wex2011investorpresentation 2 1 11

7/28/2019 WEX2011InvestorPresentation 2 1 11

1/23

WEX2011

Presentation

WaterAssetManagementDynamicInvestmentApproachtoCapitalize

onPositiveTrendsinWater

February,2011


2/23

Global demand for clean water growing at a rate greater than GDP.

WaterInvestment

pportun ty

Growing scarcity of fresh water supplies due to contamination,overuse, climate change, and inefficient agricultural practices.

Deterioratingwaterinfrastructureandincreasinglystringentwaterqualityregulationsrequiresignificantincreasesincapitalspending.

Waterindustryshistoricallypositivepricingpowerisacceleratingasmarket

based

pricing

for

water

grows

in

acceptance

as

ameans

to

allocatescarceresources.

Overleveraged government and municipal balance sheets lead toincreased privatization pressure.

Proven and available solutions exist to remedy all water supply andquality issues.

Water related equity returns have a high degree of dispersion incomparison to the broader market, offering compelling opportunities

on both longs and shorts.

WEX2011Presentation Page 2


3/23

ater ar :Denmark Germany 1.003.00cent gallon*

US/Canada/Spain/Japan 0.250.70

cent/gallon

*

India/China 0.050.20cent/gallon*

Other: Soda: $3.26/gallon

Gasoline: $2.89/gallon

OrganicMilk: $7.98/gallon

Waterpricesarelessthan1%ofdisposableincome. Plentyofroomforpricesto

continuetoincrease,allowingattractivereturnsoncapitalnecessarytoensurewater

supplyandquality,yetremainaffordable.

AverageUSmonthlywaterbillistypicallylessthan50%ofcellular,cable,orelectricity.

Page 3WEX2011Presentation


4/23

Water H stor ca yHas

Been

An

E ect ve

In at on

He ge

350.014.0%

16.0%

Water&SewerRatesVs.CPIForUrbanWageEarners

Water and Sewer Component of CP I Water and Sewer CPI 6 Month Rolling Average% Change YOY CPI All Urban Consumers % Change YOY

200.0

250.0

300.0

8.0%

10.0%

12.0%

erCPI

Index

nthrolingaverage

100.0

150.0

0.0%

2.0%

4.0%

.

Water&Se

angeInIndexYOY,6m

0.0

50.0

4.0%

2.0%

May77

May78

May79

May80

May81

May82

May83

May84

May85

May86

May87

May88

May89

May90

May91

May92

May93

May94

May95

May96

May97

May98

May99

May00

May01

May02

May03

May04

May05

May06

May07

May08

May09

May10

C

h



5/23

u ure

o a

n ras ruc ure

pen ng:

ower

a er

ea



6/23

naan

In a

Water

ap ta

pen ng



7/23

arge

n rastructure

pen ng

ee s

EPAsCleanWater

and

Drinking

Water

InfrastructureGap

Analysisestimated

drinkingwater

sys ems year

capitalneedswithin

arangeof$170to

$493Billion,witha

midpoint

estimate

of 303 Billion. 1 TheCon ressionalBud etOffice CBO re ortFutureInvestmentinDrinkin WaterandWastewaterInfrastructureestimatesannualwatersystemneedsof$12.2to

$21.2Billion,whichwouldextrapolatetoa20yeartotalneedintherangeof$245to

$424Billion.2

TheWaterInfrastructureNetworks(WINs)CleanandSafeWaterforthe21st Century enewe a ona omm men o a eran as ewa er n ras ruc ure

estimateswatersystemneedsof$21Billionannually,whichextrapolatesto$420Billionover20years. 3

1 U.S.EnvironmentalProtectionAgency,CleanWaterandDrinkingWaterInfrastructureGapAnalysis(September2002),p.5. Needswereassumedtobein1999dollars

.

2 CongressionalBudgetOffice,FutureInvestmentinDrinkingWaterandWastewaterInfrastructure(November2002),p.ix. Needswerereportedin2001dollars.

3 WaterInfrastructureNetwork,CleanandSafeWaterforthe21stCentury ARenewedNationalCommitment toWaterandWastewaterInfrastructure(undated),p.31.

Needswereassumedtobein1999dollarsbasedontheplanningperiodanddataused.



8/23

orecas e

row

or

r va e

a er

ewerage

erv ces

onpeop e %ofPopulation %ofPopulation %ofPopulation

WesternEurope 187.1 46% 217.5 53% 229.6 55%

C&EEurope 33.8 10% 64.4 20% 81.1 27%

. . .

South&CAsia 10.1 1% 53.1 3% 97.4 5%

SouthEastAsia 250.7 12% 436.1 20% 555.2 24%

Oceania 8.4 25% 12.1 32% 14.7 36%

NorthAmerica 93.9 21% 137.9 29% 209.0 40%

LatinAmerica 79.9 17% 120.5 24% 148.0 27%

Worldtotal 731.2 11% 1160.6 16.0% 1537.6 19%

Source:GlobalWaterIntelligence11/08



9/23

stor ca y

avora e

eturns

n

o at ty

or

ater

qu t es

17YearAnnualizedReturnsandVolatilitythroughNovember2010

Thewatersector

continuesto

generateabove

averagereturns5%

10%

15%

20%

thantheS&P500,

electricutilities,

energycompanies

andcommodities

0%

WAMOpportunitySet USWaterUtilities S&P500 Philade lphiaUtility Index AmexOilIn de x GSCommodityIndex

PriceReturn,CAGRAnnualVolatility

overtime

5

6

7

US Water Utilities

S&P 500

Philadelphia Util ity Index

Amex Oil Index

ear umu at ve eturnst roug ovem er

1

2

3

4GS Commo ity In ex

0Dec-92

Jun-93

Dec-93

Jun-94

Dec-94

Jun-95

Dec-95

Jun-96

Dec-96

Jun-97

Dec-97

Jun-98

Dec-98

Jun-99

Dec-99

Jun-00

Dec-00

Jun-01

Dec-01

Jun-02

Dec-02

Jun-03

Dec-03

Jun-04

Dec-04

Jun-05

Dec-05

Jun-06

Dec-06

Jun-07

Dec-07

Jun-08

Dec-08

Jun-09

Dec-09

Jun-10



10/23

pportun ty

et

eturn

spers on

vs

Quarterly SpreadofBestDecileAveragevs.WorstDecileAverageReturn

120%

140%

80%

100%

read

40%

60%

Quarterlys

S&P500

WAMOpSet

20%

1Q04

2Q04

3Q04

4Q04

1Q05

2Q05

3Q05

4Q05

1Q06

2Q06

3Q06

4Q06

1Q07

2Q07

3Q07

4Q07

1Q08

2Q08

3Q08

4Q08

1Q09

2Q09

3Q09

4Q09

1Q10

2Q10

3Q10



11/23

H stor ca yH g

D spers on

Returns

For

Water

Equ t es

Historically,thewater

sectorhas

demonstratedahigh

degreeofdispersion

AverageAnnualPerformance19962009,byDecile

133.6%

51.6%

Decile1

Decile2 ,

offeringopportunities

togeneratereturns

onbothlongand

shortstockselection

30.3%

17.4%

Decile3

Decile4

7.4%

0.0%

.Decile5

Decile6

Decile7

49.5%

28.1%

16.8% Decile8

Decile9

Decile10

60% 40% 20% 0% 20% 40% 60% 80% 100% 120% 140% 160%



12/23

aster

un

nvestment

esu ts

nce

Growth of Initial $1000

TRF Historical Data$2,000

Compound ROR 11.48% 2.29% 3.02%

$800

$1,000

$1,200

$1,400

$1,600

$1,800

Cumulative Return 72.18% 11.99% 16.03%

Cumulative Growth of$1000 $1,722 $1,120 $1,160

$0

$200

$400

De

c-05

Ma

r-06

Jun-06

Se

p-06

De

c-06

Ma

r-07

Jun-07

Se

p-07

De

c-07

Ma

r-08

Jun-08

Se

p-08

De

c-08

Ma

r-09

Jun-09

Se

p-09

De

c-09

Ma

r-10

Jun-10

Se

p-10

De

c-10

TRF Master Fund Cayman LP S&P 500 MSCI AC

Risk vs. Return

TRF Comparison ToBenchmark

S&P 500 MSCI AC

13%

TRF Master Fund Cayman LP S&P 500 MSCI AC

Mont y A p a . 7 .

Alpha Annualized 10.96% 10.37%

Beta 0.42 0.433%

5%

7%

9%

11%

AnnualReturn

orre a on . .

R-Squared 0.24 0.32

14% 15% 16% 17% 18% 19% 20% 21%

Annualized Standard Deviation



13/23

o ut ore unicipa ater is eport

KeyCERES

members

include

CalPERS

CalSTRS

IllinoisStateBoardofRetirement

IllinoisStateTreasurer

North

Carolina

Treasurer

DeutscheAssetManagement

BlackrockFinancial

TIAACREF

State

Street

Global

Advisors PrudentialInvestmentManagement



14/23

. .

LakeMead

z Water at lowest oint in 75 ears

z HooverDammaybereducedto3turbines

EnergyWaterConnection:30%ofpowerusedtomove

watertoSouthernCalifornia

LakePowell

z WatermaybetransferredtoLakeMead

EnergyWater

Connection:

Powell

cools

Navajo

,LADWP

Bay Delta

z Uncertaintyofrestorationfunding,stakeholderbuyinStorage

z Limitedstorage

opportunities:

capacity

&

quality

z Highcost

Energy

z gn can opera ngcos orsomesupp es



15/23

Creditratings

do

not

consistently

communicate

these

trends

Ratin o inions:

Assumethatwaterflowsinthefuturewillbeconsistentwiththerecentpast.

Nostress

test

to

understand

revenue

effects

of

manmade

supply

shocks.

Donotalwaysassesshowwaterlimitationsfacingwholesaleproviderscanimpactretail roviders.

Sometimesconfoundrevenuegrowthandvolumegrowth.

Applymetricslikeregionalwaterratebenchmarksthatmaydiscourageconservation

pricing. Do not necessaril differentiate between welldiversified resilient s stems from more

vulnerablesystems.

Utilityinvestorsfacetwomainfinancialrisks:

Defaultrisk.

Failure

to

incorporate

all

material

emerging

trends

into

resource

planning

candamageautilitysabilitytohonoritsdebtobligations.

Pricevolatility.Inabilitytopassthroughcostsorraisefuturedebtcanimpairautilityscreditquality.Creditchangesormarketrecognitionofriskmayresultinchangesinbondpricesonthesecondarymarketwellbeforematurity.



16/23

Population shifts due to migration and birth rates will continue to favor the Western U.S.

where o ulations are ro ected to increase b almost 40% between 2005 and 2030.

. .

State 2005Projections

2030

ProjectedGrowth

%Increase. , , , , , ,

.California 36,038,859 46,444,861 10,406,002 29%

.Colorado 4,617,962 5,792,357 1,174,395 25%

.Idaho 1,407,060 1,969,624 562,564 40%

. , , , , , ,

.NewMexico 1,902,057 2,099,708 197,651 10%

.Oregon 3,596,083 4,833,918 1,237,835 34%

.Texas 22,775,044 33,317,744 10,542,700 46%

. , , , , , ,

.Washington 6,204,632 8,624,801 2,420,169 39%

TOTAL 87,179,785 121,562,879 34,383,094 39%Footnotes:

Source: U.S.CensusBureau,PopulationDivision,InterimStatePopulationProjections,2005.



17/23

Tenmillionacrefeetofadditionalwaterannuallycouldberequiredto

This increase in water will be needed to:

sustaintheWesternU.S.overthenexttwentyyears

EstimatedUrbanWaterUsage

Increaseby2030

Replace depleted allocations

Enhance existing supplies

Provide for future housing

State ProjectedIncrease

California 1,300,000 5,800,000afTexas 2,500,000 3,000,000afUtah 600,000af

Enable industrial development

Ensure recreational viability

o ora o , aArizona 250,000 500,000afNevada 200,000 300,000afOregon 250,000 500,000af

Satisfycoolingandprocessingneedsof

conventionalandrenewablepowerplants

TOTAL 5,770,000

11,400,000

afCalifonia WaterPlanAdvisoryCommittee2005Update on UrbanUs e

Texas WaterDevelopmentBoard

UtahDivision ofWaterResources4

ColoradoStatewide WaterSupplyInitiative

Arizona DepartmentofWaterResources

Nevada Division ofWaterPlanning,Nevada State WaterPlan

Statewide WaterNeeds Assesment,OregonWaterResourceDepartment



18/23

U. .Water

an

Lan ,

LL

Transact on

Price: 70 000 000 includin 10 000 000 in seller financinWinnemucca Farm Location: HumboldtCounty,Nevada,roughly20miles

Northof

Winnemucca

Acreage: 14,486acresofirrigatedlandand5,514acresofdryland

Water: 36,261AFofappurtenantcertifiedannualwaterrights

sse s: cen erp vo rr ga onsys emsan eep

waterirrigationwells

40yearhistoryofuninterruptedwaterusage

acqu res o nnemucca arm rom nnemucca arms, nc. .

WFI will Triple Net Lease the farm from WAL for an initial 10 year term at a rate of $3,000,000 per year.The lease will be collateralized by WFIs ownership in WAL.

Lease payments will be used to:

Pursuant to the business plan WAL has initiated discussions with a company pursuing a NorthernNevada integrated power generation and transmission strategy and a company interested in

Pay a 4% annual dividend

Fund asset development Cover management overhead

Pursue additional transactions

constructing concentrating solar power plants. Both entities are considering either acquiring and/or

leasing water from the property or alternatively developing a portion of the property as a power site.



19/23

ConventionalPowerPlantOperator Leaseswaterfornewgeneratingstationson

capitalexpenditure.

RealEstate

Developer

Purchaseswaterrightsanddedicatesthemtoalocalwaterauthorityinexchan eforservicecommitmentsfor

AgricultureWaterDistrict Leases

water

on

astand

by

basis

to

augmentitssurfacewaterresources

anewsubdivision.

indryyearsinordertomeetcommitmentstoitsmembers.

CoalBedMethaneProducer Leaseswatertoreplacethe

wateritisextractingasapartofits naturalgasproduction.

WaterBanking

Authority

Purchaseswaterinwetyearswhenpricesarelowerinordertoaddtoitsundergroundstoragereserves.

ConcentratingSolarPlantFacility Leaseswatertosecureareliable

longtermsupply.



20/23

Regulatedutilitiesprovideinflationprotected,highvisibilitycashflows

doubledigitreturns

Topline

revenue

growth

supported

by

sales

of

an

essential

resource

with

consistent

pricing

power

Highlyvisibleinflationprotectedcashflowssupportconsistentdividendgrowth

expenses

Preapprovedcapitalinvestmentsandtheassociatedincreaseinratesareprimarilydrivenby

environmentalcomplianceandthereplacementofdilapidatedcriticalinfrastructure

SouthWestoperatesintwoofthemostdynamicstatesforeconomicgrowthandwaterresource

development

Californiascustomerbaseisaprimarilyurban,stablecustomerbasewhiletheTexascustomerbaseis

primarilylocatedinthefastgrowingsuburbanandexurbanmetroregionsofAustinandDallas

Contractserviceshaveadiversecustomerbaseacrosssixstateswithminimalcustomerconcentration

SouthWesthas

substantial

water

rights

and

water

storage

rights

Whileoffbalancesheet,thesehavesignificantvalue:~$160million

Strategiesforassuringwatersupplyreliabilityandwaterresourcevaluecreationinexistingbasins

beingdeveloped

Diverseserviceterritories,includingnonregulatedbusinesses,providecomplementarygrowthopportunities

Financiallystressedmunicipalities,manyoutofcompliance,requirequalifiedwaterandwastewater

solutionproviders

to

create

operating

efficiencies

and

to

comply

with

environmental

requirements



21/23

USAWaterServicesLLC,throughitsinvestmentinSouthWest Waterprovidesinvestorsa

un queopportun tyto nvest nt econso at ono t e waterut ty n ustryw t

attractive

financial

returns.

SouthWest WaterCompanyisauniquelyattractiveinvestmentforlongterminvestors

xpecte annua cas v en y e : . rst yearaverage ,grow ng

longterm

ExpectedIRRof12%+

Keyassets

located

in

attractive

regulatory

environments

ppor un y o nves su s an a a ona cap a np a ormgrow s ra egy

SouthWestWaterCompanywasacquiredbyWaterAssetManagementandJ.P.Morgan

AssetManagementsInfrastructureInvestmentsFundforapproximately$336millionin

ep em er



22/23

Waterinvestmentspendingtoaccelerateglobally

Wateravailabilityanincreasinglyimportantrisk,largelyunderappreciatedbythefinancialcommunity.

Governmentownershiptodeclinedrivenbyfiscalpressuresandrecognitionofincreasedinvestmentandoperatingexpense.

Regulatoryreform

likely

as

private

capital

is

incentivized

to

enter

the

vo create ypu c nanc a constra nts.

Privateownershipandinvestmentinbothphysicalwateranddistributionassetswillgrowglobally.

,

longshort

equity,

private

U.S

water

utility,

water

rights,

and

agriculturalpropertieswithexcesswaterinkeyhydrologicalareas.



23/23

wex2011investorpresentation 2 1 11

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