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April 20 th 2006 Nicholas Parker, Chairman Cleantech Capital Group LLC

“Cleantech Investment: Patterns, Performance and Prospects” Alternative Investments Workshop University of Toronto. April 20 th 2006 Nicholas Parker, Chairman Cleantech Capital Group LLC. Is this Important?.

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April 20 th 2006 Nicholas Parker, Chairman Cleantech Capital Group LLC

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  1. “Cleantech Investment: Patterns, Performance and Prospects”Alternative Investments Workshop University of Toronto April 20th 2006 Nicholas Parker, ChairmanCleantech Capital Group LLC

  2. Is this Important? • Since 1999, 1080 investors have placed more than $8.2 Bn into 1227‘cleantech’ venture deals in North America with an estimated additional $4.0Bn in the ROW. (This excludes IPO, debt and project-related financings). • Why? So?

  3. Agenda • Defining the “cleantech” space • Cleantech Venture Investment Trends • Corporate Cleantech Activity • Making Money in Cleantech • Opportunities and Challenges

  4. Cleantech Venture Network • The Cleantech Venture Network™ LLC is a membership organization bringing insight, opportunities and relationships to investors, entrepreneurs and service providers interested in clean technology. • We introduced the "cleantech" concept in 2002 and have since popularized it as a viable investment category. • Principal office in Ann Arbor, Michigan with a presence on US West Coast, Australia, Canada, China and Europe. • We provide information products, related services, and the Cleantech Venture Forum™ series of events, • Cleantech Venture Network ™ is part of the Cleantech Capital Group LLC

  5. Accomplishments since Launch • Achieved operating profit on initial investment. • Met or exceeded all key business plan milestones • 300+ full members: 950 affiliate members • Nine highly successful forums in North America and Europe • Cleantech Venture Monitor (established as the source on cleantech venturing: media coverage in over 200 publications • Published two groundbreaking research studies. • Sophisticated front and backend website • High-profile venture advisory boards in NA and EU • US, Canada, EU, Australia and China presence • Launched Cleantech Index • “cleantech” recognized as an investment category

  6. Accomplishments by Numbers • Tracked: • nearly $10.0B of venture investments, • $94B in M&A transactions, • over 100 IPOs • Facilitated over $500M in financings • Identified approximately 1100 investors in 1200+ venture rounds • Directly sourced > 600 new deals for our members • Profiled more than 190 pre-qualified investment opportunities at our Venture Forums • More than 2000 Forum investor attendees • Built first cleantech index of publicly-traded stocks • Avg. 340,000 hits per month on cleantech.com • Built a core team of twelve FT equivalent employees

  7. Cleantech Proprietary Research • Responding to unmet demand for authoritative research on the state, performance & opportunities in the cleantech area. • March 05 published Cleantech Venture Investing: Patterns & Performance the most comprehensive study of its kind ever undertaken. • January 06 published Cleantech Capital Report 2006 a unique 10 year view on cleantech VC flows and trends. (European version to be published June 06) • Future reports include: • Cleantech Capital Directory (online version live) • Other specialized publications, e.g. Cleantech M&A, CleanBio, M2M, Watertech, Solar in China.

  8. Cleantech Defined • Cleantech embraces knowledge-based products and services that: • optimize the use of natural resources, • while reducing ecological impact and • adding economic value by significantly lowering cost and improving profitability. • Not classic “environmental” technology – more like “biotech” as an investment theme. • Now fifth largest venture investment category with nearly 10% market share (Q4 2005)

  9. The Next Industrial Revolution Alongside the information revolution is an industrial revolution reshaping the design and manufacture of almost everything that we see around us. The disruptive products being developed today have significant improvements over the old because they:  • Are lighter, smarter and stronger. • Are cheaper to manufacture and operate. • Are less carbon-intensive and more energy efficient • Offer greater service utility per unit of material input • Enable virtually zero waste and/or emissions Cleantech is emerging as the enabling technology of modern industrial society; the next and necessary wave of venture innovation in a natural resource constrained world.

  10. Envirotech 1970s-80s Regulatory driven market Compliance-based purchasing “End-of-pipe” tech, e.g. scrubbers on smoke stacks Chemical science Traditional engineering Slow growth markets, e.g. waste management “Save the world” mentality Low IT use Cleantech mid 1990s - Economic market drivers Productivity-based purchasing “Front-of-pipe” tech, e.g. zero emission plants Biological & materials science Systems design & engineering Rapid growth markets, e.g. solar energy “Entrepreneurial” mentality High use of IT Cleantech is not Envirotech Cleantech markets represent annual global revenues upwards of $150 billion,with some segments such as natural pesticides, wind power and micro sensors having 5-10 year compound annual revenue growth rates as high as 35% .

  11. Cleantech Examples • Agriculture - bio-based materials, farm efficiency technologies, micro-irrigation systems and natural pesticides • Energy - distributed and renewable energy generation and conversion (including fuel cells, geothermal, wind and photovoltaics); energy management systems; superconducting transmission; energy storage and power quality; key enabling technologies; and related Internet and information technology-based services • Manufacturing - advanced packaging; high value materials recovery; natural chemistry; sensors; smart construction materials; and precision manufacturing instruments. • Transportation - hybrid vehicles, lighter materials, smart logistics software and telecommuting • Water - water recycling and ultra-filtration systems (UV and membrane based systems), sensors and automation systems and desalination equipment

  12. Technology Convergence Clean Energy Cleaner Production Clean Water CONVERGENCE CONVERGENCE Advanced Materials & Nanotechnology (e.g. catalysts and membranes) Information Technology & Internet (e.g. advanced meters and sensors) Biotech “CleanBio” (e.g. biopolymers and biofuels)

  13. Becoming More Cost Effective Improvements in technology and mass production will drive costs down further

  14. Cleantech Venture Investing1999-2005 Total Cleantech Venture Investing 1999-2005: $8.2bn

  15. Cleantech investment by Quarter 1999-2005 Cleantech is growing as an investment category: Now receiving 9+% of all VC in North America

  16. Cleantech Venture Investing1999-2005 Europe is about 40% and Asia 10% of North America

  17. Cleantech Investment by Segment Energy-related deals are leading: 43% of total cleantech by amount; 36% of number of cleantech deals.

  18. Investment by Region The West Coast and North East receive over 60% of all cleantech venture capital: Canada takes 9%

  19. Cleantech investment by Round and Region The Northeast receives 25% of all First Round Cleantech Investments

  20. Cleantech investment 1999-2005

  21. US Cleantech rounds as % of total US VC Source of all US VC data: PWC/Venture Economics/ NVCA

  22. 2006 Onward – Growth & ROI

  23. Honda Research Hydro Quebec Capitech IBM Corporation Ingersoll Rand Intel Capital Koch Genesis Lubrizol Corporation Marubeni Mitsui Mitsubishi International Norsk Hydro Ventures Rohm & Haas RWE Dynamics Siemens Southern California Gas Trans Pacific Petroleum Unilever Ventures and others … Air Products & Chemicals BASF Venture Capital Bosch Boeing Tech Ventures Cargill Cinergy Ventures Coca-Cola CH2M Hill Chevron Texaco Ventures ConocoPhilips Corning Eastman Ventures EBARA EDF ENCANA EPCOR Fuji Research Gaz de France GE Energy Henkel Corporate Members (Partial List)

  24. Who are the Buyers? • Pharmaceutical, Semiconductor and Thermoelectric companies who use large quantities of ultra pure water • Automobile and Aircraft Manufacturers needing higher fuel efficiency from lighter materials • Utilities and Large Energy Users demanding reliable, affordable and low carbon power supplies • Consumer Electronics companies needing to reuse valuable components and materials • Agricultural producers requiring safer and more precise inputs and products • Logistics organizations seeking more efficient use of fleets and containers

  25. GE’s Ecomagination Initiative • Launched May 9 2005 by CEO Jeff Immelt: “Green is Green” • Double investment in R&D. GE will invest $1.5 billion annually in research in cleaner technologies by 2010, up from $700 million in 04. • Introduce more ecomagination products each year. GE will double its revenues from cleantech products and services– from $10 billion in 2004 to at least $20 billion in 2010. (These products include renewable sources of energy and materials that make energy production and consumption more efficient, cleaner and more efficient transportation technologies, and products and services that conserve or purify water) • Reduce its greenhouse gas (GHG) emissions and improve its energy efficiency. GE has committed to reduce its GHG emissions 1 percent by 2012 and the intensity of its GHG emissions 30 percent by 2008 (both compared to 2004).

  26. BP Alternative Energy • Launched November 29 2005 by BP Chief Executive Lord Browne • Double its investments in the entire umbrella of alternative and renewable energy technologies. • Manage an investment program in solar, wind, hydrogen and combined-cycle-gas-turbine power generation, which could amount to $8 billion over the next ten years. • The effort has a growth potential to deliver revenues of around $6 billion a year within the next decade.

  27. Top 10 Acquirers by Value

  28. Top 10 Acquirers by Deal Count

  29. Can Cleantech Make Money? Cleantech Venture Investment – Patterns & Performance The most comprehensive investigations of cleantech investment performance to date • Report released in late March 2005 • 67 initial public offerings: 730 M&A transactions in 30+ countries • Estimates Cleantech IPOs yielded returns to pre-IPO investors of 5.5x, while European venture-backed IPO generated returns of over 8x. • Estimates overall returns on cleantech M&A transactions were 4.3x on invested equity, based on more than $94 billion in transactions tracked over the past 2 decades • A hypothetical portfolio of cleantech venture investments delivered an estimated IRR of approximately 30%.(Assumed 40% of the portfolio’s investments were written off and an average holding period of five years.)

  30. Cleantech Index™ The Cleantech Index™ was developed to capture the investment potential associated with the substantial increase in the economic value of clean technologies that will inevitably be unlocked as the global population adjusts to the linkage between economic development and resource sustainability. For a stock to be included in the selection universe, a company must be identified as one that has an exposure of over 50% to a cleantech segment. Current universe of 75 stocks with market capitalization of approximately $100 billion.

  31. Index Components

  32. Preliminary Index Statistics Preliminary Return Summary (December 29, 2000 to January 20, 2006)

  33. Attractive Financials & Fundamentals • Category is not over-invested – opportunity to get in early • Low enterprise valuations – good multiples are achievable • Sometimes lower capital intensity than many other categories • Strong trade exit potential – most M&A • Strong global corporate, consumer and government demand – strong growth rates • Evidence of rising public market interest, AIM, Solar • Emerging fund managers – opportunity for diversification • Venture grade returns can be achieved!

  34. Key Events 2005 – 06 to date • CalPERS/CalSTRS Green Wave Initiative • $60+ a barrel and OPEC instability – ME, Nigeria, Venezuela • European RE markets • Q-Cells, Suntech Power and Sunpower IPOs • Rise of AiM as Global Cleantech Exchange • Corporate announcements – GE, BP,EdF, Walmart etc • Xerox’s PARC announces cleantech initiative • US President’s State of the Union Address • Carbon trading kicks in and prices rise • The hybrid as status symbol • China and the rush for commodities • KPCB announces $100 M for cleantech investing • “biggest opportunity of the 21st century”

  35. Some Challenges • Globally: • Building big-small business partnerships • Building linkages between different capital suppliers (eg project finance, venture capital and equipment leasing) • Encouraging appropriate public policies (in the US) • Bringing cleantech to emerging market economies – BOP + BRICs • BRICs as sources of Technology and Opportunity • Globalization of Cleantech Capital • Potential Resource Bottlenecks in Clean Energy • Constant Counter-Intuitions • Canada: • Turning public R, D & D into commercial business • Institutional support for venture capital • From “clean energy” to “cleantech” • The Rise of Cleantech Clusters

  36. Thank You! www.cleantech.com nick@cleantech.com

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