Opportunities for China FDI in U.S. Renewable Energy and Clean Technology Presented by

1. Opportunities for China FDI in U.S. Renewable Energy and Clean Technology Presented by David Elkin University of Pennsylvania April 16, 2013 GreenWorld Capital, LLC Capital for a Greener World

2. A Big Thank You to Our Sponsors at University of Pennsylvania • This presentation was generously sponsored by the University Pennsylvania Chapter of Global China Connection, The Center for East Asian Studies, and the International Relations Program • And co-sponsored by Penn Engineers Without Borders, Penn International Sustainability Association, Wharton Energy Club, Penn Oikos, and Wharton China Business Society

4. The Dragon Turns Green: China's Manufacturers Adapt to a New Era Published : June 03, 2009 in Knowledge@Wharton

5. Growth in China Annual OFDI Flows ~$80B in 2012: China was the 5th largest provider of FDI in the world Source: Statistical Bulletin of China’s Outward Foreign Direct Investment by MOFCOM and Heritage; UNCTAD

6. China OFDI on the Cusp of Dramatic Growth Relative Size of China OFDI vs. Advanced Economies in 2011 Transitional economies have average ODFI Stock/GDP of 15%2. At this level, China would have OFDI stock of $1.1 trillion in 2011, and $3.7 trillion by 20203. Actual China OFDI reached only $365 billion in 2011. • Source: OECD Statistics, World Bank, China’s National Bureau of Statistics, UNCTAD • Source: “An American Open Door” by The Wilson Center, 2011 • Based on Standard Chartered’s China’s projected 2020 GDP of $24.6 trillion

7. Market Potential = $620 billion (equivalent to ½ of $1.2 trillion of U.S. Treasuries that China holds in reserve) Market Potential for China OFDI to U.S. • U.S historically has been world’s largest recipient of global FDI at 17%, 3x larger than the next largest recipient • Market Potential provided that… • China’s economy grows to $24.6 trillion by 2020 as forecast • China’s OFDI stock/GDP = 15% transitional economy average • U.S. receives 17% of China’s OFDI

8. Inbound FDI is Integral to U.S. Economy • According to the President’s Council of Economic Advisors, • in 2008, U.S. majority owned affiliates of foreign companies: • Employed 5.7 million U.S. workers, or 5% of private workforce, with 13% in manufacturing • Paid average wage of $71,000+ per employee (31% higher than national average) • Owned $11.7 trillion in U.S. assets • Generated $3.5 trillion in annual sales • Invested $188 billion in Capex, 11.3% of total private investment • Invested $40.5 billion in R&D, 14.3% of total private R&D • Source of 18.1% of U.S. exports

9. Presidential Support President Obama – • “… business investment in the United States by foreign firms is a major engine of economic growth and job creation. My administration is committed to enhancing the efforts of the United States to win the global competition for business investment by leveraging our advantages as the premier business location in the world” Executive Order Creating Select USA. June 2011

10. U.S. Will Be Major Recipient of China OFDI:Push Factors from China

11. U.S. Will Be Major Recipient of China OFDI:Pull Factors from U.S.

12. Long-Term Pull Factor: U.S. Educated Future Chinese Leaders “Today’s youth are tomorrow’s leaders. International education creates strong, lasting relationships between the U.S. and emerging leaders worldwide.” - Ann Strock, U.S. Asstnt Secretary of State for Education & Cultural Affairs

13. U.S. Renewable Energy and Clean Tech Will Benefit from China OFDI to U.S. • Of the 7 strategic emerging industries (SEIs) identified by China’s 12th Fifth Year Plan, 3 are related to sustainability: • Biotechnology • New Energy • High-End Equipment Manufacturing • Energy Conservation and Environmental Protection • Clean Energy Vehicles • New Materials • Next Generation IT 2020: 15% MOFCOM Target SEI Contribution as % GDP: 2015: 8% 2011: 2%

14. Key Areas of Opportunity for U.S. Renewable Energy and Clean Tech Diversification into Hard Assets • Greenfield Renewable Energy Projects: • Renewable energy was fastest growing sector for global FDI from 2003-11; China emerged as one of the top 10 providers of global FDI targeted to renewable energy projects • Many renewable energy projects across N. America need capital due to legislative uncertainty, financial market stress, and expiration of grants; significant effort is expected at federal, state, and local levels to attract greenfield investments from China to fill the funding gap • Operating Companies and Technology: • U.S. is home to 7,000 clean tech companies (37% of worldwide) • BUT MORE IMPORTANT – 58% of the “professionally sponsored” (PE, VC, etc) clean tech companies are in the U.S. GWC’s PED catalogues and analyzes the subset of companies likely to appeal to Chinese investors, tracking 1,050 clean tech firms with professional sponsors, covering each of the sustainability focused SEIs plus Advanced Materials

15. Industry Breakdown of Companies In ThePortfolio Enhancement Database

16. A Word on the Committee on Foreign Investment in the U.S. (CFIUS) Recent Case • Wanxiang’s recent acquisition of A123 out of bankruptcy: the transaction received opposition, but Wanxiang offered more than twice the $125 million bid of Johnson Controls. Resolution • After lobbying by A123’s creditors, the $256 million transaction received CFIUS approval after agreeing to exclude a $2.6 million military contract, approximately 1% of the transaction value. Our View • Given the high volume of cross-order transactions involving Chinese investment, there will likely be additional instances where CFIUS may block certain deals. We expect these instances to be rare and most transactions that raise issues at CFIUS will be handled with negotiated mitigation.

17. Conclusion: Chinese OFDI to U.S…. • Provides a much-needed source of capital for U.S. public and private stakeholders in the renewable energy and clean tech industry • Provides attractive investment returns to Chinese investors and useful technologies for Chinese companies • Accelerates deployment of renewable energy and clean tech projects in the U.S., in turn preserving and creatingU.S. jobs • Facilitates U.S. companies’ access to the enormous Chinese market • THANK YOU!