Slide 1: Groupe Eurotunnel SE – ElecLink Presentation
Groupe Eurotunnel SE – ElecLink Presentation 4 October 2016 François Gauthey - Deputy CEO Groupe Eurotunnel Steven Moore - CEO ElecLink
Slide 2: Groupe Eurotunnel has full control of ElecLink
Groupe Eurotunnel has full control of ElecLink 2011: Groupe Eurotunnel and STAR Capital Partners establish a joint venture (49/51) to develop an P electricity interconnector between Great Britain and France. Star Capital brings its knowledge of the electricity market and regulation P 2011-2016: Elec
Slide 3: Groupe Eurotunnel confirms its focus on infrastructure
Groupe Eurotunnel confirms its focus on infrastructure Groupe Eurotunnel operates the Fixed Link, with a concession running P until 2086 (one of the world’s longest). ElecLink enhances the value of the group’s infrastructure and utilises its P skills An investment which will boost the group’s profit
Slide 4: Agenda
Agenda ElecLink welcomes you to the Investor Presentation 1 Introduction to ElecLink • Steven Moore (ElecLink) 2 Market & Regulatory Overview • Vasilis Machias (ElecLink) 3 Closing Remarks • Steven Moore (ElecLink) 4
Slide 5: Introduction to ElecLink
Introduction to ElecLink Steven Moore, CEO, ElecLink
Slide 6: Agenda
Agenda 1 What we do 2 Where we are 3 EPC contracts 4 Achievements to date 5 Market background 6
Slide 7: What we do
What we do A new build high voltage cable through the Channel Tunnel • ElecLink will build, own and operate an exempted electricity interconnector through the Channel Tunnel to provide 1000 MW of bidirectional transmission capacity between the UK and France. • ElecLink will respond to the need for g
Slide 8: Who we are
Who we are An experienced and complementary management team Steven Moore More than 20 years of commercial experience in the electricity sector having CEO previously served as Group Director of Commerce, Optimisation and Trading at EDF and Power Markets Director at British Energy Vasilis Machias 12 y
Slide 9: Route and Grid Connections
Route and Grid Connections Key Facts ElecLink’s Route • ElecLink’s route mirrors closely the route of the existing IFA interconnector • Converter stations within the Eurotunnel terminal perimeter • 51 km in the Channel Tunnel • 3.5 km on French soil to connect to Les Mandarins substation • 14.5 km o
Slide 10: The Channel Tunnel
The Channel Tunnel The 1,000 MW HVDC cable will be installed in the north running tunnel Interior of the running tunnel HVDC cable cross section Cable installation area Image property of Prysmian ElecLink will use tested and proven HVDC technology, comprising Voltage Source Converters (VSC) and Cros
Slide 11: The converter stations
The converter stations The converter stations will be located adjacent to the tunnel entrances in GB and FR Exterior Interior Image property of Siemens 11
Slide 12: Where we are
Where we are 2012 Obtain 25 year exemption and interconnector licence - Secure grid connections in the UK and France 2016 Conduct feasibility studies Secure EPC and O&M contracts Today Forward sell long-term contracts Raise debt to part-finance construction 2016 - Construct 1000 MW power inter
Slide 13: World Class EPC Contractors
World Class EPC Contractors ElecLink will subcontract construction to industry leading companies with long and successful track record. • Construction will be undertaken by globally renowned contractors: 1. Siemens has been nominated as preferred bidder for the construction of the converter stations
Slide 14: Significant Achievements
Significant Achievements ElecLink is amongst the most advanced new interconnection projects in the UK. P Endorsed by the UK and FR governments P Secured grid connections in UK and FR Designated Project of Common Interest by P P Obtained building permits in UK and FR the European Commission Awarded g
Slide 15: Our focus today is revenue generation
Our focus today is revenue generation Transaction Structure Interconnector Access Agreement 100% RTE Debt Proceeds Lenders Debt Service NGET EPC contractors O&M contractors Long-term buyers Contracted buyers Short-term market EPC contracts O&M contracts Multi-year contracts Short-term capacity sales
Slide 16: What is the market background in GB, FR and neighbouring countries?
What is the market background in GB, FR and neighbouring countries? The difference in generation mix and demand profile drives the difference in wholesale electricity prices between connected countries 16
Slide 17: What is the current electricity interconnection level in Europe?
What is the current electricity interconnection level in Europe? GB currently has a low interconnection level whilst France has a medium interconnection level compared to European targets. EU non-binding target of interconnection capacity as a % of installed generation capacity 2030: 15% >15% 10-15%
Slide 18: Why is new interconnection important?
Why is new interconnection important? Tight reserve margins towards the end of the decade make interconnectors essential for security of supply Projected supply:demand balance in GB 80 70 70,5 67,8 66,6 65,4 64,1 61,1 60,9 60,5 61,4 60 60,3 60,2 60,2 GW 50 Peak demand 40 Transmission connected capac
Slide 19: Market & Regulatory Overview
Market & Regulatory Overview Vasilis Machias, Head of Sales & Regulation, ElecLink
Slide 20: Agenda
Agenda 1 What is the regulatory environment for electricity interconnectors? 2 ElecLink exemption 3 How does an electricity interconnector monetise its value? 4 Congestion rents 5 What other revenue streams might be accessible? 20
Slide 21: What is the regulation for electricity interconnectors?
What is the regulation for electricity interconnectors? There are three regulatory regimes for electricity interconnectors: regulated asset base, cap and floor and exempted. Regulated Asset Cap and Floor Exempted Base (RAB) Developers can seek exemptions from regulatory Standard investment route for
Slide 22: ElecLink is the most advanced new project in the UK
ElecLink is the most advanced new project in the UK Existing interconnectors Interconnector Border Capacity (MW) Commissioning Date IFA GB – FR 2,000 1986 Moyle GB – NI 500 2002 Britned GB – NL 1,000 2011 EWIC GB – IE 500 2012 New interconnectors* Interconnector Border Capacity (MW) Commissioning Da
Slide 23: ElecLink Exemption General
ElecLink Exemption General ElecLink is different from fully regulated interconnectors. Provision Difference vis-à-vis fully regulated interconnectors Third party access ElecLink is allowed to forward sell multi-year products for up to 80% (800 MW) of the total capacity in each direction. The remaini
Slide 24: ElecLink Exemption Third Party Access
ElecLink Exemption Third Party Access Multi-year products • Max 800 MW per direction • Average tenor must not exceed 15 years • All products will be allocated to the market through an • Tenors equal to or less than 5 years must be offered open, transparent and non-discriminatory auction process • Al
Slide 25: What is the value of interconnection to developers?
What is the value of interconnection to developers? Potential revenue streams include energy market revenues, capacity market revenues and ancillary services revenues. Capacity market revenues Congestion rent: Interconnectors may receive capacity payments in GB if they contribute Energy market posit
Slide 26: What are congestion rents? (I)
What are congestion rents? (I) • Consider a scenario where Country A and Country B are not connected • The price of electricity in each country is determined by supply and demand • Different countries with different generation mixes and demand profiles can therefore have different prices Demand_A De
Slide 27: What are congestion rents? (II)
What are congestion rents? (II) • Consider a scenario where Country A and Country B are linked with an interconnector • The price difference triggers a flow of electricity from the less expensive country to the more expensive one • The flow of electricity tends to reduce the price difference, but th
Slide 28: What are congestion rents? (III)
What are congestion rents? (III) The fundamental value of an interconnector is derived from congestion rents which in turn depend on price differentials. • Congestion rent = Price difference x Volume of electricity flow Demand_A - import Demand_B + export Price Price Price difference’ Peaker Peaker
Slide 29: How does an interconnector monetise congestion rent?
How does an interconnector monetise congestion rent? Interconnectors monetise congestion rents by selling capacity rights. Forward Day ahead Intraday Overview Auctions of long term Allows buying and selling of electricity for Allows players to trade interconnector capacity delivery on the following
Slide 30: What are the sources of value for congestion rents? (I)
What are the sources of value for congestion rents? (I) There are two sources of value for the congestion rents earned by an interconnector: structural value and volatility value. • Structural value derives from systematic average • These differences may manifest as average spreads hourly price diff
Slide 31: What are the sources of value for congestion rents? (II)
What are the sources of value for congestion rents? (II) There are two sources of value for the congestion rents earned by an interconnector: structural value and volatility value. • Volatility value derives from random hourly price UK and France day-ahead prices for 15.09.2016 variations between th
Slide 32: Historical congestion rents
Historical congestion rents In the period 2006 – 2015, a hypothetical 1000MW interconnector between GB and FR could have potentially generated an average of circa €119 million per year in terms of congestion rents based on the outturn day-ahead hourly prices in the two countries* 200 180 160 140 120
Slide 33: Prospective users
Prospective users ElecLink’s prospective customer base consists of market participants active in cross- border trading Vertically Integrated Utilities Suppliers Oil/Gas Majors Generators Traders Financial Players Other importers/exporters • A list of current power market participants in GB can be fo
Slide 34: What revenues can interconnectors earn from the GB capacity market?
What revenues can interconnectors earn from the GB capacity market? Interconnectors are eligible to participate in the GB Capacity Market if they contribute positively to security of supply ElecLink1 • The GB Capacity Market awards contracts to generators, demand side response and [A] Capacity 1,000
Slide 35: What revenues can interconnectors gain from ancillary services?
What revenues can interconnectors gain from ancillary services? Interconnectors can also provide ancillary services to Transmission System Operators • A range of additional services can be provided by interconnectors to the national Transmission System Operators, including: Frequency response; R
Slide 36: Closing Remarks
Closing Remarks Steven Moore, CEO, ElecLink
Slide 37: Closing Remarks
Closing Remarks Thank you for attending our presentation. We hope you found this helpful in improving your understanding of the ElecLink project Essential infrastructure: an extension of respective host countries’ regulated transmission networks EU Project of Common Interest: planned and permitt
Slide 38: Strategic Rationale
Strategic Rationale Strong Enhanced Strong Additional economic value market revenue returns creation demand streams Stable Material Essential revenue guaranteed infrastructure cash flows upside potential High price Utilising From spread existing ancillary Congested services and between UK Eurotunnel
Slide 39: Contact investors & analysts
Contact investors & analysts: Michael Schuller Jean Baptiste Roussille Corporate Finance Director co-Head of IR co-Head of IR 00 33 1 40 98 04 81 00 44 1303 288 719 Jean-baptiste.roussille@eurotunnel.com Michael.schuller@eurotunnel.com