1. Cleantech – The Energy Opportunity How the quest for energy efficiency creates new opportunities for economic development in Cleantech Dr. Florian Weig, McKinsey & Co., Inc. Berlin, May 2010 CONFIDENTIAL AND PROPRIETARY Any use of this material without specific permission of McKinsey & Company is strictly prohibited

2. McKinsey & Company | 1 The share of sectors for which energy plays a key role is particularly high in Eastern European countries SOURCE: Global Insight; World Industry Monitor, February 2009 Share on total national revenues 2008, percent Global: Ø 40% Power IT and IT services Industrial High Tech Energy-intensive industries Buildings Mobility US 30 Great Britain 31 France 35 Italy 39 Eastern EuropeEastern Europe 1 42 Japan 43 Germany 44 5,3807,4603,6404,1704,37021,070 Total market revenues EUR billions p.a. Revenues of relevant sectors EUR billions p.a. 2,3803,2101,4201,4601,3606,320 4,119 1,720 1 Bulgaria, Czech Republic, Hungary, Poland, Romania, Russia, Slovak Republic, Ukraine Global: Ø 40% Power IT and IT services Industrial High Tech Energy-intensive industries Buildings Mobility US 30 Great Britain 31 France 35 Italy 39 Eastern EuropeEastern Europe 1 42 Japan 43 Germany 44

3. McKinsey & Company | 2SOURCE: McKinsey, Vattenfall McKinsey's assessment of energy efficiency levers in the global abatement cost curve -60 -40 -20 -160 -140 -120 -100 40 20 0 1312111010232221 -80 202198796543272625241817161514 Cost of abatement EUR/t CO 2 e Insulation improvements Lighting systems Air conditioning Avoided deforestation America CCS, coal retrofit Abatement Gt CO 2 e/year Solar Clean technologies are products or solutions that ▪ Lead to a step change of 50%+ in energy efficiency vs. existing technology ▪ Are disruptive to their industry ▪ Develop global growth clusters

4. McKinsey & Company | 3 IT and IT services 1 Industrial High Tech Buildings Mobility Energy industry 29 8 18 13 7 Sum of all centers of growth Development of selected centers of growth within key sectors EUR billions p.a. 13% p.a. 2020 2,140 2008 500 CAGR Percent SOURCE: McKinsey report, "Wettbewerbsfaktor Energie" Cleantech centers of growth are developing a global market potential of EUR 2 trillion in 2020 2008 2020 1 Include energy-efficient IT, IT for energy management, smart grid, IT based traffic systems

5. McKinsey & Company | 4 1 Combined heat and power 2Total cost of ownership Radical customer orientation and new business models key to realizing market potential Adapt applica- tion to meet customer needs precisely Cater business and financing models to cus- tomers Raise custom- er awareness of TCO benefit 2 Mindset of radi- cal customer focus to bring energy-efficient products to scale Main levers Design-to-value, e.g., cogeneration solution to reuse rejected paper A Design-to-cost, e.g., using less costly components in CHP 1 systems for residential customers B Financing models, e.g., rate payment models for energy-efficient consumer products C Business model transformation, e.g., energy contracting solutions for buildings D Value-selling, e.g., clearly defining and communicating value to the customer and offer alternative operating/financing models E

6. McKinsey & Company | 5 How is your glass? Half empty? SOURCE: McKinsey Following the wave is already promising ▪ Economic competitiveness: Many Cleantech applications have short payback periods – good models to cross the initial investment barriers are needed ▪ Jobs: In typical Cleantech industries like renewable energies about 50% of value add is in designing and installing the system locally ▪ Energy independence: Energy efficiency reduces dependence from unreliable or costly supply ▪ Environmental benefit: Lower pollution levels and higher quality of life But… ▪ Accept technology leadership by others: US, Germany, China all have quite a headstart

7. McKinsey & Company | 6 How is your glass? Half full! SOURCE: McKinsey Surfing the wave leads to real opportunity ▪ Still emerging opportunities: Most Cleantech markets have no established industry structure and are expanding constantly; no single technology or business model winning so far ▪ ECA advantage 1: High energy dependency of ECA industries makes them the perfect breeding and testing ground for many Cleantech applications ▪ ECA advantage 2: Strong R&D and engineering culture providing a strong innovation base ▪ ECA advantage 3: Established partners in many of the Cleantech industries to quickly access know-how  What is your strategic posture? Where is your Cleantech master plan?

8. McKinsey & Company | 7 Start to think about your Cleantech opportunity today… Thank you!

9. McKinsey & Company | 8SOURCE: Global Insight; World Industry Monitor, February 2009; McKinsey report, "Wettbewerbsfaktor Energie" Mobility 36,500 100% = Energy industry IT and IT services Industrial High Tech Energy-intensive industries Buildings 8,760 1,110 7,650 1,710 9,830 7,440 2008 worldwide revenues, EUR billions 60%40% 100% = 90,750 Energy plays a key role in 40% of the global economy

10. McKinsey & Company | 9 The energy crisis and climate change are forcing politicians and industry to act on energy efficiency Energy efficiency discussion driven by 3 underlying issues ▪ Challenging national targets for energy efficiency, e.g., in Germany and the US ▪ EU CO 2 trading schemes will likely be extended to more industries; long-term CO 2 prices climbing Climate policy objectives ▪ Indigenous local resources being depleted, e.g., EU gas supply will shrink by 15 - 20% by 2020 ▪ Remaining resources increasingly under political control of exporting countries Concentration of supply ▪ Energy prices volatile, but increasing in long term, e.g., by 2.5 - 3.5% p.a. for German industry ▪ Driver: sharply increasing demand for primary fuels, especially in developing regions High energy prices in long term "Double energy efficiency by 2020 compared to 1990 levels" German Federal Government

11. McKinsey & Company | 10 Our definition of clean technologies – Cleantech – and respective centers of growth Definition We focus on clean technologies/ products/solutions that … ▪ … can improve energy effi- ciency (or decrease GHG emissions) by at least 50% beyond historic trajectory ▪ … are thus disruptive ▪ … develop into centers of growth with average growth rates of 13% p.a. Example – automobile drive technology SOURCE: McKinsey report, "Wettbewerbsfaktor Energie" 55 13 42 22 Automobiles sold Millions 20202008 CAGR Percent -7 29 24 Automobiles with Standard com- bustion engines Hybrid or elec- tronic motors Optimized com- bustion engines Centers of growth Increase in energy efficiency above historical average < 50% > 50%

12. McKinsey & Company | 11 43% p.a. 2008 100.7 2004 24.2 1 Excluding M&A and MBO deals 2USD converted to EUR with exchange rate of 0.71 EUR/USD SOURCE: World Economic Forum report, "Green Investing 2009" Already in 2008, over EUR 100 billion investments flowed into the Cleantech sector across all asset classes worldwide Private equity 4.1 Government R&D Venture capital Public markets Corporate R&D Small-scale projects Asset finance Global Cleantech investment flows 1 EUR billions 2

13. McKinsey & Company | 12 Innovative financing models – Berlin Energy Agency aligns investment and benefits for building retrofitting SOURCE: Berlin Energy Agency C ▪ Berlin Energy Agency manages retrofits of large buildings ▪ Example projects include schools, offices, hospitals, and residential buildings ▪ Public-private partnership of city of Berlin, Vattenfall and KfW (Federal Promotional Bank) ▪ Program already transferred to several ECA cities ▪ No up-front investments ▪ Professional retrofit plan leveraging full savings potential ▪ Positive cash flow from energy savings from day 1 Building owner ▪ New business generated through endorsement of Berlin Energy Agency ▪ Additional revenues if retrofit measure more effective than planned Energy systems company, e.g., equipment supplier ▪ Guarantees energy savings of > 25% ▪ Assures financing of retrofit ▪ Pays 80 - 97% of achieved energy savings until retrofit is paid back (8 - 12 years) Berlin Energy Agency ▪ Acts as project manager ▪ Pools buildings and negotiates contracts Project approach Key benefits

14. McKinsey & Company | 13 Energy contracting models can bridge high up-front costs Contracting model transformed business from selling mere equipment to selling energy efficiency service SOURCE: Siemens Building Technologies D … creating a win-win situation Customer ▪ Does not need to pay for up-front investment ▪ Does not assume any risk ▪ Benefits from any upsides of energy savings Contractor ▪ Makes investment for energy-saving measures ▪ Receives payment within guaranteed amortization period Energy contracting example, Siemens Building Technologies Both customer and contractor benefit from energy savings … Energy and operational costs Program Time (years) Reduced costs due to performance-based solutions Guaranteed savings Customer savings Baseline costs