Wind power suppliers’ challenge to meet utility standards …or conservative utilities ability to understand wind power? May 2007

2 Vattenfall is Europe’s fourth largest power generator EDFEONRWEVattenfall TWh el (Annual) Top 4 European generators

3 Vattenfall is a north European, traditional power producer Hydro Nuclear Fossil Wind power, bio-fuel and waste Vattenfall power generation 2006 Current core markets Current additional markets Vattenfall markets (May 2007) 165 TWh el Hydro Nuclear Fossil Other RES

4 Current portfolio not sustainable from a CO 2 perspective Vattenfall needs a larger long term portfolio – growth  Wind power is the largest scale RES alternative currently available Vattenfall wants to grow its RES portfolioVattenfall wind power assets May MW 0,5 TWh 311 MW 0,8 TWh 90 MW 0,3 TWh 600 MW 1,7 TWh el Vattenfall’s aspires for an important position in wind power as well 30 MW 0,1 TWh Vattenfall is prepared to invest 5-10 billion Euro in wind power the next decade

5 Vattenfall perceives some supplier issues going forward System perspective Generation – Vattenfall’s business Cost control Optimisation on plant level –Guarantees –Component suppliers Service contracts –O&M scale harder to achieve –Philosophy – control Double-digit grow for decades to come… …eternal delivery challenges Where is the customer cost perspective? –Our best guess: Production economics and supply chain management

6 Happy investors will allocate a lot more money to wind power CAGR 10% A successful wind industry CAGR 20% An important wind industry Annual wind installations

7 Backupp

8 The global wind power expansion has created large wind power producers Source: BTM World Market Update 2006 Top 14 wind power generators (end of 2005) Essent Vattenfall RWE EdF/EnXco EdP Shell Renewables ENEL DONG EUROS Energy Endesa Babcock Brown Acciona Iberdrola FPL * Installed MW European companies dominate the market –Only three non-European companies in the top-15 list Countries with historically strong support systems for wind power dominate the worldwide capacity –Three Spanish companies in the top-5 * Including the acquisition of Scottish Power 2007

9 Vattenfall is Europe’s fourth largest power generator EDFEONRWEVattenfall TWh el (Annual) Top 4 European generators RES Fossil Nuclear

10 Wind power suppliers gaining strength, which will ultimately benefit customers Repower Siemens Suzlon Gamesa Enercon GE Vestas Large industrials Large independents Wind turbine market structure 2005 Strong consolidation on-going Industrial production capabilities entering industry –Areva and Suzlon bids for Repower 2007 –Siemens acquired Bonus 2004 –GE acquired Enron Wind 2002 As suppliers grow larger and more capable, production economy likely to improve New market entrants expected in booming industry –Mitsubishi growing strongly in Asia Source: BTM March 2006 Mitsubishi

11 The learning curve for wind power has historically indicated 13% price decrease for doubled cumulative output Learning curves for emerging technologies 1 Production economy indicates lower prices Wind power’s cumulative output is currently doubling every four years, indicating 13% cost reduction every four years There may be potential for steeper price decreases: –Strong growth has meant focus on delivery, not cost –Historic rapid technology development has meant short production runs Business environment maintains price levels Future strong demand limits medium term and possibly long term price potential Vattenfall’s potential to affect prices is limited by the fact that Vattenfall’s ambitions amount to <1% of industry output Source: Vattenfall 3C initiative Wind power learning curve

12 OLD

13 Vattenfall’s production unit is the power plant Power plant focus –Optimisation –Guarantees –Component suppliers Vattenfall would like to see more of a system perspective from wind suppliers – as Vattenfall is used to

14 Vattenfall is a generator, who owns and operates power plants Service contracts on individual wind farms… –Leads to sub-optimisation of Vattenfall’s portfolio –Makes O&M scale effects harder to achieve –Is of an almost philosophical nature – Vattenfall wants information and control of its power generation equipment Vattenfall believes generation is its business, including asset control

15 Vattenfall’s experience so far is that wind power is expensive Vattenfall understands that it is a seller’s market However, Vattenfall finds it harder to understand frequent product launches when existing products do not perform satisfyingly Vattenfall worries that an industry, poised to grow double-digit for decades to come, with eternal delivery challenges, does not seem to work the customer cost perspective –Production economics and supply chain management is Vattenfall’s best guess on how to achieve reasonable long term prices Wind power is very expensive with no real end in sight

16 What will happen? From Vattenfall’s perspective –Long term – Vattenfall will support the development of alternative technologies with better long term prospects (Which?) –Medium term – Vattenfall is not comfortable to invest more than ”necessary” –Short term – bite the apple (more comfortable if the long term looks bright) Or… Vattenfall changes, to a new perspective of power generation