FUTURE EU ENERGY MIX — WILL COAL PLAY

FUTURE EU ENERGY MIX - WILL COAL PLAY AN IMPORTANT ROLE? International Conference in Gliwice 29 May 2006 Matthias Dürr RWE AG 1

Diversity of the Energy Mix will be key n Each individual energy source has its own advantages and disadvantages n In a world of general uncertainties, no one knows how the costs and supply conditions will evolve – including economic and social costs n Therefore, a well thought-out strategy calls for a diversification of the energy mix in order to reduce dependence on the current polluting and imported sources n This also includes greater efficiency in power plants and in the deployment of plant and equipment, sparing use of valuable resources n Lignite is the only indigenous fuel available in Germany that can be extracted cost-effectively and without subsidies in the long term 2

Facts on lignite n Lignite is a domestic, zero-subsidy resource that is mined at the site of its utilization n Germany is the world’s number one lignite mining nation with 182 million tons of in 2004 n 92% of the lignite mined are used for power production and it accounted for 26. 1 % of Germany’s total power production n Commercially attractive lignite resources in the „Rheinland“ alone account for ca. 50 billion barrels of oil equivalents (boe) n This energy content exceeds the remaining oil and gas resources in the entire north sea by the factor 1. 3 (estimated at 40 billion barrels of oil equivalents) n At the current rate of depletion, resources in the Rhineland are expected to last for more than 200 years 3

Significant fossil energy sources in the future energy mix World electricity generation in bn MWh 25. 8 Increasing world energy consumption requires more use of fossil energy sources 4. 9 + 55 % 16. 7 Water etc. Nuclear energy 3. 0 2. 6 3. 0 1. 3 + 62 % Global climate protection requires efficient technologies and policies 6. 8 Fossil 3. 2 Global solutions n 1. 2 Natural gas n Inclusion of threshold and developing countries n Oil Implementation of JI and CDM n Intelligent technology solutions for CO 2 reduction 9. 8 Coal 6. 7 2003 2020 Source: IEA, World Energy Outlook, 2004 Edition 4

Lignite is a modern energy The CO 2 emission penalization is a challenge for power generators, but modern lignite technology can turn the challenge into commercial advantage Available today: Upgrade options The near future: Increased efficiencies The future: Zero-CO 2 emissions plan CO 2 -”cleaning” for modern steam technology Pre-dried lignite Zero-CO 2 IGCC power plant 5

Our vision: Power production with CO 2 separation and storage: RWE pursues IGCC* technology RWE is the only company that combines coal power plant and gasification know-how (RWE Power) with theoretical knowledge of CO 2 storage in e. g. depleted gass wells (RWE Dea) in Europe. Key data for the envisaged pilot plant: 450 MWel 40% efficiency with CO 2 separation** 2. 3 million tons of CO 2 storage per annum € 1 billion investment * IGCC = Integrated Gasification Combined Cycle ** without CO 2 separation, above 51% thermal efficiency can be achieved *** assuming full cooperation of government agencies in approving partially new technology In production*** 2014 6

Swift implementation by 2014 calls for parallel development of power plants and CO storage facilities today Power plant 8/2007 Project development 2010 Engineering, approval Decision Energy source/location CO 2 storage site Construction, commissioning Approval Decision to build Screening, exploration, approval 2014 Start of operation Construction, commissioning Approval Start of operation The geological conditions found in the storage site will determine what amounts of CO 2 can be fed at the start and how they can be increased 7

Back-up 8

RWE has a strong Carbon Footprint due to Coal based Activities Germany: Power Produced in 2005 in TWh ( own plants only) Lignite 70. 91) Nuclear energy 45. 1 Hard coal 16. 7 Gas 12. 52) UK: Power Produced in 2005 in TWh Others Total Hard coal Gas 14. 82) Others Oil 148. 5 CO 2 emissions in 2005 120 million tons 0. 5 0. 3 Total 3. 3 1) Including plant consumption 2) Inlcuding CHP 17. 8 33. 4 CO 2 emissions in 2005 22. 7 million tons 9

Lighthouse Project of RWE‘s Climate Strategy: The zero-CO 2 power plant Drying Coal gasification Gas treatment CO 2 capture Gas and steam turbine Power Dry coal Raw coal 10

Power generation with CO 2 capture and storage: RWE is pushing forward the IGCC technology RWE has the in-house know-how in power plant and gasification processes (RWE Power) and basic knowledge for CO 2 storage (DEA) IGCC* Oxygen Gasification Hydrogen Coal CO 2 Gas and steam turbine Power 450 MWgross can also be used as H 2, or to produce SNG, methanol, fuel per pipeline to CO 2 storage facility * IGCC = Integrated Gasification Combined Cycle 11

CO 2 storage at the IGCC power plant CO 2 is liquefied in the power plant using high pressure, transported per pipeline and permanently stored at great depths underground. H 2 O Coal IGCC power plant Power CO 2 Depth: approx. 1, 000 – 3, 000 m Aquifer, old oil, gas field (North German basin) 12

RWE is strenghtening its development of CO 2 scrubbing - for lignite and hard coal Technology suitable for retrofitting existing power plants and those being built Power Air Coal Zero-CO 2 flue gas Advanced steam power plant CO 2 scrubber Power CO 2 per pipeline to CO 2 storage site 13

Development steps towards early availability of the CO 2 scrubber n Development of new scrubbing agents in the context of the EU CASTOR project/test facility at Esbjerg PP (DK) n Creation of partnerships with suppliers and chemical industry for development and optimization n Plant trialling in lignite-fired power plant of RWE – until 2008: pilot project – from 2009: demonstration plant (start of engineering) n RWE budget: approx. € 90 mill. 14