clean energy infrastructure clean investor 2011 · clean energy infrastructure clean investor 2011...

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Clean Energy Infrastructure Clean Investor 2011

Rory Quinlan, Managing Director, Clean Energy and Infrastructure (CEI) June 2011

Confidential 2 Clean Energy Infrastructure | Disclosure Statements | July 2011

Disclosure statements

  Capital Dynamics, Ltd. is a member of Capital Dynamics Group (“Capital Dynamics” or “the Firm”), which is an independent asset management firm focusing on private assets and comprises Capital Dynamics Holding AG and its affiliates

  As an affiliate of Capital Dynamics, Ltd. takes advantage of the global network of companies, experience and research.

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Contents

Capital Dynamics and Clean Energy and Infrastructure (CEI)

What is CEI and what are the growth drivers?

Why invest in CEI? Return, yield and risks

What are policy incentives and regulatory environment across various regions?

How to invest in CEI?

Clean Energy Infrastructure | Contents | July 2011

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Chile   Edelnor   Hydro Chile

Capital Dynamics Clean Energy and Infrastructure Team investment experience

Germany   Bewag   Germania

Australia   Tarong North Power   Gladstone Power   Collinsville Power   Energy Developments   Ecogen   Loy Yang A

UK   Novera Energy plc

(including CPL, Ambient, Arpley, NMRE, RED, ELSEF, and Arbutus)

  Southwestern Electric

Renewables Clean energy and renewables Conventional energy Clean energy

Argentina   Alicura

China   CEPA

Indonesia   Chevron Co-Generation

Philippines   CEPA

USA   Tangent Energy Solar   PPM Energy   Birchwood   Dallas Clean Energy

Note: Includes investments made by the Capital Dynamics US Solar Energy Fund and information reflecting the industry experience of senior team members prior to joining Capital Dynamics.

Clean Energy Infrastructure | Capital Dynamics and CEI | July 2011

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Wind •  Onshore •  Offshore

Solar •  Photovoltaic

(PV) •  Thermal •  Concentrated

(CSP and CSH)

Biomass and Waste •  Waste to energy •  Landfill gas •  Biomass •  Biofuels

Hydro •  Large to small

scale •  Wave / tidal

Geothermal •  Geothermal

reservoirs

Energy Efficiency

What is clean energy infrastructure?

Combined Heat and Power •  “Cogeneration”

Clean Energy Infrastructure | Capital Dynamics and CEI | July 2011

90 111

140 161

187 221

245 269

293

2008 2009 2010 2011 2012 2013 2014 2015 2016

Total Supporting policy Mandates and standards

0

5

10

15

20

25

30

1976 1981 1986 1991 1996 2001 2006 2011

Rea

l cos

t per

Wat

t mod

ule

(USD

/W

att)

Historical price Chinese c-Si module price

8.0

10.0

12.0

14.0

16.0

18.0

1990 2007 2010 2020 2030 5

6

7

8

9

10

Bill

ion

tonn

es o

il eq

uiva

lent

Bill

ion

peop

le

Energy demand (LHS) Population (RHS)

0

50

100

150

200

250

0

5

10

15

20

25

2005 2010 2015 2020 2025 2030 2035

Proj

. WTI

pric

e (U

SD/b

bl)

Proj

. oil

pric

e (U

SD/m

mB

tu)

Heating oil WTI (base) WTI (high)

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What are the growth drivers? Strong economic fundamentals

Rising fossil fuel prices Increasing population and energy consumption

Falling clean energy costs Strong policy momentum

Source: Wood Mackenzie and AEO 2011 Source: International Energy Agency, 2009

Source: Bloomberg New Energy Finance, 2011 Source: Deutsche Bank, 2011

Clean Energy Infrastructure | | What is CEI and what are the growth drivers? | July 2011

Confidential 7

The high cost of CEI alternatives

Nuclear Energy

“The Chernobyl nuclear accident in 1986 is estimated to cost over

US$235 bn over 30 years” Barclays, March 2011

Ageing Infrastructure

“UK power and grid upgrades require £110 billion investment”

DECC, December 2010

Depletion of Fossil Fuels

“If everyone consumed as much energy as the average

Singaporean and US resident, the world’s oil reserves would be

depleted in nine years” WWF, 2011

Fossil Fuel Subsidies

“Fossil fuels are currently subsidized six times as much as

renewable energy.” IEA, DBCCA, 2011

Political Demand

“I’m asking Congress to eliminate the billions in taxpayer dollars we currently give to oil companies” Obama State of the Union Address, 2011

Social Demand

“45% of [German] voters put energy/environment policy as the most important criteria for their

voting decision” Jefferies, March 2011

Climate Change

“The cumulative economic cost to the physical environment,

food security across the climate scenarios could be in

the range of US$2-4 trillion by 2030”

Mercer, 2011

Energy Security

“The EU imports about 50% of its energy needs”

EU Congressional Research, 2008

Clean Energy Infrastructure | Why invest in CEI? | July 2011

Confidential 8

The levelised cost of CEI

Source; (1) Ecofys / WWF Energy report 2011, (2) For plants entering service in 2016. Energy Information Administration (EIA), Bloomberg New Energy Finance, 2011

Levelised Cost of Development of New Generation Assets2

“By 2050 we [could] save nearly €4 trillion per year through energy efficiency and reduced fuel costs”1

Range represents total capital to total system cost (US$/MWh)

Parity with fossil fuels


Buildings; 600

Electricity distribution; 529

Electricity production; 508

Vehicles; 583

Transport infrastructure; 35

Growing investment and capital required

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Source: New Energy Finance and REN21. Bloomberg New Energy Finance Q4 2010 Fact Pack. Historical numbers have been revised and may differ from previous reports.

Global investment in clean energy 2004-2030 (US$ billion)

29% compound annual growth 2004-2010

Historical Forecast

“The 15 technologies analysed require €591bn in development and €2.3tn in procurement capital between 2011-2020, leading to carbon savings of 2.2GT CO2e and energy savings of €261bn.”1

Source: (1) Accenture / Barclays, 2011

European capital requirements by clean energy sector 2011-2020 (€ billion)

€2.3tn


CEI: Operating CEI: Development Cleantech & commercialisation R&D

Confidential 10

CEI returns, yield and risks

Public Markets and Funds

Infrastructure Funds

Government and R&D

Investment Risk

Operating Cash Flow

Private Equity: Growth Capital (earlier) ─ LBO (later)

Typical investment owners and source(s) of funding

Negative Operating Cash Flow

Positive Operating Cash Flow

Breakeven

Unproven Technology;

Financial Uncertainty

Established Technology;

Mature Investment

Moderate growth,

predictable, cash flows

Clean Energy Development Cycle

Venture capital

Key CEI investment stage


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Key CEI characteristics

  Stable cash flow and distributions

  Strong, regular yield

  Competitive IRRs (particularly compared to traditional infrastructure1)

  Low correlation with traditional asset classes

  Long term projects – 10-30 years

  Locked in, contracted revenues through power purchase agreements (PPAs)

  Inflation hedge (through indexed revenue)

  High grade counterparties – including governments, energy utilities

  Leverage capabilities through bankable technology

  Low ongoing operational costs

  Regulatory support

(1) Based on utilities, toll road/transport, airport and social infrastructure returns, 50-90% leverage reported by Harvard, Capital Matters, 2008


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Competitive returns

Example US solar project IRRs

21% 24%

28%

15% 19%

13% 8%

35% 34% 28%

21%

14% 13%

5%

Source: Barclays, 2011. Note: Includes select states with active SREC markets. Assumes 50% leverage

Example global solar project IRRs

Source: Deutsche Bank, 2011 Note: Assumes leveraging and based on FIT policies for projects connected by Q4 2010

Average: 13% Average: 18%


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Regular, long term cash yield

Contracted, dual income Wind farm project revenue and IRR

Long term, regular yield

Stable margins and cash distributions Wind farm project EBITDA and equity distributions

Solar PV project annual yield

Source: Capital Dynamics (1) ROC: Renewable Obligation Certificates, LEC – Levy Exemption Certificates

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Key CEI investment risks and mitigation techniques

Risk Mitigation •  Change in law/regulatory risk •  Contractual allocation, portfolio diversification

(geographies, technologies, scale)

•  Volatility of energy and environmental credit prices •  Fixed price contracts (3-20 years)

•  Fuel supply risk •  Wind, solar: low variation, “capacity” due diligence •  Biomass, waste: contractual protection

•  Production risk (energy output) •  Due diligence, monitoring, response, guarantees

•  Counterparty/buyer credit risk •  High credit counterparties (energy utilities, government parties)

•  Capital/construction cost risk •  Developer and EPC1 “wraps”, retention and guarantees

•  Inflation •  Annual revenue and cost indexation escalation and caps

•  Interest rate risk •  Prudent leverage, interest rate swaps

(1) Engineer, Procure and Construct


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  Binding and non binding targets. Targeting % share of primary energy or electricity to be generated by renewables.

  Feed-in-tariffs (FiTs). Tariffs paid to renewable energy generators, for renewable energy generation and potentially export to the grid

  Energy Certificates. Tradeable certificates, including Renewable Obligation Certificates (ROCs), Renewable Energy Certificates (RECs) and Green Certificates (GCs)

  Renewable Portfolio Standards. Policies mandating a percent of electricity to be derived from renewable sources

  Grants. Cash grant incentives. e.g. US 30% Investment Tax Credit

  Tax credits.

  Accelerated depreciation.

Types of renewable incentives and policies

Clean Energy Infrastructure | Policy incentives and regulatory environment | July 2011

Germany • 18% by 2020 • FITs, grants, tax credits • Revised in 2010

France • 23% by 2020 • FITs, grants, tax credits • 2010 moratorium

Italy • 17% by 2020 •  “Conto Energia” FIT. • FITs, RPS, GCs

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CEI incentives and regulation: Europe

United Kingdom United Kingdom • 15% by 20201

• FITs, RPS, grants • Renewable Obligation

Certificates (ROCs)

Spain • 20% by 2020 • FITs, grants, tax credits • 2010 Royal Decree to

retroactively reduce FITs

(1)  Share of Final energy from renewables. Source: REN21, 2010. This does not illustrate an exhaustive/comprehensive list of incentives or policies for each country FITs – Feed-in-tariffs, RPS – Renewable Portfolio Standard, ECs – Environmental Certificates, RECs – Renewable Energy Certificates, GCs – Green Certificates

Portugal • 31% by 2020 • Tendering scheme/FITs • Potential impact of recent

economic developments

European Union • 20% by 2020 binding

target • FIT, EU-ETS, and fiscal

support in over 20 countries

Sweden • 49% by 2020 • RPS, grants,

tax credits


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CEI incentives and regulation: Rest of world

Brazil • 75-80% electricity

by 2020 • Tax credits

Australia • 20% of power generation

by 2020 • RECs, FITs at state level

Japan • 2% electricity by 2014 • FITs, RPS, grants,

credits

China • 15% by 2020 • Agreed PPA rates and

government grants

USA • 15-30% by 2020

(state) • RECs under RPS • Federal and state

grants and tax credits

Canada • 14.3 TWh by 2020 • Province based FITs

and RPS, grants

India • 25% by 2010 • State based FITs, RPS,

grants, tax credits

(1)  Share of Final energy from renewables. Source: REN21, 2010. This does not illustrate an exhaustive/comprehensive list of incentives or policies for each country FITs – Feed-in-tariffs, RPS – Renewable Portfolio Standard, ECs – Environmental Certificates, RECs – Renewable Energy Certificates, GCs – Green Certificates

South Korea • FITs, grants, tax

credits

Russia • RECs, grants


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A range of investment options

  Direct investment in CEI assets

  Consortium approach for larger scale projects

  Direct development company investment

  CEI fund (stability, risk diversification, reduced

management requirements)

Direct and Fund investment Listed investments

  Listed funds (higher volatility)

  Equity and convertible instruments

  Corporate or government bonds

Clean Energy Infrastructure | How to invest in CEI? | July 2011

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Wind farm at Mynydd Clogau

Elan Valley dam, 3.9MW hydro scheme

Lissett Airfield wind farm under construction

Landfill gas project pipe

Q&A

Clean Energy Infrastructure | Q&A | July 2011

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For further information please contact

Rory Quinlan, Managing Director Capital Dynamics, Ltd. 21 Sackville Street London W1S 3DN United Kingdom

Phone: +44 20 7297 0200 Mobile: +44 783 347 6370 Email: [email protected]

www.capdyn.com

London New York Zurich Tokyo Hong Kong Silicon Valley Rio de Janeiro Munich Birmingham Zug

Clean Energy Infrastructure | Contact details | July 2011

Confidential 21

Capital Dynamics worldwide London Capital Dynamics, Ltd. 21 Sackville Street London W1S 3DN United Kingdom

Phone: +44 207 297 0200 Fax: +44 207 297 0299

Birmingham Capital Dynamics, Ltd. (Main UK office) 9 Colmore Row Birmingham B3 2BJ United Kingdom

Phone: +44 121 200 8800 Fax: +44 121 200 8899

New York Capital Dynamics, Inc. / Capital Dynamics Broker Dealer (Main US office) 645 Madison Avenue 19th Floor, New York, NY 10022 – USA

Phone: +1 212 798 3400 Fax: +1 212 798 3499

Zug Capital Dynamics AG Bahnhofstrasse 22 6301 Zug Switzerland

Phone: +41 41 748 8444 Fax: +41 41 748 8440

Hong Kong Capital Dynamics, HK Ltd. 16/F Nexxus Building 41 Connaught Road Central Hong Kong

Phone: +852 3757 9818 Fax: +852 3757 9401

Munich Capital Dynamics, GmbH Possartstrasse 13 81679 Munich Germany

Phone: +49 89 2000 418-0 Fax: +49 89 2000 418-99

Silicon Valley Capital Dynamics, Inc./ Capital Dynamics Broker Dealer 2440 Sand Hill Road Suite 150 Menlo Park, CA 94025 USA

Phone: +1 650 388 7000 Fax: +1 650 388 7099

Rio de Janeiro Capital Dynamics Investimentos, Ltda Av. Niemeyer 2, Sala 102 Leblon Rio de Janeiro 22450-220 Brazil

Phone: +55 21 352 15 010

Zurich Capital Dynamics AG Selnaustrasse 32 8001 Zurich Switzerland

Phone: +41 41 748 8444 Fax: +41 41 748 8440

Tokyo Capital Dynamics Co., Ltd. East Tower 4F Otemachi First Square 1-5-1 Otemachi Chiyoda-ku Tokyo, Japan 100-0004

Phone: +81 3 5219 1357 Fax: +81 3 5219 1358

Clean Energy Infrastructure | Capital Dynamics offices | July 2011

Confidential 22

Disclaimer (1/3) This presentation contains information that has been provided by a number of sources not affiliated with Capital Dynamics. “Capital Dynamics” comprises Capital Dynamics Holding AG and its affiliates. Capital Dynamics has not verified the information provided. Nothing contained herein shall constitute any representation or warranty and no responsibility or liability is accepted by Capital Dynamics as to the accuracy or completeness of any information supplied herein.

This presentation does not constitute an offer to sell or a solicitation of an offer to purchase any securities of any kind in Capital Dynamics, including any of its funds of funds. Any such offer or solicitation shall be made pursuant to a private placement memorandum furnished by Capital Dynamics. Before relying on this information in any way, Capital Dynamics advises the recipient of this information (the “Recipient”) to perform independent verification of the data and conduct his or her own analysis hereto with appropriate advisors. Statements contained in this presentation may include statements of future expectations and other forward-looking statements. Any projections or other estimates in these materials are based upon certain assumptions. Actual events may differ materially from those assumed, which may have a material impact on any projections or estimates provided herein. In addition, certain assumptions may have been made to simplify the presentation and/ or calculation of projections or estimates. Capital Dynamics does not purport that any such assumptions will reflect actual future events, and reserves the right to change its assumptions without notice to the Recipient.

The information contained herein may contain general, summary discussions of certain tax, regulatory, accounting and/ or legal issues. Any such discussions and issues may be generic and may not be applicable to or complete for the Recipient. Capital Dynamics does not offer tax, regulatory, accounting or legal advice and this presentation should not and cannot be relied upon as such. Prior to entering into any proposed transaction or agreeing to proposals made herein, the Recipient should determine, in consultation with the Recipient’s own legal, tax, regulatory and accounting advisors, the economic risks and merits of any action, as well as the legal, tax, regulatory and accounting consequences of such action. When considering alternative investments, such as private equity funds, the Recipient should consider various risks including the fact that some funds may use leverage and engage in a substantial degree of speculation that may increase the risk of investment loss, can be illiquid, are not required by law to provide periodic pricing or valuation information to investors, may involve complex tax structures and delays in distributing important tax information, are not subject to the same regulatory requirements as mutual funds, often charge high fees, and in many cases the underlying investments are not transparent and are known only to the investment manager.

With respect to alternative investments, such as private equity funds, in general, the Recipient should be aware that: (1)  Returns can be volatile (2)  The Recipient may lose all or portion of your investment (3)  The manager has total portfolio authority, and the use of a single manager could mean a lack of diversification and higher risk (4)  Many funds are subject to substantial expenses that must be offset by portfolio profits. A portion of the profit is paid to the investment manager in the forms of

carried interest and management fees (5)  There is often a lack of transparency as to the fund's underlying investments

Clean Energy Infrastructure | Disclaimer | July 2011

Disclaimer (2/3)

Confidential 23

(6) With respect to funds of funds, the fund of fund's manager has complete discretion to invest in various sub-funds without prior disclosure. There is no way to ascertain with certainty the specific investments made by the sub-fund or to know whether the sub-fund investments are consistent with the fund of fund’s historic investment philosophy or risk levels

(7) A fund of fund invests in other funds and fees are charged at both the fund of fund and sub-fund level. Thus the overall fees paid by an investor will be higher than such investor would pay by investing directly in the sub-fund. In addition, each sub-fund charges or may charge an incentive fee, or carry, on new profits regardless of whether the overall operations of the sub-fund are profitable

(8) There may be no secondary market for fund interests. Transfers of interests are subject to limitations. The fund's manager may deny a request to transfer if it determines that the transfer may result in adverse legal or tax consequences for the fund

(9) The fund's offering memorandum and the investment manager’s disclosure document describes the various risks and conflicts of interest relating to an investment and to its operations. The Recipient should read those documents carefully to determine whether an investment is suitable in light of, among other things, the Recipients financial situation, need for liquidity, tax situation, and other investments

(10) The Recipient should only commit risk capital to any investment product. Alternative investment products, including private equity funds, are not for everyone and entail risks that are different from more traditional investments.

Should this presentation contain performance information, then please note: Except where otherwise specified, (i) all gross and net IRRs are “pooled IRRs”, i.e. calculated on the basis of aggregated cash flows of all products of each generation of products, and (ii) all cashflows since inception (July 1991) have been taken into account up to, unless otherwise stated, the track record date. Cashflows between Capital Dynamics’ funds of funds are excluded. The latest value that an underlying manager reports for its fund is counted as a positive cash flow. The calculations depend on valuations, therefore, in particular in respect of unrealized value, that have often been determined by third parties, which third parties are typically the underlying funds’ general partners. Actual realized returns on any unrealized investments will depend on the value of investments at the time of disposition, any related transaction costs and the manner of sale.

“Gross” means gross of Capital Dynamics fees but net of underlying funds’ fees. “Net” means net of Capital Dynamics fees and of underlying funds’ fees. “Multiple” stands for the TVPI (Total Value to Paid-In) multiple (i.e. the ratio of the sum of distributions plus current NAV to the sum of draw downs).

Where investments have been made in a currency other than the reference currency of the track record: (i) actual cash flows have been converted into the reference currency at the exchange rate for the relevant payment or receipt; and (ii) unrealized investments have been converted into the reference currency at the prevailing exchange rate as at the track record date.

Past performance is not an indication of future results. The information compiled by Capital Dynamics has not been audited.


Confidential 24

Disclaimer (3/3) Material notes to investors: Based in United States of America: Capital Dynamics, Inc. is registered as an Investment Adviser with the Securities and Exchange Commission (SEC). Securities are offered through Capital Dynamics Broker Dealer LLC, a registered broker-dealer with the SEC, and a member of the Financial Industry Regulatory Authority (FINRA) and Securities Investor Protection Corporation (SIPC). Any Recipient not interested in the analysis described herein should return this presentation to Capital Dynamics, Inc. or Capital Dynamics Broker Dealer LLC, 645 Madison Avenue 19th floor, New York, NY 10022 USA and contact Capital Dynamics as soon as possible (t. +1 212 798 3400). Based in Switzerland: Material is presented to investors by Capital Dynamics AG. It does not constitute a public offering or marketing within the meaning of the Swiss Act on Collective Investment Schemes. It is addressed to a limited group of qualified investors. Any Recipient not interested in the analysis described herein should return this presentation to Capital Dynamics AG, Bahnhofstrasse 22, 6301 Zug, Switzerland and contact Capital Dynamics AG as soon as possible (t. +41 41 748 84 44). Based in Germany: This presentation is issued and distributed by Capital Dynamics GmbH. This presentation has not been filed with or approved by the Federal Financial Supervisory Authority (BaFin). It does not constitute a public offer of sales prospectus within the meaning of article 8f Law on the Prospectus for Securities offered for Sale (VerkProspG). It is addressed to a limited group of professional investors. Any recipient not addressed by Capital Dynamics GmbH should return this presentation to Capital Dynamics GmbH, Possartstrasse 13, 81679 Munich, and contact Capital Dynamics GmbH as soon as possible (t. +49 89 2000 4180) Based in the United Kingdom and select countries in the European Union: Material is presented to investors by Capital Dynamics Ltd. Capital Dynamics Ltd is authorized and regulated by the Financial Services Authority (FSA). Any Recipient not interested in the analysis described herein should return this presentation to Capital Dynamics Ltd, 9 Colmore Row, Birmingham, B3 2BJ, United Kingdom and contact Capital Dynamics as soon as possible (t. +44 121 200 8800). Based in Japan: Material is presented to investors by the issuer. Based in Australia: This offer is only open to wholesale clients (as that term is defined in the Corporations Act 2001 (Cth)). Prospective investors should not treat the contents of this document as investment advice or advice relating to legal, taxation or any other matters. The offer is issued by Capital Dynamics Investments (Australia) Limited ARBN# 145 827 738, a foreign company registered in its original jurisdiction of the United Kingdom as Capital Dynamics Limited. The Issuer is operating in Australia under relief issued by the Australian Securities and Investments Commission from the requirement to hold an Australian financial services (AFS) license and therefore the Issuer does not hold an AFS license. Based in other jurisdictions: The distribution of this presentation in certain jurisdictions may be restricted by law. Persons into whose possession this presentation comes are required by Capital Dynamics to inform themselves about, and to observe, any such restrictions. This presentation does not constitute an offer to sell or the solicitation of an offer to purchase any securities in any state or other jurisdiction: (i) in which such offer or invitation is not authorized; (ii) in which the person making such offer or invitation is not qualified to do so; or (iii) to any person to whom it is unlawful to make such offer or solicitation.

This presentation is for informational purposes only, is confidential and may not be reproduced in whole or in part (whether in electronic or hard-copy form).


clean energy infrastructure clean investor 2011 · clean energy infrastructure clean investor 2011...

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