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Ottawa Venture Capital Fair

• Investing in Sustainable Clean Technologies A
  Canadian Perpective
• Rick Whittaker
• Ottawa, Canada
• September 29, 2005

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What is Clean Technology?

• Clean Technology is About
• Being a business enabler
• Managing cost and efficiency of energy for
  business use
• Managing business processes more efficientlyan
  enabling technology of the modern industrial
  society
• Turning wasteful parts of the business process
  into value.
• Next up and coming sector which is attractive
  to equity investors (now the 6th largest venture
  investment category with over 7 market share)

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Clean Technology Investments

• As a percent of total private investments, clean
  technology placements have risen relative to the
  total.
• They have increased from a low of 1.6 in 2000,
  to a current year-to-date high of 7.6. During
  one quarter (Q3/04), Canadian clean tech
  investments averaged 9.6 of total investments.
• To the end of Q3/04, there have been 177.8M in
  clean technology announcements, on a market total
  of 2,342.9M.
• This is indicative of a shift towards clean
  technology.

CAD Million
Sources MacDonald and Associates. Nov 2004, and
CleanTech Venture Monitor, Issue 4
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Is Cleantech a Viable Investment Category?
Cleantech Venture Investment Patterns
Performance

• Report released in late February 2005
• 67 initial public offerings 730 MA transactions
  in 30 countries
• Both North American and European coverage
• Conclusions are indicative more than definitive
• Sponsored by six leading investors in Canada, US,
  Switzerland.
• Co-edited by N. Parker and D. Propper authored
  by J. LoGerfo
• Research team involving Ivy League universities.

The most comprehensive investigations of
cleantech investment performance to date
Source Cleantech Venture Network
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Report Highlights (1)

• Provides evidence investors in privately-held
  cleantech companies have been able to achieve
  liquidity both through public offerings and trade
  sales
• Documents instances in which shareholders exited
  their investments with venture-grade returns.
• 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 MA
  transactions were 4.3x on invested equity, based
  on more than 94 billion in transactions tracked
  over the past 2 decades
• To translate returns multiples into an estimated
  IRR, the report team constructed a hypothetical
  portfolio of cleantech venture investments. The
  portfolio delivered an estimated IRR of
  approximately 30. (Assumed 40 of the
  portfolios investments were written off and an
  average holding period of five years.)

Source Cleantech Venture Network
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Report Highlights (2)

• For evidence of the ability of cleantech
  companies to generate long-term shareholder
  value, the report team created the
  Vortex-Cleantech Index (VCI) and 11 associated
  segment indexes.
• Based on a basket of 182 US-traded cleantech
  stocks with a combined market cap of nearly 100
  billion.
• Over the ten years from June 1994 to May 2004,
  the VCI (267) outpaced both the NASDAQ (181)
  and the Russell 2000 (146).
• The VCIs solid showing was built on a broad
  foundation no single industry segment dominated
  overall performance. The overall index traded
  well relative to the market because the majority
  of cleantech segment indexes traded at a similar
  level.

Source Cleantech Venture Network
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Report Highlights (3)

• To directly address the issue of cleantech
  company financial performance, we found cleantech
  companies with long records of growth in sales
  and earnings, as well as shareholders equity.
• Compiled a universe of 41 cleantech successes
  to represent a broad range of sizes, industry
  segments, and geographies. All 41 have operating
  histories of at least a decade
• The cleantech 41 universe has aggregate 30
  billion in annual revenue, 2 billion in net
  income and a market capitalization of 53
  billion.
• Sixteen of the 41 cleantech successes have been
  public since 1990 or prior. From 1990mid-2004,
  these sixteen posted compound annual revenue
  growth of 10, and net income growth of 15. (For
  comparison, over the same time horizon, revenue
  from global semiconductor shipments increased at
  the same 10 rate).
• Whether the starting point is 1990, 1995 or 2000,
  the average share price of the cleantech
  successes outperformed the Nasdaq and the
  Russell 2000 in virtually every time period.

Source Cleantech Venture Network
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SDTC Investment Envelope

• SDTC represents the single-largest clean tech
  investment pool in Canada.
• It leverages a 550M fund 2-3 times with
  consortia partners, creating an investment
  envelope of between 1.6B and 2.2B by 2009.
• One third is financed by the Government of Canada
  through SDTC, while two thirds is from the
  private sector.
• To date, SDTC has approved 126M in project
  funding, with an additional 354M in leveraged
  funding, for a total of 480M

Current Leverage Ratio 2.61
CAD Million
Investment Envelope
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Investment Portfolio
SDTCs current investment in 60 projects totals
126 million.
Energy Exploration and Production Power
Generation Energy Utilization Transportation Agric
ulture Forestry Waste Management
0
10M
20M
30M
40M
SDTC Funding Breakdown by Sector
(up to last round of financing, July 6, 2005)
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Partnering with SDTC

• Increased Deal Flow SDTC accesses all
  emerging clean technologies in Canada, encourages
  competitor analysis, and minimizes investor
  search and analysis time.
• Reduced Risk All applications are
  pre-screened on their technical, market and
  financial merit plus emissions intensity. Due
  diligence equivalent to VC industry process.
  Only high potential applications are approved.
  SDTC funds projects that de-risk the technology.
  
• Faster Market Entry All technologies are
  pre-revenue yet near market commercialization.
  SDTC manages hand-off, and exits to the
  investment community.
• Superior Arrangements SDTC takes no equity
  position, so the funds are non-diluted. SDTC
  takes no IP ownership in the projects. Project
  contracts are rigorous.
• Strengthening Team and Technology Value
  Proposition SDTC builds consortia, seeks
  strategic and follow-on investors and builds
  entrepreneurial capacity.

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For more Information Sustainable Development
Technology Canada 230 Queen Street, Suite
250 Ottawa, Ontario K1P 5E4 www.sdtc.ca