1. Wind Energy Developments in Emerging Market Countries Global Opportunities Session European Wind Energy Conference Athens, Greece March 2, 2006 Prepared by Dana R. Younger,International Finance Corporation and Demetrios Papathanasiou, World Bank Presented by Demetrios Papathanasiou

2. Outline What is driving wind energy in emerging market countries? What is driving wind energy in emerging market countries? Where is wind energy market growth in the developing world? Where is wind energy market growth in the developing world? What is needed to accelerate wind energy in the developing world? What is needed to accelerate wind energy in the developing world? What is the World Bank Group doing? What is the World Bank Group doing?

3. Key Drivers Energy Security Energy Security Economic Growth – Electricity Demand Growth Economic Growth – Electricity Demand Growth Environmental Objectives Environmental Objectives LocalLocal GlobalGlobal Industrial Development Industrial Development International Pressure International Pressure

4. Key Wind Energy Markets Largest Markets: India ~4,430MW, China 1,264MW, Egypt 230MW, Ukraine 82MW, Poland 73MW, Costa Rica 71MW, Morocco 64MW, Brazil 58MW, Carib. 55MW, Tunisia 35MW, Estonia 30 MW, Argentina 26MW, Latvia 26 MW, Philippines 25MW, Turkey/Colombia 20MW (each) Largest Markets: India ~4,430MW, China 1,264MW, Egypt 230MW, Ukraine 82MW, Poland 73MW, Costa Rica 71MW, Morocco 64MW, Brazil 58MW, Carib. 55MW, Tunisia 35MW, Estonia 30 MW, Argentina 26MW, Latvia 26 MW, Philippines 25MW, Turkey/Colombia 20MW (each) Growth Leaders: India, China, Brazil Growth Leaders: India, China, Brazil Poised for Growth: Mexico, Poland, Turkey Poised for Growth: Mexico, Poland, Turkey Planned Projects: e.g. Argentina, Bulgaria, Chile, Colombia, Costa Rica, Croatia, Dominican Republic, Ecuador, Ghana, Honduras, Hungary, Jordan, Kazakhstan, Malaysia, Kenya, Morocco, Nicaragua, Pakistan, Panama, Philippines, Romania, Russia, South Africa, Sri Lanka, Tunisia, Uruguay Planned Projects: e.g. Argentina, Bulgaria, Chile, Colombia, Costa Rica, Croatia, Dominican Republic, Ecuador, Ghana, Honduras, Hungary, Jordan, Kazakhstan, Malaysia, Kenya, Morocco, Nicaragua, Pakistan, Panama, Philippines, Romania, Russia, South Africa, Sri Lanka, Tunisia, Uruguay Market Growth is Still Slow and Uneven Market Growth is Still Slow and Uneven

5. Established Growth Markets - India Largest installed base in developing world (4.5GW) --Technical potential of 45GW Largest installed base in developing world (4.5GW) --Technical potential of 45GW New electricity law --RE standards at state level New electricity law --RE standards at state level Indian non-energy companies expanding investments Indian non-energy companies expanding investments Project finance for wind projects beginning Project finance for wind projects beginning Larger projects (300-500MW) announced Larger projects (300-500MW) announced Manufacturing base is growing – Suzlon IPO, LM Glasfiber blade factory and Gamesa/Asia Pioneer assembly plant are examples Manufacturing base is growing – Suzlon IPO, LM Glasfiber blade factory and Gamesa/Asia Pioneer assembly plant are examples IFC financing wind and private power facilities IFC financing wind and private power facilities

6. Established Growth Markets - China Fast growing market (1.2GW installed) Massive wind potential (200-300GW onshore) Concessions for 100/200MW projects (WB loans) Private projects totaling 10-30GW under development New RE law and wind target of 20GW by 2020 Tariff system announced in January 2006 may slow growth Large domestic players active and new foreign entrants (CLP, HydroTasmania, CR Power, etc.) Large manufacturing investments -- Vestas, GE, Gamesa, Suzlon, Acciona/Ingetur, Nordex and Goldwind for domestic sales and export IFC financing wind and private power facilities

7. Mexico IPP Market Fully Developed IPP Market with >20 projects, 28,000MW of Conventional Generation (mainly, gas-fired CCGTs) Fully Developed IPP Market with >20 projects, 28,000MW of Conventional Generation (mainly, gas-fired CCGTs) Off-taker is National Utility – CFE Off-taker is National Utility – CFE Committed Private Investment of US$6B Committed Private Investment of US$6B 22% of Mexicos Electricity from IPPs 22% of Mexicos Electricity from IPPs IFC has financed 5 conventional power IPPs since 1996 with US$247M in direct investment and US$614M including B Loan participants IFC has financed 5 conventional power IPPs since 1996 with US$247M in direct investment and US$614M including B Loan participants IFC is ready to finance wind IPPs when market develops IFC is ready to finance wind IPPs when market develops

8. Mexico Wind Market Wind technical potential of >40,000MW (Oaxaca, Yucatan & Baja) Wind technical potential of >40,000MW (Oaxaca, Yucatan & Baja) Only 5MW installed in last 10 years – 2MW is La Venta I plant of CFE in Isthmus of Tehuantepec in Oaxaca State Only 5MW installed in last 10 years – 2MW is La Venta I plant of CFE in Isthmus of Tehuantepec in Oaxaca State 83.3MW La Venta II under construction for CFE by Gamesa/Iberdrola – 850kW WTGs 83.3MW La Venta II under construction for CFE by Gamesa/Iberdrola – 850kW WTGs 101MW La Venta III – First Wind IPP to be bid by CFE in Fall 2006 101MW La Venta III – First Wind IPP to be bid by CFE in Fall 2006 404MW of additional wind IPPs by 2010 – 101MW per year 404MW of additional wind IPPs by 2010 – 101MW per year 7 private wind projects at ~957MW have CFE permits as self-supply projects 7 private wind projects at ~957MW have CFE permits as self-supply projects Additional 2,250MW of self-supply projects in Private Developers Pipeline Additional 2,250MW of self-supply projects in Private Developers Pipeline Major Companies involved including EDF, Iberdrola, Endesa, Union Fenosa, Gamesa, Clipper, and Preneal Major Companies involved including EDF, Iberdrola, Endesa, Union Fenosa, Gamesa, Clipper, and Preneal Regulatory/transmission constraints involving CRE (regulator) and CFE (utility) limit private investments in self-supply market Regulatory/transmission constraints involving CRE (regulator) and CFE (utility) limit private investments in self-supply market World Bank is developing IPP segment with GEF support World Bank is developing IPP segment with GEF support

10. Brazils Electricity Sector More than 91,000MW of installed capacity More than 91,000MW of installed capacity Growth in demand will require expansion of 17,000-46,000MW by 2012 Growth in demand will require expansion of 17,000-46,000MW by 2012 75% of electricity is hydro – 65GW > 30MW 75% of electricity is hydro – 65GW > 30MW Private IPP and Merchant Power Market (25%) Private IPP and Merchant Power Market (25%) Wholesale electricity market with large national utility – Electrobras major off-taker and generator (mixed capital company with publicly traded shares) Wholesale electricity market with large national utility – Electrobras major off-taker and generator (mixed capital company with publicly traded shares) Diversification underway to utilize more RE esp. wind, small hydro and biomass Diversification underway to utilize more RE esp. wind, small hydro and biomass National Law – PROINFA passed in 2002 to accelerate renewables development National Law – PROINFA passed in 2002 to accelerate renewables development

11. Brazils Wind Market Wind Technical Potential of >143,000 MW (mainly in Northeast, Central and Southeast coast) Installed capacity of only 48MW (incl. small turbines) >7,000MW in 117 private sector wind projects have ANEEL (regulator) approvals PROINFA Phase I has awarded 1,400MW of wind projects (Ceara, Rio Grade do Sul, & Santa Catarina have ~230 MW each) 20 year PPA with Electrobras at favorable tariff (higher tariffs for lower wind speeds) -- $94-$107/MWh Wobben/Enercon making 800kW and 2MW WTGs locally; GE Wind and Fuhrlander may also manufacture locally (60% local content requirement) IFC helped finance 49.3MW Rio do Fogo Wind Project of Iberdrolas Enerbrasil subsidiary with US$5.5M equity investment 200 MW under construction with 300-500MW seeking equity finance Phase II of PROINFA will be 10% RE RPS including wind, biomass and small hydro

12. Best Wind Conditions in Brazil located in Northeast Mata Campo aberto Zona costeira MorroMontanha CLASSE DE ENERGIA Wind speed [m/s] 50 meters above the surface

13. Wind Energy and Hydro Average water flow of São Francisco River versus Wind Speed jan feb mar apr may jun jul aug sep oct nov dez Water flow Months São Francisco river discharge Typical wind speed – Northeast coast 1000 2000 3000 4000 5000 6000 7000 8000 9000 10,000 m 3 /s m/s 1 2 3 4 5 6 7 8 9 10 Optimal wind conditions during the dry season Wind

14. Other Markets Poised for Growth – Poland EU accession driving market EU accession driving market RE portfolio standards RE portfolio standards Tariffs still too low but REC sales (green certificates) make projects bankable Tariffs still too low but REC sales (green certificates) make projects bankable 1-2GW in development 1-2GW in development 200-400MW per year possible by 2007 200-400MW per year possible by 2007 Local banks engaged and also concessional loans from BOS, EcoFund and National Fund for Environmental Protection Local banks engaged and also concessional loans from BOS, EcoFund and National Fund for Environmental Protection New foreign entrants – Iberdrola, Vattenfall, Invenergy/REG, EuroWind, etc. New foreign entrants – Iberdrola, Vattenfall, Invenergy/REG, EuroWind, etc.

15. Other Markets Poised for Growth - Turkey New RE law New RE law Higher tariff for wind from 2007 for 7 years – may not be sufficient Higher tariff for wind from 2007 for 7 years – may not be sufficient Power sector re-structuring moving but slowly – distribution company privatization planned (32 separate Distribution Comp.) Power sector re-structuring moving but slowly – distribution company privatization planned (32 separate Distribution Comp.) 750MW-1.5GW under development 750MW-1.5GW under development Previous BOT awards from 2000-2001 for ~390MW cancelled due to fiscal crisis Previous BOT awards from 2000-2001 for ~390MW cancelled due to fiscal crisis 20MW installed since 1998 20MW installed since 1998 Local power sector firms interest grows in wind Local power sector firms interest grows in wind Enercon manufacturing blades locally Enercon manufacturing blades locally

16. The Long and Winding Road Electricity Sector at a crossroads (again) between privatization, de-regulation and state ownership / state responsibility Electricity Sector at a crossroads (again) between privatization, de-regulation and state ownership / state responsibility Perceptions (and realities) on Perceptions (and realities) on IntermittencyIntermittency Quality of resourcesQuality of resources real system valuereal system value high capital costshigh capital costs Project Financing implications Project Financing implications

17. What will it take for wind energy to grow in emerging markets? Clarity needed given uncertain regulatory/market structures and limited financial returns in many markets Further policy development and higher tariffs High … oil prices (but…) ? Wind capital cost increases, turbine availability, full EPC quotes Transfer of knowledge in systems dispatching, power management, power planning Continued international support Resolution of post-Kyoto uncertainties Continued expansion of investments in global and local manufacturing Better coordination among stakeholders -- developers, utilities, investors, manufacturers, financiers, government agencies, regulators, and donor agencies

18. The World Bank Group Working on the interfaces with poverty, macroeconomics, governance and environment Working on the interfaces with poverty, macroeconomics, governance and environment Support for reform process and associated capacity building to regulate and develop competitive energy markets Support for reform process and associated capacity building to regulate and develop competitive energy markets Facilitating transfer of knowledge among developing countries Facilitating transfer of knowledge among developing countries Catalyzing private investment flows to non-investment grade countries Catalyzing private investment flows to non-investment grade countries

19. The World Bank Group G8 Gleneagles Clean Energy Investment Framework G8 Gleneagles Clean Energy Investment Framework Policy Support for wind and other RE often with GEF funding support -- new RE laws in Mexico, China and Turkey Policy Support for wind and other RE often with GEF funding support -- new RE laws in Mexico, China and Turkey US$ 9 billion for renewable energy and energy efficiency since 1990 US$ 9 billion for renewable energy and energy efficiency since 1990 US$ 748 for 41 projects in 28 developing countries in the last year alone US$ 748 for 41 projects in 28 developing countries in the last year alone Commitment to increase RE and EE portfolio by 20% annually through 2010 Commitment to increase RE and EE portfolio by 20% annually through 2010 Leveraging of public and private resources Leveraging of public and private resources Complementary roles of World Bank/IDA, IFC and MIGA Complementary roles of World Bank/IDA, IFC and MIGA Development of carbon finance market (including new products) Development of carbon finance market (including new products)

20. Thank You ! Contacts: Contacts: Dana R. Younger, International Finance Corporation, dyounger@ifc.orgDana R. Younger, International Finance Corporation, dyounger@ifc.orgdyounger@ifc.org Demetrios Papathanasiou,World Bank, dpapathanasiou@worldbank.orgDemetrios Papathanasiou,World Bank, dpapathanasiou@worldbank.org dpapathanasiou@worldbank.org