INVESTING IN CLEANTECH FROM PHILANTHROPY TO THE NEXT BIG THING

November 2008

Julia Balandina JaquierAIG Investments

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INVESTOR APPETITE FOR CLEANTECH

a luxury

a niche market driven by environmentalists

regulated/driven by subsidies= dependency + low economic viability

primarily Wind/Solar = not applicable for base load

energy is “OLD ECONOMY” and “BORING”

an answer to energy security, rising energy demand and climate change

billion $ market, ↑growth, driven by irreversible global trends

regulated /driven by subsidies = stability + visibility of revenues

primarily Wind/Solar = no feedstock risk, good for peak

supply

energy is “KEY” and “SEXY”

5 YEARS AGO NOW

CLEANTECH IS….

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Mega-trends

Commodity/feedstock risk

Peak load

Regulation

Markets

Subsidy regimes

Technological maturity

Grid parity is a reality

JUST A CHANGE OF PERCEPTION OR A CHANGE OF FUNDAMENTALS?

PERCEPTION CHANGES FUNDAMENTAL CHANGES

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HUGE CAPITAL INFLOW INTO CLEANTECH

Source: New Energy Finance.

USD 200 bnINVESTED IN CLEANTECH IN 2007

RENEWABLE ENERGY SHARE OF TOTAL NEW CAPACITY IN 2007

23%

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WILL ALL THIS MONEY BE INVESTED SUSTAINABLY?

CONTROVERSIAL AREAS EXIST:

BEST COMBINATION OF GOING GOOD AND GOING WELL…

CLEANTECH IS PROBABLY BEST EXAMPLE OF TBLI INVESTING:

SOCIALJob creation, social benefits of

core activities, support of young companies

ENVIRONMENTALEnvironmental innovation

/solutions are core of operations

Quick pre-IPO rounds First generation biofuels

ECONOMICGenerates exceptional returns

Hedge funds Drinking water

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PRIVATE EQUITY IN CLEANTECH – WHO WILL MAKE MONEY?

STAY AHEAD OF THE PACK

BE A VALUE-ADD INVESTOR

POSSESS STRONG SECTOR EXPERTISE

LOOK FOR SPECIAL SITUATIONS

4 STRATEGIES TO GET THE DIAMONDS OF CLEANTECH:

AVOID COMPETITION

WIN OVER COMPETITION

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STRATEGY I: POSSESS STRONG SECTOR EXPERTISE

Sector is broad and diverse Regulatory environment is key,

complex and changing Technological innovation is

inevitable

Valuations vary across geographies

Young companies with multiple activities

Management teams seek partners who understand market and technology

Deal experience is key Develop internal knowledge,

sector focus Maintain it (tradeshows, market

insights, etc..) Use, involve and incentivize

experts Speak to peers

BE/BECOME THE EXPERT

WHY HOW

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EXAMPLE: THIN FILM SOLAR

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STRATEGY II: STAY AHEAD OF THE PACK

Many great deals at high valuations

Cleantech is much more than wind, solar, and biomass …

Addresses any old-economy sector …

Identify overlooked subsectors

Resolve supply chain bottlenecks

Create deals

DO NOT WAIT FOR DEALS COMING TO YOU

FIND/CREATE TOMORROW’S “FLAVOR OF THE DAY”

WHY HOW

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EXAMPLES: SIMPLE SOLUTIONS

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STRATEGY III: LOOK FOR SPECIAL SITUATIONS

Potential challenges:

Cost-overruns

Slower revenue ramp-up

Regulation/market sentiment

Debt facilities

Resulting in:

Need for additional capital infusion

Reasonable valuations

Stay close to companies

Get a good insight over time before company is struggling

Be able to act quickly

Fundamentals should still work!

STAY PATIENT AND BE PREPARED

WHY HOW

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EXAMPLE: SPECIAL SITUATIONS

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Global markets require global strategies

Capital is not enough

Differentiation in competitive situations

Shifts focus from valuation

Value enhancement

Team enhancement

Strategic guidance

Financial discipline

Global strategy:

Market entry/expansion

Global sourcing/offshore production

Raising capital globally

STRATEGY IV: BE A VALUE-ADD INVESTOR

DEVELOP/IMPLEMENT VALUE-ADD STRATEGIES

WORK CLOSELY WITH THE PORTFOLIO COMPANY

WHY HOW

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EXAMPLE: WIND COMPONENTS SOLUTIONS

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TRAPS TO AVOID

Interim solutions

Wonderful companies with mediocre management

Early stage deals

Long sales cycles

Competition with “big boys”

“Next Google” deals at current Google valuations..

Too eager to go public, or already there…

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