1. Energy & Environmental Technology Presented by Jane Lindner
Investing in China 2005 Symposium

2. Energy & Environmental Opportunities
Tremendous global opportunity in energy & environmental technology
For the next 10 years China will be:
A key market
and
A key market driver 2

3. Macro Factors Favoring Energy & Environmental Technology
The world is demanding cleaner power, water & living space
Existing energy infrastructure is aging under a growing population
Traditional energy sources are getting more expensive
Globalization has exacerbated each of these issues

4. China’s Unique Problem
High Growth
Dense Population
Opportunity
Major Environmental Concerns
Huge Energy Demand
Weak Infrastructure 4

5. The Environmental Issue
World bank: China has 16 of the world's 20 most-polluted cities
Electricity production accounts for 34.2% of China’s air pollution (legacy of coal economy)
China is on pace to discharge 1.4 to 1.9 billion tons of carbon dioxide by 2020 – ranking it as the world’s top polluter
Industrial waste amounts to 650 million tons/year
The daily sewage rate of 3.7 tonnes requires 10,000 wastewater treatment plants = $48 billion to achieve a 50% treatment rate

6. The Water Issue Water shortage in 2/3rds of Chinese cities
300 million rural residents in China lack clean drinking water
Only a small percentage of surface water meets domestic standards
Severe urban/rural divide exists
70% of water in 5 of China’s 7 major rivers systems not suitable for human contact
The not talked about problem: water infrastructure soaks up power like a sponge

7. Power Issue Today per capita generation is small
1/13th of the US; 1/8th of Japan
China needs 1.5 billion kW of generation capacity by 2010 (385 MM kW today)
100 mm people lack access to power
China is the largest coal producer in the world
58% for industrial use
Not a sustainable source for long-run growth
2nd largest consumer of energy but lacks oil and gas resources
No growth without cheap efficient power
To fulfill the goal of quadrupling year 2000 GDP by 2010, China faces serious challenges in terms of energy supply and environmental protection

8. China Macro Factors Rapid economic growth
World Bank estimate: between 2004 and 2015 half of the world’s construction will be in China
Large population and abundant renewable energy resources
Big environmental problems today and getting worse with rapid development
World attention focused on China
“Green” 2008 Olympics and 2010 Expo Shanghai
Pledge to the United Nations – every rural family will have clean drinking water by 2020

9. China’s Response 10th 5 Year Period (2001-2005)
Construction of coal mines and coal processing plants - Promote development of clean coal tech
Accelerate local production of wind power equipment; find a solution for remote power supply
Implement pilot projects on energy conservation in large energy consuming industries
$85 billion to be invested in environmental production

10. Where Might Opportunities Lie?
Water
Power Generation
Renewables
Fuel Cells
Clean coal
Efficiency
Green building construction

11. Water Water treatment alone is $500 billion industry globally
Veolia Water
Acquired 45% of Shenzhen Water Group for $400 million in December 2003
Signed contract with Beijing municipal government to build wastewater treatment plant for Olympics
Has won a total of 13 water contracts and invested a total $1.2 billion
Source: China Daily
Recent Case Study
Water treatment alone is $500 billion industry globally
China will be a big piece of this market as it grows over the next 10 years
5 Year Plan: $12 billion allocated to water and wastewater treatment
Drinking Water
Over the past 5 years, 800,000 new water treatment facilities went into operation
More than 14 million rural families have gained access to drinking water
Wastewater
Beijing will spend $1.45 billion on wastewater equipment
9 sewage plants
8 recycling treatment plants

12. Infrastructure – Power Choices
190 Gigawatts
75% Coal
25% Hydro & Nuclear
Very minimal other
Source: EIA
China’s Power Today
Oil/Natural gas
clean, rising prices, limited supply
Hydro
large domestic resources; huge environmental impact; big ticket item
Nuclear
moderate priced & clean, long-term environmental tradeoffs
Renewables
Great to talk about; but only a small dent in supply needs
Coal
Dirty, cheap, plentiful (for now)

13. How about Fuel Cells?
60 domestic institutes & companies active in fuel cells
Electric bicycles one noted application (2.5 mm/year production)
Est. $300-$400 mm in investment in fuel cell and advanced hybrid technology in
China is not as big a player as the US, Japan, and Europe
But China is very active and huge potential market
Fuel cells are another area where China’s low cost manufacturing may make a difference

14. Where Do Renewables Fit?
Guangting Power Plant
World’s largest wind project
Beijing, China
Launched in October 2004
Xinfengda Technology Group is the project builder
Using large scale advanced wind power generation units from Germany
400,000 KW with 2 billion KWh generation capacity
2 Phases to be completed in 2006 and 2008
Source: Interfax-China
Recent Case Study
China’s Renewable Energy Development Project
Launched in December 2001
Total Budget of $139 million
Solar Photovoltaic (PV)
Solar energy will be principal energy source for 2008 Olympics.
Power 80-90% of streetlights
Heat up to 90% of hot water
Government grants to PV companies to accelerate installation of 300,000 – 400,000 PV systems (10 MW)
Wind Power
Largest exploitable wind power capacity in the world – 25.3 billion KW
Only 560,000 kW installed to date
Currently relying on imports – domestic products could reduce cost about 50%

15. Efficiency “Green” construction accelerating
Century Prosper Center
155,000 m2 twin office tower
Beijing Central Business District
Main green strategies: high performance chiller with energy recovery system, low emissivity window glazing, automatic dimming lighting, reduced lighting density
Annual energy Savings – 12 million kWh
Annual cost Savings – $ 1 million
Simple payback period – 1.1 years
Source: The China Business Review
Recent Case Study
“Green” construction accelerating
A kilowatt saved is a kilowatt produced
Target 50% less energy use/sq foot from 1980s
All the major Western players are already there: Trane, Carrier, York, Delta, GE, Honeywell, Siemens, Caterpillar, Cummins
Possible areas of investment opportunity
Advanced roofing/building materials
BIPV (building integrated photovoltaics)
Insulation and prefab products
Heat recovery systems/variable speed drives
Power conserving lamps
Energy efficiency can mean rapid payback

16. Clean Coal Coal gasification-based technologies
Gasification technologies can supply electricity and liquid fuels as well as hydrogen and other chemicals and greatly reduce pollution
China is ideal candidate
Rich coal resources
Existing power and chemical industries
R&D ability
Positioned to acquire IP and become manufacturer of core equipment
Could become world leader
High Risk / High Reward

17. What makes a Chinese Cleantech Company Attractive?
Innovation
Quality
Realistic pricing (valuation)
Sound business strategy
Compelling economics

18. Summary
China is in a unique position to become a world leader in energy and environmental technology
Large population
Abundant natural resources
Rapid economic growth
Current limited infrastructure is a two-edged sword
Limits pace of growth
Clear path to use next generation technologies
Big opportunities for clean technology

19. ane Capital
P a r t n e r s J