Slide 1: Investor presentation Q4 & FY 2017
Investor presentation Q4 & FY 2017 1 February 2018
Slide 2: Disclaimer
DISCLAIMER. Certain statements in this presentation are based on the beliefs of our management as well as assumptions made by and information currently available to the management. Forward-looking statements (other than statements of historical fact) regarding our future results of operations, finan
Slide 3: Significant strategic and operational progress in 2017
Significant strategic and operational progress in 2017 Strategic transformation Utility • Upstream Oil & Gas divested • Coal-free in 2023: Commissioning of Skærbæk bioconversion and FID on Asnæs • Green share of generation increased to 64% and on track to reach +95% in 2023 • Renescience Northwich p
Slide 4: Strong growth in EBITDA
Strong growth in EBITDA EBITDA Outperformance vs. original DKKbn guidance of DKK 15-17bn Non-recurring items Timing effects DKK ~4.5bn: 22.5 WP new partnerships • Borkum Riffgrund 2 originally Existing activities forecasted to close in 2018 19.1 • Redistribution of Walney Ext. gain 9.8 from 2018 to
Slide 5: Construction program well in progress
Construction program well in progress Walney Borkum Asnæs Renescience Smart meter Project Race Bank Hornsea 1 Borssele 1&2 Hornsea 2 Extension Riffgrund 2 CHP plant Northwich roll-out Country Asset type 129MW Heat, 120,000 1m Capacity 573MW 659MW 450MW 1,218MW 752MW 1,386MW 25MW Power tonnes waste i
Slide 6: Wind Power market development
Wind Power market development • Auction of 1.6GW in April 2018 Germany • Climate targets and strategy being discussed by potential government coalition partners • Submitted first bid in Massachusetts in December 2017 • Final agreement for construction of Virginia pilot being negotiated with Dominion
Slide 7: Strategic direction and priorities
Strategic direction and priorities Offshore wind Utility Growth opportunities CAPEX (2018-2023) 85-90% CAPEX (2018-2023) 5-10% CAPEX (2018-2023) 0-10% • Maintain market leadership in • Complete biomass conversions of • Renescience: Innovative offshore wind Danish CHP plants and phase out enzymatic w
Slide 8: Capital deployment spectrum towards 2023
Capital deployment spectrum towards 2023 Illustrative gross investments 2018-2023 DKK 130-140bn DKK 45-55bn Only currently committed capital FID of additional No farm downs Additional green High capital spend, only currently spend, 'locked in' growth, high pay- 3-4GW offshore wind post Hornsea 1 gro
Slide 9: EBITDA more than doubled in Q4 2017
EBITDA more than doubled in Q4 2017 Discontinued operations Continuing operation EBITDA Net profit Free cash flow DKKm DKKm DKKm 7,537 125 9,429 12,148 124 13,032 79 625 6,310 5,871 3,515 9,350 439 3,988 2,033 Q4 2016 Non- Q4 2016 WP BTP DCS Other Q4 2017 recurring underlying -473 items Q4 2016 Q4 2
Slide 10: All-time high EBITDA and net profit
All-time high EBITDA and net profit Discontinued operations Continuing operation EBITDA Net profit Free cash flow DKKm DKKm DKKm 8,728 52 22,519 20,199 5,367 19,109 359 344 6,920 14,442 13,213 4,667 1,052 12,161 13,279 FY 2016 Non- FY 2016 WP BTP DCS Other FY 2017 261 recurring underlying items FY 2
Slide 11: Net cash of DKK 1.5bn and increased ROCE
Net cash of DKK 1.5bn and increased ROCE Net interest-bearing debt development FFO / Adj. net debt ROCE DKKm % % 64 24 25 5,805 10,260 50 -3,078 660 -14,875 -289 -1,517 30 Sep CFO CAPEX Divest- Disc. Other 31 Dec 31 Dec 31 Dec 31 Dec 31 Dec 2017 ments operations 2017 2016 2017 2016 2017 Negative net
Slide 12: Wind measurements
Wind measurements Change from wind energy content to wind speed New metric – Wind speed (m/s) Normal wind year 2017 m/s • Wind speed is more intuitively understandable and transparent 10.3 10.4 (meters per second vs. an index) 9.2 8.2 7.9 • Wind speed is based directly on external data sources and c
Slide 13: Wind Power – Strong results in Q4 2017
Wind Power – Strong results in Q4 2017 Sites Construction contracts Power generation EBITDA and divestment gains Free cash flow TWh DKKm Other DKKm 2.9 12,591 13,417 3,226 1.8 5,054 10,033 1,899 3,309 -154 -668 -958 Q4 2016 Q4 2017 Q4 2016 Q4 2017 Q4 2016 Q4 2017 Power generation up 61% EBITDA up DK
Slide 14: Wind Power – Strong operational and partnership results
Wind Power – Strong operational and partnership results Sites Construction contracts Power generation EBITDA and divestment gains Free cash flow ROCE TWh DKKm Other DKKm % 8.5 20,595 4,628 28.4 8,529 6.0 11,867 16.5 5,869 13,667 7,012 -1,014 -1,601 -1,205 31 Dec 31 Dec FY 2016 FY 2017 FY 2016 FY 201
Slide 15: Bioenergy & Thermal Power – IPO guidance reached
Bioenergy & Thermal Power – IPO guidance reached Heat Heat Ancillary services Ancillary services EBITDA – Q4 Power Free cash flow – Q4 EBITDA – FY Power Free cash flow – FY DKKm DKKm DKKm DKKm 240 299 152 115 100 695 235 407 172 147 300 321 89 122 -607 -864 -635 -146 -117 -796 Q4 2016 Q4 2017 Q4 201
Slide 16: Distribution & Customer Solutions – Q4 & FY 2017
Distribution & Customer Solutions – Q4 & FY 2017 EBITDA – Q4 Non-recurring Free cash flow – Q4 EBITDA – FY Non-recurring Free cash flow – FY DKKm Underlying DKKm DKKm Underlying DKKm 1,243 922 7,108 5,971 439 4,667 2,082 804 179 2,441 -71 -1,289 Q4 2016 Q4 2017 Q4 2016 Q4 2017 FY 2016 FY 2017 FY 201
Slide 17: Outlook – New EBITDA guidance method
Outlook – New EBITDA guidance method New EBITDA guidance method Guidance on EBITDA excl. new WP partnerships • Future guidance only include existing WP partnership agreements DKKbn • Previously, outlook included partnership agreements expected to be 22.5 concluded during the year • Outlook was thus
Slide 18: Outlook – Business unit EBITDA FY 2018 vs. FY 2017
Outlook – Business unit EBITDA FY 2018 vs. FY 2017 Wind Power (excl. new partnership Bioenergy & Thermal Power – Higher Distribution & Customer Solutions – agreements) – Higher Significantly lower • Total EBITDA from our heat and power • Earnings from offshore wind farms in generation activities exp
Slide 19: WP guidance on growth in sites EBITDA towards 2023
WP guidance on growth in sites EBITDA towards 2023 Average yearly increase in WP sites EBITDA (CAGR) • We introduce a new directional target for the operating profit from our offshore wind farms in operation • We expect an average annual increase in EBITDA (incl. O&M and PPAs) of 13%-14% from 2017 t
Slide 20: Lower CAPEX guidance on Wind Power build-out
Lower CAPEX guidance on Wind Power build-out Reductions in construction costs achieved Key offshore wind CAPEX/MW reduction drivers • At time of IPO average CAPEX/MW for the FID’ed build-out • Larger turbines portfolio of six offshore wind farms (Gode Wind 1+2, Burbo Bank • Larger sites Ext., Race B
Slide 21: Financial targets and financial policies
Financial targets and financial policies Return on capital employed (ROCE) 2018-2023 Financial targets Target Year • Target average ROCE of 12-14% for the Group in the 2018-2023 Return on capital employed (ROCE) period (previously 2017-2023) Group 12-14% Avg. 2018-2023 • Wind Power main contributor
Slide 22: 2018 key priorities
2018 key priorities Commissioning of Race Bank and Walney Ext. Construction progress on Hornsea 1, Borkum Riffgrund 2, Borssele 1&2 and Hornsea 2 Hornsea 1 farm-down process German auction US market expansion Taiwan: Greater Changhua 1-4 Path to coal free: Asnæs bioconversion and Esbjerg agreement C
Slide 23: Q&A Conference call
Q&A Conference call DK: +45 35 44 55 83 UK: +44 203 194 0544 US: +1 855 269 2604 For questions, please press 01
Slide 24: Appendix
Appendix
Slide 25: Structural transformation of European power generation
Structural transformation of European power generation Offshore wind CAGR 2017-2030 European power mix 3.7 PWh 3.4 PWh 3.3 PWh Biomass Offshore wind 1% 1% 2% 2% Wind¹ Solar PV 3% Offshore wind 7% New Renewables 17% Biomass 9% 23% Solar PV 8% Hydro Onshore wind 9% Biomass 9% 38% Fossil Nuclear 16% On
Slide 26: Wind Power build-out plan
Wind Power build-out plan Installed capacity MW 590 1,386 8,914 752 1,218 6,776 450 659 573 3,876 2017 Race Bank Walney Borkum Hornsea 1 2020 Borssele Hornsea 2 Decided (FID) German Extension Riffgrund 2 1&2 capacity Development Portfolio Country UK UK Germany UK Netherlands UK Germany 2024 Expected
Slide 27: SPA/CA split and timing of CA gains on farm-downs
SPA/CA split and timing of CA gains on farm-downs Wind farm MW capacity Commissioning SPA/CA split 2015 2016 2017 2018e 2019e SPA All Gode Wind 1 330 Q4 2016 CA: 75-100% 0-10% 65-75% 20-30% SPA Gode Wind 2 252 Q4 2016 CA: 75-100% 55-65% 30-40% 0-10% SPA DKK 0.6bn Burbo Bank Ext. 258 Q1 2017 CA: 75-1
Slide 28: Group – Financial highlights Q4 & FY
Group – Financial highlights Q4 & FY FINANCIAL HIGHLIGHTS Q4 17 Q4 16 D FY 17 FY 16 D EBITDA DKKm 13,032 6,310 107% 22,519 19,109 18% • Wind Power 12,591 5,054 149% 20,595 11,867 74% • Bioenergy & Thermal Power 240 115 109% 152 100 52% • Distribution & Customer Solutions 179 1,243 (86%) 2,082 7,108
Slide 29: WP – Financial highlights Q4 & FY
WP – Financial highlights Q4 & FY FINANCIAL HIGHLIGHTS Q4 17 Q4 16 D FY 17 FY 16 D EBITDA DKKm 12,591 5,054 149% 20,595 11,867 74% • Sites incl. O&Ms and PPAs 3,226 1,899 70% 8,529 5,869 45% • Construction contracts and farm-down gains 10,033 3,309 203% 13,667 7,012 95% • Other incl. A2SEA and proje
Slide 30: BTP – Financial highlights Q4 & FY
BTP – Financial highlights Q4 & FY FINANCIAL HIGHLIGHTS Q4 17 Q4 16 D FY 17 FY 16 D EBITDA DKKm 240 115 109% 152 100 52% • Heat 235 172 37% 695 407 71% • Ancillary services 122 89 37% 321 300 7% • Power (117) (146) (20%) (864) (607) 42% Free cash flow 147 299 (51%) (796) (635) 25% KEY BUSINESS DRIVE
Slide 31: DCS – Financial highlights Q4 & FY
DCS – Financial highlights Q4 & FY FINANCIAL HIGHLIGHTS Q4 17 Q4 16 D FY 17 FY 16 D EBITDA DKKm 179 1,243 (86%) 2,082 7,108 (71%) • Distribution 172 233 (23%) 1,199 1,602 (25%) • Sales 21 (71) n.a. 32 (15) n.a. • Markets 575 1,131 (49%) 1,422 5,766 (75%) • LNG (589) (40) n.a. (571) (245) 133% ROCE1
Slide 32: Differences in Business Performance EBITDA and IFRS EBITDA
Differences in Business Performance EBITDA and IFRS EBITDA DKKm FY 2017 FY 2016 EBITDA – BUSINESS PERFORMANCE (BP) 22,519 19,109 BP adjustment in respect of revenue for the year 205 (3,808) BP adjustment in respect of COGS for the year (150) 1,638 EBITDA – IFRS 22,574 16,939 Total BP adjustments for
Slide 33: Investments
Investments GROSS AND NET INVESTMENTS (DKKm) FY 2017 FY 2016 Gross investments per Capital employed per business unit business unit Cash flow from investing activities (10,054) (1,060) FY 2017 31 Dec 2017 Dividends received and capital reduction, reversed (13) (22) Purchase and sale of securities, r
Slide 34: FFO/Adjusted net debt calculation
FFO/Adjusted net debt calculation FUNDS FROM OPERATIONS / ADJUSTED NET DEBT (DKKm) FY 2017 FY 2016 EBITDA – Business Performance 22,519 19,109 Interest expenses, net (629) (402) Reversal of interest expenses transferred to assets (754) (574) Interest element of decommission obligations (194) (172) 5
Slide 35: Debt overview
Debt overview Gross debt and hybrids Net debt Long term gross debt maturity Q4 2017 DKKbn schedule Q4 2017, DKKbn 16 14 5% 12 10 3.5 31% 42.9 8 DKKbn 6 64% 4 -1.5 2 0 Bonds Hybrids Bank loans 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027+ Q4 2016 Q4 2017 Bonds Bank loans 35
Slide 36: Interest rate risk and funding costs
Interest rate risk and funding costs Effective funding costs – gross debt Key risk figures Q4 2017 (excl. hybrid) (excl. hybrid) Bond and bank debt (excl. hybrid), LHS DKKbn Gross interest expense (excl. hybrid), LHS Cost of Modified Avg. time to Average effective interest rate (excl. hybrid), RHS %
Slide 37: Hybrid capital in short
Hybrid capital in short Hybrid capital can broadly be defined as funding • Deeply subordinated and only senior to Ørsted has made use of hybrid capital to maintain instruments that combine features of debt and common equity our ratings at target level in connection with the equity in a cost efficien
Slide 38: Benefits of hybrid capital
Benefits of hybrid capital Hybrid capital is an attractive form of financing for corporates: Illustrative example – current example • Provides strength to the balance sheet at relatively attractive terms (tax deductible) ASSUMPTIONS • Supportive to credit ratings Pricing for a hybrid with first call
Slide 39: November 2017 - EUR hybrid and Senior transactions
November 2017 - EUR hybrid and Senior transactions Hybrid Senior Liability Management 6.500% due 2019 Tenor/Target Notes 1000NC7 12 years 4.875% due 2021 2.625% due 2022 Size/Amount Tendered EUR 500m EUR 750m EUR 198.7m Coupon 2.250% 1.500% - Investor Demand EUR 2.4bn EUR 1.6bn - • Successfully achi
Slide 40: Ørsted has issued Green Bonds
Ørsted has issued Green Bonds In November 2017 Ørsted issued a Green senior bond with maturity 2029 and a Green hybrid bond with maturity 3017. Ørsted's Green Bonds Framework follows the four pillars of the ICMA Green Bond Principles 2017 Use of Proceeds Project Evaluation and Selection Process • Ac
Slide 41: Financing strategy
Financing strategy We have a centralised financing All cash flow generated by our strategy as customary for vertically and subsidiaries supports the horizontally integrated European energy creditworthiness and rating of and thus utilities. the debt taken up by the Group parent. The strategy supports
Slide 42: Currency hedging principles
Currency hedging principles • The purpose of our currency risk management is to reduce the Group’s currency risks over a 5-year horizon • The main principle is to hedge FX exposure once it is deemed relatively certain that the underlying cash flows in foreign currency will materialise • Thus, FX ris
Slide 43: Hedging of FX and power risk in Wind Power
Hedging of FX and power risk in Wind Power Construction and farm-downs – Hedging of FX Commercial Operations – Hedging of FX and power Decision gates 100 Pre-FID • Early hedging of large DEVEX items on a 100% basis 80 100% share 75 60 Final Investment 50 • Build up of hedges of transmission asset 40
Slide 44: New income cap on power distribution RAB as expected
New income cap on power distribution RAB as expected Revenue expectations are maintained at same level after Still some uncertainties regarding the future income caps the new income cap order is enacted 06/2018 12/2018 Main elements in new regulation DERA: determination DERA: benchmark • 5-year inco
Slide 45: Investor Relations contacts
Henrik Brünniche Lund Sabine Lohse Rasmus Keglberg Hærvig Head of Investor Relations IR Officer IR Officer HEBRL@orsted.com SABLO@orsted.com RAKOL@orsted.com