Bermuda Government Alternative Energy July 14, 2010 Ronald Simmons, Trustee Bermuda Pension Plans Bill Monagle, CPA, Partner

Renewables & Clean Tech: – Clean Tech and Renewables provide energy with reduced ecological impact from sustainable sources Sustainable energy sources are the alternative to fossil fuels, which have a finite quantity in the earth, produce waste that is harmful to the environment and are being depleted rapidly – Investment opportunities include investments in the sources of clean, sustainable energy as well as opportunities that can increase efficiency and decrease waste of current sources of energy. The most prominent sources of sustainable, clean energy are: Solar; Wind; Hydro; Biomass & Biofuels; and Geothermal – Other opportunities exist in energy efficiency as well as ways to make traditional energy sources cleaner such as carbon capture for coal – Opportunity is Global Alternative Energy

Global Energy Demand Source: US Energy Information Administration (EIA): International Energy Outlook 2010 *Reference case assumes current laws and regulations remain unchanged – Global Energy Demand projected to increase Demand projected to be driven by emerging economies because of industrialization of these countries and their expanding populations – 84% of increased demand expected from Non-OECD countries Projection

Global Energy Demand (cont’d) Source: US Energy Information Administration (EIA): International Energy Outlook 2010 *Reference case assumes current laws and regulations remain unchanged – Energy consumption from all energy sources expected to increase Renewable energy electric generation projected to increase 3% per year between 2007 and 2035 – 80% of increased renewable electric generation expected to come from hydro and wind 2035 projections indicate 23% of world electric generation will come from renewable energy sources, up from 18% in 2007 However, still a small portion of all energy consumption

Global energy demand expected to rise – Demand expected to be driven by emerging countries through industrialization and expanding populations (India and China) – Fossil fuel reserves, especially oil are dwindling and harder to access Global warming – Emissions restrictions expected to become more stringent – “Going Green” trend in business nationwide – BP spill in Gulf illustrates the ecological dangers of fossil fuel production in areas that are harder to access but necessary due to the depletion of more accessible reserves Energy security – Dependence on oil from hostile nations undermines the security of Western economies for reasons that are not simply dictated by traditional supply/demand economics – Fossil fuel prices will continue to rise and remain volatile Government mandate for clean energy – Global mandates exist in the United States and Europe “Going Green” is the trend in corporate America – Private and public investment levels continue to increase Why Alternative Energy?

Cost – Renewable energy production remains more expensive than fossil fuels Hydro and wind most economically competitive sources, with solar catching up Natural Gas projections of recoverable gas in North American shale has tripled with technological advances, moving natural gas prices down. Natural Gas produces half the co2 as coal in power production which makes it a cleaner, cheaper alternative and is viewed by some as a negative driver of investment into clean energy sources Much of the investment in new sources of energy has been sparked by government incentives – Tax breaks or grants in the United States – Feed-in tariffs in Europe » Uncertain future of government incentives due to budget restraints projected for the United States and Europe Aging infrastructure – Grid inefficiencies continue to hamper waste reduction This area is also an opportunity to invest in “smart grid” technologies as well as other efficiency products – Connecting to the grid remains complex Alternative Energy Risks & Concerns

Production is inconsistent – Renewable sources of energy predicated on nature; wind must blow and sun must shine for wind and solar power to be produced Traditional power sources will remain necessary to cover production deficits in periods when weather does not provide enough fuel to provide power to grid 3 Transmission from optimal sun and wind regions to densely populated areas remains problematic Attractive metrics in other energy sources that will continue to have majority of market share in energy for foreseeable future – Natural gas investments increasing in North America due to new proven reserves that has made natural gas cheaper. Natural gas is ceaner than coal and oil which has decreased incentive to invest in clean tech at lower margins in the short term Alternative Energy Risks & Concerns (cont’d)

Investment Landscape Annual Global investment in Renewable Energy – $90 billion in 2009 according to Bloomberg New Energy Finance Expected to increase to $150 billion in 2010, less than the $230 billion necessary to meet projected co2 targets according to the group Investment in Alternative Energy expected to expand – Wind investment expected to be roughly $330 billion in the US 95% expected to occur onshore Still represents a downturn in projections due to near term barriers that include the decline in power demand domestically during the recession as well as natural gas prices that have made natural gas power more attractive Source: HIS Emerging Energy Research – “US Wind Power Markets and Strategies: ”

Investment Landscape (cont’d) Venture investment in Cleantech up 65% in first half of 2010 globally – $2.02 billion invested across 140 companies in North America, Europe, China & India, leading sectors were: Solar: $811 million Biofuels: $302 million Smart Grid: $256 million Energy Efficiency: $147 million – Trends: More follow on rounds of investment Greater M&A volume due to unpredictable IPO market Increased corporate activity in cleantech Source: The Cleantech Group and Deloitte: Preliminary 2Q 2010 results for clean technology venture investments

NEPC Views Allocation to Renewables/Cleantech could provide upside potential as a part of a diversified energy program Investment in Cleantech/Renewables dedicated fund or standalone investment still risky – Uncertain Regulatory atmosphere – Government support uncertain as nations and states deal with budget constraints and attempt to lower deficits Mandated energy production from alternative sources are predicated on tax breaks, grants and feed-in tariffs; unknown how future deficit reduction policies will affect current government investment in renewable energy sources – Potential for end-user backlash Incentives to use alternative energy currently provide this energy to users on a voluntary basis at a higher cost, the costs of alternative energy will eventually be priced in to all customers

It is important to note the following characteristics of many non-traditional investment strategies including hedge funds and private equity: – Performance can be volatile and investors could lose all or a substantial portion of their investment – Leverage and other speculative practices may increase the risk of loss – These investments can be highly illiquid, and investors may be subject to lock-ups or lengthy redemption terms. There are no secondary markets for investors’ interests in hedge fund partnerships. – Managers are not required to provide periodic pricing information to investors – These funds may involve complex tax structures and delays in distributing important tax information – These funds are not subject to the same regulatory requirements as registered investment vehicles – Fees are typically high – Trades executed for a hedge fund may take place on foreign exchanges – Limited partnership agreements often give the hedge fund manager authority to trade in securities, markets or currencies that are not within the manager’s realm of expertise or contemplated investment strategies Alternative Investment Disclosures