Cleantech venturing - performance, players and potential Presentation to Environmental Finance Workshop December 9 th 2004 Prepared by Nicholas Parker, Chairman

Presentation Outline Venture Capital & Cleantech Defined Cleantech Venture Network Cleantech Trends – By the Numbers The opportunity in cleantech –Venture grade returns –The industry drivers –The players Summary –Cleantech Venture Network/WBCSD collaboration

Venture Capital Defined “Funds made available for startup firms and small businesses with exceptional growth potential. Managerial and technical expertise are often also provided”.startupgrowth Businesses are typically technology-intensive, such as IT, telecom or biotech. Capital invested is usually in the form of preferred shares VC funds are raised from pension funds, insurance companies, banks, corporations and wealthy families VCs are angels, professionals and corporations VCs seek to exit deals via IPOs or trade sales Silicon Valley in northern CA is the epicentre although now a global phenomenon

Cleantech Defined Embraces products and services that optimize the use of natural resources, while reducing ecological impact and adding economic value by significantly lowering cost and improving profitability. Cleantech spans many industries, from alternative forms of energy generation to water purification to materials-efficient production techniques. Not classic “environmental” technology – more like “biotech” as an investment theme.

“Cleantech” – the Sustainable Venturing Opportunity Alongside the information revolution is an industrial revolution reshaping the design and manufacture of almost everything that we see around us. The revolutionary products being developed today have dramatic improvements over the old because they:  Are lighter, smarter and stronger.  Are cheaper to manufacture and operate.  Are less carbon-intensive and more energy efficient  Offer greater service utility per unit of material input  Enable virtually zero waste and/or emissions

Cleantech Industry Segments Energy Generation Energy Storage Energy Infrastructure Energy Efficiency Transportation & Logistics Water Purification & Management Air Quality Materials & Nanotechnology Manufacturing/Industrial Agriculture & Nutrition Enabling Technologies Materials Recovery & Recycling Environmental IT

Cleantech Thematic Segments Clean Energy Clean Water Cleaner Production Advanced Materials & Nanotechnology (e.g. catalysts and membranes) Information Technology & Internet (e.g. advanced meters and sensors) Cleantech is a category like biotech, not a sector. CONVERGENCE

Cleantech is not Envirotech Envirotech 1970s-80s Regulatory driven market Compliance-based purchasing “End-of-pipe” tech, e.g. scrubbers on smoke stacks Chemical science Traditional engineering Slow growth markets, e.g. waste management “Save the world” mentality Low IT use Cleantech mid 1990s - Economic market drivers Productivity-based purchasing “Front-of-pipe” tech, e.g. zero emission plants Biological & materials science Systems design & engineering Rapid growth markets, e.g. solar energy “Entrepreneurial” mentality High use of IT

Cleantech Examples Agriculture - bio-based materials, farm efficiency technologies, micro-irrigation systems and natural pesticides Energy - distributed and renewable energy generation and conversion (including fuel cells, geothermal, wind and photovoltaics); energy management systems; superconducting transmission; energy storage and power quality; key enabling technologies; and related Internet and information technology-based services Manufacturing - advanced packaging; high value materials recovery; natural chemistry; sensors; smart construction materials; and precision manufacturing instruments. Transportation - hybrid vehicles, lighter materials, smart logistics software and telecommuting Water - water recycling and ultra-filtration systems (UV and membrane based systems), sensors and automation systems and desalination equipment

Our Background & Mission Cleantech Venture Network (“Cleantech”) is a private company founded in 2002 by investors to provide information-based services to an emerging community of clean technology venturers. Our mission is to accelerate the growth of investment into venture-grade companies deploying "clean technologies" through the provision of high quality market facilitation activities. Our principal office is in Michigan, with a presence in Canada, Europe and on the US West Coast 5 Full-time employee equivalents + hiring 2-3 additional employees.

Current Services Venture Forums – provide access to high quality deal flow, industry information, and networking opportunities Venture Monitors – provide investment tracking and quarterly analysis, along with industry updates, trends and forecasting. On-line Investment Opportunities – provides access to cleantech investment opportunities in real time with minimal transactional costs Research – provide subscription based reports on investment returns and prospects leveraging proprietary data streams and industry partnerships

Accomplishments Met all key targets in founding business plan. Five highly successful forums in Toronto, San Francisco & New York Venture Monitor established as the source on cleantech venturing Media coverage in over 80 publications including WSJ, FT, Newsweek, Red Herring, VCJ Sophisticated website, offering member services High-profile venture advisory board Currently expanding into Europe with first Forum planned for Spring 2005 in Paris

Accomplishments by Numbers 130 full members with >$3.5 billion in assets focused on cleantech venturing, as well as over 400 affiliate members Reported on more than $3.0B in cleantech venture investments since beginning of 2002 Identified approximately 480 investors in 450 deals Directly sourced > 600 deals for our members Profiled 103 pre-qualified investment opportunities at our Venture Forums More than 1000 investor attendees at Forums Over $250M raised to date by presenting companies Avg. 250,000 hits per month on cleantechventure.com

Corporate Members Ingersoll Rand Henkel Hydro Quebec Capitech Intel Capital Lubrizol Corporation Mitsubishi International Norsk Hydro Ventures OPG Ventures PwC RBC Technology Ventures RWE Dynamics Southern California Gas Trans Pacific Petroleum Unilever Ventures and others…… ABB New Ventures BASF Venture Capital Boeing Tech Ventures Cinergy Ventures CH2M Hill Chevron Texaco Ventures DTE Energy Ventures Eastman Ventures EBARA Electricite de France ENCANA EPCOR Fuji Research GE Energy Honda Research

Investor Members (Partial List) Specialist Funds Global Environment Fund NGEN Partners Enertech Capital Rockport Capital Nth Power SAM Private Equity Expansion Capital Perseus LLC Odyssey Venture Partners Ventures West Braemar Energy Ventures Quantum Leap Company Mainstream Funds Kleiner Perkins Caufield & Byers VantagePoint Venture Partners Draper Fisher Jurvetson Technology Partners Ventures West CDP Capital Garage Technology Ventures Bessemer Venture Partners Arch Venture Partners Carlyle Group

Upcoming Events Cleantech VI – March San Francisco –500+ investors expected to attend –Opportunity for significant LP and MNC participation Cleantech VII – May Paris –Launch of Cleantech Europe –European Advisory Board Cleantech VIII – September Boston –Our first visit to Boston Cleantech IX – December Shanghai –Launch of Cleantech Asia –Asia Advisory Board

Cleantech Venture Monitors In Each Issue: Cleantech Investments Monitored Cleantech Investments Profiled Clean Capital Stories Venture Activity Clean Bulletin Board Established reference for media and other stakeholders on cleantech venture industry $3 billion in deals tracked!

On-line Investment Opportunities Available to Member Investors –Comprehensive inventory of clean technology investment opportunities –Have sourced over 500 deals to our Members Full search capability on-line –By segment, stage, geography, capital raise, posting date, etc. –Download or view full executive summaries notification of companies of interest –Timely and efficient delivery Due diligence assistance –Identify competitors, competing or complementary technologies, potential partners, etc.

Pioneering Research Responding to an unmet demand for reliable research on the state, performance and opportunities in the cleantech area. Initiated preparation and publication of the first report on cleantech venture returns, exits and prospects. Report underwritten by sponsors – EnerTech Capital, Expansion Capital Partners, CDP, Rustic Canyon, Sustainable Asset Management, SDTC. First report will provide preliminary data suggesting strong historical and projected returns to cleantech venture investors. Future reports will cover topics such as State of the Industry, VC Directory as well as more detailed data on investor returns

“Cleantech – Achieving Competitive Venture Returns” Report The most comprehensive investigations of cleantech investment performance to date Covers over 75 initial public offerings and 650 M&A transactions - with total value of over $94 billion - across a dozen industries, a score of countries and a quarter of a century  Provides evidence investors in privately-held cleantech companies have been able to achieve liquidity.  Documents instances in which shareholders exited their investments with venture-grade returns.  Indicates returns to cleantech investors over the past decade have matched or exceeded average venture returns across all sectors during the same period.

“Returns” Report in Numbers Exits have been available both through public offerings and trade sales Past 10 years, overall VC returns have been 26%, in cleantech it is nearly 30% Cleantech IPOs yielded returns to pre-IPO investor of 5.5x, over 8x in Europe Over the past 10 years, cleantech stocks have outperformed the S&P 500 and Russel 2000 Overall returns on cleantech M&A transactions were 4.3x on invested equity, based on over $90 billion in transactions tracked over the past 2 decades

Cleantech Venturing 2002 – 2004 (Q2) Nearly $3b invested in cleantech in the past 10 quarters deals over Approximately 450 unique investors in 400 deals over Energy related companies account for 40% of all cleantech deals Strong pipeline of early stage deals requiring follow-on financing Geographic dispersal and average deal size broadly tracks overall deal activity Cleantech now 6 th largest venture investment category

Cleantech Investment vs. Overall VC

Investment by Industry Seg. (Q – Q2 2004)

Investment by Energy Industry Segment for (est.) Energy Infrastructure – IT related $303,918,900, 29% Energy Storage, $186,398,900, 18% Energy Efficiency, $74,320,431, 7% Energy Generation, $493,589,900, 46% Source: Cleantech Venture Network LLC

Who is Investing? deals over More than 450 investors in 400 deals over Small pool of specialist energytech funds Small pool of funds specializing in industrial and environmental technologies Small pool of mainstream VCs with some cleantech exposure although a large number researching the cleantech space Significant pool of corporate VCs Emerging institutional and family office interest –California Green Wave initiative: $500M from CalPERS and CalSTRS being allocated to cleantech ventures.

Who is Buying? Pharmaceutical, Semiconductor and Thermoelectric companies who use large quantities of ultra pure water Automobile and Aircraft Manufacturers needing higher fuel efficiency from lighter materials Utilities and Large Energy Users demanding reliable, affordable and low carbon power supplies Consumer Electronics companies needing to reuse valuable components and materials Agricultural producers requiring safer and more precise inputs and products Logistics organizations seeking more efficient use of fleets and containers

The Opportunity The market for cleantech is rapidly developing Industrial restructuring Scientific and engineering advances Changing socio-political values Concern for environmental sustainability Some clean technology markets are growing at compound annual rates of more than 20% Prospect of products that cost less, perform better, and sustainably satisfy human demand The impact of cleantech is ubiquitous: there are large and highly disruptive market opportunities emerging Clean technologies reflect long-term trends – decarbonization, lighter materials, greater social transparency etc – accelerated by technology and the eco-footprint of 6.1 bn people. Trends + acceleration = new sustainable market opportunities

The Trends A confluence of major “tipping point” events such as $50 a barrel oil, driving a shift toward cleaner energy generation and consumption patterns Increasing interest by major corporations in adopting clean technologies to drive productivity and reduce waste The rise of “serial” entrepreneurs in the cleantech field, A leveling of the “playing field” – with the bursting of the dot com bubble. The rise of China, in particular, as a major consumer of resources and source of pollution. Continuing improvements in the performance of clean technologies

The Attraction Category is not over-invested – opportunity to get in early Low enterprise valuations – good multiples are achievable Lower capital intensity than other categories Strong trade exit potential – most M&A Strong and growing global corporate, consumer and government demand Evidence of rising public market interest Pro forma portfolio IRRs equal or better than other sectors Investors can play a key role by selecting and nurturing the potential winners for high financial ROI and societal benefits

The Challenges Fostering “serial” cleantech entrepreneurs Building big-small business partnerships Building investment syndicates Attracting institutional capital Gaining recognition as an investment category Developing sell-side analyst coverage Bringing cleantech to emerging market economies Avoiding a mini “bubble” Building linkages between different capital suppliers (eg project finance, venture capital and equipment leasing) Encouraging appropriate public policies

Summary Cleantech is an emerging asset allocation category Cleantech venturing can help reduce carbon and other sustainability risks while generating an attractive financial return and a window on emerging business models and markets. Environmental financiers should allocate 5-7% of equity funds to cleantech ventures. Toronto and Canada can be global leaders in the cleantech arena.

Thank You! We welcome your interest and support!