© copyright 2005, cleantech venture network, all rights reserved date: presented by: “cleantech...

www.cleantech.com© Copyright 2005, Cleantech Venture Network, All rights reserved

Date:

Presented By:

“Cleantech Investment: Patterns, Performance and Prospects”Alternative Investments Workshop University of Toronto

April 20th 2006

Nicholas Parker, ChairmanCleantech Capital Group LLC


Is this Important?Is this Important?

Since 1999, 1080 investors have placed more than $8.2 Bn into 1227 ‘cleantech’ venture deals in North America with an estimated additional $4.0Bn in the ROW. (This excludes IPO, debt and project-related financings).

Why? So?


AgendaAgenda

• Defining the “cleantech” space

• Cleantech Venture Investment Trends

• Corporate Cleantech Activity

• Making Money in Cleantech

• Opportunities and Challenges


Cleantech Venture NetworkCleantech Venture Network

The Cleantech Venture Network™ LLC is a membership organization bringing insight, opportunities and relationships to investors, entrepreneurs and service providers interested in clean technology.

We introduced the "cleantech" concept in 2002 and have since popularized it as a viable investment category.

Principal office in Ann Arbor, Michigan with a presence on US West Coast, Australia, Canada, China and Europe.

We provide information products, related services, and the Cleantech Venture Forum™ series of events,

Cleantech Venture Network ™ is part of the Cleantech Capital Group

LLC


Accomplishments since LaunchAccomplishments since Launch

• Achieved operating profit on initial investment.• Met or exceeded all key business plan milestones• 300+ full members: 950 affiliate members• Nine highly successful forums in North America and Europe• Cleantech Venture Monitor (established as the source on

cleantech venturing: media coverage in over 200 publications

• Published two groundbreaking research studies.• Sophisticated front and backend website• High-profile venture advisory boards in NA and EU• US, Canada, EU, Australia and China presence• Launched Cleantech Index• “cleantech” recognized as an investment category


Accomplishments by NumbersAccomplishments by Numbers

• Tracked:• nearly $10.0B of venture investments,

• $94B in M&A transactions,

• over 100 IPOs

• Facilitated over $500M in financings• Identified approximately 1100 investors in 1200+ venture

rounds• Directly sourced > 600 new deals for our members• Profiled more than 190 pre-qualified investment

opportunities at our Venture Forums • More than 2000 Forum investor attendees• Built first cleantech index of publicly-traded stocks• Avg. 340,000 hits per month on cleantech.com• Built a core team of twelve FT equivalent employees


Cleantech Proprietary ResearchCleantech Proprietary Research

• Responding to unmet demand for authoritative research on the state, performance & opportunities in the cleantech area.

• March 05 published Cleantech Venture Investing: Patterns & Performance the most comprehensive study of its kind ever undertaken.

• January 06 published Cleantech Capital Report 2006 a unique 10 year view on cleantech VC flows and trends. (European version to be published June 06)

• Future reports include:

• Cleantech Capital Directory (online version live)

• Other specialized publications, e.g. Cleantech M&A, CleanBio, M2M, Watertech, Solar in China.


Cleantech DefinedCleantech Defined

• Cleantech embraces knowledge-based 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.

• Not classic “environmental” technology – more like “biotech” as an investment theme.

• Now fifth largest venture investment category with nearly 10% market share (Q4 2005)


The Next Industrial RevolutionThe Next Industrial Revolution

Alongside the information revolution is an industrial revolution reshaping the design and manufacture of almost everything that we see around us. The disruptive products being developed today have significant 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 is emerging as the enabling technology of modern industrial society; the next and

necessary wave of venture innovation in a natural resource constrained world.


Cleantech is not EnvirotechCleantech is not Envirotech

Envirotech1970s-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

Cleantechmid 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 markets represent annual global revenues upwards of $150 billion, with some segments such as natural pesticides, wind power and micro sensors having 5-10 year compound annual revenue growth rates as high as 35% .


Cleantech ExamplesCleantech 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


Technology ConvergenceTechnology Convergence

Clean Energy

Clean WaterCleaner Production

Advanced Materials & Nanotechnology (e.g. catalysts and membranes)

Information Technology & Internet (e.g. advanced meters and sensors)

CONVERGENCE CONVERGENCE

Biotech “CleanBio” (e.g. biopolymers and biofuels)


Becoming More Cost EffectiveBecoming More Cost Effective

Improvements in technology and mass production will drive costs down further


Cleantech Venture Investing1999-2005Cleantech Venture Investing1999-2005

Total Cleantech Venture Investing 1999-2005: $8.2bn

US and Canadian Cleantech Venture Deals by Year, 1999- 2005

191

246

205222

108

134121

0

200

400

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1600

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2000

1999 2000 2001 2002 2003 2004 2005

$US

m

0

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Nu

mb

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f d

eals


Cleantech investment by Quarter 1999-2005Cleantech investment by Quarter 1999-2005

Cleantech is growing as an investment category: Now receiving 9+% of all VC in North America

U.S. and Canadian Cleantech Venture Deals by Quarter and as a percentage of total VC (by amount), 1999-2005

5%

6%5%

3%

1%1%2%

3%

2%1% 1%

1%

2% 2%2%

6%6%

5%5%

4%

5%

4%4%

5%

6%

4%

7%

9%

0

100

200

300

400

500

600

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19

99

Q1

19

99

Q2

19

99

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00

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00

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01

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Q3

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05

Q1

20

05

Q2

20

05

Q3

20

05

Q4

$ US m

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%


Cleantech Venture Investing1999-2005Cleantech Venture Investing1999-2005

Cleantech Periods, $ invested & number of deals

$4,944$3,233

618

363

$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

Q1 1999 - Q4 2001 Q1 2002 - Q4 2005

Bubble and Burst Learning and Diversification

$US

m

0

100

200

300

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600

700

Nu

mb

er o

f d

eals

$ invested US m

Number of deals

Europe is about 40% and Asia 10% of North America


Cleantech Investment by SegmentCleantech Investment by Segment

Energy-related deals are leading: 43% of total cleantech by amount; 36% of number of cleantech deals.

Cleantech segments: by amount invested 1999 - 2005

Materials & Nanotechnology

15%

Manufacturing/ Industrial11%

Materials Recovery & Recycling

6%

Enabling Technologies6%

Agriculture & Nutrition5%

Water Purification & Management

5%

Transportation & Logistics3%

Air Quality2%

Environmental IT4%

Energy43%


Investment by Region Investment by Region

Percentage of total amount invested in cleantech by Region (1999-Q3 2005)

Source: Cleantech Venture Network, 2006

Northwest4%

Eastern Canada5%Midwest

9%

Northeast27%

Rockies/Plains3%

Southeast8%

Southwest6%

West Coast35%

Western Canada3%

The West Coast and North East receive over 60% of all cleantech venture capital: Canada takes 9%


Cleantech investment by Round and RegionCleantech investment by Round and Region

Amount and number of cleantech deals by Round and Region, 1999 - 2005

125

3225

183181

232526

4652

41

85

141

70

38

5748

29

-

500

1,000

1,500

2,000

Wes

tern

Can

ada

Eas

tern

Can

ada

Nor

thw

est

Sou

thea

st

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/Pla

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/Pla

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est

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wes

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Wes

t Coa

st

First Round Follow -on

$US m

0

20

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Nu

mb

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eals

The Northeast receives 25% of all First Round Cleantech Investments


Cleantech investment 1999-2005Cleantech investment 1999-2005

US and Canadian Cleantech Deals by Quarter, Q1 1999- Q2 2005, by Amount and Number of deals.

47

53

76

50

55

65

60

41

2321

36 36

16

3532

242626

534947

59

464743

515142

0

100

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1999

Q1

1999

Q2

1999

Q3

1999

Q4

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Q1

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$ U

S m

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Num

ber

of c

lean

tech

dea

ls


US Cleantech rounds as % of total US VCUS Cleantech rounds as % of total US VC

US cleantech % of total US VC: comparing first round and follow-on rounds (by amount and number of deals)

8%10%

9%

5%

3%1%

1%

1%

2%

4%

5%

11%

8%

9%

4% 4% 4%

5%

1%2%

1%

5%4%4%

5%

2%

2%

3%

0%

2%

4%

6%

8%

10%

12%

1999 2000 2001 2002 2003 2004 Q1 - Q2 2005

% o

f U

S c

lea

nte

ch

to

US

to

tal V

C

First Round ($ amount)

First Round (# of deals)

Follow-on ($ amount)

Follow-on (# of deals)

Source of all US VC data: PWC/Venture Economics/ NVCA


2006 Onward – Growth & ROI2006 Onward – Growth & ROI

Three periods of cleantech, $ amounts and numbers of deals invested Q 1999-Q2 2005 and projected for Q3 2005-Q4 2009

$3,233 $4,944 $8,487

618

1,489

363

$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

$8,000

$9,000

Q1 1999 - Q4 2001 Q1 2002 - Q4 2005 Q1 2006 - Q4 2008

Bubble and Burst Learning and Diversification Growth and Returns

$US

m

0

200

400

600

800

1,000

1,200

1,400

1,600

Nu

mb

er o

f d

eals


Corporate Members (Partial List)Corporate Members (Partial List)

Honda Research

Hydro Quebec Capitech

IBM Corporation

Ingersoll Rand

Intel Capital

Koch Genesis

Lubrizol Corporation

Marubeni

Mitsui

Mitsubishi International

Norsk Hydro Ventures

Rohm & Haas

RWE Dynamics

Siemens

Southern California Gas

Trans Pacific Petroleum

Unilever Ventures

and others …

Air Products & Chemicals

BASF Venture Capital

Bosch

Boeing Tech Ventures

Cargill

Cinergy Ventures

Coca-Cola

CH2M Hill

Chevron Texaco Ventures

ConocoPhilips

Corning

Eastman Ventures

EBARA

EDF

ENCANA

EPCOR

Fuji Research

Gaz de France

GE Energy

Henkel


Who are the Buyers?Who are the Buyers?

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


GE’s Ecomagination InitiativeGE’s Ecomagination Initiative

Launched May 9 2005 by CEO Jeff Immelt: “Green is Green”

Double investment in R&D. GE will invest $1.5 billion annually in research in cleaner technologies by 2010, up from $700 million in 04.

Introduce more ecomagination products each year. GE will double its revenues from cleantech products and services– from $10 billion in 2004 to at least $20 billion in 2010. (These products include renewable sources of energy and materials that make energy production and consumption more efficient, cleaner and more efficient transportation technologies, and products and services that conserve or purify water)

Reduce its greenhouse gas (GHG) emissions and improve its energy efficiency. GE has committed to reduce its GHG emissions 1 percent by 2012 and the intensity of its GHG emissions 30 percent by 2008 (both compared to 2004).


BP Alternative EnergyBP Alternative Energy

Launched November 29 2005 by BP Chief Executive Lord Browne

Double its investments in the entire umbrella of alternative and renewable energy technologies.

Manage an investment program in solar, wind, hydrogen and combined-cycle-gas-turbine power generation, which could amount to $8 billion over the next ten years.

The effort has a growth potential to deliver revenues of around $6 billion a year within the next decade.


Top 10 Acquirers by ValueTop 10 Acquirers by Value

Announced

Acquirer Acquirer DescriptionDeal Value

($MM)Deal

Count

Tyco International Ltd Diversified US Industrial 17,336$ 13

ABB European electrical equipment co. 11,644$ 43

Veolia Environnment European Water treatment & filtration 8,200$ 1

BASF AG European Chemicals and Allied Products 5,827$ 11

GE Diversified US Industrial 4,649$ 24

Suez European Water treatment & filtration 4,200$ 1

Siemens AG Diversified European industrial 4,068$ 54

Danaher Diversified US industrial 3,868$ 78

Hercules Inc US Chemicals and Allied Products 3,148$ 1

Schneider European Water treatment & filtration 3,079$ 28

SPX Corp Diversified US Industrial 2,685$ 9

68,704$ 263


Top 10 Acquirers by Deal CountTop 10 Acquirers by Deal Count

Announced

Acquirer Acquirer DescriptionDeal

CountDeal Value

($MM)

Danaher Diversified European industrial 78 3,868$

Siemens AG Diversified European industrial 54 4,068$

ABB European electrical equipment co. 43 11,644$

Schneider European Water treatment & filtration 28 3,079$

Roper Diversified US industrial 27 881$

GE Diversified US industrial 24 4,649$

AMETEK Inc European electronic & electrical equipment co. 16 436$

Honeywell Inc US electronic & electrical equipment co. 16 624$

Cooper Industries Inc US electrical equipment co. 15 2,478$

Osmonics Inc Diversified US (part of GE as of March 2003) 14 140$

ATS Diversified US industrial 13 49$

TOTAL 328 31,917$


Can Cleantech Make Money?Can Cleantech Make Money?

• Report released in late March 2005

• 67 initial public offerings: 730 M&A transactions in 30+ countries

• Estimates Cleantech IPOs yielded returns to pre-IPO investors of 5.5x, while European venture-backed IPO generated returns of over 8x.

• Estimates overall returns on cleantech M&A transactions were 4.3x on invested equity, based on more than $94 billion in transactions tracked over the past 2 decades

• A hypothetical portfolio of cleantech venture investments delivered an estimated IRR of approximately 30%. (Assumed 40% of the portfolio’s investments were written off and an average holding period of five years.)

Cleantech Venture Investment – Patterns & PerformanceThe most comprehensive investigations of cleantech investment

performance to date


Cleantech Index™Cleantech Index™

The Cleantech Index™ was developed to capture the investment potential associated with the substantial increase in the economic value of clean technologies that will inevitably be unlocked as the global population adjusts to the linkage between economic development and resource sustainability.

For a stock to be included in the selection universe, a company must be identified as one that has an exposure of over 50% to a cleantech segment. Current universe of 75 stocks with market capitalization of approximately $100 billion.


Index ComponentsIndex Components

12.31.2005

6

7

2

9

24

7

2

3

5

10

Materials & Nanotechnology

Air Quality & Emission Controls

Transportation & Logistics

Energy Generation

Energy Infrastructure

Energy Storage

Energy Efficiency

Enabling Technologies

Materials Recovery & Recycling

Water Purification &Management


Preliminary Index StatisticsPreliminary Index Statistics

Preliminary Return Summary (December 29, 2000 to January 20, 2006)

Start Date End Date PeriodCleanTech Index

CleanTech Index - TR

WilderHill Clean Energy

IndexS&P 500 Index

Dow Jones Industrial Index Nasdaq 100

Palisades Water Index

12/31/1999 1/20/2006 ITD 96.81% 101.75% NA -14.14% -7.22% -54.79% 147.46%

12/29/2000 12/30/2005 5 YR 52.96% 55.81% -10.32% -5.45% -0.64% -29.74% 99.84%

12/31/2002 12/30/2005 3 YR 117.10% 119.16% 72.71% 41.88% 28.48% 67.13% 85.67%

12/31/2004 12/30/2005 1 Yr 9.47% 9.76% 4.07% 3.00% -0.61% 1.49% 8.48%

12/30/2005 1/20/2006 YTD 8.19% 8.20% 12.15% 1.06% -0.47% 1.90% 6.11%

12/30/2005 1/20/2006 QTD 8.19% 8.20% 12.15% 1.06% -0.47% 1.90% 6.11%

Annualized

12/31/1999 1/20/2006 ITD 11.82% 12.28% NA -2.48% -1.23% -12.28% 16.13%

12/29/2000 12/30/2005 5 YR 8.85% 9.26% -2.15% -1.11% -0.13% -6.80% 14.82%

12/31/2002 12/30/2005 3 YR 29.49% 29.89% 19.98% 12.37% 8.71% 18.67% 22.91%


Attractive Financials & FundamentalsAttractive Financials & Fundamentals

• Category is not over-invested – opportunity to get in early

• Low enterprise valuations – good multiples are achievable

• Sometimes lower capital intensity than many other categories

• Strong trade exit potential – most M&A

• Strong global corporate, consumer and government demand – strong growth rates

• Evidence of rising public market interest, AIM, Solar

• Emerging fund managers – opportunity for diversification

• Venture grade returns can be achieved!


Key Events 2005 – 06 to dateKey Events 2005 – 06 to date

• CalPERS/CalSTRS Green Wave Initiative• $60+ a barrel and OPEC instability – ME, Nigeria, Venezuela• European RE markets• Q-Cells, Suntech Power and Sunpower IPOs• Rise of AiM as Global Cleantech Exchange• Corporate announcements – GE, BP,EdF, Walmart etc• Xerox’s PARC announces cleantech initiative• US President’s State of the Union Address• Carbon trading kicks in and prices rise• The hybrid as status symbol• China and the rush for commodities• KPCB announces $100 M for cleantech investing

– “biggest opportunity of the 21st century”


Some ChallengesSome Challenges

Globally:

• Building big-small business partnerships

• Building linkages between different capital suppliers (eg project finance, venture capital and equipment leasing)

• Encouraging appropriate public policies (in the US)

• Bringing cleantech to emerging market economies – BOP + BRICs

• BRICs as sources of Technology and Opportunity

• Globalization of Cleantech Capital• Potential Resource Bottlenecks in Clean Energy

• Constant Counter-Intuitions

Canada:

• Turning public R, D & D into commercial business

• Institutional support for venture capital

• From “clean energy” to “cleantech”

• The Rise of Cleantech Clusters


Thank You!Thank You!

www.cleantech.com

[email protected]

© copyright 2005, cleantech venture network, all rights reserved date: presented by: “cleantech...

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