Transaction Advisory Services Global Challenges and Opportunities ROLE OF REGULATORY DRIVERS IN WIND MARKETS 9 May 2007 Jonathan Johns (Partner) Ernst & Young Renewables Waste and Clean Energy Group Tel: Fax:

1 Climate change: wind still requires support Governments and business are dealing with climate change on a global basis There are insufficient resources in the supply chain to satisfy demand. Countries are competing for renewable energy resource, financial and corporate capital Feed in tariffs build capacity: costs have been an issue In liberalized markets, the market based green certificate mechanism tends to be preferred: distortions can occur Cap and Trade carbon schemes curtail the activities of high carbon intensity industries rather than act as incentives for new renewable capacity: they are helpful in JI/CDM territories

2 Incentives are not enough Energy production and supply chain can undermine otherwise effective mechanisms Changes in policy direction produce uncertainty Any renewable energy policy needs to be part of a coherent climate change strategy as a whole with complimentary measures focused on: power production transport fuel heat and energy efficiency European countries tend to be driven by national guidelines However, non-European markets tend to be regionally driven.

3 United States of America Debate about long term renewal vs cost to consumer/tax payer Debate over Federal Renewable Portfolio Standard (RPS) RPS obligation in 24 states & district of Columbia, eg: Texas: 5,880MW by 2015 Oregon introduced RPS April 2007 Tariff Mechanism: US$0.019/kWh Production Tax Credit (expires 2008) (Regional) 1* * Q Country Attractiveness Indices Long-term Wind Index position

4 India Individual states operate feed in tariffs and some renewable energy obligations, eg: Tamil Nadu: PPA fixed at INR 2,750/MWh (€46/MWh) with 10% renewable energy target, Rajasthan: 20 year PPA at INR 2,960/MWh (€50/MWh) Accelerated tax depreciation of 80% per annum 10 year tax holiday for generating power Excise duty benefits renewable assets: Tariff Mechanism: Regional Feed In Tariff (Regional) 2* * Q Country Attractiveness Indices Long-term Wind Index position

5 Canada Federal Production Incentive available for up to 10 years for projects constructed within the next 4 years Established provincial targets, eg, Quebec 3,500MW wind energy by 2013, Ontario target 2,700 MW by 2010 Tariff Mechanism: CAD$0.01/kWh Production Incentive (Regional) 7* * Q Country Attractiveness Indices Long-term Wind Index position

6 China National targets – 2010: 5GW, 2020: 30GW Obligation on local grid operators to purchase any renewable energy produced within its locality Competitive tender for projects, power tariffs allocated per project Projects 100MW and over gain fixed price concession from National Government Projects less than 100MW not guaranteed a fixed tariff Concessions from US$46 – US$65/MWh Tariff Mechanism: Government Tender (National) 5* * Q Country Attractiveness Indices Long-term Wind Index position

7 In conclusion Will carbon eventually become the common currency? It’s early days yet Investors need to be careful about market selection and future regulatory risk Talk incorporates material from Jonathan Johns’ US Senate hearing, April 2007 Link to testimony :

8 Ernst & Young Renewable Energy Group With a dedicated 45-strong team of international advisors, supported by a network of specialists, Ernst & Young’s Renewable Energy Group helps clients to maximize value from renewable energy activity. The Group provides advice and services in the following areas: Financial advisory / valuation Financial modelling / structuring Taxation Finance Raising Asset value optimisation M&A Market entry strategy Procurement strategy PPA tendering Transaction support PE advice IPO advice Carbon economy advice Strategic partnering Strategy review Knowledge leadership Q Country Attractiveness Indices Webcast 22 May

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