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Business and Climate Change Series: The Creation and Growth of Aquamarine Power - Richard Round, CFO (30.09.13)

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An overview of the experiences of Aquamarine Power, as a young high-growth company in the renewables sector, in gaining early stage financing and plans in moving forward.

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Business and Climate Change Series: The Creation and Growth of Aquamarine Power - Richard Round, CFO (30.09.13)

  1. 1. Oyster – Green energy out of the blue Edinburgh University – Business School
  2. 2. Disclaimer This teaser document (the “Document”) is a discussion document and does not constitute and should not be construed as a prospectus or offering memorandum or an offer for sale or subscription of, or solicitation of any offer to buy or subscribe for, any securities in any jurisdiction and is not intended to provide the basis for any credit or other evaluation of any investment in Aquamarine Power Limited ("Aquamarine Power" or the “Company”) and should not be considered as a recommendation that any investor should subscribe for or purchase any investment in the Company. This Document is strictly private and confidential and intended solely for the information of the persons to whom it is issued. The contents of this document have not been verified and therefore there can be no reliance or assurance that the statements made are accurate. Any person interested in acquiring an interest in the Company is recommended to seek its own independent financial advice. No representation or warranty, express or implied, is or will be given by the Company, or its directors, partners, employees or advisers or any other person as to the accuracy or completeness of this Document or any other written or oral information made available to any prospective investor or its advisers and, so far as permitted by law and except in the case of fraudulent misrepresentation by the party concerned, no responsibility or liability is accepted for the accuracy or sufficiency thereof or for any errors, omissions or misstatements, negligent or otherwise, relating thereto and any such liability is expressly disclaimed. Certain statements in this Document constitute forward-looking statements. The words “forecast", “anticipate”, “estimate”, “project”, “intend”, “expect”, “should”, “believe”, and similar expressions are intended to identify forward-looking statements although not all forward-looking statements are so identified. These forward-looking statements involve, and are subject to, known and unknown risks, uncertainties and other factors which could impact the Company‟s actual results, performance (financial or operating) or achievements to differ from the future results, performance (financial or operating) or achievements expressed or implied by such forward-looking statements. Forward-looking statements are necessarily dependent on assumptions, data or methods that may be incorrect or imprecise and that may be incapable of being realised and in some instances are based on consensus estimates of analysts not affiliated with the Company. All forward-looking statements attributable to the Company herein are expressly qualified in their entirety by the above-mentioned cautionary statement. The Company disclaims any obligation to update forwardlooking statements contained in this Document, except as may be required by law. No information contained in this Document should be construed as giving legal, investment or other advice of any kind to any person. No representation or warranty is made by the board of directors of the Company (the “Board”) and/or the Company as to the accuracy or completeness of any information contained in the Document nor as to the non-occurrence of any change in the affairs of the Company since the date or dates as or which the information within is provided and neither the Board nor the Company shall have any liability for any representations (expressed or implied) contained in, or for any omissions from, or for any opinions expressed in, this Document or any other written or oral communications transmitted to any Prospective Investor in the course of its evaluation of the Company except as otherwise provided by law. No party shall have any right of action against the Company or any other person in relation to the accuracy or completeness of the information contained in this Document or any other written or oral information made available to it in connection with a potential investment in the Company. 2
  3. 3. Aquamarine Power is a technology company that has developed a product called Oyster which produces electricity from ocean wave energy. 3
  4. 4. Wave energy in the UK Survivability  4
  5. 5. Wave energy advantages • Exploitable wave resource – Estimated at 80,000TWh/yr (world electricity consumption x 5) • Size of market – 600GW raw resource – 64GW global commercial Oyster resource – 14GW European commercial Oyster resource – £192bn global Oyster market • Enhanced national energy security • Diversified/enhanced renewable portfolio – Reduced variability – Enhances system stability – Lowers balancing costs 5
  6. 6. Wave energy in the UK • UK could capture almost a quarter of the global marine energy market • Potential to generate up to £76bn to the UK economy by 2050 • Potential to generate over 68,000 UK jobs • Source: Carbon Trust (July 2011) 6
  7. 7. Wave energy in the UK Market  7
  8. 8. Aquamarine Power milestones 2005 • Company established 2009 • 1GW SSE agreement 2007 • SSE invests 2011 • Crown Estate seabed leases (240MW) 2010 • Oyster 1 >6000 operating hours 2009 • Oyster 1 gridconnection 2010 • ABB invests 2013 • Oyster 800 producing power. Improve availability 2012 • Oyster 800 operational testing 8
  9. 9. Key shareholders •ABB Technology Ventures •Global power and automation group •Operations in over 100 countries with 145,000 staff •Engineering and R&D expertise •UK‟s leading generator of renewable electricity •Over 3,500MW renewable energy capacity in operation, under construction or with consent in UK and Ireland •Government agency charged with fostering economic growth •Active equity investor and provider of R&D funding Environmental Energies Fund •Managed by well-respected fund manager – Scottish Equity Partners •Institutional investor support •Strong financial expertise 9
  10. 10. Wave energy in the UK Strong shareholders  10
  11. 11. 11
  12. 12. Oyster – Key benefits • • Simple Survivable • Shore-based electricity generation 12
  13. 13. Oyster 1 • • • • 315kW demonstration device Manufactured 2008 Installed 2009 Grid-connected 2009 • >6000 operating hours • Peak power close to 300kW • Operation through two winter seasons – meeting two year design life requirement 13
  14. 14. Oyster 800 • • • • 800kW demonstration device Manufactured 2011 Installed Sept 2011 Operational testing and first electrical power June 2012 • Significantly improved power generation • Reduced cost of power • Simplified marine installation process • Easier routine maintenance 14
  15. 15. Oyster 800 onshore site 15
  16. 16. Oyster 800 - milestones Deballasting 1st power to the grid 1st 24-hour Generation • 12 February 2013 • 14 February 2013 • 27 February 2013 16
  17. 17. Product Improvement Plan 2013 • Executed a campaign over the summer months – Learn! – Replace/repair/upgrade hydraulic components – Replace/repair/upgrade control and instrumentation • Product Improvement Plan – In last few days – Expect to bring Oyster 800 back into operation by mid October • Seeking sustained reliable performance – Monitor performance against wave resource monitoring devices 17
  18. 18. Next Evolution Oyster 801 • • • • • Lower cost machine – reduced materials requirement Simpler to install – monopile replaces two piles More efficient – improved hydro-dynamic shape More economic – lighter and cheaper than Oyster 800 Route to value – fabrication from FRP materials takes advantage of weight-saving properties 18
  19. 19. Wave energy in the UK Technology concept proven  19
  20. 20. Market Opportunities • Electricity production • Desalination 20
  21. 21. Wave energy in the UK Other potential markets  21
  22. 22. Customer and market development • Two sites secured from The Crown Estate – 200MW Orkney – 40MW Lewis – fully consented • Permitting sites today for Oyster sales tomorrow – – – – Parallel technology development and site development Strategic partners – JVs to share experience and risk Full site consent service – permitting sites 2/3 years in advance Creation of additional value 22
  23. 23. Lewis 40MW Oyster wave farm Key assumptions Total installed capacity 40MW or 50 devices Fully consented (40MW) Q2 2013 Target date for first operation (3MW phase 1) 2017- 2018 Value milestone Target date Seabed lease Site development progress 10 MW and 30MW agreement for lease secured Complete 40MW transmission offer accepted (available 2017) Grid connection Complete 3MW distribution offer accepted EIA EIA completed Complete Full consent received for 40MW Complete Onshore „Planning in Principle‟ received Complete Land agreement Heads of Terms signed, Lease documents being finalised Q4 2013 Consents 23
  24. 24. Business Plan – Timeline for technology development 24
  25. 25. Wave energy in the UK Route to market  Grid? 25
  26. 26. Global market incentives (2013) Location Market pull incentives Market push incentives Scotland 5 ROCs + wholesale price (~£270/MWh total) to March 2017 thereafter Contract for difference – Minimum £305/MWh Scottish Investment Bank £18m Marine Renewable Commercialisation Fund (grants) £103m Renewable Energy Investment Fund (equity/debt) Rest of UK 5 ROCs + wholesale price (~£270/MWh total) to March 2017 thereafter Contract for difference – Minimum £305/MWh 26
  27. 27. Wave energy in the UK Strong government support  Uncertainty on Electricity Market Reform? 27
  28. 28. Business model • Commercialise Oyster technology • Identify and permit sites to deploy Oyster technology • Joint venture with utilities to carry out early stage development of sites • Sell down ownership of permitted sites to utilities prior to full scale construction • Supply technology and maintenance services to utility customers 28
  29. 29. Wave energy in the UK Business Plan  29
  30. 30. Wave energy in the UK So why no queue of investors? 30
  31. 31. Funding / Ownership • • • • • • • • Potential huge market Next big untapped renewable resource Strong shareholders Technology concept proven Survivability proven Route to market Other potential market Business Plan • But......... 31
  32. 32. Funding / Ownership But............ • Competition for funds eg Offshore Wind • High technology risk? • Which is the right technology to back? • Can it be done commercially? • Long development timelines? • Capital intensive? • Need for large industrial support – not just money • Electricity Market Reform risk • Grid risk 32
  33. 33. Question Who should own and fund this business? 33
  34. 34. 34