westport innovations inc. presented by: simon fraser university march 5, 2011

WESTPORT INNOVATIONS INC.Presented by: Simon Fraser University

March 5, 2011

Content

Overview.………………………………………………Positive Drivers.....………………………………….Negative Drivers…….…………..…………………..Valuation………….……………………………………

Simon Fraser University | March, 2011Disclaimer: This information is provided to you for informational purposes only and is intended for use only by the Global Investment Research Challenge.

Section1234

2

Recommendation


3

Report Price

as ofDecember 3, 2010

$19.30

Target Price

$16.38

HOLD

TSE: WPT

Westport Innovations


4

Formed in 1995, headquartered in Vancouver, Canada Over 400 patent applications worldwide with over 200 issued patents 186 employees with 7 partners across the globe

Natural Gas Engine Technology


5

Joint Ventures & Partnerships


6

Equity Financing


7

Strong Foundation


8

Forecasted Fuel Prices


9

Government Incentives


10

Strategic Partnerships


Global Engine Producers

Global Truck Producers

1. Weichai2. Volvo3. Daimler4. Cummins5. CNHTC

1. Daimler2. Volvo3. Dongfeng4. Tata5. FAW

Weichai Westport Inc.


Adapting Business Model


13

Westport HD Diesel

Pmt Per month $4,000 $2,400

Maintenance CostPer mile

0.115 0.085

Annual mileage Fuel Cost

100,000$2.10/DGE

100,000$3.60

Per month:

Fuel (at 5 mpg) $3,500 $6,000

Lease charge 4,000 2,400

Operating charge 958 708

TOTAL $8,458 $9,108

Savings $650 / month

Management


14

Sound Balance Sheet


15

High Uncertainty


Is there a market?

16

Market Resistance


17

Technical Complexity


Natural Gas Engine Diesel Engine

Double the price Less power and torque Requires special parts Requires more maintenance

18

Infrastructure Limits


Source: DOE as of September 16, 2010

19

R&D Costs and IP Risk


Source: Westport

20

Valuations


21

Comparable Companies


22

Company Name EPSMarket Cap

($M)P/E P/S EV/Sales

Woodward Inc. 1.49 2,556.34 24.89x 1.75x 1.78x

Clean Energy Fuels Corp. -0.27 958.1 - 5.61x 5.17x

Fuel Systems Solutions Inc. 3.39 626.61 10.49x 1.23x 1.25x

China Automotive Systems Inc. 1.09 403.75 13.66x 1.23x 1.32x

Hydrogen Engine Center Inc. -0.11 2.42 - 1.78x 4.28x

Averages3/5

Positive909.45 16.35x 2.32x 2.76x

Westport Innovations Inc. -17.88 903.96 - 6.26x 4.70x

Value Driver – Revenue Growth


CWI accounted for 92% of Westport’s total revenues in 2010 Wildcard projects include Weichai-Westport, Volvo Powertrain

CAGR 32%

CAGR 16%

23

Product Revenue


Forecasted 20% annual growth in units shipped from 2011 – 2015 Unit price growth driven by refocus on HD segment

24

Cash Flow


Operating cash flow to break-even by 2013

25

FCFF Valuation


Cost of equity 11.18%

Cost of debt 8.10%

WACC 11.10%

Terminal growth rate 2.00%

PV of firm $ 658,187

Add: Cash & equivalents $ 211,461

Less: Debt $ 23,656

PV of equity $ 851,239

Outstanding options 2,091

# shares outstanding 48,929

Intrinsic value $ 17.40

26

Sensitivity Analysis


Cost of capital 8.3% 11.1% 13.9%

Terminal growth

1.5% 21.55 16.80 14.09

2.0% 22.76 17.40 14.45

2.5% 24.18 18.07 14.84

27

Gross Margin 30.0% 35.0% 40.0%

Growth Stage CAGR

15.0% 5.06 7.79 10.52

20.0% 14.27 17.40 20.52

25.0% 24.69 28.26 31.84

Summary


28

Catalysts


29

Conclusion to NAT GAS Act Broader Market Adoption of Natural Gas

Vehicles Climbing price of oil Growth in Asia/ Weichai JV

Contact Information


Simon Fraser University

Beedie School of Business

500 Granville Street

Vancouver, Canada

Tel +1 (778) 782-5209

30

Index of Slides


31

OverviewRecommendationCompany BackgroundEngine TechnologyJVs and PartnershipsEquity FinancingPositive DriversStrong FoundationForecasted Fuel PricesGovernment IncentivesStrategic PartnershipsWeichai Westport Inc.Adapting Business ModelManagementSound Balance SheetNegative DriversHigh UncertaintyMarket ResistanceTechnical ComplexityInfrastructure LimitsR&D Costs and IP RiskBreak-Even Point

ValuationsComparable CompaniesFCFF ValuationValue DriversRevenue GrowthProduct RevenueParts RevenueRevenue ForecastGross MarginOperating EfficiencyOperating Cash FlowWACC CalculationWorking CapitalNet InvestmentSensitivity AnalysisInvestment SummaryCatalystsDCF AssumptionsFinancial AnalysisKey RatiosCash Burn RateR&D ExpenseSegment Analysis

Pro Forma StatementsIncome StatementBalance SheetStatement of Cash FlowsOtherBoard of DirectorsManagementManagement CompensationBusiness OverviewPartnershipsGoing GreenUS Truck MarketCompetitorsEarly AdvantageCompetitive AnalysisGovernment IncentivesInternal RiskExternal Risk

Investment Summary


– Neutral +

Industry

Engine Competition

Alternative Competition

Financial

Management

Risk

32

2011 E 2012 E 2013 E 2014 E 2015 E 2016 E 2017 E 2018 E 2019 E 2020 E

Product

Units shipped 4,509 5,411 6,493 7,792 9,350 10,285 11,314 12,445 13,690 15,059

Unit shipped growth 15% 20% 20% 20% 20% 10% 10% 10% 10% 10%

Unit price 26.55 27.08 27.62 28.17 28.74 29.02 29.31 29.61 29.90 30.20

Unit price growth 2.0% 2.0% 2.0% 2.0% 2.0% 1.0% 1.0% 1.0% 1.0% 1.0%

Product revenue 119,703 146,517 179,337 219,508 268,678 298,501 331,635 368,447 409,344 454,781

Parts 25.0% 25.0% 25.0% 25.0% 25.0% 25.0% 25.0% 25.0% 25.0% 10.0%

% Previous 2-years' product sales 18% 18% 17% 16% 15% 14% 13% 12% 11% 10%

Parts revenue 36,865 39,915 45,257 52,137 59,827 68,346 73,733 75,616 77,009 77,779

Service 6,000 5,000 4,000

Total revenue 162,568 191,433 228,594 271,645 328,505 366,848 405,369 444,063 486,353 532,561

Source: Team B Student Research

Revenue Forecast


33

Parts Revenue


34

Rolling 12 Month Basis


35

Factor Rate Source

Beta 1.53 Bloomberg risk-adjusted 5-yr monthly beta

Rf 3.55% Bank of Canada 10-yr bond yield as of 1 Dec 2010

Risk premium 5.00% Market implied risk premiumSource: Damodaran (2010)

Cost of equity 11.18% Calculated using CAPM

Cost of debt 8.10% After tax interest rate on most recent debt offering

WACC 11.10% Weight-adjusted by market value of debt to equity


Discount Rate Calculation


36

DCF Assumptions


Commodity Price Risk Development Risk

development cost overruns procurement delays permitting issues

Operational Risk Weather related Unexpected changes in mineralogy

Currency Risks

37


Discounted FCFF


38

2011e 2012e 2013e 2014e 2015e 2016e 2017e 2018e 2019e 2020e

After-tax operating earnings (7,015) (12,391) (7,795) (579) 3,903 7,377 12,995 11,064 10,097 36,722

Less: Changes in non-cash working capital

(13,748) (13,292) (16,991) (20,626) (25,464) (17,454) (17,661) (17,891) (19,652) (14,723)

Less: Cap Ex - Depreciation (2,353) (1,185) (277) 290 671 (548) 815 490 473 479

Free cash flow to firm 9,086 2,086 9,473 19,758 28,696 25,379 29,840 28,465 29,276 50,967

Discount factor 1.11 1.23 1.37 1.52 1.69 1.88 2.09 2.32 2.58 2.87

Present value 8,177 1,690 6,908 12,968 16,953 13,495 14,282 12,263 11,352 560,094

Account Balances 2011 E 2012 E 2013 E 2014 E 2015 E 2016 E 2017 E 2018 E 2019 E 2020 E

Non-cash current assets

Accounts receivable 18,216 21,450 25,614 30,437 36,809 41,105 45,421 49,757 54,495 59,673

Inventories 10,833 12,900 15,540 18,796 22,730 25,383 28,048 30,726 33,652 34,015

Prepaid expenses 1,567 1,880 2,254 2,703 3,242 3,887 4,662 5,591 6,704 8,040

Non-debt current liabilities

Accounts payable and accrued liabilities 15,416 18,357 22,114 26,747 32,346 36,121 39,914 43,724 47,888 48,404

Deferred revenue 1,657 1,973 2,377 2,875 3,477 3,883 4,291 4,700 5,148 5,637

Warranty liability 12,877 15,163 18,107 21,517 26,021 29,058 32,109 35,174 38,524 37,279


Schedule of Working Capital


39


Schedule of Net Investment


40

2011e 2012e 2013e 2014e 2015e 2016e 2017e 2018e 2019e 2020e

∆Sales/Cap Ex 20 20 20 20 20 20 20 20 20 20

Capital Expenditure 1,318 1,523 1,946 2,399 2,899 1,955 1,964 1,973 2,156 2,356

Depreciation 3,671 2,708 2,223 2,110 2,228 2,503 1,149 1,483 1,683 1,877

PPE 3,856 2,671 2,394 2,684 3,355 2,807 3,623 4,113 4,586 5,065

Key Financial Ratios


2008 2009 2010Profitability

Revenues (CAD) 71.5 121.8 130.7

Gross Margin 31.5% 25.3% 31.6%

Net Income (CAD) -10.3 -24.4 -37.6

Net Profit Margin-

14.4%-

20.0%-

28.8%

Operation Efficiency

Return on Assets-

13.1%-

18.0%-

24.1%

Return on Equity-

34.6%-

40.1%-

44.3% Asset Turnover Ratio

0.91 0.90 0.84

Liquidity

Current Ratio 1.8 3.6 4.8

Quick Ratio 1.5 3.2 4.5

Leverage

Debt-Equity Ratio 1.7 1.2 0.8

41

Cash Burn Rate


2009 Q3 – 2010 Q2 Total

Net Income -31.22

Add: Depreciation & Amortization 2.36

Other Non-Cash Adjustments 9.92

Changes in Non-Cash Capital 14.64

Cash Outflow -15.63

Monthly Burn Rate -1.30

Cash at 2010 Q2 71.59

Months of Burn Remaining 55.07

42

R&D Expense


43

R&D Expense

Net Income

Net Income Without R&D

2003 37.29 -48.51 -11.22

2004 26.09 -37.72 -11.63

2005 18.42 -26.21 -7.79

2006 16.94 -16.86 0.08

2007 21.89 -11.31 10.58

2008 23.03 -10.32 12.71

2009 30.98 -24.43 6.55

2010 28.41 -37.64 -9.23

Segment Analysis


Figure 8.2. Natural Gas Vehicle Growth by Region

Region Average Growth

Asia-Pacific 51.0%

Europe 15.8%

North America -0.1%

Latin America 23.5%

Africa 19.2%

Worldwide 27.5%

Source: IANGV

44

Investment Risks


Figure 8.3. Incremental Engine Costs Over Diesel

(in $US)Sector (in thousand lb) Extra CostLight-duty (10 lb – 14 lb) 17,000Medium-duty (14 lb – 26 lb) 40,000Heavy-duty (26 lb +) 60,000Source: EIA

Figure 8.4. Natural Gas Station in Each State

45

Income Statement


46

2008 2009 2010 2011e 2012e 2013e 2014e 2015e 2016e 2017e 2018e 2019e 2020e

Revenues 71,536 121,837 130,712 162,568 191,433 228,594 271,645 328,505 366,848 405,369 444,063 486,353 532,561

CoGS (49,023) (91,020) (89,352) (101,769) (121,181) (145,986) (176,569) (213,528) (238,451) (263,490) (288,641) (316,130) (319,536)

Gross profit 22,513 30,817 41,360 60,799 70,251 82,608 95,076 114,977 128,397 141,879 155,422 170,224 213,024

Research and development (23,026) (30,982) (28,411) (28,979) (29,559) (30,150) (30,451) (30,756) (31,064) (31,374) (31,688) (32,005) (32,325)

General and administrative (6,033) (8,575) (12,728) (15,430) (18,705) (22,675) (27,488) (33,322) (40,395) (48,969) (59,363) (71,963) (87,238)

Sales and marketing (10,550) (15,071) (18,102) (18,230) (29,436) (35,355) (35,606) (44,768) (47,058) (47,392) (51,824) (54,476) (54,862)

Depreciation and amortization (1,550) (1,978) (2,128) (3,671) (2,708) (2,223) (2,110) (2,228) (2,503) (1,149) (1,483) (1,683) (1,877)

Foreign exchange gain (loss) (1,287) (682) (348) (424) (424) (424) - - - - - - -

Interest income 1,316 1,882 383 1,713 3,538 3,878 3,956 5,409 6,017 7,607 8,628 9,741 13,259

Other non-operating income (expense)

5,095 9,033 (5,559) (8,591) (9,857) (11,123) (12,389) (13,655) (14,921) (16,187) (17,453) (18,719) (19,985)

EBIT (13,522) (15,556) (25,533) (12,814) (16,899) (15,465) (9,012) (4,343) (1,527) 4,415 2,239 1,118 29,996

Interest expense (1,266) (2,348) (3,208) (2,681) (2,777) (2,897) (576) (617) (660) (706) (756) (809) (866)

Pretax income (14,788) (17,904) (28,741) (15,495) (19,676) (18,361) (9,588) (4,960) (2,186) 3,709 1,483 309 29,130

Income tax recovery (expense) 4,473 (6,521) (8,895) (1,504) (2,235) - - - - - - - -

Net income (10,315) (24,425) (37,636) (16,999) (21,911) (18,361) (9,588) (4,960) (2,186) 3,709 1,483 309 29,130

Less: Abnormal gains (losses) 10,659 14,275 2,972 - - - - - - - - - -

Normalized income (20,974) (38,700) (40,608) (16,999) (21,911) (18,361) (9,588) (4,960) (2,186) 3,709 1,483 309 29,130

Balance Sheet


47

2008 2009 2010 2011e 2012e 2013e 2014e 2015e 2016e 2017e 2018e 2019eCurrent assets

Cash and cash equivalents 22,762 82,619 105,851 211,461 192,116 191,894 192,455 209,803 235,032 268,771 305,162 345,581

Accounts receivable 7,028 6,417 11,570 18,216 21,450 25,614 30,437 36,809 41,105 45,421 49,757 54,495

Loan receivable 6,774 11,234 13,505 15,146 18,035 21,727 26,279 31,779 35,489 39,215 42,958 47,049Inventories 9,020 13,982 8,175 10,833 12,900 15,540 18,796 22,730 25,383 28,048 30,726 33,652

Prepaid expenses 1,033 1,387 1,307 1,567 1,880 2,254 2,703 3,242 3,887 4,662 5,591 6,704

Other current assets 4,944 4,451 5,069 5,069 5,069 5,069 5,069 5,069 5,069 5,069 5,069 5,069

Total Current assets 51,561 120,090 145,477 262,292 251,449 262,098 275,740 309,431 345,965 391,186 439,262 492,551

Equipment, furniture and leasehold improvements 3,685 7,712 6,209 3,856 2,671 2,394 2,684 3,355 2,807 3,623 4,113 4,586

Intangible assets 574 430 287 5,648 4,518 3,389 2,259 1,130 - - - -Goodwill - - - 8,665 8,665 8,665 8,665 8,665 8,665 8,665 8,665 8,665

Future income tax assets 4,366 5,337 4,144 4,144 4,144 4,144 4,144 4,144 4,144 4,144 4,144 4,144

Other long-term assets 18,754 1,935 - - - - - - - - - -

Total long-term assets 27,379 15,414 10,640 22,313 19,998 18,592 17,752 17,294 15,616 16,431 16,922 17,395

Total Assets 78,940 135,504 156,117 284,606 271,448 280,690 293,491 326,725 361,582 407,618 456,184 509,945

Balance Sheet


48

2008 2009 2010 2011e 2012e 2013e 2014e 2015e 2016e 2017e 2018e 2019e

Current Liabilities Accounts payable and accrued liabilities 8,470 14,359 13,902 15,416 18,357 22,114 26,747 32,346 36,121 39,914 43,724 47,888Deferred revenue 205 546 891 1,657 1,973 2,377 2,875 3,477 3,883 4,291 4,700 5,148Demand instalment loan 5,776 4,642 3,295 - - - - - - - - -Short-term debt 5,995 1,614 163 200 - - - - - - - -Current portion of long-term debt 54 17 139 14,003 81 1 - - - - - -Current portion of warranty liability 4,899 12,222 12,082 12,467 14,845 17,884 21,630 26,158 29,211 32,278 35,359 38,727

Obligation to issue warrants 4,000 - - - - - - - - - - -Total Current liabilities 29,399 33,400 30,472 43,744 35,257 42,376 51,253 61,981 69,215 76,483 83,784 91,763Warranty liability 4,258 12,369 9,199 10,717 12,762 15,374 18,595 22,487 25,112 27,748 30,397 33,292Long-term debt 8 11,353 12,936 9,452 9,720 10,080 - - - - - -

Other long-term liabilities 1,496 4,821 5,271 36,977 51,906 69,417 89,789 113,362 140,547 172,969 210,104 252,682Total liabilities 49,144 74,546 71,222 100,891 109,644 137,247 159,637 197,830 234,873 277,201 324,285 377,737Share capital 258,202 311,855 376,710 492,529 492,529 492,529 492,529 492,529 492,529 492,529 492,529 492,529Other equity instruments 3,079 12,319 12,293 12,293 12,293 12,293 12,293 12,293 12,293 12,293 12,293 12,293Additional paid in capital 5,097 5,263 5,260 5,260 5,260 5,260 5,260 5,260 5,260 5,260 5,260 5,260Accumulated deficit (247,460) (271,885) (309,521) (326,520) (348,431) (366,792) (376,380) (381,340) (383,527) (379,818) (378,335) (378,026)Accumulated other comprehensive income 10,878 3,406 153 153 153 153 153 153 153 153 153 153

Total Shareholders' equity 29,796 60,958 84,895 183,715 161,804 143,443 133,855 128,895 126,708 130,417 131,900 132,208

Total Liabilities and Equity 78,940 135,504 156,117 284,606 271,448 280,690 293,491 326,725 361,582 407,618 456,184 509,945

Statement of Cash Flows


49

2008 2009 2010 2011e 2012e 2013e 2014e 2015e 2016e 2017e 2018e 2019e 2020eCash flows from operating activities

Loss for the year (10,315) (24,425) (37,636) (16,999) (21,911) (18,361) (9,588) (4,960) (2,186) 3,709 1,483 309 29,130

Items not involving cash

Depreciation and amortization 1,550 1,978 2,128 3,671 2,708 2,223 2,110 2,228 2,503 1,149 1,483 1,683 1,877

Joint Venture Partners' share of net income from joint ventures

5,564 4,221 7,453 8,591 9,857 11,123 12,389 13,655 14,921 16,187 17,453 18,719 19,985

Changes in non-cash operating working capital

1,795 16,349 3,028 (5,380) 2,066 2,634 3,570 3,776 2,264 2,149 2,008 2,096 972

Other (14,393) (7,399) 2,974 6,261 6,201 7,518 9,113 11,048 13,393 16,235 19,682 23,859 28,923

(15,799) (9,276) (22,053) (3,857) (1,078) 5,136 17,593 25,747 30,894 39,429 42,108 46,666 80,887

Statement of Cash Flows


50

2008 2009 2010 2011e 2012e 2013e 2014e 2015e 2016e 2017e 2018e 2019e 2020eCash flows from investing activities

Purchase of equipment, furniture and leasehold improvements

(1,081) (5,904) (256) (1,318) (1,523) (1,946) (2,399) (2,899) (1,955) (1,964) (1,973) (2,156) (2,356)

Long-term investments 17,977 19,379 3,811 - - - - - - - - - -

Loan receivable (6,774) (1,641) (4,789) (1,641) (2,889) (3,692) (4,552) (5,501) (3,709) (3,726) (3,743) (4,091) (4,470)

Other investing activities 7,150 (28,199) 8,753 - - - - - - - - - -

17,272 (16,365) 7,519 (2,960) (4,412) (5,638) (6,951) (8,400) (5,664) (5,691) (5,716) (6,248) (6,826)

Cash flows from financing activities Short-term debt 10,158 (6,413) (2,552) (3,258) (200) - - - - - - - -

Long-term debt (6,814) 13,891 (47) (135) (13,655) 280 (10,081) - - - - - -

Share issuance 1,041 53,024 59,999 115,819 - - - - - - - - -

Other financing activities - (9,259) (4,218) - - - - - - - - - -

4,385 51,243 53,182 112,426 (13,855) 280 (10,081) - - - - - -

Increase in cash and cash equivalents

5,858 25,602 38,648 105,610 (19,345) (222) 562 17,347 25,230 33,738 36,391 40,419 74,061

Cash and cash equiv, beginning of year

23,081 22,762 82,619 105,851 211,461 192,116 191,894 192,455 209,803 235,032 268,771 305,162 345,581

Cash and cash equiv, end of year

22,762 82,619 105,851 211,461 192,116 191,894 192,455 209,803 235,032 268,771 305,162 345,581 419,642

Management Compensation


Name Position WPT Start Date

Total Compensation

Exerciseable Options

Unexercisable Options

John A Beaulieu Chairman Sep-97 246,154

David Demers CEO/Co-Founder

Mar-95 805,313 950,557 639,296

William Edward Larkin

CFO Feb-10 246,154

Elaine A Wong Exec VP: Strategic Development

Sep-01 495,124 316,410 581,168

Nicholas C Sonntag

Exec VP: Corporate Development

Oct-06 584,997 111,818 181,038

Darren Seed VP: Investor Relations & Comm

Melih Ogmen VP: Fuel Systems & Supply Chain

449,271

W Chipman Johnston

Secretary

51

Extensive Experience


Sara Liao SauFormer Secretary for the Environment, Transport and Works of Hong Kong

John Beaulieu, ChairmanExperienced in financing and assisting growth of more than 70 emerging technology firms

52

Board of Directors – Key Members



Dezsö J. HorváthDean of Schulich School of Business, York University, named AIB International Den of the year

M.A. Jill BodkinFounding Chair of the British Columbia Securities Commission, Former Ernst & Young Corporate Finance Partner

53

Board of Directors – Key Members



Bill. E. Larkin,CFOFormer CFO of Fuel Systems Solutions, Inc. and DDi Corp., auditor at Deloitte & Touche LLP

David R. Demers, CEOCEO since 1995, background in both physics and law, on board of directors from Primero Mining Corp. and CWI

54

Management

Elaine A. Wong, Exec. VPFormer CFO of Westport, extensive experience in international strategic planning in Canada and Asia

Nicholas C. Sonntag, Exec. VPPresident, Westport Asia and Europe. Former President of CH2M Hill in China and Canada,

W. Chipman JohnstonCorporate Secretary for Westport, Partner of Bennett ones LLP, experience in M&A

Business Overview


• Develops technologies which convert diesel engines to run on natural gas.

• Establishes partnerships with OEM’s

• Operates globally but currently derives majority of revenue from US market which only makes up 1.3% of NGV market.

55

Partnerships


Partnerships

Global Engine Producers Rank Partnership

Weichai 1 YES

Volvo 2 YES

Diamler 3 -

Cummins 4 YES

CNHTC 5 -

Global Truck Producers Rank Partnership

Daimler 1 YES

Volvo 2 YES

Dongfeng 3 YES

Tata 4 YES

FAW 5 -

Source(s): Westport November Presentation, AutomoticeWorld.com

• Established partnerships with industry leaders

• Only profitable venture is CWI

56

Going Green


Figure 5.4 Fossil Fuel Emission Levels (Lb / Billion Btu of Energy Input)

Pollutant Natural Gas Oil Coal

Carbon Dioxide 117,000 164,000 208,000

Carbon Monoxide 40 33 208

Nitrogen Oxides 92 448 457

Sulfur Dioxide 1 1,122 2,591

Particulates 7 84 2,744

Mercury 0 0.007 0.016

Source: EIA - Natural Gas Issues and Trends 1998

“…natural gas is the cleanest fossil fuel and a highly efficient form of energy.” ~pickensplan.com

• Worldwide use of natural gas vehicles has grown 27.5% per year since 2000.

57

US Truck Market


Thousands of Trucks1992 1997 2002

Light Trucks (in thousand lb)

Less than 6 lb 50,545.7 62,798.4 62,617.3

6 to 10 lb 4,647.5 5,301.5 17,142.3

Medium Trucks (in thousand lb)

10.0 to 14.0 lb 694.3 818.9 1,142.1

14.0 to 16.0 lb 282.4 315.9 395.9

16.0 to 19.5 lb 282.3 300.8 376.1

Light-heavy Trucks (in thousand lb)

19.5 to 26.0 lb 732.0 729.3

Heavy Trucks (in thousand lb)

26.0 to 33.0 lb 387.3 427.7 436.8

33.0 to 40.0 lb 232.6 256.7 228.8

40.0 to 50.0 lb 338.6 399.9 318.4

50.0 to 60.0 lb 226.7 311.4 326.6

60.0 to 80.0 lb 781.1 1,069.8 1,178.7

80.0 to 100.0 lb 33.3 46.3 68.9100.0 to 130.0 lb 12.3 17.9 26.4

130.0 lb or more 4.6 5.9 6.3

Not reported <50 <50 NA

ALL trucks 59,200.8 72,800.3 85,174.8Source(s): 1992, 1997, 2002: U.S. Census Bureau

• 42% increase in overall number of trucks during ten year period.

• 28% increase in Heavy Trucks.

58

Competitors


Westport Innovations Business Units

Heavy Duty Medium Light dutyR&D

ServicesWestport HD CWI Juniper Westport

Weichai, Volvo, Daimler, Cummins Advanced Fuels Technologies,

PrinsAutogassystemen Fuel Systems Solutions Inc. Landi Renzo

Revenues ROEWestport 130,710,000 -51.61Competitors Diesel Weichai 14,425,690,000 34.5Volvo 193,063,000,000 -19.57Daimler 26,808,000,000 -8.59Cummins 6,405,000,000 12.22Natural Gas Fuel Systems Solutions 453,320,000 25.1Landi Renzo 270,770,000 16.8

*Data in USD for FY 2009

Source: Bloomberg

Westport faces robust competition from established diesel engine manufacturers

59

Operating Efficiency


Sharp decline in contribution margin in 2010 due to: New emissions standards, requiring redesigned

components Transition to new suppliers

60

Early Advantage


Founding at UBC Westport’s Advantages

Early to market Highlight of some tech

Relationships Partners / Suppliers Customers

61

Competitive Analysis


62

Government Incentives


Income tax credits for natural gas refuelling equipment

Excise tax credit to seller of CNG or LNG Income tax credits for alternative fuel

vehicles NAT GAS Act

“I think that the odds are low in a lame duck session” David Demers, CEO (Q2 2011 Earnings Call)

63

High Internal Risk


Financial risks High R&D costs Takeover risk due to excess cash

Adoption risks Lack of infrastructure Psychology risk

Technology risks R&D and intellectual capital expiration New technology

64

High External Risk


Management risk High exposure to JV and partnership risk

Legislative and environmental risk Demand affected by natural gas act

65

Free Cash Flow


66

2010 2011 2012 2013 … Terminal2020

After-tax operating earnings (28,904) (7,015) (12,391) (7,795) 36,722

Less: Changes in non-cash working capital (3,400) (13,748) (13,292) (16,991) (14,723)

Less: Cap Ex - Depreciation (1,872) (2,353) (1,185) (277) 479

Free cash flow to firm (23,632) 9,086 2,086 9,473 50,967

Break-Even Point


67

Continued revenue growth and operating efficiency improvements lead to break-even in operating earnings by 2015

Net income could become positive by 2017

Leasing Program


68

Global Relationships


69

Vancouver

Vancouver

Sweden

China

Stock Price Movement


70

Natural Gas Consumption


71

westport innovations inc. presented by: simon fraser university march 5, 2011

Documents

informational purposes

simon fraser universitymarch

positive drivers

negative drivers

wptreport priceas ofdecember

target price

patent applications

patents186 employees