Greenbacks from Greentech: Cashing in on Private Capital’s Hottest Sector

Forecasts: why are they so wrong?
- Oil
- Gas and coal
- Mobile phones
- Belief system bias
Black swans – the solution to the energy crisis?
Carbon-negative cement
Fast-track biofuel crude
Drive for carbon reduction
Evaluating solutions: the scaling model
Cost trajectory
- Carbon trajectory costs
- Types of cost
Adoption risk
Optionality
Capital formation
Carbon reduction capacity

Chapter 02: Accessing the low carbon investment opportunity: generating returns and managing risk

By Jim Totty, Partner and Senior Investment Manager, Osmosis Capital

The growth of the low carbon economy
Energy and water security
- Commodity price volatility
- Climate change and the need to create a new inter-generational legacy
  - Financial consequences of climate change
- Long-term ‘green collar’ job creation and government stimulus
- Population growth
Funding the growth: why superior investment returns are available in the low carbon sector
- Investment required in the low carbon sector
  - current temperatures (US$bn)
- The changing funding landscape
Recent private equity investment levels
- Investment stage
- Region
  - Sector
  - Future growth
Returns in the low carbon sector
- Need for experienced banks and advisors
Investment funds in cleantech
- Funds in the low carbon sector
- Venture capital
- Private equity
- The challenge of fund selection
- Capital raising in the sector
Investment considerations for LPs
- Diversification of exposure
  - Sub-sectors
  - Investment styles
  - Vintage years
  - Major geographies
  - Funds
- Selection of top quartile managers
  - Lack of track record
  - Need for specialist sector knowledge for due diligence
  - Cleantech experience
  - Direct investing experience
  - Team and fund
  - Access to funds
Investing through funds of funds
- Characteristics of successful funds of funds
  - Team
  - Independence and specialisation
  - Network and database
Conclusion

Chapter 03: Why government policy is central to solving climate change

By Mark Fulton, Global Head, and Mark Dominik, Vice President, Climate Change Investment Research, DB Climate Change Advisors

Why government intervention is necessary: climate change and market failure
What government commitment needs to unlock: financial flows
How policy is crafted
- Long-term target setting
A taxonomy of government policy
- Carbon pricing
- Innovation policy
- Traditional regulation
The dynamics of policy development over time
Implications for investors: the need for long-term focus and commitment

Chapter 04: Venture capital investment in greentech/cleantech

By Andrew Affleck, Chairman, Low Carbon Accelerator

Venture capital compared to other funding sources
Grants and soft loans
- Friends and family
- Angel investors
- Bank debt
- Corporations
- Capital markets
Venture capital in the greentech/cleantech sector
Greentech/cleantech challenges for venture capital
- Price premiums
- Suppliers
- Customers
- Capital requirements
- Financing risk
- Time frames
If not venture capital, then what?
Innovative private sector financing approaches
- Supporting investment in carbon reducing technologies
- Supporting financing of first commercial plants and marine technologies
Is venture capital the most important cleantech investor?

Chapter 05: Private equity perspectives on investing in renewable energy

By Mark Brown, Managing Director, Head of Barclays Natural Resource Investments

The rising profile of renewable energy
Broad parameters for private equity investment
- Management
- Technology
- Development
- Political and regulatory context
- Investment scale and timing
- Reliance on debt
- Ability to exit
- Return on (and competition for) capital
Case study: Mainstream Renewable Power
- Mainstream's business strategy
- How Mainstream meets BNRI's investment parameters
Conclusions

Chapter 06: Cleantech’s opportunities for sector-focused portfolio diversification

By Thomas Martin, Senior Vice President, PCG Asset Management

Sector-focused funds provide opportunity for institutional investment
Portfolio contruction factors
- Investment stage
- Sub-sector allocation
- Investment structure
- Geography
- Vintage year
Summary

Chapter 07: Cleantech financing trends – A European perspective

By Robert Markus Feldmann, Managing Director, Corporate Finance Advisory, Deloitte & Touche Corporate Finance GmbH

Cleantech financing barriers
Project financing: new mix
Financing trends
Investor analysis more critical

Chapter 08: Cleantech opportunities in emerging markets

By Ashish Patel, Managing Director, Intel Capital EMEA

Tailoring investment strategies to development stage
Barriers to cleantech adoption
Advantages of emerging markets
Drivers of opportunity
Regional opportunities
Supply-side opportunities
Demand-side opportunities
Services opportunities
Individual opportunities
China
- Goals and regulations
- Current investment
- Coal
- Wind
- Solar
- Energy efficiency
- Water treatment
India
- Energy efficiency
- Rural electrification
- Clean water
Africa
Other markets
Conclusions

Chapter 09: Why MENA should integrate CSP into its energy mix

By Samer Zureikat, Managing Director, MENA Cleantech AG

The energy intensity of the MENA water-use cycle
Per capita renewable water flows, not per capita CO2 emissions
Decoupling fossil fuels from the water-use cycle
CSP technologies fit MENA’s solar resources
Case study: JOAN1, 100MW CSP Plant, Ma’an, Jordan
A sustainable MENA water-use cycle can also sustain Europe

Chapter 10: Perspectives on smart grid development

By Ashutosh Shastri, Director, EnerStrat Consulting

Overview
Defining the smart grid
How smart is the grid today?
Smart grid growth drivers
- Customer demand and technology supply
- Political push for infrastructure investment
Sizing and segmenting the smart grid space
- Advanced transmission and distribution systems
- Advanced metering infrastructure
- Demand response systems
Corporate activity in smart grids
Smart grid deployment in the US and EU
- EU energy policy
- US energy policy
Smart grid implementation challenges
Investing in the smart grid future
Outlook and conclusions

Chapter 11: Case study: MBA Polymers

By Nigel Grierson, managing director, Doughty Hanson Technology Ventures

Introduction
MBA Polymers and cleantech funding
Market opportunity
How do they do it?
Customers are demanding a more sustainable supply chain

List of tables and figures

Table 2.1: China, India, Middle East – population and fresh water supply (%)

Table 2.2: Active PE and VC investors in the low carbon sector, 2007, 2008

Table 4.1: Largest companies by market value, 2008 (US$m)

Table 7.1: Financing solutions for phases of company development

Figure 1.1: Oil price forecasts and actuals, 1985–2005

Figure 1.2: Gas price forecasts and actuals, 1985–2005

Figure 1.3: Coal price forecasts and actuals, 1985–2005

Figure 1.4: New technology cost trajectory

Figure 1.5: Technology cost curves differ

Figure 1.6: Cost types as proportion of total cost

Figure 1.7: Carbon trajectory

Figure 1.8: Optionality: biofuels feedstocks and pathways

Figure 1.9: Optionality: hybrids vs. biofuels

Figure 1.10: Global carbon reduction capacity to 2050

Figure 2.1: Investment growth in the low carbon sector, 2004–08 (US$, %)

Figure 2.2: Estimated annual investment required to maintain global warming at 2ºC above current temperatures (US$bn)

Figure 2.3: Global VC/PE investment by type, 2002–08 (US$bn)

Figure 2.4: Global VC/PE investment by region, 2002–08 (US$bn)*

Figure 2.5: Global VC/PE investment by sector, 2008 (US$bn)

Figure 2.6: Total equity value of VC / PE low-carbon investment worldwide, 2002–2014 (f) (US$bn)

Figure 2.7: Global funds raised for the low carbon sector, 2000–09

Figure 2.8: Disclosed VC & PE funds raised, 2002–08 (US$bn)

Figure 3.1: The capital curve

Figure 3.2: Targets underpin and support each other

Figure 3.3: Three broad types of climate policy

Figure 3.4: The government policy process will move through stages over time for a given technology that has been proven in demonstration

Figure 10.1: Smart grid sub-technologies and characteristics

Figure 10.2: Smart grid technology applications across the electricity value chain

Figure 10.3: Key drivers of smart grid deployment

Figure 10.4: Segmenting smart grid technologies and markets

Figure 10.5: Growing global corporate activity in smart grids

Figure 10.6: Comparison of US and EU smart grid development

Figure 10.7: US smart grid funding from the government stimulus package

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Greenbacks from Greentech: Cashing in on Private Capital’s Hottest Sector

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