Graph 62:           Shareholder structure


                                                            9.87%
                                  9 .5 4%




                                                                                                               8 0.59%
                                                  Free Flo at
                                                  C redit Suis s e
                                                  FMR C o rp . Fide lity Inves tm en t

                                                                                                    Source(s): Plambeck Neue Energien



                               Even more impressive is the history of PNE’s capital structure. PNE is a story of constant capital
                               increases and even a decrease, convertible bond re-ratings and financial reshuffling. Not even two
                               years after the December 15 1998 IPO, shares were split on a ratio 1:3. From then on, PNE
                               became a story of constant capital reshuffling. At the first capital increase, May 2001, 2.25m new
                               shares were issued and October/November 2004 a second capital increase was executed.
                               November/December 2005 2.25m new shares were issued and before, a capital decrease in ratio
                               of 3:2 was performed in order to remove their negative equity. Over the period 2006-2007 three
                               other capital increases went ahead for a total amount of € 35m. With this money, PNE has the
                               intention to grow its wind business and to repay part of its debt. Of course the capital increases
                               have led to a severe dilution of the EPS.

                               Table 22:           Capital movements
                               Issue                    December, 1998
                               Share split              October 2000 in ratio of 1:3
                               Capital increase         May 2001 for 2.25m new shares
                               Script issue             September 2003 in ratio 20:1
                               Capital increase         October/November 2004 for 2.761m new shares at € 1/share
                               Capital decrease         November 2005 in ratio 3:2, around € 10m
                               Bond reprising           more favorable conditions than at issue
                               Capital increase         November/December 2005 for 2.25m new shares at € 1.1/share
                               Capital increase         April 2006 for 2.25m new shares at € 2.5/share
                               Capital increase         December 2006 for 12.4m new shares at € 1.5/share
                               Capital increase         August 2007 for 3.7m shares at € 3.75/share
                                                                                                    Source(s): Plambeck Neue Energien

                               We understand investors trust was dented although believe PNE has the worst behind and is ready
                               to regain that trust. Capital increases in the RE sector are common practice and needed if these
                               companies want to accomplish their growing strategy. We will go deeper into PNE’s investment
                               program in the next chapter.


                               X.4.         Plambeck’s project portfolio
                                      Feeling Hung(a)ry for wind

Small gains and no certainty   Through a joint venture with GM Umwelt- und Energiewirtschaft, Dresden, PNE will enter the
                               Hungarian onshore wind market, with a project pipeline up to 260MW over 9 projects (130 wind
                               turbines). PNE will get a majority stake of 79% in the joint venture and will be responsible for
                               selecting and purchasing wind-energy systems, project financing and distribution as for the
                               commercial and technical plant management in the wind farm’s operating phases. Its partner is
                               responsible for the development of the projects up to readiness of construction. The total project
                               should be realized by 2011 and has an estimated investment volume of roughly € 365m (€
                               1.4m/MW), what feel to be conservative.
Renewables                                                                                                                               61



                                  Graph 63:          Hungarian onshore wind probabilities


                                                                                                                            100%
                                                                                                    91%




                                                                                 20%


                                                                5%
                                              1%

                                      Project planning    Perm its pending    Fully perm itted   Under cons truction      In operation


                                                                                                                       Source(s): Dexia Est.

Grid constraints a culprit for    We estimate the onshore EV in Hungary at € 2.23m/MW for project becoming operational in 2010.
Hungarian wind developers         Hungary has one of CEE’s best incentive schemes with a feed-in tariff of € 90/MWh, increasing
                                  with CPI (2.5%). This gives us an value creation of € 1.03/MW, taking a € 1.2m/MW investment
                                  cost.

                                  Although the remuneration scheme in Hungary is very supportive, we regret the Hungarian market
                                  suffers from limited grid capacity as is the case for most CEE countries. PNE believes the
                                  European Commission will intervene and give extra subsidies and support. Their wind farms are
                                  located in areas where grid connection is possible. Nevertheless we feel the 260MW by 2011 is
                                  overenthousiastic given the Hungarian cap of 330MW through 2010 due to grid constraints. To
                                  ensure that all fully permitted projects can be developed by 2020, developers needed to reduce
                                  their project size even to half of what was intended. In our view 200MW can be added by 2010 and
                                  over the period 2011-2015 another 60MW per year is likely to become operational. Of this total of
                                  500MW by 2015, PNE wants to install more than half (260MW), what we believe to be
                                  overconfident, especially knowing there is currently a pipeline of over 1,100MW in Hungary. We
                                  use a probability rate of 1-5% for the projects since they are only still in the permits
                                  pending/planning stage and given the aforementioned grid constraints.

                                         Contract Babcock & Brown
Important € 400m deal, although   March 2006, a framework agreement on the sale of wind farms with B&B Wind Partners Limited
small added value                 was signed. The contract encloses 30 wind farm projects, with approximately 108 turbines totalling
                                  a capacity of 300MW running over the period 2006-‘09. The projects will be built in Germany by
                                  PNE on turnkey basis while B&B arranges the financing from construction phase onwards. PNE
                                  has furthermore received the mandate for the 20 year technical and commercial management of
                                  the delivered wind farms. With a total investment volume of € 400m, the price per MW paid by B&B
                                  is € 1.33m/MW. The contract was won after a global tender procedure. With an average investment
                                  cost of € 1.2m/MW, a small € 0.13/MW value creation will be made by PNE. We strongly support
                                  this contract on PNE’s domestic market, especially in support of financial security, although believe
                                  it’s time to move abroad and offshore.

                                  In January PNE delivered the first wind farm, the 10 MW Kaarst wind project, to B&B for € 17.5.
                                  The project is expected to have a further 2MW added capacity built this year. The € 1.46m/MW
                                  paid is higher than the average € 1.33m/MW what can point at an agreement between B&B and
                                  PNE where the latter will get paid a higher amount over its first contract in order to have enough
                                  financial means to pre-finance the other projects. The contract will be paid through milestone
                                  payments. The contract also includes several clauses amongst others and adjustment in the
                                  context of the EEG revision.
Renewables                                                                                                                                                                                                                   62



                                     Graph 64:                             German onshore wind probabilities

                                                                                                                                                                                                    100%
                                                                                                                                                                            91%

                                                                                                                                                       73%

                                                                                                                                   46%

                                                                                                               23%
                                                                                              11%
                                                                        5%
                                           0%
                                       Project not




                                                                     indentified




                                                                                                                                    pending




                                                                                                                                                                                                              In operation
                                                                                              Measurement




                                                                                                                Land lease




                                                                                                                                                           permitted




                                                                                                                                                                               construction
                                                                                                                                    Permits
                                       identified




                                                                                                                 arranged
                                                                       Project




                                                                                                                                                             Fully




                                                                                                                                                                                  Under
                                                                                                                                                                                    Source(s): Dexia Est.

                                                       Other German onshore wind project developments
                                     PNE has 400MW in the planning phase in Germany in addition to 70MW consented. If all contracts
                                     would go through, PNE would have a 170MW pipeline in addition to the 300MW B&B deal. We
                                     value a German project at € 1.25m/MW and investment costs at € 1.2m/MW. With decreasing feed-
                                     in tariffs by 2% each year the extra pipeline would thus create limited value for the company. Note
                                     there is a possible revision on its way, and a potential extra € 7.0/MWh could be added to the
                                     current feed in tariff while degression would drop from 2% to 1%. Since PNE is active in the
                                     servicing and management of onshore wind farms, long term stable revenues can be generated.

                                                       The future lies in offshore wind development

                                     Graph 65:                             Offshore wind project probability in Germany

                                                               Bor k um Riffgr und, turbine manuf acturing
                                                                                                                                                                                                   100%
                                                               negotiations ongoing (45%)
                                                                                                                                                                            85%

                                      Gode Wind,f inancial partner                                                                                         65%
                                      negotiations ongoing, 1 year consented
                                      (35%)



                                                                                                                                    25%

                                                                                                                     10%
                                                                                                      5%
                                                                            2.5%
                                              0.0%
                                                                                                 Measurement




                                                                                                                                           permitted




                                                                                                                                                                                                    In operation
                                         Project not




                                                                                                               Permits




                                                                                                                                                       Turbines
                                                                                                                         pending




                                                                                                                                                                                    construction
                                                                                indentified




                                                                                                                                                                  ordered
                                                       identified



                                                                      Project




                                                                                                                                   Fully




                                                                                                                                                                            Under




                                                                                                                                                                                    Source(s): Dexia Est.

                                     Borkum Riffgrund
PNE’s first offshore farm needs to   The Borkum Riffgrund project got its building permits in February 2004 and is the third offshore
pave the way                         wind farm that got consented in Germany. The project will be built 38km North of the island Borkum
                                     at a water depth of 23-29m and is built in a joint venture with Danish Dong energy for both
                                     construction phases. The cost for Borkum Riffgrund is estimated at € 1.0bn for 720MW which
                                     brings us to a low cost of € 1.4m/MW excluding the grid connection. Wind developers are excluded
                                     from paying the grid connection cost in Germany. However, even without the grid connection cost
                                     of around 25% of the total investment cost, the initial investment would only be € 1.85m/MW
                                     against our € 2.4m/MW on average throughout Europe. We take into account a € 1.88m/MW
                                     investment cost (excluding grid connection cost) in line with German projects.
Renewables                                                                                                                              63



                                   The project will run over two construction phases: in phase1 77 probably 3.6 turbines will be
                                   erected during the first construction phase and 103 probably 3.6 turbines in a second phase will be
                                   added to that. Total installed capacity would in this way run up to 650MW. PNE intends to start
                                   construction 2008/2009, although we are sceptical if this target will be achieved since turbines still
                                   need to be ordered and will result in construction delays. We foresee construction to start end 2008
                                   with a start of operation in the second half of 2010. In this way PNE can still profit from the renewed
                                   EEG and is excluded from paying the grid costs. Since the company believes to deliver 750,000
                                   households from electricity and knowing the average electricity use per household per year is
                                   3,500kWh, we calculate 3,650 operating hours, in line with our generic model of 3,700 operating
                                   hours for Germany.

                                   Gode Wind

                                   PNE commenced with the development of Gode Wind in 2000, with preliminary applications
Strong potential, operational by   submitted mid 2005. After completing the environmental impact study, approval of the 80 turbine
2011                               pilot phase was requested mid 2005. August 2006 the BSH gave approval for construction. Gode
                                   Wind will be built in depths of between 28 to 33 meters, 38km North of Juist. The project will be
                                   built in two phases, one of 80 turbines (3.6MW estimated) and a phase of another 101 (5MW
                                   estimated) turbines. This brings the total capacity of Gode Wind at 793MW. Infrastructure Journal
                                   estimates the construction costs for the Gode Wind farm with 5MW turbines (management
                                   indicated probably 3.6MW turbines will be used) at € 750m. This would raise costs to € 2.6m/MW
                                   (€ 2.0m/MW excluding grid connection costs). Just like was the case with Borkum Riffgrund,
                                   construction is expected to start 2008-‘09. Due to the same reasons (mainly turbine delivery time),
                                   and the fact that no financial partner is selected yet, we expect construction will be postponed with
                                   a year. We foresee Gode Wind to be handed over to the investors as of 2011.

                                   Opposing to Borkum Riffgrund, no partner has been selected yet, although far going negotiations
                                   are currently in process with a strong financial partner for a partnership. This would raise credibility
                                   in management and the company.

                                   Still some extra offshore projects in the pipeline

                                   Other projects are currently in the project planning phase and of little importance to our valuation.
                                   Given the lengthy development process of offshore wind farms, little visibility is given. PNE
                                   provides us with a brief view on these projects which are 1,228MW in total located in the Baltic and
                                   North Sea.

                                   Table 23:         Offshore project pipeline
                                   Offshore projects                    Location         Year operat.                MW        Probability
                                   Borkum Riffgrund phase 1             Noth Sea           2010-2011                 277           45.0%
                                   Borkum Riffgrund phase 2             Noth Sea                 n.r.                370           10.0%
                                   Gode Wind phase 1                    Noth Sea           2010-2011                 288           35.0%
                                   Gode Wind phase 2                    Noth Sea                 n.r.                505           10.0%
                                   Project 5                            Baltic Sea               n.r.                228            5.0%
                                   Project 6                            Noth Sea                 n.r.                500            5.0%
                                   Project 7                            Noth Sea                 n.r.                500            5.0%
                                   Total                                                                           2,668
                                                                                             Source(s): Plambeck Neue Energien, Dexia Est.


                                   X.5. Financials: Focus on guidance
Table: Company guidance            PNE will have difficulties to reach its 2007 guidance of € 160-180m revenues given the already
 €m           2007E     2008E      weak 1H’07 reporting, € 26.5m revenues ant € 0.29m EBIT, and no onshore projects under
 Revenues   160-180   180-200      construction. The only revenues in this way come from SSP, the current generation division (non-
 EBIT          12-16     16-20     core) and the servicing and management of wind farms sold.
 EBT           10-14     14-18
 EPS       0.24-0.34 0.32-0.40
                                   We only have a view on 70MW projects consented, and taking into account a 10 months to 1 year
                                   construction period it won’t be possible for PNE to achieve this guidance. On the EBIT front on the
                                   other side, a surprise could come from the offshore wind farm division. PNE is currently negotiating
                                   with an investment bank to take a participation in the Gode Wind farm. Such a deal could possibly
                                   lead to a down payment from the partner. Taking abstraction of the minor depreciation in the
Renewables                                                                                                                                   64



                                  offshore wind division (~ € 1m) a € 10m fee would make Plambeck to reach its EBIT guidance.
                                  Focus will in our view be on this EBIT target although reaching guidance through offshore wind
                                  farm down payments could also mean the financial partner will be able to achieve a better pricing
                                  than what they would need to pay prior to start of construction. The hunger of PNE to live up to
                                  their guidance and to get a financial partner as soon as possible can result in sales and margin loss
                                  in the future.

                                  Table 24:          P&L
                                  €m                             2005            2006           2007E             2008E        2009E     2010E
                                  Consolidated sales              68.0            87.8            55.3              85.8        147.2     348.7
                                  EBITDA                           5.6             2.2             4.4               7.3          9.5      90.0
                                  % margin                       8.2%            2.5%            7.9%              8.5%         6.5%     25.8%
                                  Depreciation                     1.9             1.9             1.9               2.0          2.2       2.4
                                  EBIT                             3.7             0.3             2.5               5.2          7.3      87.7
                                  Financial income                 0.7             0.3             0.3               0.2          0.1       1.0
                                  Financial expense                7.0             6.7             6.0               6.2          5.3       5.5
                                  EBT                             -2.6            -6.1            -3.1              -0.7          2.1      83.2
                                  Taxes                           -0.1            -0.2             1.0               0.2         -0.7     -27.2
                                  Consolidated profit             -2.7            -6.3            -2.1              -0.5          1.4      57.8
                                  Minorities                       0.0             0.0             2.5               3.8          6.1       9.8
                                  Net profit, group               -2.7            -6.3            -4.6              -4.3         -4.7      48.1
                                                                                                  Source(s): Plambeck Neue Energien, Dexia Est.

Debt repayment through capital    If we look at PNE’s balance sheet it becomes clear that PNE has a hefty amount of debt
increases and a possible IPO of   outstanding. In July this year a new capital increase went through in order to reduce this debt
SSP                               position. PNE’s difficult history and the difficult circumstances in Germany were at the basis. PNE
                                  will definitely need to perform better to achieve the aforementioned guidance, especially on the
                                  EBIT front. An IPO of SSP could be another way next to capital increases and selling offshore wind
                                  projects, to optimize its balance sheet. However, achieving their guidance and prove profitability
                                  through their own business model still remains the best way to do this.

                                  Table 25:          Balance sheet
                                  €m                                     2005            2006       2007E           2008E       2009E    2010E
                                  Fixed and financial assets             64.2            60.9         59.3            60.8        62.1     80.5
                                  Cash                                     3.0            7.8         10.9             6.4         2.2     31.3
                                  Current assets (net of cash)           50.0            56.6         59.9            65.0        73.9     94.8
                                  Sh. Equity                              -3.5           14.9         28.9            28.4        29.8     87.6
                                  Minority interest                        0.0            0.2          4.1             8.0        14.1     23.8
                                  Other provisions                       21.3            17.0          6.2             6.4         6.5      6.7
                                  Net debt                               74.3            60.9         57.8            62.3        66.5     37.5
                                                                                                  Source(s): Plambeck Neue Energien, Dexia Est.

                                  PNE only has minor capex expenses, as most of the investments are recorded as work in progress,
                                  and in PNE’s case paid by partners they work with. We believe PNE will be able to pay back a part
                                  of its debt in 2007, thanks to the capital increase and a first payment for the Gode Wind project.
                                  This should result in a low change in cash for the coming years. From 2010 we foresee PNE to sell
                                  1 offshore project each year, probability adjusted based on the phase the projects are in.

                                  Table 26:          Cash Flow Statement
                                  €m                                        2005          2006           2007E        2008E     2009E    2010E
                                  Funds From Operations (FFO)                 3.3         -18.0           -11.1          1.6       3.7     60.3
                                  Change in working capital                 -14.2           7.8            -1.7         -2.6      -4.4    -10.5
                                  Cash from operating activities            -11.0         -10.2           -12.8         -1.0      -0.7     49.9
                                  Cash for investing activities               1.0          -1.5            -2.3         -3.5      -3.5    -20.8
                                  Of which capex                             -1.9          -1.7            -2.3         -3.5      -3.5     -3.5
                                  Free cash flow before financing            -9.9         -11.6           -15.1         -4.5      -4.2     29.1
                                  Recurring FCF before financing            -12.8         -11.9           -15.1         -4.5      -4.2     46.4
                                  Cash from financing activities              3.9          16.5            18.1          0.0       0.0      0.0
                                  Change in cash                             -6.0           4.8             3.0         -4.5      -4.2     29.1

                                                                                                  Source(s): Plambeck Neue Energien, Dexia Est.
Renewables                                                                                                                                             65



                                  X.6. All eyes on the offshore division
                                  To value PNE we have made a DCF model for each division separately:

                                      As discussed, the onshore wind division will profit from the B&B deal, although given the
                                      novelty of the pipeline, most of the onshore value lies in the servicing and management of the
                                      wind farms sold. We furthermore value the “pipeline beyond pipeline”, taking into account the
                                      country targets in onshore instalment and PNE’s constant market share (~3%) in Germany.

                                      The offshore wind division will be able to profit from the boom in offshore wind instalments in
                                      the years to come, assisted by revenues from the offshore wind farm servicing contracts. We
                                      furthermore feel PNE will take a ~7% equity stake in the offshore wind farms they develop.

                                      SSP’s business model is finally up and running and first orders are won. Nevertheless we
                                      remain cautious as the division is just gaining ground and needs to prove itself. The operating
                                      margins in the first year half came in at 17% and will maybe be difficult to achieve in the future.
                                      If we compare to LM Glassfibre a competitor of SSP we witness 11% EBIT margin.

                                      Given the limited view on the current generation division, we value the business on a DCF
                                      basis. As a result we come in at an EV of € 8.9m.


                                  Table 27:                     SoTP

                                                                                 €m                                                          Comment
                                   _Onshore                                      83.8                300MW B&B deal, 216MW in planning in Hungary
                                   _Offshore                                    214.3       565MW consented, 2,670MW pipeline, Incl. servicing & mgmt.
                                   _SSP                                          18.3              Turbine blade manufacturing, 1.5% long term growth
                                   _Current generation                            8.9
                                   _Holding Cost                                -48.8
                                   Fair EV                                      276.5
                                   - net debt ‘07                                57.8
                                   - minority interest ‘07                        6.1
                                   - provisions ‘07                               3.0
                                   - deferred tax ‘07                             0.0
                                   + equity stake                                15.1                                          7% offshore wind operating
                                   + associates ‘07                               0.7
                                   = Fair equity                                225.3
                                   number of shares                              46.6                           Diluted, convertible bond of 5.35m shares
                                   =Value per share                               4.8
                                                                                                                                     Source(s): Dexia Est.

Taking participations to create   PNE could be valued at higher multiples if they would take into consideration taking participations
extra value                       in their developed wind farms and be active as an operator. From talks with management we are
                                  confident PNE will take equity stakes in their offshore wind farms, although for the time being
                                  limited visibility is given as only one project has found a partner. The cash flows generated by
                                  selling offshore wind farms will offer PNE the financial means to put this into practice for future
                                  offshore projects.

                                  Graph 66:                     Feed-in tariff sensitivity analysis

                                                               12.0                                                                € 11.00
                                                                                                                       € 10.10
                                                               10.0          Current share price           € 8.30
                                                                8.0
                                                TP (€/share)




                                                                                               € 6.60
                                                                6.0                € 4.80
                                                                4.0

                                                                2.0    € 1.60

                                                                0.0
                                                                        91          110          120        130          140         150
                                                                                             Feed-in Tarif f (€/MWh)


                                                                                                                                     Source(s): Dexia Est.
Renewables                                                                                                     66



             Our price target is highly sensitive to the German feed-in tariff. Currently this feed-in tariff is €
             91/MWh for the first 12 years, while through the renewed German Electricity law (EEG) feed-in
             tariffs intend to increase to a range € 110-150/MWh for the first 12 years. This range is a proposal
             made by the German government in the beginning of 2007 and an official decision on the tariff
             needs to be made by the end of the year. In our model we apply the lower end of this range, €
             110/MWh (for a 20 year period or € 120/MWh for 12 years adjusted by the base rate and average
             water depth and distance from coast), and come in at a TP of € 4.8. An increase to the middle of
             this range, € 130/MWh would increase our TP to € 8.3 while the high end of the range inflects a rise
             to € 11.0/share.
Renewables                                                                                              67



                                    X.7. Financial Profile
  Consolidated P&L (€ m)                           2006       2007E      2008E      2009E     2010E
  Consolidated Sales                                87.8        55.3       85.8      147.2     348.8
  EBITDA                                             2.2          4.4        7.3        9.5      90.1
  % margin                                         2.5%        7.9%       8.5%       6.5%     25.8%
  Depreciation                                       1.9          1.9        2.0        2.2       2.4
  EBIT                                               0.3          2.5        5.2        7.3      87.7
  Financial income                                   0.3          0.3        0.2        0.1       1.0
  Financial expense                                  6.7          6.0        6.2        5.3       5.5
  EBT                                              (6.1)        (3.1)      (0.7)        2.1      83.2
  Taxes                                            (0.2)          1.0        0.2      (0.7)    (27.2)
  Consolidated profit                              (6.3)        (2.1)      (0.5)        1.4      57.9
  Minorities                                         0.0          2.5        3.8        6.1       9.8
  Net profit, group                                (6.3)        (4.6)      (4.3)      (4.7)      48.1

  Funds Flow (€ m)                                 2006       2007E      2008E      2009E     2010E
  Funds From Operations (FFO)                     (18.0)       (11.1)        1.6        3.7      60.3
  Change in working capital                          7.8        (1.7)      (2.6)      (4.4)    (10.5)
  Cash from operating activities                  (10.2)       (12.8)      (1.0)      (0.7)      49.9
  Cash for investing activities                    (1.5)        (2.3)      (3.5)      (3.5)    (20.8)
  Of which capex                                   (1.7)        (2.3)      (3.5)      (3.5)     (3.5)
  Free cash flow before financing                 (11.6)       (15.1)      (4.5)      (4.2)      29.1
  Recurring FCF before financing                  (11.9)       (15.1)      (4.5)      (4.2)      46.4
  Cash from financing activities                    16.5         18.1          -          -         -
  Change in cash                                     4.8          3.0      (4.5)      (4.2)      29.1

  Balance Sheet (€ m)                              2006       2007E      2008E      2009E     2010E
  Fixed and financial assets                       60.9         59.3       60.8       62.1      80.5
  Cash                                              7.8         10.9        6.4        2.2      31.3
  Current assets (net of cash)                     56.6         59.9       65.0       73.9      94.8
  Sh. Equity                                       14.9         28.9       28.4       29.8      87.6
  Minority interest                                 0.2          4.1        8.0       14.1      23.8
  Other provisions                                 17.0          6.2        6.4        6.5       6.7
  Net debt                                         60.9         57.8       62.3       66.5      37.5

  Per share data                                   2006       2007E      2008E      2009E     2010E
  EPS                                              (0.3)        (0.1)      (0.1)      (0.1)      1.2
  CFPS                                             (0.2)        (0.0)        0.0        0.1      1.5
  DPS                                                  -            -          -          -        -
  Book value per share                               0.6          0.6        0.5        0.4      1.5
  pay-out                                          0.0%        0.0%       0.0%       0.0%      0.0%

  Ratios                                           2006       2007E      2008E      2009E     2010E
  ROE %                                          -42.7%      -18.6%     -21.1%     -30.0%     75.3%
  ROCE %                                          -8.4%       -2.6%      -0.6%       1.7%     57.1%
  Net gearing %                                  407.7%      200.1%     219.4%     223.3%     42.8%
  Net debt/EBITDA                                   28.0        13.2        8.6        7.0       0.4

  Valuation ratios                                  2006      2007E      2008E      2009E     2010E
  P/E                                              -8.72      -25.02     -26.68     -24.42      2.40
  P/BV                                               3.7         4.7        5.6        7.3       1.8
  Div Yield                                            -           -          -          -         -
  EV/Sales                                           1.3         3.1        2.1        1.2       0.4
  EV/EBIT                                          457.9        69.0       33.9       24.9       1.7
  EV/EBITDA                                         53.3        39.6       24.4       19.1       1.7
  EBIT/int exp                                       0.0         0.4        0.8        1.4      15.9
  D/(D+E)                                         82.1%       70.4%      70.8%      69.8%     44.0%
Renewables                                                                                                                         68



                                 XI. ENERGIEKONTOR,                           TAKING          ON        THE          OFFSHORE
                                     CHALLENGE
                                     Energiekontor is a wind farm developer, listed on the German stock exchange. Recently it
                                     contrary to PNE also became active in the operation of onshore wind farms. The company
                                     intends to build offshore wind farms in Germany, where it has a consented pipeline of a
                                     possible 378-525MW (3.6MW Siemens or 5MW turbines) and has 80 turbines in the permits
                                     pending phase.

                                     For one of its offshore wind projects, Nordergründe, Energiekontor already found a partner
                                     with NIBC and intends to start construction by 2009. The other offshore wind farm, Borkum
                                     Riffgrund West also got consented although a financial partner still needs to be found or the
                                     project would be finished on a non-recourse financing basis. In addition far going negotiations
                                     with a wind turbine manufacturer could result in a first offshore wind turbine order. The
                                     company furthermore has a diversified international onshore wind portfolio with assets in
                                     Germany, the UK and Portugal, two remunerative wind countries. Through the operation of
                                     onshore wind farms the company has secured itself of stable revenues in the years to come in
                                     addition to its servicing and management activities.

                                     We support i) the internationally oriented strategy of the group, mainly in a growing market like
                                     the UK and ii) the offshore strategy and move to take part in the operation of wind farms. But
                                     still many uncertainties remain. The Portuguese market has to endure grid constraints while
                                     land acquisition and permitting is consequently witnessing serious delays. Furthermore the
                                     continued focus on the German onshore market is not a strategy we applaud given the lack of
                                     equity value creation. The onshore market is “drying up” and offshore wind farms are ready to
                                     take over. The company also can’t be proud of its communication towards investors and its
                                     uninspiring history. Energiekontor left the “Neuer markt” back in 2002 and is now listed on the
                                     less regulated Frankfurt stock exchange. In this context the company only reports in German,
                                     making it more difficult for international investors to grasp its business. What’s more,
                                     EnergieKontor already saw some of its offshore wind project pipeline fade away. Compared to
                                     Plambeck Neue Energien, the other listed wind farm developer in Germany, Energiekontor has
                                     only a limited offshore pipeline and we don’t have a view on extra projects in addition to the
                                     ones consented. In the past we also remark that the company had some problems in securing
                                     turbines, what is something we didn’t saw at Plambeck Neue Energien. As a result we initiate
                                     coverage on Energiekontor with a Neutral rating and TP of € 4.7.


  Strengths:                                                       Weaknesses:

         Two consented offshore wind projects.                             Limited offshore pipeline compared to Plambeck.

         Diversified onshore wind portfolio, active in the UK as           History with loss of investors trust.
         one of the most profitable countries
                                                                           Exposure to low profitable German onshore wind
         Operating onshore wind farms                                      market.

                                                                           Listed on less regulated Frankfurt stock exchange,
                                                                           communication in German.



  Opportunities:                                                   Threats:

         EEG offshore feed-in tariff revision from € 91/MWh to             Grid constraints in Portugal can put pressure on the
         € 110-150/MWh.                                                    development of its onshore pipeline.

         Taking stakes in offshore wind farms.                             Not being able to get turbines in time.

         Takeover candidate, equal to a similar trend in the
         onshore wind market.
Renewables                                                                                                                                          69



                                      XI.1. A little history lesson not to be proud of

                                      Although the German onshore wind market has been growing at an incredible pace, it was not
                                      always “clear skies ahead” for the wind farm developers. In the case of Energiekontor, initially
                                      issued at € 32 in May 2000 and rising to an all time high of € 121 things looked quite bright.

                                      It was in November 2000 shares first started to slip after the postponement of some wind farms and
                                      reporting below guidance. It went even to the point that the price dropped to an all time low of €
                                      0.86 ((shares were split 4:1 giving a rebased IPO price of € 8 to compare with). Although with
                                      seriously dented investors trust, because of difficulties to achieve guidance and further external
                                      political pressure (tax law revision for private RE investments), Energiekontor will need to prove
                                      what its worth. We feel confident the company has what it takes to keep its head above water, and
                                      even more to regain the lost trust. The new upwards revision of the EEG law will possible create
                                      extra value for both their onshore as offshore plants and the decision to take wind farms on their
                                      books has already created and will furthermore offer financial security.

                                      Energiekontor has also decided to step down from new wind energy technologies, like a hybrid
                                      storage wind power plant and offshore wind monitoring and operating systems and now fully
                                      focuses on the wind development chain.

     Graph 67: Energiekontor price evolution 2000-2007

             35      IPO, s ev eral brokers iniate
                     c ov erage w ith a "Buy " rating

             30

                                                  Pos tponement of w ind f arms and
             25                                   res ults c ome in below guidanc e

                                                         Fears on detoriation of the regulatory
                                                         env ironment f or projec t dev elopers .
             20

                                                         A llegations of legal ac tion to reac quire
                                                                                                                         Propos al upw ards EEG
             15                                          3 projec ts , prof it w arning ==> dented
                                                                                                                         rev is ion
                                                         inv es tors trus t
                                                               A nother prof it w arning w ith reduc tion of 2002
             10
                                                               s ales guidanc e f rom €200m to €130-140m

                                                                        Leav ing the Neuer Markt
              5


              0
             0         0        1        1        2        2        3        3        4        4        5        5        6        6        7
           -0        -0       -0       -0       -0       -0       -0       -0       -0       -0       -0       -0       -0       -0       -0
         ay        ov       ay       ov       ay       ov       ay       ov       ay       ov       ay       ov       ay       ov       ay
        M         N        M        N        M        N        M        N        M        N        M        N        M        N        M


                                                                                                                        Source(s): Energiekontor, Dexia


                                      XI.2. Wind development, from the cradle to the grave

                                      Energiekontor was founded in 1990 and is one of the market leaders in Germany for the
                                      development of onshore wind farms. With more than 450MW installed, Energiekontor is one of the
                                      leading German wind farm developers. The company is active in the full development chain and is
                                      always on the lookout for acquiring good wind locations, which are leased from the current
                                      landowners. The latter receive payments based on the amount of electricity generated. Once the
                                      project receives planning permission Energiekontor finances, builds and often operates the wind
                                      farm, what shows the company is active in the wind value chain from the cradle to the grave. By the
                                      end of 2006 Energiekontor developed 65 wind parks totalling around 450MW in Germany, Greece,
                                      the UK and Portugal for a total investment amount of € 640m (€ 1.4m/MW).
 Renewables                                                                                                                         70



                                   Graph 68:        Value chain




                                                                                                               Source(s): Energiekontor

                                   In the past Energiekontor had one of the biggest pools of private investors who were able to profit
                                   from tax exemptions. Now things have changed and Energiekontor is looking for bigger institutional
                                   investors, especially for their offshore wind farms completing the private investors.

                                   From the context of internationalisation and the move offshore, we definitely support
                                   Energiekontor’s strategy. The German onshore market is currently consolidating with the best sites
                                   already claimed and repowering is on its way. The future of the German market is offshore and
                                   through Nördergründe (125MW) and Borkum Riffgrund (400MW) Energiekontor has already two
                                   offshore wind farms consented.


                                   XI.3. Shareholders and management background

                                      Dr. Bodo Wilkens and Günter Lammers founded Energiekontor back in 1990 and are with 32%
Graph: Shareholders structure
                                      and 35% the biggest shareholders. They were also the initial managing directors of the group
                         Lammers
                                      and in the first place targeted onshore development in Germany, although through the opening
   Fr ee
                         Günt er      of several international offices, became active in Portugal, Spain, the UK and Greece. Early
  Float
                           34%
   32%                                2000, Energiekontor also announced its first offshore projects in Germany.

                                               Dr. Bodo Wilkins is one of the two founders of Energiekontor and previously
                                               operated as the company’s CEO. He followed a PhD in economics and worked for the
                                               Association of Germany Electricity Producers. He is currently the chairman of
              Wilk ens
               B odo                           Energiekontor’s supervisory board.
               34%

                                               Günter Lammers is the other founder of the company. He previously worked in a
                                               number of companies active in the marketing of ecological products.

                                      Daily management is in hands of Mr. Dirk Gottschalk and Mr. Peter Szabo.
Renewables                                                                                                                  71



             XI.4. Energiekontor’s project portfolio
                          Onshore development
             In 2006 Energiekontor had to endure longer waiting times (18 to 24 months) and higher turbine
             prices (30% rise y-o-y) just as any other wind farm developer. This led to the postponement of
             several wind projects, the lengthening of the construction period accompanied by the deferral in the
             issue of building permits. The realisation period of a wind farm project has in this way been
             postponed by a couple of months.

             Table 1: Energiekontor wind market evolution (MW)



                                                                           CAGR 3.9%

                                  Germ any
                                  Portugal
                                  UK


                                                                              CAGR 10.0%




                                                                                    CAGR 14.2%
                  2006A




                              2007E




                                             2008E




                                                       2009E




                                                                2010E




                                                                                                         2015E
                                                                                                        Source(s): Dexia Est.

             Energiekontor has an onshore wind project pipeline in Germany, Portugal and the UK. While in
             Germany the onshore market is starting to slow down, we foresee strong growth in both Portugal
             and the UK. This is also something we see in the remuneration of the onshore wind farms.

             Table 2: German onshore feed-in tariff evolution (€ kWh)




                                                                                                                 Source(s): BWE

             In Germany we only see limited added value of € 0.1m/MW, while in the UK, even with the higher
             investment cost (€ 1.65m/MW against € 1.2m/MW elsewhere in Europe), € 0.55m/MW value
             creation is created. The German onshore feed-in tariffs for new installations are decreasing each
             year with 2% and a new EEG law revision expected in December 2007 should change this
             degression from 2% to 1% and increase the feed-in tariff with a proposed € 7/MWh for installations
             fulfilling the technical needs.

             Table 28:                 Onshore project pipeline

             MW                                  Construction           Consented            Planning             Land leasing
             Germany                                       10                  15                  28                      100
             Portugal                                       4                  10                 100                       80
             UK                                             0                   0                  50                      280
                                                                               Source(s): Plambeck Neue Energien, Dexia Est.
Renewables                                                                                                                      72



                       Offshore development

             Graph 69:              Offshore wind project probability in Germany

                         Norde rgründe , turbine manufacturing negotiations
                                                                                                              100%
                         ongoing, f inancial partner f ound (45%)
                                                                                               85%
              Bork um Riffgrund We s t, w ithout                                     65%
              partnership, 1 year consented (30%)



                                                                         25%

                                                                10%
                                                    5%
                                     2.5%
                 0.0%




                                                Measurement
                Project not




                                                                        permitted




                                                                                                                 In operation
                                                              Permits




                                                                                    Turbines
                                                              pending




                                                                                               construction
                                 indentified




                                                                                    ordered
                 identified



                                   Project




                                                                          Fully




                                                                                                  Under
                                                                                                     Source(s): Dexia Est.

             Borkum Riffgrund West

             The start of construction is foreseen in May 2009, although given the long waiting times for turbines
             some delay can be expected. Energiekontor is currently on the lookout for investors for the Borkum
             Riffgrund project that will probably be built in three phases representing 80 (not determined what
             scale) turbines. In a first phase, 30 turbines are expected to be erected followed by two phases of
             25 turbines each. Energiekontor is currently negotiating an extension phase for the Borkum
             Riffgrund project with another 80 turbines.

             Nordergründe

             Dutch bank NIBC will take up financing for the Nordergründe wind farm that has already been
             consented and since July the environmental study is done. Energiekontor plans the construction
             and operation in 2009 although we believe that long turbine delivery times will restrain the quick
             offshore expansion and operating will only start in 2011, especially in the context to profit from the
             grid cost exemption. The offshore farm will be built 15km North East of Wilhemshaven and will
             count around 25 wind turbines (size not decided). The project will thus be built in the 12nm zone at
             a depth of around 4 to 15 metres.

             Graph 70:              Location offshore wind farms




                                                                                               Source(s): Energiekontor

             We don’t have a view on extra offshore wind projects for PNE although the company indicates they
             are currently looking into it.
Renewables                                                                                                                                                 73



                                       XI.5. Financials, taking on some operation
                                       Last year Energiekontor transferred several Portuguese wind farms into its own balance sheet
                                       resulting in a rise in debt and financial stability. Currently the company operates ~80MW spread
                                       over 10 wind farms on their own balance sheet, divided over German and Portuguese assets. This
                                       led to a stabilisation of their sales revenues and earnings and gives Energiekontor less exposure to
                                       the volatile wind farm development. Last year the revenues from electricity came in at € 11.3m
                                       against € 5.3m in 2005. Knowing the group revenue in 2006 came in at € 14.9m, the electricity
                                       revenue made up over 75% of the total. This again points at the weak market circumstances in
                                       2006 for onshore wind farm developers. The revenues for the sale of wind farms to third parties
                                       totalled € 1.9m in 2006 while revenues from services came in at € 1.7m.

Graph 71:          2006 sales revenues split-up                           Graph 72:           Onshore project pipeline

        Sale of            Services
     w ind farms             11%                                              250
         13%
                                                                              200

                                                                              150                                           150             UK

                                                                                                                 150
                                                                                                                                            Portugal
                                                                              100                                                           Germany


                                                                               50                  75                       70
                                                                                                                 40
                                                                                         10
                                Electricity                                        0
                                   76%                                                 2007      2008       2009          2010


                                         Source(s):       Energiekontor                                      Source(s):           Energiekontor, Dexia Est.



                                       The graph above on the right gives our underlying not probability adjusted MW rollout assumptions.
                                       While Germany and Portugal provide the short-term revenues, the 2009-‘10 expected rollout will
                                       primordially come from the UK.

                                       The company will possibly endure risks from the delay in turbine deliveries, foreign governments
                                       restricting land acquisitions in their markets and the scaling down of the local German market.

                                       Table 29:          P&L

                                        €m                                 2005         2006            2007E            2008E         2009E           2010E
                                        Consolidated sales                  34.6         14.9             21.8             27.1          47.8           101.9
                                        EBITDA                              10.6          9.7             15.0             10.0           7.5            32.5
                                        % margin                          30.7%        65.0%            68.8%            36.8%         15.7%           31.9%
                                        Depreciation                         7.4          6.6              7.2              8.0           9.2             9.3
                                        EBIT                                 3.2          3.1              7.8              2.0          -1.7            23.2
                                        Financial income                     1.1          0.8              0.9              0.7           0.5             0.7
                                        Financial expense                    4.2          6.2              6.0              6.7           7.9             8.2
                                        EBT                                  0.1         -2.4              2.7             -4.0          -9.1            15.8
                                        Taxes                                0.0         -0.5              0.9             -1.3          -2.8             5.2
                                        Consolidated profit                  0.1         -1.8              1.8             -2.7          -5.9            11.0
                                        Minorities                           0.0          0.0              0.0              0.0           0.0             0.0
                                        Net profit, group                    0.2         -1.8              1.8             -2.7          -6.0            10.9
                                                                                                                       Source(s): Energiekontor, Dexia Est.

                                       The “take on balance” approach for onshore wind farms changed both the P&L and cash flow
                                       statement of Energiekontor in a positive way. More certainty is now offered to investors, given the
                                       stable income from operating a wind farm compared to the development of these assets. In
                                       addition investors will change their view on Energiekontor and value the company in the range of
                                       operators, quoting at higher multiples. The group now carries high debt on its balance sheet,
                                       although this debt is due to non-recourse financing of its onshore projects and will thus be paid
                                       back by these projects.
Renewables                                                                                                      74



             Table 30:          Balance sheet

             €m                                  2005      2006       2007E       2008E        2009E       2010E
             Fixed and financial assets          93.8      90.3         94.5       101.5        116.7       118.6
             Cash                                46.6      37.3         35.2        29.5         19.7        25.2
             Current assets (net of cash)        21.4      25.4         26.7        28.0         29.3        30.6
             Sh. Equity                          49.5      41.0         39.6        33.9         25.0        32.9
             Minority interest                    1.3       1.3          1.3         1.3          1.4         1.4
             Other provisions                     9.2       7.0          7.2         7.3          7.5         7.7
             Net debt                            44.8      62.9         69.0        82.0        105.8        97.8
                                                                               Source(s): Energiekontor, Dexia Est.

             In 2006, 541,400 shares were bought back and together with the amount of share bought back in
             2005 and begin 2007 the total amount of shares comes in at 15.09m. In July 2007 the General
             Assembly of Energiekontor decided 10% of the share capital can be bought back with 23
             November 2008 as end date. The shares will not be destroyed and the capital will be added back to
             the outstanding equity. Furthermore, Energiekontor offers its investors a small dividend of €
             0.2/share.

             Table 31:          Cash Flow Statement

             €m                                  2005      2006       2007E       2008E        2009E       2010E
             Funds From Operations (FFO)          55.7     -20.7         7.9         4.4          3.7        24.0
             Change in working capital           -24.1      12.7         0.7         0.5         -0.1        -1.8
             Cash from operating activities       31.6      -8.0         8.6         4.9          3.5        22.2
             Cash for investing activities       -56.2      -3.2       -11.4       -15.0        -24.3       -11.2
             Of which capex                       56.2       3.2        11.4        15.0         24.3         3.2
             Free cash flow before financing     -24.6     -11.2        -2.8       -10.1        -20.8        11.0
             Recurring FCF before financing      -24.6     -11.2        -2.8       -10.1        -20.8        19.0
             Cash from financing activities       18.3       2.1         0.8         4.4         10.9        -5.4
             Change in cash                       -6.3      -9.1        -2.0        -5.7         -9.8         5.5
                                                                               Source(s): Energiekontor, Dexia Est.


             XI.6. Valuation
             We have valued the company on a SoTP based approach valuing the development pipeline aside
             from the assets under operation and the servicing and management of onshore and offshore wind
             farms. As a result we initiate coverage on Energiekontor with a Neutral rating and TP of € 4.7.


             Table 32:          SoTP

              Activities                           €m                                                   Comment
              _Development                        119.0     Pipeline, DCF generic wind model offshore and onshore
              _Service and management              48.2               Onshore and offshore wind farm management
              _Operation                           23.1     65MW onshore wind assets, 50% operating in the future
              _Holding Cost                       -45.1                                                      DCF
              Fair EV                             145.2
              - net debt                           69.0
              - minority interest                   1.3
              - provisions                          7.2
              + equity stake                        2.2        Equity stake of 10% in Nordergründe offshore farms
              + associates                          0.0
              = Fair equity                        69.9
              number of shares                     15.0
              =Value per share                      4.7
                                                                                             Source(s): Dexia Est.

             Note we have incorporated Energiekontor will take a 10% equity stake in the Nordergründe project,
             representing the € 2.2m equity stake.
Renewables                                                                                                                75



             Graph 73:                   Feed-in tariff sensitivity analysis

                                        14.0
                                                                                                        12.0
                                        12.0                                                     10.9
                                                        Current share price
                                        10.0                                           8.8




                         TP (€/share)
                                         8.0                                  6.7
                                         6.0                   4.7
                                         4.0
                                         2.0    € 0.7
                                         0.0
                                                 91           110         120         130        140    150
                                                                       Feed-in Tarif f (€/MWh)

                                                                                                        Source(s): Dexia Est.

             Our price target is highly sensitive to the German feed-in tariff. Currently this feed-in tariff is €
             91/MWh while through the renewed German Electricity law (EEG) feed-in tariffs intend to increase
             to a range € 110-150/MWh. This range is a proposal made by the German government in the
             beginning of 2007 and an official decision on the tariff needs to be made by the end of the year. In
             our model we apply the lower end of this range, € 110/MWh, and come in at a TP of € 4.3. An
             increase to the middle of this range, € 130/MWh (20 years operation or € 140/MWh for 15 years)
             would increase our TP to € 8.8 while the high end of the range inflects a rise to € 12.0/share (~ €
             150/MWh for 15 years).
Renewables                                                                                                76



                                    XI.7. Financial Profile
  Consolidated P&L (€ m)                           2006        2007E       2008E     2009E      2010E
  Consolidated Sales                                14.9         21.8        27.1      47.8      101.9
  EBITDA                                             9.7         15.0        10.0        7.5      32.5
  % margin                                        65.0%        68.8%       36.8%     15.7%      31.9%
  Depreciation                                       6.6          7.2          8.0       9.2       9.3
  EBIT                                               3.1          7.8          2.0     (1.7)      23.2
  Financial income                                   0.8          0.9          0.7       0.5       0.7
  Financial expense                                  6.2          6.0          6.7       7.9       8.2
  EBT                                              (2.4)          2.7        (4.0)     (9.1)      15.8
  Taxes                                            (0.5)          0.9        (1.3)     (2.8)       5.2
  Consolidated profit                              (1.8)          1.8        (2.7)     (5.9)      11.0
  Minorities                                         0.0          0.0          0.0       0.0       0.0
  Net profit, group                                (1.8)          1.8        (2.7)     (6.0)      10.9

  Funds Flow (€ m)                                  2006       2007E       2008E     2009E      2010E
  Funds From Operations (FFO)                      (20.7)          7.9         4.4       3.7       24.0
  Change in working capital                          12.7          0.7         0.5     (0.1)      (1.8)
  Cash from operating activities                    (8.0)          8.6         4.9       3.5       22.2
  Cash for investing activities                     (3.2)       (11.4)      (15.0)    (24.3)     (11.2)
  Of which capex                                      3.2         11.4        15.0      24.3        3.2
  Free cash flow before financing                  (11.2)        (2.8)      (10.1)    (20.8)       11.0
  Recurring FCF before financing                   (11.2)        (2.8)      (10.1)    (20.8)       19.0
  Cash from financing activities                      2.1          0.8         4.4      10.9      (5.4)
  Change in cash                                    (9.1)        (2.0)       (5.7)     (9.8)        5.5

  Balance Sheet (€ m)                               2006       2007E       2008E     2009E      2010E
  Fixed and financial assets                        90.3         94.5       101.5     116.7      118.6
  Cash                                              37.3         35.2        29.5      19.7       25.2
  Current assets (net of cash)                      25.4         26.7        28.0      29.3       30.6
  Sh. Equity                                        41.0         39.6        33.9      25.0       32.9
  Minority interest                                  1.3          1.3         1.3       1.4        1.4
  Other provisions                                   7.0          7.2         7.3       7.5        7.7
  Net debt                                          62.9         69.0        82.0     105.8       97.8

  Per share data                                    2006       2007E       2008E      2009E     2010E
  EPS                                               (0.1)         0.1        (0.2)      (0.4)      0.7
  CFPS                                                0.3         0.6          0.3        0.2      1.3
  DPS                                                 0.3         0.2          0.2        0.2      0.2
  Book value per share                                2.6         2.5          2.2        1.6      2.1
  pay-out                                        -250.8%      162.5%     -111.8%     -50.6%     27.4%

  Ratios                                            2006       2007E       2008E      2009E     2010E
  ROE %                                            -4.6%        4.8%       -8.3%     -25.2%     34.7%
  ROCE %                                           -1.8%        1.7%       -2.3%      -4.6%      8.5%
  Net gearing %                                    154%         174%        242%       424%      297%
  Net debt/EBITDA                                     6.5         4.6         8.2       14.1       3.0

  Valuation ratios                                  2006       2007E       2008E      2009E     2010E
  P/E                                             -16.72        35.29      -24.27     -10.98      5.94
  P/BV                                                0.8         1.7          2.0        2.8      2.1
  Div Yield                                           1.0         2.0          3.0        4.0      5.0
  EV/Sales                                         (16.7)        35.3       (24.3)     (11.0)      5.9
  EV/EBIT                                            30.5        17.3         73.2   (103.1)       7.0
  EV/EBITDA                                           9.6         9.0         14.8       22.7      5.0
  EBIT/int exp                                        0.5         1.3          0.3      (0.2)      2.8
  D/(D+E)                                         71.0%        72.5%       76.7%      83.4%     78.9%
Renewables                                                                                                                                        77



                                    XII. ROUND-UP: PNE VS. ENERGIEKONTOR

    Table 33:         PNE vs. Energiekontor
    Key business drivers                                             Plambeck Neue Energien                                    Energiekontor

    I Geographies onshore                                               Hungary (=) Germany (-)               Germany (-) UK (+) Portugal (=)
    II Pipeline offshore                              2,670 MW, 10.5% of German pipeline (+)              778 MW, 3% of German pipeline (=)
    III Consented offshore (see table 34)                565 MW, 9% of consented projects (+)         378 MW*, 6% of consented projects (+)*
    IV Operating projects                                                                   No (-)                                    Yes (+)
    V Investor confidence/Track record                                               Troubling (-)                               Troubling (-)
    VI Financial partners                                           Babcock & Brown, Dong (+)                                       NIBC (=)
    VII Contract with turbine manufacturers                               Vestas turbine order (+)             Turbine capacity constraints (-)
    VIII Take-over candidate                          Yes, in spite of strong partnerships (= / +)                                    Yes (+)
    IX Communication/reporting                                                         English (+)                                German (-)


    Recommendation                                                                          Buy                                        Neutral
    Current price                                                                    € 2.8/share                                   € 4.4/share
    Target price                                                                     € 4.8/share                                   € 4.7/share
                                                                Source(s): Dexia Est. *Est. 3.6MW turbines, including Nordergründe <12nm zone




    Table 34:         German consented offshore wind projects

     Project                             Location                       Developer                       Turbines         Permit           MW
     North Sea
     Test Field Borkum West              43 km north of Borkum          E.ON, Vattenfall, EWE                  12        Nov-01             60
     Amrumbank West                      37 km west of Amrum            E.ON Energy Projects                   80        Jun-04            400
     Nordsee Ost                         35 km NW of Helgoland          Essent Wind                            80        Jun-04            400
     Sandbank 24                         100 km west of Sylt            Sandbank 24/Projekt                    80        Aug-04            400
     Nördlicher Grund                    84 km west of Sylt             Renergys and Geo                       80        Dec-05            400
     Global Tech 1                       93 km north of Juist           Nordsee Windpower                      80        May-06            400
     Hochsee Windpark Nordsee            90 km north of Borkum          EOS Offshore                           80         Jul-06           400
     Bard Offshore 1                     89 km NW of Borkum             Bard Engineering                       80        Apr-07            400
                                                                        Airtricity/Offshore Bürger
     Butendiek                           35 km west of Sylt             Windpark                               80        Dec-02            240
     Borkum Riffgrund West               40 km NW of Borkum             Energiekontor                          80        Feb-04            288
     Borkum Riffgrund                    34 km north of Borkum          Plambeck/Dong                          77        Feb-04            277
     Offshore North Sea Windpower        40 km north of Juist           E.ON Energy Projects                   48        Feb-05            240
     Dan-Tysk                            70 km west of Sylt             Geo                                    80        Aug-05            400
     Godewind                            33 km north of Norderney       Plambeck Neue Energien                 80        Aug-06            288
     Meerwind Ost                        24 km north of Helgoland       Windland, Berlin                       40        May-07            200
     Meerwind Süd                        24 km north of Helgoland       Windland, Berlin                       40        May-07            200
     Baltic Sea
     Kriegers Flak                       30 km north of Rügen           Offshore Ostsee Wind                   80        Apr-05            400
     Arkona-Becken Südost                35 km NW of Rügen              E.ON Energy Projects                   80        Mar-06            400
     Ventotec Ost 2                      35 km NE of Rügen              Ventotec Ost 2                         80        May-07            400
                                                                                                                 Source(s): Companies, Dexia
ANALYST CERTIFICATION
I, Dieter Furniere, hereby certify that the views expressed in this research report accurately reflect my personal
opinion about the companies and the securities discussed herein. This report has been submitted to the issuer of
the financial instrument it relates to before its publication. Like all employees of Dexia Bank Belgium, the
remuneration can be base in part on the results of Dexia Bank Belgium as a whole, which may include investment
banking revenues. I certify that I do not hold, directly or indirectly, any interest in the companies mentioned above.
However, no part of my compensation was or is related to any recommendation or opinion expressed in this
report.

RELATED COMPANIES:
Plambeck (PNE3 GY, €2.75, XETRA)
Energiekontor (EKT GR, €4.40, FSE)

COMPANY SPECIFIC REGULATORY DISCLOSURES
Dexia Bank Belgium or any entity of Dexia Group can perform commercial banking, brokerage and advisory
services for or on behalf of any of the companies or organisations referred to in this report. Furthermore, Dexia
Bank Belgium or any entity of Dexia group may hold a position either independently or for the benefit of third
parties, or trade in the securities of any company or organisation referred to this report, as a broker, market maker,
or in any other role. The following disclosures relate to relationships between Dexia Bank Belgium or its
subsidiaries and companies covered by the equity research division of Dexia Bank Belgium and referred to in this
research. Dexia Bank Belgium may have from time to time non-securities related banking relationships with the
companies covered by its research department.

RECOMMENDATIONS
We use four stock recommendations which reflect the share's expected absolute performance as follows:
  Buy: we expect this stock to generate a return of >15% over the next twelve months;
  Add: we expect this stock to generate a return of 5-15% over the next twelve months;
  Neutral: we expect this stock to generate a return of 0-5% over the next twelve months;
  Reduce: we expect this stock to generate a negative return over the next twelve months

DISTRIBUTION OF RATINGS/INVESTMENT BANKING RELATIONSHIPS

                                                  Rating distribution             Investment banking relationship
Rating Category                    Count                      Percent                   Count                 Percent
Buy                                     20                     33.3%                        4                  20.0%
Add                                     14                     23.3%                        2                  14.3%
Neutral                                 18                     30.0%                        5                  27.8%
Reduce                                   8                     13.3%                        0                   0.0%
Rating distribution Total: 60
Investment banking relationship Total: 11

MEASURES PREVENTING CONFLICTS OF INTEREST
Dexia Bank Belgium prohibits its analysts from owning securities of any company he/she is covering. Such
restrictions are enhanced by the formal undertaking to perform all personal securities transactions through an
account with Dexia Bank Belgium. Analysts' remuneration can be based in part on the results of Dexia Bank
Belgium which may include investment banking revenues. Analysts are required to respect the information sharing
policy that restricts disclosure of recommendations to third parties or to any other department of Dexia Bank
Belgium or any other entity of the Dexia group prior to the distribution or the public disclosure thereof. Similar
information barriers apply to the staff involved in the corporate banking, corporate finance and structured finance
activity in order to prevent conflicts of interest. They are not allowed to enter into transactions involving securities
of a listed company for their own account or for the account any third party, when involved in the customer
relationship with such company nor communicate on the relationship with such company outside the corporate
department without the prior authorization of the Compliance Officer.
                                                            9-11-2007
             Rating and Target Price History for: Plambeck as of
 08/11/07
BUY:EUR4.8
                                                                                           5
                                                                                           4
                                                                                           3
                                                                                           2
                                                                                           1
                                                                                           0
                                 Q1                 Q2                     Q3
             2007




                                                                        Created by BlueMatrix




                                                             9-11-2007
         Rating and Target Price History for: Energiekontor as of
08/11/07
NEU:EUR4.7
                                                                                           6
                                                                                           5
                                                                                           4
                                                                                           3
                                                                                           2
                                                                                           1
                                 Q1                 Q2                     Q3
             2007




                                                                        Created by BlueMatrix
Disclaimer
This report has been prepared with necessary care under the responsibility of Dexia Bank Belgium, a Belgian
bank licensed and supervised by the CBFA (the Belgian Banking, Finance and Insurance Commission). This
report does not contain an offer or solicitation for the purchase or sale of any financial instrument. This report is for
distribution in the United Kingdom only to persons having professional experience in matters relating to
investments or to persons of the kind described in Article 49(2) (A) to (D) of the Financial services and Markets Act
2000 (Financial Promotion) Order 2001 of the United Kingdom and is not intended to be distributed or passed on,
directly or indirectly, to any other class of persons (including private investors) in the United Kingdom. This report
is distributed in the U.S. solely to "major institutional investors" as defined in Rule 15a-6 (U.S. Act of 1934). Each
U.S recipient by its acceptance hereof warrants that it is a "major institutional investor", as defined, understands
the risks involved in dealing in securities or any financial instrument, and shall not distribute nor provide this report,
or any part thereof, to any other person. The information contained in this report is based on information obtained
from reliable public sources with respect to the information barriers (Chinese walls) applicable within Dexia Bank
Belgium. Dexia Bank Belgium or any entity of the Dexia Group is not liable for any damages that may result from
any inaccuracy or incompleteness in/of this information. Dexia Bank Belgium or any entity of the Dexia Group is
not liable for any investment decisions of whatever nature, which are in any way based on this report by the user
of this report. Any entity of the Dexia Group can perform commercial banking, brokerage and advisory services on
behalf of any of the companies or organisations referred to this report. Furthermore, Dexia Group or an entity
thereof may hold a position either independently or for the benefit of third parties, or trade in the securities of any
company or organisation referred to this report, as a broker, market maker, or in any other role. This report was
based on current facts and conditions that can change from time to time. In addition, because research reports
contain more complete information concerning the analysts' views, investors should carefully read the entire
research report. Dexia Bank Belgium is under no obligation whatsoever to inform the user of this report, of any
change to these facts, circumstances, and/or opinions upon which they are based. Save as indicated otherwise,
this report has not been disclosed to the issuer of the financial instrument it relates to before its publication nor is
there any agreement between Dexia Bank Belgium and the issuer or any other person related to the dissemination
of the recommendation. The content of this report has not been disclosed to any entity of the Dexia Group prior to
its public disclosure. Our salespeople, traders and other professionals may provide oral or written comments to
our clients that reflect opinions that differ from the opinions or recommendations expressed in this research. Our
asset management area, our proprietary trading desks and investing businesses may make investment decisions
that are inconsistent with the recommendations expressed in this report.




Our research is available on our website: www.dexia.be/EquityReports
                                 EQUITIES CONTACT LIST




                  RESEARCH                                         SALES



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                                               Manager Sales & Trading
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ENERGY & UTILITIES
Alternative Energies                           Head of Sales
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