Transcript Generation Opportunities in CEE/SEE market

The Electricity Markets in
Converging Europe
November 2007
Vienna • Warsaw • Zagreb
Executive Summary

Rising electricity demand and decommissioning of outdated power plants in Converging Europe
causes significant investment needs in the electricity sector of the Region

Supply of renewable energy is not sufficient to comply with Kyoto targets and directives of European
Commission

Convergence with the Western European standards due to market opening and elimination of
market distortion mechanisms

Electricity market liberalisation and harmonisation of the frameworks with the EU standards
establish the preconditions for well-functioning electricity markets

Privatisation of power plants is progressing or being prepared in many countries of the Region

Major European energy companies (E.ON, RWE, Enel, EdF, GdF, CEZ, EVN, Verbund) are present
in the Region in electricity generation and distribution sector
November 2007
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Electricity Prices and Consumption



Electricity consumption per capita 2006
Electricity consumption in the Region still remains
up to 50% below the EU-15 average despite strong
growth in recent years
Regional electricity prices are lower than EU-15
average but have experienced strong growth in
recent years
Further growth of electricity prices will be caused
by low efficiency levels of local electricity
generators and decommissioning of old power
plants
10
9.0
9
8
MWh per capita

6.7
7
6
6.3
4.9
5
4
4.8
4.5
4.1
3.8
3.6
3
2
2.5
2.4
RO
BiH
1
0
EU15
Source: UCTE
SL
CZ
BG
GR
HU
SK
HR
PL
Electricity prices* 2006
The accelerating liberalisation process will increase
market efficiency
90
80
79.6
78.2
76.3
73.7
70.2
EUR/MWh
70
66.8
64.3
60.2
60
53.2
45.5
50
40
30
20
10
0
EU-15
RO
SK
CZ
HU
GR
SL
HR
PL
Source: Eurostat
* Electricity prices for industrial customers with annual consumption up to 2 GWh
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BG
Energy Flows in the Converging Europe

The main electricity importers in the Region are
Hungary and Croatia and the major electricity
exporters are Poland and Czech Republic.
Turkey is expected to experience a significant
shortage of electricity supply in the near future
Energy flows in 2006
PL
10,1
3,4
12,1

CZ
5,9
The expected decommissioning of outdated
power plants will influence the export/import
capacities of certain countries (e.g. Bulgaria,
Slovakia)
SK 8,6
5,7
HU
4,8
1,5
1,4
SL



The outdated infrastructure and long-term
contracts decrease cross border transmission
capacities
6,9
BiH
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SRB
2,8
MNE**
BG
2,1
4,5
MK
AL*
TR
1,0
GR
Net electricity
importer
Source: UCTE
* Albania is synchronised with UCTE
** Data for Montenegro is not available
November 2007
3,3
3,6
By 2020 up to 16,400kV of cross-border
transmission lines shall be added or
modernised in the Region
The ongoing harmonisation of the electricity
markets develops the potential for international
electricity trading
RO
HR
Net electricity
exporter
Energy flows in TWh
Major International Players – Regional Overview
Poland
Poland
Tschechische
Republik
Czech Republic
Slovakia
Slowakei
Ungarn
Hungary
Slowenien
Slovenia
Rumänien
Romania
Kroatien
Croatia
Bosnia
Bosnia &
&
Herzegovina
Herzegovina
Electricity generation and distribution in
former-Yugoslavia is almost fully stateowned (with the exception of Macedonia)
2 Distribution company
1 Distribution company
Bulgaria
Bulgarien
Montenegro
Macedonia
Makedonien
Albanien
Albania
GriechenGreece
land
1 Distribution company
1 Distribution company
Serbia
Serbien
1 Coal PP (670 MW ); wind farm (120 MW)
1Coal PP (840 MW)
Turkey
Türkei
1 Coal PP (1,260 MW); 3 distribution companies
1 District heating company (1,259 MWth, 85 MWe);
2 distribution companies
2 Distribution companies
50% Stake in hydro and gas PP(120
MW)
Enerjisa: Joint Venture of Verbund
and Sabanci Group
Wind farm (210 MW)
Source: VCP
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Growth Opportunities in the Region (1)
POLAND
CZECH REPUBLIC
 Decommissioning of coal fired power
plants (3,500 MW) until 2015
 The dominant market position of CEZ
(70% of electricity generation) affects the
market attractiveness negatively
 Generation capacities are outdated (40%
are more than 35 years in service)
 The state-owned companies BOT Group
and PKE SA possess 44% and 18% of
generation capacities respectively
PL
SLOVAKIA
 Enel controls more than 85% of
the electricity generation
CZ
HUNGARY
SK
 The decommissioning of
nuclear power plant will turn
Slovakia into an electricity
importer
 Hungary is particularly attractive for
Greenfield projects
HU
SL
 64% of the generation capacities (including
NPP PAKS) belongs to the state-owned
MVM. The privatisation of a minority stake
(25%) via public offering is planned
 The privatisation of Vertes coal PP is in
process
SLOVENIA
 The electricity generation is stateowned (97% belongs to HSE)
 Several power plant construction projects
were announced
 HSE intends to expand into Balkan
states and CEE markets
 Strong increase of the electricity prices
over the past 5 years (CAGR 6.5% )
Source: VCP
November 2007
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Growth Opportunities in the Region (2)
EX-YUGOSLAVIA
 In the countries of former
Yugoslavia the electricity
generation is mostly stateowned
 Only Macedonia is an
exception: the distribution
network was privatised and
the Negotino TPP was
acquired by „Hitch &
MacDonald” (Canada)
 In BiH CEZ will reconstruct
and increase the capacities of
Gacko coal PP
 The shortage of capital
(investment) in the Region
creates attractive
opportunities for green field
projects
 Privatisation of the generation
capacities is envisaged to
start in the coming years
ROMANIA
 Generation capacities are generally
outdated and require high investments
 Privatisation of generation sector is
prearranged to start in 2007 with
privatisation of Turceni (2,310 MW), Rovinari
(1,320 MW) and Craiova (610 MW)
RO
HR
 Privatisation of 16 small HPP (up to 10 MW)
will be conducted in 2007
BiH
SRB
BULGARIA
BG
MNE
AL
MK
GR
TR
 After the privatisation of the distribution
companies, the privatisation of TPP and
district heating companies is expected to
be completed in the near future
 High investment need due to outdated and
environment-unfriendly power plants
 The privatisation of Bobovdol coal PP (630
MW) is scheduled for 2008
TURKEY
 48% of generation capacities (mostly
HPPs) belong to the state-owned company
NEK EAD
 Electricity market with strong prospects (attractive
prices and significant demand growth)
 Privatisation of distribution assets is scheduled for 2008
 Generation assets are mostly controlled by local
companies
 Realisation of the Ilisu Dam (1,200 MW HPP) project is
still debatable
 The shut down of 2 units at Kozloduy NPP
(880 MW) and the gradual closing of the
old TPPs coupled with the delay in the
construction of NPP Belene resulted in
decreasing of exports to almost zero and
may turn Bulgaria into electricity importer in
the coming years
Source: VCP
November 2007
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Disclaimer
This presentation was prepared by VCP Capital Partners Unternehmensberatungs AG (“Vienna Capital Partners” or “VCP”). The
information in this presentation reflects prevailing conditions and our judgement as of this date, all of which are accordingly
subject to change. In preparing this presentation, VCP has relied upon and assumed, without independent verification, the
accuracy and completeness of all information available from public sources. No representation or warranty, expressed or implied
is given by VCP as to the accuracy or completeness of the information. No responsibility or liability whatsoever is accepted by any
person for any errors, misstatements or omissions in this document.
November 2007
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