Empresas ESM, S.A. de C.V. Energy and Water Savings Multinational

1
Empresas ESM, S.A. de C.V. Energy and Water
Savings Multinational

• New Ventures Investor Forum, Monterrey, Mexico
  2002

2
Mission

• To develop and implement comprehensive energy
  efficiency, renewable energy, and water treatment
  projects that exceed our clients expectations.
• To make the Mexican commercial and industrial
  business sector more efficient, competitive, and
  environmentally aware in an increasingly global
  economy while growing ESM by completing
  successful and profitable projects.

3
Company Overview

• Turn key customized solutions to energy and
  environmental problems
• Reduces customers energy and operational costs
• Provides solutions for environmental compliance
  and Greenhouse gas mitigation
• Pioneer in providing financial solutions for
  project implementation
• Founded in 1998 - have implemented over 2
  million in projects
• ESM has 17 employees located in Monterrey and at
  project sites throughout Mexico

4
Company Overview

• ESM has raised 700,000 in equity
• Secured 850,000 in debt
• Require 7 million in equity over next four years
  in order to secure 12 million in debt to
  implement projects valued at over 20 million
• Currently raising 2 million in equity for
  projects through 2003
• Provide return on equity by investing in project
  assets provide a gt 25 IRR on a project basis

5
Performance Contracting
Energy Budget
Customer Keeps
Implement Project
To ESM

• Value of Project
• Capital improvements
• Risk management
• Service consolidation
• Energy cost savings
• Financing expands of measures
• Improved operating efficiency
• Information
• Mitigation of air pollution
• Reduced global warming

To Utility
6
Energy Efficiency Project
Efficient air compressor technology from Belgium
High Efficiency Transformers from the US
Energy Efficient Kiln Technology from Italy
Operations Maintenance
Empresas ESM
Engineering Construction Management
Local Bank Financing
Performance Contract
US
US Denominated Contract Savings
Energy User
7
CERVECERÍA CUAHUTEMOC MOCTEZUMA

• First true performance contract in Mexico
• Implemented energy efficient control system to
  reduce electricity use and demand
• 186,000 Project Cost at two facilities
• Annual Payments of 72,000 over five years
• Actual savings are almost double
• ESM retained rights to carbon credits

8
EólicaSanta Catarina

• ESM is developing a 20 MW wind farm near
  Monterrey, Mexico
• Partnership with 7 municipalities representing
  population of 5 million
• Average rate they pay is 0.18/kWh
• gt35 plant factor possible
• JV with international wind developer
• Carbon credits range .250 - .5 M tons CO2
  equivalent over 10 years

9
Market Overview

• Rapidly rising electric rates (four times
  inflation over past two years) and increasing
  power shortages
• Increased environmental regulation and
  enforcement
• 300 Mexican companies account for 25 of
  electrical use
• Industrial sector accounts for over 50 of the
  countries electric - estimated 1.9 billion
  market for energy efficiency in this sector alone
• Aging equipment operating inefficiently and ready
  for replacement in many facilities
• ESM has a first to market position to take
  advantage of this relativity untapped market

10
Competition

• Over 70 small consulting firms involved in energy
  auditing and energy engineering services
• Most lack access to capital - only two others
  currently offer financing - ESM has had success
• Equipment manufacturers - typically do not
  provide turn-key services with financing
• Biggest competition - Customer - doing it
  themselves or not doing anything

11
Management Team

• Hector Martinez Vivas - General Director
• 13 years experience in controls engineering and
  energy auditing
• Performed hundreds of audits and over 50 training
  courses
• Peter Oatman, P.E. - CEO
• 20 Years experience in Energy Engineering and in
  the U.S. energy services business
• Founded and sold an energy services company to US
  Utility providing a 30 return to investors
• Econergy International Corporation
• Thomas H Stoner, CEO
• John Paul Moscarella, Vice President

12
Strategy

• Barrier to growth - availability of equity and
  debt financing - requires a strong balance sheet
• Cover operating cost through equipment sales and
  auditing services
• Keep operating cost low - outsource engineering
  and construction services
• Strategic partners - share project development
  costs - guarantee debt - cost is sharing project
  revenues
• Use direct customer financing sources - Ex-Im
  bank and FIDE programs

13
Strategy

• Raise equity to strengthen balance sheet
• Reduce investor risk through preferred stock
  structure
• Only accept equity when projects are developed
  and signed
• Secure larger debt facility once sufficient
  project size is reached
• Pool smaller projects
• Working with NAFIN, Banorte, CAF, Ex-IM Bank, IDB
• Create a Carbon Portfolio - 2 M tons of CO2
  equivalent - 6 million to 16 million benefit
• Performance contracting is ideal for delivering
  carbon projects

14
Milestones

• 1998 - First performance contract in Mexico
• 1999 - 2001 - Raised 1.5 million in debt and
  equity financing for five projects
• Equity from Angels and Calvert World Value Fund
• Projects in automation controls, efficient air
  compressors, desalinization, and high efficiency
  kiln
• 2002 - Continuing our success
• Auditing contracts of 150k and equipment sales
  of 470k - signed performance contract for 330k.
• JV with International wind developer
• Sales pipeline of 9 million of projects with
  companies like Coca Cola, Whirlpool, and Carrier

15
Financial Projections
Carbon credits value added environmental
asset Exit Strategy Sale at 5X EBITDA
16
Summary

• ESM is a pioneer in using performance contracting
  in Mexico
• Mission is to implement environmentally
  beneficial projects and create a carbon portfolio
• Implemented over 2 million in projects and are
  developing 35 million more
• Raising 2 million in equity through preferred
  stock
• We expect to deliver 20 million in projects over
  the next four years and achieve a venture capital
  return for our investors