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Low Carbon Accelerator Asia, L.P.

Bridging the gap between innovation and infrastructure

Presentation to the 6th Asia Clean Energy Forum


Brandon Courban Manila, 22 June 2011

Low Carbon Investors Pte Ltd is supported with financial assistance from the European Union.

TABLE OF CONTENTS

I. II.

ABOUT US THE LOW CARBON INVESTMENT OPPORTUNITY

III. LCA ASIA STRATEGY

IV. CASE STUDIES


V. DEAL PIPELINE

I. ABOUT US: LCA ASIA HIGHLIGHTS


LCI is an investment manager focused solely on the low-carbon economy, with an established track record in clean technology financing.

LCI has a strong team with technological, operational and regional experience, supported by an Expert Panel, with investment professionals based in its office in Singapore and London.
The valley of death presents a major market opportunity:
o The investment strategy supports both forward and backward-integration across the supply chain to bridge the gap between innovation and infrastructure.

Simple model to deploy established technologies to the high growth markets in South and South East Asia
o Target territories are India, Indonesia, Malaysia, Singapore, Thailand and Vietnam

These markets are badly under-served by PE/VC and sources of conventional finance
o Low Carbon global PE/VC allocation globally of 5% to Asia, and less than 2% to our target markets

The launch of LCA Asia is supported by the Asian Development Bank and the European Investment Bank under their Technical Assistance Programme.

I. ABOUT US: MANAGING A GLOBAL PLATFORM FOR LOW CARBON INVESTMENTS


Vintage

Low Carbon Accelerator

Venture Capital UK and USA

$80m

2006

INNOVATION Low Carbon Accelerator Asia


Private Equity Asia

$150m

2011

INFRASTRUCTURE

Downing Low Carbon

Infrastructure Projects (<5MW) UK

$40m

2010

Low Carbon Solar Holdings


NB. Dashed line indicates planned fund launches

Infrastructure Projects (>5MW) Spain, Greece, Italy, USA

$150m

2010

II. ASIA REPRESENTS THE LARGEST AND FASTEST GROWING MARKET FOR LOW CARBON COMPANIES
Population Growth
Global population expected to grow to 7 billion by 2012 and surpass 9 billion by 2050. Population growth in the Funds target countries is expected to grow approximately 6.3% between now and 2015. In contrast, the population growth in the EU and USA is forecast to be 2.5% in the same period. GDP Growth The GDP growth forecast of the Funds target countries is expected to remain at a strong level at an average annual rate of 6.4% between now and 2015 (compared to the European Average of target countries level of 1.7%).
Europe

Population Growth in LCA Asias Target Countries (millions)


1,750 1,700 1,650 1,600 1,550
2009 2010 2011 2012 2013 2014 2015 Source: IMF 2010

GDP Growth in LCA Asias Target Countries (%)


15 10 5 0
2010 2011 2012 2013 2014 2015

Source: IMF 2010

Demand for Energy Demand for energy is expected to rise 40% between now and 2030. Southeast Asias primary energy demand is expected to expand by 76% over this period at an annual rate of 2.5%. Indias primary energy demand is expected to more than double by 2030, growing Asia (exc Japan and Korea) at an annual rate of 3.5%.
Rest of world

Growth in Asian Energy Demand (mtoe)


20,000 15,000 10,000 5,000 0

Source: WEO 2008

1990 2006 2015 2020 2025 2030

II. THE REGION IS UNDERSERVED BY CAPITAL FOR LOW CARBON TECHNOLOGIES


Funds committed

Region is underserved with less than 5% of worldwide investments in expansion and growth stage low carbon technology companies targeted to Asia in 2009.
Source: New Energy Finance

II. YET ASIA IS VIEWED AS A HIGHLY ATTRACTIVE REGION FOR CLEANTECH INVESTMENT OPPORTUNITIES
Fund Managers Views on Most Attractive Regions for Cleantech Investment Opportunities in 2011
80%
Proportion of Respondents

70% 60% 50% 40% 30% 20% 10% 0% Australasia North America Europe Greater China South America MENA Africa Asia

Source: Preqin (2011)

II. INVESTMENT THEMES HIGHLY SUITED TO THE REGION


Distributed Energy Large parts of rural population have no access to the grid.
Extending the grid is costly: World Bank has estimated the average cost to extend the grid in developing countries is between USD$ 8,000/ km to USD$10,000 /km, up to USD$22,000 /km. Several renewable energy technologies can deliver the lowest levelised generation costs for off-grid electrification. Waste to Energy Region has strong agricultural industries with waste products from the production of sugar, palm oil, rice straw and husks, and other. Municipal solid waste is expected to grow due to population growth and urbanisation. Energy Efficiency A kWh saved is often cheaper than a kWh generated. Reduces infrastructure bottlenecks and future investment requirements. Clean Water Rising water shortages combined with urbanisation and industrialisation are driving the demand for water management, water recycling and desalination.
Off-grid Forecast Generating Cost

Source: World Bank (2007)

III. ASIAN INVESTMENT STRATEGY: BUILDING A DIVERSIFIED PORTFOLIO THROUGHOUT THE SUPPLY CHAIN
The clean energy transition from innovation to infrastructure has a major market inefficiency the valley of death This represents an attractive investment opportunity if:
Investment thesis focuses on distributed generation, waste to energy and energy efficiency Supply-side investment is combined with demand side facilitation

Minimises the trough in the typical J-curve of venture capital funds Enables the Fund to drive demand, rather than wait for it

IV CASE STUDY: THE OPPORTUNITY IN SMALL SCALE WIND

LARGE SCALE WIND


o Typical returns 5% (7% + with CDM) o Pinch points on supply of blades o High Capex requirements

SMALL SCALE WIND


o Typical returns 15 45% o Severe supply side constraints with only 3 manufacturers accredited to claim UK FITs o Lower capex and faster permitting time

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IV CASE STUDY: THE OPPORTUNITY IN SMALL SCALE WIND contd


LCI approached the opportunity by investing in both the Supply AND the Demand side
Windcroft Developments Ltd Clean Power Generation Ltd Renewable Energy Trading Ltd

Technology Provider

Early-stage in country Project Development

Asset-backed companies

RATIONALE AND BENEFITS Highly constrained supply chain Low implementation risk Fast growing off-grid/rural market

Revenue generating within 1 year Attractive local incentives Sets de-facto standards and drives bankability

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IV OPPORTUNITY ILLUSTRATION: TELECOM BASE STATION SOLUTIONS


TELECOMMUNICATIONS BASE STATION MARKET

1.6 billion people live without access to electricity. The mobile industry is experiencing unprecedented growth in these same off-grid regions of the developing world. GSMA estimates that nearly 639,000 off-grid based stations will be rolled out by 2012 and that there is a potential for 200,000 of these sites to be powered using renewable energy. Pilot project in Namibia with MTC and Motorola concluded a hybrid wind/solar solution had an ROI period of 3 years. Asian governments under increasing pressure to reduce oil and fuel subsidies. Average diesel price has increased by >50% in 12 months in many Asian regions. Providers has relied on diesel-powered generators for off-grid base stations, but increasingly apparent that diesel is not the optimal solution.

Opportunity for telecom base stations based on lack of available grid

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IV. DEAL PIPELINE ILLUSTRATION : BIODIESEL


Supply-side: Biodiesel System Technology using waste feedstocks Technology Investment
Confidential company has developed a game-changing technology using low cost waste-based feedstocks to produce biodiesel. Converts all classes of fatty acid containing lipids no other process converts leftovers into biodiesel Degumming leftovers processed from soy and palm, brown grease, vegetable oils and animal fats that are lower in price than traditional feedstocks. Eliminates biodiesel pre-treatment cost of feedstock with increased yield. Pilot demonstration unit operational for over 2 years validating multiple low cost feedstocks. Investment amount circa US$7 million

Demand-side: Company/ Project Investment


Region has significant biomass feedstocks including sugar, palm oil, rice straw and husks, coconut shells, wood waste and other agricultural wastes. Power produced by biomass cogeneration systems is often used for on-site consumption with excess sold to the grid. Low value waste streams currently sold into the detergent and soap industries, with prices >80% lower than those refined oils normally used in biodiesel production. LCA Asia intends to fund multiple projects, each in the 1 to 5 million litres per year, producing biodiesel fuel from waste material for use in on-site power generation. Project IRRs are >50% and it is forecast that the fund will invest $10-15 million across a range of projects