Investing in Green Energy

Will new capacity meet

renewable targets set by states?

State RE Goal (5/50)

PA: 18%**

by 2020NJ: 22.5% by 2021

CT: 23% by 2020

WI: requirement varies by utility; 10% by 2015 goal

IA: 105 MW

MN: 25% by 2025(Xcel: 30% by 2020)

TX: 5,880 MW by 2015

AZ: 15% by 2025

CA: 20% by 2010

NV: 20% by 2015

ME: 30% by 200010% by 2017 -

new RE

State RPS (28/50)

HI: 20% by 2020

RI: 16% by 2020

CO: 20% by 2020 (IOUs)10% by 2020 (co-ops & large munis)

DC: 20% by 2020

NY: 24% by 2013

MT: 15% by 2015

IL: 25% by 2025

VT: (1) RE meets any increase in retail sales by

2012;

(2) 20% RE & CHP by 2017

MD: 20% by 2022

NH: 23.8% in 2025

OR: 25% by 2025 (large utilities)5% -

10% by 2025 (smaller utilities)

VA: 12% by 2022

DE: 20% by 2019NM: 20% by 2020 (IOUs)

10% by 2020 (co-ops)

NC: 12.5% by 2021 (IOUs)10% by 2018 (co-ops & munis)

ND: 10% by 2015

SD: 10% by 2015

UT: 20% by 2025OH: 25% by 2025

MI: 10% + 1,100 MW by 2015

MA: 15% by 2020

+ 1% annual increase

(Class I Renewables)

MO: 15% by 2021

WA: 15% by 2020

Source:

DSIRE, Interstate Renewable Energy Council.

State Renewable Portfolio Standards and State Renewable Energy Goals

Will the U.S. reach its renewable energy consumption goals?

Solar1%

Biomass47%

Geothermal6%

Hydro45%

Wind2%

Renewable energy

6%

Petroleum40%

Coal23%Natural gas

23%

Nuclear power8%

Total energy consumption

Source:

EIA 2006.

Global clean-tech revenues growing

0

20

40

60

80

100

120

140

160

Biofuel Wind Solar

2007

2008

2018 Projection

Source:

Clean Edge 2009

US$ billions

Will renewable power overcome its additional hurdles?•

Low margins and high capital costs (nature of the investment means that costs must be amortized over a long period of time, increasing all other risks)

•

Low operating costs (creating tax disadvantages vs. fossil fuel generation)•

Technology risk premiums (unproven technologies such as biomass gasification, cellulosic ethanol and new advanced wind turbines)

•

Market risk premiums (uncertainty of resource availability and continued policy support)

•

Reduced capacity payments ability to sell into the spot market (due to intermittency of resource or unreliability of plant operation)

•

Inconsistent regulation in the form of subsidies and tax credits

make renewable power a risky investment

Source:

Booz Allen Hamilton.

Global quarterly clean-tech investment

slowing down

05

1015202530354045

2004

Q1

2004

Q2

2004

Q3

2004

Q4

2005

Q1

2005

Q2

2005

Q3

2005

Q4

2006

Q1

2006

Q2

2006

Q3

2006

Q4

2007

Q1

2007

Q2

2007

Q3

2007

Q4

2008

Q1

2008

Q2

2008

Q3

2008

Q4

2009

Q1

Source: New Energy Finance.

US$ billions

Infrastructure and energy represents 15% of Recovery and Reinvestment Act

Source: The American Recovery and Reinvestment Act of 2009

Other stimulus US$ 646.4 Billion

Infrastructure US$ 80.9 Billion

Energy US$ 49.7 Billion

The American Recovery and Reinvestment Act of 2009: Energy Expenditures

Source: The American Recovery and Reinvestment Act of 2009

Energy-efficient smart grid $4.5B

Transmission lines $6.5B

State and local energy investment $6.3B

Radioactive cleanup $6B

Weatherizing medium income homes $6B

Federal building efficiency $4.5B

Carbon capture experiments $3.4B

Energy efficiency research $2.5B

Advanced car battery $2B

Energy efficiency and conservation grants $3.2 B

Other $3.7B

How to bridge the gap between VC, PF

and projected investment needs?Venture Capital

•Total invested in Clean-Tech industry in 2008: US$ 4.1 billion

•Size of average deal: US$ 15 million

Project Financing

•Total invested in Energy/Infrastructure industry in 2008: US$ 262 billion

•Size of average deal: US$ 400 million (up to US$ 10 billion)

Sources: PricewaterhouseCoopers/National Venture Capital Association, Thomson Reuters, Brattle Group.

Total investment needed to update the US electric system:

•Smart Transmission and Distribution grids: US$ 900 billion

•New and cleaner generation capacity: US$ 600 billion to US$ 1.1 trillion

? ?

The Funding Gap

Lynde

H. Coit, Executive VP, Corporate DevelopmentPlasco

Energy Group, Inc.

Plasco

Energy Group

Robert Kleine, TreasurerState of Michigan

Green Investing in Michigan

Green Investing Poised for Golden Age Allianz

Global Investors Survey of Investors

Obama Adm. will produce more policy promoting green investment in first year than Bush Adm. produced in eight years

% Agree

78%

Congress more strongly support policies promoting green investment

74%

Exploring alternative fuel sources remains important, despite declining gas prices

97%

Resolving environmental problems will be a major issue for years 91%

Green Investing Poised for Golden Age Allianz

Global Investors Survey of Investors% Agree

Important to look at investing in companies that capitalize on

addressing problems Environmental technology has potential to be “next great American industry”

69%

78%

Plunging stock prices (70% for Green Index) have had no effect on desire to invest in environmental stocks

72%

“At least somewhat likely”

to invest in environmental companies this year

48%

Made investments in 2008 in firms capitalizing on environmental trends

22%

Renewable electricity as percentage of U.S. electricity

Source: American Wind Energy Association

Coal 48.5%

Petroleum & Petroleum Coke 1.1%

Natural Gas 21.6%

Other 0.3%

Nuclear 19.7%

Hydro 6.1%

Other Renewables

3.0%

Wind 42.0%

Other Biomass

13.8%

Geothermal 12.1%

Wood 31.4%

Solar 0.7%

Coal 48.5%

Petroleum & Petroleum Coke 1.1%

Natural Gas 21.6%

Other 0.3%

Nuclear 19.7%

Hydro 6.1%

Other Renewables

3.0%

Wind 42.0%

Other Biomass

13.8%

Geothermal 12.1%

Wood 31.4%

Solar 0.7%

Recent Legislation

•

Clean, Renewable, and Efficient Energy Act (PA 295 of 2008) –

10% of electric provider’s energy must come from renewable sources by 2015–

Requires electric and natural gas providers to file energy optimization plans–

Prescribe maximum retail rate impacts resulting from compliance of with renewable energy standards

–

Numerous additional provisions designed to encourage the use of renewable energy in electricity generation.

•

Qualified Home Improvement Credit and Renewable Energy Standard Credit (PA 287 of 2008)

–

10% income tax credit up to $200 for qualified home improvements

including insulation, furnaces, water heaters, windows, dishwashers, clothes washer and refrigerators that meet energy start guidelines; (AGI less than $37,500 single, $75,000 joint)

–

Income tax credit equal to 25% tax year 2009 and 20% in 2010 and

2011 of the increase in the residential utility rate resulting from the renewable energy source requirements. (The utility rate increase cannot exceed $3 per month).

Motor Vehicle Battery Activity

•

Tax credits enacted designed to make Michigan the center for advanced automotive battery manufacturing.

•

Provide credits for–

Battery pack assembly–

Expenses for vehicle engineering to support battery use–

Expenses for engineering for advanced automotive battery technologies–

Capital investment expenses for construction of battery manufacturing facilities

•

$520 million in credits will lead to $2 billion in investments and 7,700 new jobs

Battery Investment in Michigan

•

Johnson Controls-Saft

Advanced Power Solutions

--

$220 million investment for advanced batteries for plug-in hybrid vehicles. JCS has partnered with Ford Motor. Project expected to create 498 new jobs.

•

LG Chem-Compact Power

–

Korean based LG Chem, in partnership with GM, investing $200 million to manufacture lithium ion batteries in Michigan.

•

KD Advanced Battery Group

–

Joint venture of Dow Chemical, Kokam

America, and Townsend Ventures LLC, plans to invest $665 million

in a new 800,000 square foot battery manufacturing facility. Expected to

create 885 new jobs.

•

A123 Systems Inc.

–

Plans to invest $600 million in Michigan in initial coating, cell manufacturing, and pack assembly. Has entered into an agreement with Chrysler LLC to provide battery systems for the company’s ENVI product line.

Solar Energy Investment

•

Dow Chemical and Hemlock Semiconductor

–

will invest up to $1 billion to expand its manufacturing facility in Hemlock Michigan. HSC is the world’s leading producer of polycrystalline silicon, a component of photovoltaic cells. State provided a tax credit totaling $8.4 million over 20 years.

Project expected to create 576 jobs.

•

United solar

–

expanding plant manufacturing solar panels in Greenville Michigan. Expansion will add 400 workers. Tax credits totaling

$5.7 million over 20 years.

•

Evergreen solar

–

new facility that will create inputs for the solar power manufacturers low cost String Ribbon wafer technology. Expansion includes $55 million in investment and 596 new jobs. State tax credits totaling $1.8 million over 10 years.

Wind Energy

•

Danotek

Motion Technologies

–

a technology developer and manufacturer of permanent magnet generators, power control electronics and brushless motor for power generation industries and advanced-automotive applications expanding operations and relocating Plymouth Michigan. The facility will produce generators for use with wind turbines. Project received a $2.5 million tax

credit and will create 353 new jobs.

Alternative Investments -

Wind

•

Noble Environmental Power

–

Alternative Energy (wind farms)•

Modular Wind Energy

–

Produces blades for wind turbine.•

Svendborg

Brakes

–

Hydraulic brake solutions for wind turbine industry.

•

LM Glasfiber

–

Produces blades for wind turbine.•

Power Wind Holding

–

Manufactures wind turbine.

Alternative Investments -

Solar

•

Advent Solar

–

Unique design to increase solar cell efficiency.•

SmartSpark

Energy Systems

–

Alternating current photovoltaic.•

CaliSolar

–

Photovoltaic company patents and manufactures solar cells.

•

Solar Power Partners

–

Solar energy facilities.

Alternative Investments -

BioFuels

•

Qteros

(SunEthanol) –

Develop cellulosic ethanol processing solution.

•

Coskata

–

Biology-based renewable energy for liquid fuels.•

ZeaChem

–

Biorefinery

platform producing ethanol or a broad portfolio of other chemicals.

•

EcoSynthetix

–

Develops bio-based materials with performance capabilities equal to or greater than petroleum-based products.

Alternative Investments -

Other

•

Imara

–

Rechargeable batteries for cordless power tools and hybrid electric vehicle markets.

•

Redwood Systems

–

Power control technologies to save energy costs for lighting.

Steve Westly, Managing Partner The Westly

Group

Clean Tech: This is Not a Bubble

China + 50 Other Emerging Market Countries

Clean Tech: This is Not a Bubble

PARTICULATE MATTER OVER LOS ANGELES THAT CAME FROM CHINA: 25%25%

Then vs. Now, eBay vs. Tesla

Internet BoomInternet Boom

1.1.

Viral GrowthViral Growth

2.2.

Tech DrivenTech Driven

3.3.

Silicon Valley DrivenSilicon Valley Driven

Clean TechClean Tech

1.1.

Steady Growth, Heavy M&ASteady Growth, Heavy M&A

2.2.

Tech & GovernmentTech & Government

3.3.

Silicon Valley & AsiaSilicon Valley & Asia

The Obama Stimulus:

Clean Tech is a Smart Investment

$19 billion for energy efficiency & green building:–

Smart Grid & Utility Enhancements

$11 billion to modernize the electric grid–

Green Building Materials

$2 billion in grant funding for energy storage and vehicle batteries–

Zero Emission Vehicles

Speakers:Jonathan Bloch, Senior Managing Director and Managing Partner, GKM Newport; Managing Partner, GKM VenturesLynde

Coit, Executive Vice President, Corporate Development, Plasco

Energy Group Inc.Robert Kleine, Treasurer, State of MichiganJim McDermott, Managing Director, US Renewables

GroupSteve Westly, Managing Partner, The Westly

Group

Moderator:Paul Deninger, Vice Chairman, Jefferies & Company Inc.