Beyond the Public Markets: Alternative Investments in the Environmental Economy

1
Cross Over Funding Private Equity to Project
Finance David Eva Manager Renewable Power
Project Development Quantum Leap Asset
Management

• Beyond the Public Markets Alternative
  Investments in the Environmental Economy
• April 20, 2005

2
Todays Discussion

• Need for clean, economical infrastructure
• No magic bullet solutions are expected
• Many technologies in various stages being
  developed

Market Context
Cross-Over Requirements

• Crossing-over into project finance requires
  major reduction in risk and substantial increases
  in capital outlay
• Investors are looking for more than proven
  technologies

Case Studies

• Case study 1 Clean Energy Developments
• Case study 2 Encelium Technologies

• Overview of Quantum Leap
• The Quantum Leap Company Asset Management
• Fund Overviews Renewable Power and VC Funds

Quantum Leap
3
How to meet energy infrastructure needs in a
clean (yet economical) fashion?
Ontario electricity supply and demand outlook
Ontario Electricity Peak Demand
Supply Gap
Aggressive Renewables
Existing Generation Capacity
4
No magic bullet it will likely take a
portfolio approach to meeting our growing power
needs
SHELL 2003
5
Many technologies are being developed to address
this opportunity
NON-EXHAUSTIVE
Fundamental Research
Proven
Prototype Development
Product Demonstration
Initial Mass Production/ Deployment
Generation and Fuels Supply

• Hydrogen (Fuel Cells, and IC)
• Fly Wheels
• Super Capacitors

Small Hydro
Solar PV
Small Wind
Geothermal

• Tidal Power
• Clean Coal

MSW and Biomass
Large Scale Wind
Demand Management/ Reduction
District Cooling
Smart Meters
Solar Thermal
Geoexchange
6
Todays Discussion

• Need for clean, economical infrastructure
• No magic bullet solutions are expected
• Many technologies in various stages being
  developed

Market Context
Cross-Over Requirements

• Crossing-over into project finance requires
  major reduction in risk and substantial increases
  in capital outlay
• Investors are looking for more than proven
  technologies

Case Studies

• Case study 1 Clean Energy Developments
• Case study 2 Encelium Technologies

• Overview of Quantum Leap
• The Quantum Leap Company Asset Management
• Fund Overviews Renewable Power and VC Funds

Quantum Leap
7
Crossing over into project finance requires
reductions in risk and large capital outlays
Fundamental Research
Proven
Prototype Development
Product Demonstration
Initial Mass Production/ Deployment
Governments / Foundations / Industry
Typical sources of financing
Angel Investors
Traditional Project Finance (Debt Equity)
Venture Capital
Cross-over
Returns
20
Equity 12-20 Debt 6-11
Risk
High
Moderate/Low
Capital
Tens of millions
Hundreds of millions to billions
8
Being a proven technology isnt enough for
project finance investors
Examples
Investors Needs
Proven Technologies

• 100 operating wind turbines of a given model
  before able to secure bank financing

1

Quantifiable and manageable risks
2

• 2 years of hydrology data plus 20 year
  correlation
• Long-term pricing on outputs

With all these requirements, how can emerging
technologies achieve mass deployment and access
capital?

3
Stable Regulatory Regime and Govt Policy

• Status of 1000 MW of wind farm contracts if WPPI
  not reinstated?
• US wind industry roller coaster PTC

Solid development partners
4

• Developers must be professionals able to
  anticipate project needs/requirements

9
Todays Discussion

• Need for clean, economical infrastructure
• No magic bullet solutions are expected
• Many technologies in various stages being
  developed

Market Context
Cross-Over Requirements

• Crossing-over into project finance requires
  major reduction in risk and substantial increases
  in capital outlay
• Investors are looking for more than proven
  technologies

Case Studies

• Case study 1 Clean Energy Developments
• Case study 2 Encelium Technologies

• Overview of Quantum Leap
• The Quantum Leap Company Asset Management
• Fund Overviews Renewable Power and VC Funds

Quantum Leap
10
Example 1 Clean Energy Developments

• Provides high efficient heating/cooling/hot water
  systems to new residential developments.
  Combines benefits of geoexchange with
  solar-thermal hot water systems. Payback to new
  home owners of 3-5 years.
• Approach and Learning's
• 650 home development will require approximately
  15 million in financing for geoexchange systems
• Had to prove technology was mature (specific team
  had several operating systems)
• Needed to assess several models and approach
  multiple parties (utilities, builders, banks
  mortgages, equipment financing hot water
  heaters)
• Over time, expect model to evolve early stage
  (mortgages) to securitization of cash flows
  (heating charge / paid from savings / rental
  payments)

11
Example 2 Encelium Technologies

• The Encelium Energy Control System is a lighting
  technology that
• Reduces lighting related energy costs in
  commercial and industrial facilities by 50 to
  75
• Improves lighting quality and workplace
  ergonomics
• Offers next generation of lighting efficiency
  hardware and software, providing facilities
  managers with significant electricity cost
  savings
• 2 to 4 year simple payback for system users
• Approach and Learning's
• Initially Customers buy outright
• Over time for larger installations, developing a
  paid-from-savings model (whereby customer not out
  of pocket for initial capital outlay)

12
Todays Discussion

• Need for clean, economical infrastructure
• No magic bullet solutions are expected
• Many technologies in various stages being
  developed

Market Context
Cross-Over Requirements

• Crossing-over into project finance requires
  major reduction in risk and substantial increases
  in capital outlay
• Investors are looking for more than proven
  technologies

Case Studies

• Case study 1 Clean Energy Developments
• Case study 2 Encelium Technologies

• Overview of Quantum Leap
• The Quantum Leap Company Asset Management
• Fund Overviews Renewable Power and VC Funds

Quantum Leap
13
Quantum Leap Business Overview
A Toronto based asset management and advisory
firm focused on building value in the areas of
Energy and Efficiency
Asset Management
Venture Services
Principal Business

• Venture Capital
• Project Finance

14
Quantum Leap Private Equity Venture
Portfolio
Technology applications


























15
Quantum Leap Project Finance and Power
Development
Province
Sector
Investee
BC
Hydro
Observatory Inlet Development Corp.
NS
Wind
Glace Bay Lingan Wind Power Ltd.
NS
Wind
Springhill Riverhurst Wind Power Ltd.
BC
Hydro
Spuzzum Creek Power Corp.
ON
Wind
Ventus Energy Inc.
ON
Wind
SkyPower Corp.
ON
Wind
Vector Wind Energy Inc.
ON
Wind
Schneider Power Inc.
SK
Wind
WindSwept Power Inc.
NS
Wind
Cape Breton Power Inc.
16
Thank you ! www.quantumleapco.com