The CleanTech Market Opportunity

Confidential

Element Ventures - Highlights

$250+ million - capital under management• Focused exclusively on CleanTech

• Institutional Limited Partner base

Experienced General Partners with deep domain expertise• Successfully managed $375 million in four prior CleanTech funds

• Advent Energy I, Advent Energy II, EnerTech I, EnerTech II

Strong financial performance• 72% gross IRR since 1995 in CleanTech

• 3.5x cash-on-cash return on realized investments

Proven strategy • Invest where resource constraints are economically important

• Focus on market-driven solutions with compelling value propositions

Exceptional reach and world-class investment infrastructure

• Unique network for technical expertise and portfolio company support

What is CleanTech?

CleanTech: Resource Management through Resource Lifecycle

Variety of Resources:

Affects most Industries:

Sourcing & Delivery

Management & Optimization

Disposal & Reuse

Resource Lifecycle

• Commodities• Materials• Chemicals

• Water• Power• Fuels

• Air• Emissions

• Utilities• Chemicals • Electronics

• Agriculture• Consumer• Services

• Industrial• Transportation • Manufacturing

EnviroTech to CleanTech

Regulatory Driven Decisions

Compliance-based Purchasing

Reactive (“end of pipe”)

Chemical Science

Traditional Engineering

Slow Growth Markets

“Save the World”

Economic Decisions

Productivity-based Purchasing

Proactive (“clean fuels”)

Material Science

Collaborative Engineering

Rapid Growth Markets

“Entrepreneurial” Mentality

CleanTech(Late 1990’s – Today)

EnviroTech (1980 – Early 1990’s)

CleanTech Market Overview

CleanTech products & services account for $150 billion globally with 5 – 10 year growth rates projected at 35%4

Sources: 1. http://hebe.statenet.com/leg/wp/snlegwhitepaper.pdf. 2. A typical eight inch silicon wafer requires 2,800 - 3,200 gallons of “high purity” water to manufacture. PPRC. 3. US Department of Commerce; Manufacturing in America, January 2004. 4. CleanTech Venture Network, CleanTech – Achieving Competitive Venture Returns” October, 2004.

• Transportation and Logistics• Material Sourcing and Replacing• Resource Optimization• Material Handling• Enabling Technologies• Recovery and Recycling • Environmental Compliance

Manufacturing and Industrial

• Fuel Recovery• Power Generation • Energy Storage• Energy Infrastructure• Energy Efficiency• Alternative Energy• Advanced/Alternative Fuels

Energy and Power

• Water Purification• Water Filtration• Desalinization • Wastewater Treatment• Water Management• Air Quality• Emissions abatement

Air and Water

CleanTech Market Drivers

Resource constraints

• Energy supply and demand imbalance

• Shortages of clean air, clean water, and clean power

• Aging power and water delivery infrastructure

Global competition

• Increasing focus on resource efficiency and cost of production

• Corporate responsibility for product “lifecycle management”

Tightening environmental regulation

• Acceleration of global concern and government mandates

• Public awareness and shareholder influence

Technological advances

• Ability to apply advances in other fields to resource constraint problems

• Biotech, sensing, communications, IT, advanced materials, and power electronics

Historical Commodity Prices

0

100

200

300

400

500

2000 2001 2002 2003 2004 2005

IndexCentral Appalachia Coal Natural Gas Light Sweet Crude

Source: FactSet Research Systems; Bloomberg.

Attractive Investment Opportunity

CleanTech has emerged as a high-potential investment space

• Accelerating rate of new CleanTech business formation

• More seasoned entrepreneurial pool

• Leveraging technology advances across multiple fields

Currently undercapitalized by institutional venture capital

• Reasonable valuations (but changing)

• Less competition (but changing)

Poised for aggressive growth over the next decade

• Fueled by strong economic, regulatory, and technology drivers

Improving capital markets

• More than $4 billion invested in upwards of 500 CleanTech venture deals since 20021

• Over the last two decades the number of exits and the acquisition multiples have increased

Source: 1. Vortex Energy LLC; “CleanTech Venture Investing: Patterns and Performance;” March 2005.

0

50

100

150

200

250

300

350

400

450

500

1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999

Year

($ M

illi

on

s)

CleanTech

Environmental

Environmental Tech vs. CleanTech

Source: Vortex Energy LLC

WAVEWAVEEnvironmental Technology CleanTech

Growing CleanTech Exit Opportunities

• M&A activity has increased at a 95% CAGR over the last four years

• IPO activity has increased at a 73% CAGR over the last four years

53

95

143

227

16 21

45

74

0

50

100

150

200

250

2002 2003 2004 2005

Transactions & Offerings

$0

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

US$ Millions

IPO Dollars Raised M&A Transaction Values Number of M&A Transactions Number of Public Offerings

Sources: Capital IQ, New Energy Finance. As of 12/31/2005.

Emerging: Number of Nanotech & Cleantech Co’s 2005

72

64

41

101

United States Europe

Biopharma: 13

Biopharma: 1

Med Devices: 3

Comm: 4

Electronics: 8

Electronics: 10

Info Services: 1

Semi: 18

Semi: 1Software: 4

Software: 4

Products: 1

Products: 1Services: 1

Mat/Chem: 16

Mat/Chem: 8

Agriculture: 2

Energy: 3

Energy: 21

Other : 1

Other : 15

Nano Clean Tech

Biopharma: 8 Biopharma: 4

Med Devices: 6Comm:

1

Electronics: 4

Electronics: 7

Semi: 3

Semi: 1Software: 1

Software: 1

Products: 8

Services: 2 Services: 6Retail: 1

Mat/Chem: 14 Mat/Chem: 15

Agriculture: 1

Energy: 1

Energy: 24

Other : 1

Other : 33

Nano Clean Tech

Source: Ernst & Young / Dow Jones VentureOne

Emerging: Cumulative Capital in Nanotech & Cleantech 2005

€165 M

$1182 M€348 M

$1173 M

United States Europe

Biopharma: $276

Biopharma: $78

Med Device: $18

Comm: $146

Electronics: $107

Electronics: $245

Info Services: $5

Semi: $320

Software: $87

Software: $86

Products: $20

Mat/Chem: $207

Mat/Chem: $105

Agriculture: $70

Energy: $8

Energy: $407

Other : $6

Other: $166

Nano Clean Tech

Biopharma: € 47Biopharma: € 9

Med Device: € 13Electronics: € 16

Electronics: € 46

Semi: € 9

Semi: € 3Software: € 0.1

Software: € 1

Products: € 11

Services: € 0.4

Services: € 23

Mat/Chem: € 79

Mat/Chem: € 42

Agriculture: € 1

Energy: € 0.1

Energy: € 135

Other : € 0.2

Other : € 80

Nano Clean Tech

[$197 M]

[$415 M]

Source: Ernst & Young / Dow Jones VentureOne

Generation Technology Costs, 1980–2004

500

Dollarsper

MWh

400

19800

300

200

100

20041985 1990 1995 2000

Solar PV

Wind

GeothermalSupercritical Coal

Coal IGCC

Nuclear

Gas CCGT

Source: Cambridge Energy Research Associates.40321-5

Drivers: technology changes, fuel prices and interest rates