Energy & Environmental Technology Presented by Jane Lindner

1. Energy & Environmental TechnologyPresented by Jane Lindner Investing in China 2005 Symposium www.janecapital.com

2. Energy & Environmental Opportunities • Tremendous global opportunity in energy & environmental technology • For the next 10 years China will be: • A key market and • A key market driver 2

3. Macro Factors Favoring Energy & Environmental Technology • The world is demanding cleaner power, water & living space • Existing energy infrastructure is aging under a growing population • Traditional energy sources are getting more expensive • Globalization has exacerbated each of these issues

4. Dense Population High Growth Opportunity Major Environmental Concerns Huge Energy Demand Weak Infrastructure China’s Unique Problem 4

5. The Environmental Issue • World bank: China has 16 of the world's 20 most-polluted cities • Electricity production accounts for 34.2% of China’s air pollution (legacy of coal economy) • China is on pace to discharge 1.4 to 1.9 billion tons of carbon dioxide by 2020 – ranking it as the world’s top polluter • Industrial waste amounts to 650 million tons/year • The daily sewage rate of 3.7 tonnes requires 10,000 wastewater treatment plants = $48 billion to achieve a 50% treatment rate

6. The Water Issue • Water shortage in 2/3rds of Chinese cities • 300 million rural residents in China lack clean drinking water • Only a small percentage of surface water meets domestic standards • Severe urban/rural divide exists • 70% of water in 5 of China’s 7 major rivers systems not suitable for human contact • The not talked about problem: water infrastructure soaks up power like a sponge

7. Power Issue • Today per capita generation is small • 1/13th of the US; 1/8th of Japan • China needs 1.5 billion kW of generation capacity by 2010 (385 MM kW today) • 100 mm people lack access to power • China is the largest coal producer in the world • 58% for industrial use • Not a sustainable source for long-run growth • 2nd largest consumer of energy but lacks oil and gas resources • No growth without cheap efficient power • To fulfill the goal of quadrupling year 2000 GDP by 2010, China faces serious challenges in terms of energy supply and environmental protection

8. China Macro Factors • Rapid economic growth • World Bank estimate: between 2004 and 2015 half of the world’s construction will be in China • Large population and abundant renewable energy resources • Big environmental problems today and getting worse with rapid development • World attention focused on China • “Green” 2008 Olympics and 2010 Expo Shanghai • Pledge to the United Nations – every rural family will have clean drinking water by 2020

9. China’s Response • 10th 5 Year Period (2001-2005) • Construction of coal mines and coal processing plants - Promote development of clean coal tech • Accelerate local production of wind power equipment; find a solution for remote power supply • Implement pilot projects on energy conservation in large energy consuming industries • $85 billion to be invested in environmental production

10. Where Might Opportunities Lie? • Water • Power Generation • Renewables • Fuel Cells • Clean coal • Efficiency • Green building construction

11. Recent Case Study • Veolia Water • Acquired 45% of Shenzhen Water Group for $400 million in December 2003 • Signed contract with Beijing municipal government to build wastewater treatment plant for Olympics • Has won a total of 13 water contracts and invested a total $1.2 billion Source: China Daily Water • Water treatment alone is $500 billion industry globally • China will be a big piece of this market as it grows over the next 10 years • 5 Year Plan: $12 billion allocated to water and wastewater treatment • Drinking Water • Over the past 5 years, 800,000 new water treatment facilities went into operation • More than 14 million rural families have gained access to drinking water • Wastewater • Beijing will spend $1.45 billion on wastewater equipment • 9 sewage plants • 8 recycling treatment plants

12. Oil/Natural gas clean, rising prices, limited supply Hydro large domestic resources; huge environmental impact; big ticket item Nuclear moderate priced & clean, long-term environmental tradeoffs Renewables Great to talk about; but only a small dent in supply needs Coal Dirty, cheap, plentiful (for now) China’s Power Today • 190 Gigawatts • 75% Coal • 25% Hydro & Nuclear • Very minimal other Source: EIA Infrastructure – Power Choices

13. How about Fuel Cells? • 60 domestic institutes & companies active in fuel cells • Electric bicycles one noted application (2.5 mm/year production) • Est. $300-$400 mm in investment in fuel cell and advanced hybrid technology in 2001-2005 • China is not as big a player as the US, Japan, and Europe • But China is very active and huge potential market • Fuel cells are another area where China’s low cost manufacturing may make a difference

14. Recent Case Study • Guangting Power Plant • World’s largest wind project • Beijing, China • Launched in October 2004 • Xinfengda Technology Group is the project builder • Using large scale advanced wind power generation units from Germany • 400,000 KW with 2 billion KWh generation capacity • 2 Phases to be completed in 2006 and 2008 Source: Interfax-China Where Do Renewables Fit? • China’s Renewable Energy Development Project • Launched in December 2001 • Total Budget of $139 million • Solar Photovoltaic (PV) • Solar energy will be principal energy source for 2008 Olympics. • Power 80-90% of streetlights • Heat up to 90% of hot water • Government grants to PV companies to accelerate installation of 300,000 – 400,000 PV systems (10 MW) • Wind Power • Largest exploitable wind power capacity in the world – 25.3 billion KW • Only 560,000 kW installed to date • Currently relying on imports – domestic products could reduce cost about 50%

15. Recent Case Study • Century Prosper Center • 155,000 m2 twin office tower • Beijing Central Business District • Main green strategies: high performance chiller with energy recovery system, low emissivity window glazing, automatic dimming lighting, reduced lighting density • Annual energy Savings – 12 million kWh • Annual cost Savings – $ 1 million • Simple payback period – 1.1 years Source: The China Business Review Efficiency • “Green” construction accelerating • A kilowatt saved is a kilowatt produced • Target 50% less energy use/sq foot from 1980s • All the major Western players are already there: Trane, Carrier, York, Delta, GE, Honeywell, Siemens, Caterpillar, Cummins • Possible areas of investment opportunity • Advanced roofing/building materials • BIPV (building integrated photovoltaics) • Insulation and prefab products • Heat recovery systems/variable speed drives • Power conserving lamps • Energy efficiency can mean rapid payback

16. Clean Coal • Coal gasification-based technologies • Gasification technologies can supply electricity and liquid fuels as well as hydrogen and other chemicals and greatly reduce pollution • China is ideal candidate • Rich coal resources • Existing power and chemical industries • R&D ability • Positioned to acquire IP and become manufacturer of core equipment • Could become world leader • High Risk / High Reward

17. What makes a Chinese Cleantech Company Attractive? • Innovation • Quality • Realistic pricing (valuation) • Sound business strategy • Compelling economics

18. Summary • China is in a unique position to become a world leader in energy and environmental technology • Large population • Abundant natural resources • Rapid economic growth • Current limited infrastructure is a two-edged sword • Limits pace of growth • Clear path to use next generation technologies • Big opportunities for clean technology

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