Pioneer Power Solutions, Inc.Pioneer Power Solutions, Inc.Investor Presentation

November 2012©2012 Pioneer Power Solutions, Inc.

Forward‐Looking Statements

This presentation contains certain "forward‐looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, as amended. Such statements may be preceded by the words "intends," "may," "will," "plans," "expects," "anticipates," "projects," "predicts," "estimates," "aims," "believes," "hopes," "potential" or similar words.  

Forward‐looking statements are not guarantees of future performance, are based on certain assumptions and are subject to various known and k i k d i i f hi h b d h ' l d b di d ifi d d lunknown risks and uncertainties, many of which are beyond the company's control, and cannot be predicted or quantified and consequently, 

actual results may differ materially from those expressed or implied by such forward‐looking statements.

Such risks and uncertainties include, without limitation, risks and uncertainties associated with (i) the Company's ability to expand its business through strategic acquisitions, (ii) the Company's ability to integrate acquisitions and related businesses, (iii) the fact that many of the Company's competitors are better established and have significantly greater resources, and may subsidize their competitive offerings with other products and services, which may make it difficult for the Company to attract and retain customers, (iv) the Company's dependence on Hydro‐Quebec , y p y , ( ) p y p y QUtility Company and Siemens Industry, Inc. for a large portion of its business, and the fact that any change in the level of orders from Hydro‐Quebec Utility Company or Siemens Industry, Inc. could have a significant impact on the Company's results of operations, (v) the potential loss or departure of key personnel, including Nathan J. Mazurek, the Company's Chairman, President and Chief Executive Officer, (vi) the fact that fluctuations between the U.S. dollar and the Canadian dollar will impact the Company's revenues, (vii) the Company's ability to generate internal growth, (viii) market acceptance of existing and new products, (ix) operating margin risk due to competitive pricing and operating efficiencies, supply chain risk material labor or overhead cost increases interest rate risk and commodity risk (x) restrictive loan covenants or thesupply chain risk, material, labor or overhead cost increases, interest rate risk and commodity risk, (x) restrictive loan covenants or the Company's ability to repay or refinance debt under its credit facilities that could limit the Company's future financing options and liquidity position and may limit the Company's ability to grow its business, (xi) general economic and market conditions in the electrical equipment, power generation, commercial construction, industrial production, oil and gas, marine and infrastructure industries, (xii) the impact of geopolitical activity on the economy, changes in government regulations such as income taxes, climate control initiatives, the timing or strength of an economic recovery in the Company's markets and the Company's ability to access capital markets, (xiii) the fact that unanticipated increases in raw material prices or disruptions in supply could increase production costs and adversely affect the Company's profitability (xiv) the fact thatraw material prices or disruptions in supply could increase production costs and adversely affect the Company s profitability, (xiv) the fact that the Company's Chairman controls a majority of the Company's combined voting power, and may have, or may develop in the future, interests that may diverge from yours and (xv) the fact that future sales of large blocks of the Company's common stock may adversely impact the Company's stock price.  

More detailed information about the company and the risk factors that may affect the realization of forward‐looking statements is set forth in the company's filings with the Securities and Exchange Commission. Investors and security holders are urged to read these filings free of charge on the SEC's web site at www.sec.gov. The company does not undertake to publicly update or revise its forward‐looking statements as a result of new information, future events or otherwise.

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Snapshot of Pioneer Power Solutions, Inc.

Manufacturer of specialty electrical equipment headquartered in Fort Lee, NJ, operating through 3 businessunits located in the U.S., Canada and Mexico

id f hi hl i d l i f li

Electrical Transmission & Distribution Equipment

Liquid‐Filled Transformers

Provides a range of highly‐engineered solutions for applica‐tions in the utility, industrial and commercial segments of the electrical transmission and distribution industry

Owner of Pioneer Transformers since 1995. Acquired Jefferson in April 2010 and Bemag in July 2011 DisconJefferson in April 2010 and Bemag in July 2011. Discon‐tinued former wind energy business (AAER Inc.)

2011A revenue of $68.8M

– 2012 revenue guidance of $80 to $85M

Dry‐Type Transformers

2011A non‐GAAP EPS from continuing operations of $0.56

– 2012 guidance is for EPS between $0.70 and $0.75

Market Information

Ticker Symbol (OTCBB): PPSI– Ticker Symbol (OTCBB): PPSI

– Recent Closing Price: $5.55

– Shares Outstanding: 5,907,255

– Market Capitalization: $32.8 million

– Freely Traded Float: 1,240,000

‐ 3 ‐

Investment Highlights

Stable and Profitable Core Businesses

Recurring Blue Chip Customer Base

High Long‐Term Growth Potential

Aging North American Electrical Infrastructure Needing Replacement

Growth of Renewable Energy Sources Needing Connection to the Power Grid

Increasing Demands and Requirements for Grid System Stability & Efficiency

Management Track Record of Growth, Particularly Through AcquisitionManagement Track Record of Growth, Particularly Through Acquisition

‐ 4 ‐

Pioneer History and Evolution

History Original business acquired by Pioneer’s CEO from Schneider Electric S.A. in 1995

d d i l l d f C di ili i ( 80% )– Produced a single, low‐power product for Canadian utilities (one ~80% customer)– 1995 sales of ~$12 million with approximately 50 employees

Implemented an organic growth strategy. By the time Pioneer went public in late 2009:– It had become a diversified producer of highly‐engineered, higher‐power products– Sales grew to ~$40 million among over 60 customers, while employing the same 

number of people at two locations in CanadaToday Through acquisition‐driven expansion in the last two years, Pioneer is now a full‐line 

manufacturer of liquid‐filled, encapsulated and ventilated electrical transformers– 2012 sales expected between $80 and $85 million – Specializes in customized products, particularly for substations and for commercial 

and industrial users– 3 manufacturing plants, one centralized distribution center, 376 employees– Full‐coverage distribution network in the U.S. and Canada for standard products

‐ 5 ‐

Pioneer’s Position in the Electrical Grid

GENERATION TRANSMISSION DISTRIBUTION

Power Transformers

PowerStation

Transmission Substation Distribution

Substation

Transformers

Distribution / Control Equipment

Solar

Wind Farm

Commercial & Industrial Users

ResidentialCustomers

‐ 6 ‐

Pioneer’s focus is on niche markets and customized applications within the electrical grid

Liquid‐Filled Transformer ProductsPioneer Transformers Ltd.

Major Product Categories

➲ PowerTransformers

From 300kVA single phase transformers through to 

Transformer Basics Reduces or increases voltage of 

electricity traveling through a wire Transformers f g30MVA three phase with top voltage in 69kV class

➲ NetworkTransformers

Subway and vault‐type network transformers from 300kVA up to 3750 kVA

electricity traveling through a wire– “steps‐up” for travelling long distances more efficiently“ t d ” f di t ib ti i 300kVA up to 3750 kVA

➲ Pad‐MountTransformers

Three phase, fully tamper proof in the range of 75kVA to 10MVA with top voltages in 44kV voltage class

– “steps‐down” for distribution in local network or to equipment

Pioneer Models44kV voltage class

➲ Unitized Pad‐Mounts

Mini‐substations up to 5MVA, primarily for facilities buying power at the primary voltage level and for wind projects

Wide range of voltages, phases, fre‐quencies and ratings up to 30MVA

Typical applications➲Mini‐PadTransformers

➲ Platform‐

Single phase, low profile in range of 25kVA to 167kVA for residential and underground distribution

Single phase units from

– Utility & industrial substations– Commercial power centers for factories,  apartment complexes 

‐ 7 ‐

➲ Platform‐MountTransformers

Single phase units from 250kVA to 1000kVA, also supplied for sub‐station installation up to 2500kVA 

shopping centers, airports, others– Network failsafe planning

Dry‐Type Transformer ProductsJefferson Electric, Inc. and Bemag Transformer Inc.

Major Product CategoriesDry‐Type Models Low and medium voltage, distribution 

and power transformers for indoor or➲Medium Voltage

Size ranges from 30kVA to 10MVA and up to 35,000 volts, 

and power transformers for indoor or outdoor use in size ranges from 3 kVathrough 10,000 kVAT i l li ti

➲ Ventilated Transformers

Size ranges from 25 to 100kVA (single phase) and 15kVA to 10MVA (three phase)

gstandard and custom designs 

Typical applications– Industrial and commercial power 

applicationsOriginal equipment manufacturer

➲ Encapsulated Transformers

Size ranges from 50VA to 50kVA in single phase, and from 3kVA to 112kVA in three phase models

➲ Floor Mount From 30kVA to 112kVA– Original equipment manufacturer applications (e.g., elevators) 

– Power centers for mining, drilling, refineries factories chemical

➲ Buck Boost Transformers

Single phase transformers from 50VA to 10kVA  for 

➲ Floor Mount EncapsulatedTransformers

From 30kVA to 112kVA transformers for general loads and in rugged environments

refineries, factories, chemical plants, marine duty and ship docks

– Office environments, including server rooms

fcorrecting voltage

➲ Non‐linear Transformers 

From 15 to 300kVA, designed to meet load demands of com‐puters & electrical equipment

‐ 8 ‐

server rooms– Landscape, pool and spa lighting– Custom solutions

➲ Other  Specialty Products

Various size ranges, available in customized designs

Transformer Customers

Revenue Distribution by End Market Representative Customers

2011A Revenue: $68.8 Million2011A Revenue:  $68.8 Million

Utilities32%

Distributors, E&C Firms

34%

Industrial18%

Commercial16%

‐ 9 ‐

Industry Size and Dynamics

$7.7 billion U.S. market for transformers, forecast to grow to $10.1 billion by 2015 (a)

Transformers represented 16% of electrical 

Value of Annual U.S. Transformer Demand ($Bn)

2010:  $7.7 Billionp

equipment industry shipments in 2010, up from 13.1% in 2002 (b)

Growth DriversAging po er grid o er 70% of all po er Power

Other transformers 

& parts

Nonutility8%

– Aging power grid, over 70% of all power transformers are over 25 years old (c)

– U.S. electricity demand to grow 30% from 2008 to 2035 (d), increasing utility 

i d k i d

42%

Specialty11%

p12%

expansion and network maintenance needs– Clean energy capacity additions to grow 

fastest to meet demand, requiring new transmission & distribution infrastructure Distribution

27%– Higher energy costs, stricter environmental 

regulations and efficiency standards leading to upgrades, retrofits and equipment replacement

27%

‐ 10 ‐

(a) The Freedonia Group(b) IBIS World Inc.(c) The Brattle Group (d) U.S. Energy Information Administration

Growth Strategy

Acquisitions

– Profitable companies with strengths in complementary market niches

– Potential for operating efficiencies through integration

– Broaden Pioneer’s range of power solutions through more technically‐advanced products (not limited to transformers) new distribution channelsadvanced products (not limited to transformers), new distribution channels and geographic reach

Organic Growth

– Continued migration towards new, more highly‐engineered products

– Shared product portfolio and cross‐selling among Pioneer business units

– Address increasing demand driven by renewable energy projects

– Additional engineering expertise for more specialized applications

‐ 11 ‐

Executive Leadership

Nathan J. MazurekChairman and Chief Executive Officer

20+ years of experience in the electrical equipment and components industry Extensive track record of consolidating companies, factories and product lines

– Over 20 consummated acquisition divestiture joint venture and investment– Over 20 consummated acquisition, divestiture, joint venture and investment transactions in the industry

Three major platform companies during career:

100% focus today is on Pioneer BA from Yeshiva College and JD from Georgetown University Law Center

‐ 12 ‐

Financial Overview

Summary Operating Statements($ millions, except per share data)

FYE December 31, 2010 2011 9M 2011 9M 2012

R $47 2 $68 8 $50 1 $61 4Revenue $47.2 $68.8 $50.1 $61.4

% Growth +16.3% +45.6% +45.5% +22.6%

Gross Profit $11.6 $16.0 $11.7 $13.6$ $ $ $

% Margin 24.6% 23.2% 23.3% 22.2%

Adjusted EBITDA (a) $5.3 $6.1 $4.6 $5.4

% Margin 11.1% 8.8% 9.2% 8.8%

Net Earnings (a) $2.9 $3.3 $2.5 $2.7

% Margin 6.2% 4.8% 5.0% 4.4%

Diluted EPS (a) $0.50 $0.56 $0.42 $0.46

Average Diluted Shares  5 9 5 9 6 0 5 9

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gOutstanding 5.9 5.9 6.0 5.9

(a) Non‐GAAP measure, from continuing operations. See supplemental financial schedule attached for a reconciliation of GAAP to non‐GAAP measures

Financial Position($ millions)

09/30/12

LiquidityCapital Structure

09/30/1209/30/12

Revolving Bank Debt $7.4

Term Loan Bank Debt 10.9

Equipment Term Debt 1.4

09/30/12

Current Assets $28.7

Current Liabilities (22.5)

Net Working Capital $6.2Equipment Term Debt 1.4

Capital Lease Obligations 0.0

Cash and Equivalents (0.1)

Total Net Debt 19.7

Current Ratio 1.3x

Operating Net Working Capital (a) $15.4

O ti W ki C it l R ti (a) 2 2Total Net Debt 19.7

Shareholders’ Equity 16.8

Total Capitalization $36.5

Operating Working Capital Ratio (a) 2.2x

Current Maturities of Debt:

Revolving Bank Debt $7.4

Net Debt / Total Capitalization 54%

Net Debt / Adjusted EBITDA 2.9x

Term Loan Bank Debt 1.7

Equipment Term Debt 0.3

Capital Lease Obligations 0.0

‐ 15 ‐

Cash and Equivalents (0.1)

Net Debt (Cash), Current $9.3(a) Excluding cash and equivalents and current maturities of debt

Revised 2012 Outlook (a)Company Revenue and Earnings Guidance

Full Year Assumptions

R h f 20% id i f

2012E Guidance

2011A 2012E ∆%

Revenue growth of ~20% at mid‐point of range

– Targeting 10%+ growth on an organic basis

Stable gross margins

Revenue $69 $80 ‐ 85 16 ‐ 23%

Diluted EPS(non‐GAAP)

$0.56 $0.70 ‐ 0.75 25 ‐ 34%

Stable gross margins

Higher effective tax rate expected in 2012

Excludes any non‐recurring costs and income Excludes any non‐recurring costs and income

Excludes future acquisitions

FX assumption for last 3 months of 2012: FX assumption for last 3 months of 2012:

– $CAD to 1.00 USD = 1.00

‐ 16 ‐

(a) Updated as of November14th, 2012. Originally issued guidance was for revenue of $76 to $84 million and non‐GAAP EPS of between $0.65 and $0.75 per share

Investment Highlights

Stable and Profitable Core Businesses

Recurring Blue Chip Customer Base

High Long‐Term Growth Potential

Aging North American Electrical Infrastructure Needing Replacement

Growth of Renewable Energy Sources Needing Connection to the Power Grid

Increasing Demands and Requirements for Grid System Stability & Efficiency

Management Track Record of Growth, Particularly Through AcquisitionManagement Track Record of Growth, Particularly Through Acquisition

‐ 17 ‐

Contact Us

Investor Relations:Corporate Headquarters:

Howard Gostfrand, PresidentAmerican Capital Ventures(T) 305.918.7000( )

Pioneer Power Solutions, Inc.400 Kelby Street, 9th FloorFort Lee, NJ 07024( ) (F) 305.466.1747

info@amcapventures.comwww.amcapventures.com

(T) 212.867.0700(F) 212.867.1325www.pioneerpowersolutions.com

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Questions & Answers

Supplemental Financial Schedules

Reconciliation of Non‐GAAP Measures(In thousands, except per share data)

Year Ended December 31, Three Months Ended September 30, Nine Months Ended September 30,2010 2011 2011 2012 2011 2012

Reconciliation to Non‐GAAP Net Earnings and Diluted EPS:Earnings  per share from continuing operations  (GAAP measure) 0.55$             0.42$             0.05$                  0.04$                  0.32$                  0.33$                 g p g pEarnings  from continuing operations  (GAAP measure) 3,234$            2,471$            283$                    213$                    1,883$                 1,944$                Amortization of acquisition intangibles 144                  252                  67                         71                         175                      214                     Stock‐based compensation expense 161                  254                  64                         69                         190                      202                     Stock and warrant issuance expense for services 232                  ‐                       ‐                            ‐                            ‐                            ‐                           Non‐recurring acquisition and reorganization costs 353                  334                  258                      ‐                            282                      32                        (Gain) loss  on sale of assets ‐                       ‐                       ‐                            (6)                          ‐                            (8)                         Withd fi i t ti t 487 70 45 487 45Withdrawn financing transaction costs ‐                     487                70                       45                       487                    45                      Non‐recurring tax (recoveries) non‐cash charges, net (831)                (26)                   ‐                            411                      (130)                     411                     Tax effects (347)                (464)                (155)                     (38)                       (394)                     (122)                    

Non‐GAAP net earnings 2,945$            3,307$            588$                    765$                    2,493$                 2,718$                Non‐GAAP net earnings  per diluted share 0.50$              0.56$              0.10$                   0.13$                   0.42$                   0.46$                  Weighted average diluted shares  outstanding 5,931 5,949 5,982 5,915 5,973 5,910

Reconciliation to Adjusted EBITDA:Earnings  from continuing operations  (GAAP measure) 3,234$            2,471$            283$                    213$                    1,883$                 1,944$                Interest and bank charges 182                  646                  207                      270                      428                      699                     Provision for income taxes 327                  773                  56                         640                      583                      1,337                  Depreciation and amortization 763                  1,086              305                      394                      746                      1,124                  Non‐recurring acquisition and reorganization costs 353                  334                  258                      ‐                            282                      32                        (Gain) loss on sale of assets (6) (8)(Gain) loss  on sale of assets ‐                     ‐                     ‐                          (6)                        ‐                          (8)                       Withdrawn financing transaction costs ‐                       487                  70                         45                         487                      45                        Impairment charges ‐                       ‐                       ‐                            ‐                            ‐                            ‐                           

EBITDA 4,859              5,797              1,178                   1,556                   4,410                   5,174                  Adjustments  to EBITDA:Stock‐based compensation expense 161                  254                  64                         69                         190                      202                     Stock and warrant issuance expense for services 232                  ‐                       ‐                            ‐                            ‐                            ‐                           

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Adjusted EBITDA (Non‐GAAP measure) 5,251$           6,050$           1,243$                 1,625$                4,600$                5,376$