© london asia capital plc 1 global energy security november 2005 simon littlewood ceo

1© London Asia Capital plc

Global Energy Security

November 2005

Simon Littlewood

CEO


About London Asia

• Asian focused merchant banking group:

• Private equity investment of own & third party funds

• Over 35 investments made since 2002

• Focus on education, financial services, TMT, and Energy & Environment

• Corporate finance advisory services

• M&A; Fund raising; Capital market transactions

• Fund management

• Manage the £50 million UK listed London Asia Chinese Private Equity Fund

• Structured finance

• Listed on UK’s AIM Stock Market since 2002

• Over 50% owned by UK institutional shareholders

• International network of offices and joint ventures:

• China (32 offices) London New York Hong Kong

• Germany Singapore Mongolia

• Malaysia Canada Vietnam


Existing E&E Investments

• Management team track record of over 10 years in the E&E sector• made first energy investment in China in 1996

• Raised over €500 million for projects in Europe and North America

Current Asian investments:

• China New Energy (UK PLUS listed) – ethanol equipment

• Asia Wind – wind technology & projects in Asia

• Asia Water (S’pore listed) – water supply & treatment;

• China Solar - solar thermal

• Devotion Ecothermal Technology (S’pore listed);

• Energy efficient heating equipment

• Green Coke & other clean coal/oil technology

• Asia Power (S’pore listed) – renewable power generation in China

• China Climate Exchange – leading Chinese CDM consulting business

• Coal mines & coal bed methane


Energy Security - The Problems

• Rising demand

• Dwindling supplies of fossil fuels

• Environment sacrificed for energy security

• Limited alternative strategies

• Existing infrastructure can’t cope with demand

• Short term solutions delay the inevitable


Rising Demand – to continue

• IEA estimates 53% increase in energy consumption by 2030

• Demand growth 3.7% pa for non OECD countries

• Driven mainly by India and China – India 3.6 - 3.9%

• India’s Energy consumption up 208% from 1980-2001 = 5.4% pa

• China up 130% - 4.3% pa

• India’s Production & consumption

• 11th biggest energy producer (2.4% of world production)

• 6th biggest consumer (3.3% of consumption)


Supply Shortages

• Increasing reliance on a smaller number of source countries

• IEA estimates non OPEC crude oil production will peak by 2015

• Rush to secure the last remaining supplies

• Economic, political & military conflict;

• Compromising long term stability and principles for short term

solutions

• Rising costs

• biggest hit are developing countries without adequate natural

resources – cut backs on education & health to fund it

Source: Shell


India’s Position

• Coal• 90 billion tons reserves – 10% of world total

• 200 years worth at current consumption

• 3rd largest coal producer in the world – 8.5% of world production

• 3rd largest coal consumer – 9% of global consumption

• Responsible for over 50% of India’s energy• 70% of electricity production

• Demand 50% greater than 10 years ago

• Oil:• Proven reserves 5 billion barrels of oil – 4.5% of world total

• Potentially up to 11 billion barrels

• 25th largest producer of oil – 1% of world output

• 6th largest oil consumer – 2.9% of world consumption

• 30% of India’s energy from oil• 60% of it imported

• Estimated consumption of 3 million bpd by 2010

• 75% increase in consumption in last 10 years


India’s Energy Position

• Gas:

• Reserves 0.5% of world total

• Consumption growing 4.8% pa

• Hydro

• 6th largest producer in the world – 3.7% of world total

• Another 30,000 MW under construction

• India’s energy consumption per unit of GDP – 0.19kg oil equivalent

per dollar

• World average 0.21


India’s Position (cont’d)

• 6th biggest generator of electricity – 4% of world total

• 6th biggest electricity consumer – 3.5% of world total

• Electricity consumption & generation up 64% in last decade

• Projected 8-10% pa increase till 2020

India’s Primary Energy Resources and energy use (2006)


Environment Sacrificed

• Environmental cost accelerating

• Healthcare

• Agriculture

• Climate related damage

• Decreasing quality of supplies + increased use = more pollution

• IEA estimates 55% increase in CO2 emissions by 2030

• China & India produce 21% of global CO2 emissions• Expected to rise to 36%

• US 23%

• Rest of G7 16%

• India’s carbon dioxide emissions per capita 1 tonne• World average 4 tonnes

• Developed nations up to 19,000 tonnes

• Public opinion

• Civil unrest


Alternatives Expensive

• Coal, gas and oil relatively cheap & efficient

• Energy efficient and renewable technology relatively expensive

• government incentives and legislation required

• Those countries which can least afford more expensive forms of

energy production are those showing the largest energy growth

• Production (and related energy use and pollution generation) is

shifting to the lowest cost countries

• Increasing pressure from consuming countries to reduce production

cost


Infrastructure Needs Upgrading

• IEA estimates US$20 trillion investment required in energy supply

and infrastructure from 2005-2030

• Infrastructure needs upgrading to reduce risk

• Oil reserves storage

• Gas pipelines

• Development of new resources in undeveloped countries

• Legacy systems expensive to replace


Existing Solutions

• Reduce, reuse, recycle

• Use more Coal

• Adequate resources for several hundred years in India & China

• Dirty & difficult to enforce pollution control

• Massive damage to agriculture & water supply

• Clean coal technology unproven

• Nuclear

• Cost – current and future

• Supply of raw material

• Public concern

• Risk


Existing Solutions

• Biofuels

• Planting opportunities in India

• India has 540m tonnes of crop & plantation residue• 150m tonnes economic in current environment = 19,500MW

• 537MW under commission, 536MW under construction

• 1% of global road transport fuel currently• On current trends, IEA projects 4% by 2030

• IEA optimistic scenario is 7% by 2030

• Currently needs subsidies in most countries

• Competes with food production• Technology needs to be developed to take fibrous feedstock

• Carbon capture/sequestration


Existing Solutions

• Wind:• 4.4MW installed in India end 2005

• Up 48% in 2005

• Growth of 1.5-1.8MX pa planned - another 5MW planned by 2010

• Tax breaks & speedy approval process

• Technology needs further development• Efficiency

• Cost

• Low speed turbines

• Solar• 250-300 sunny days a year in India

• Large program already in place:• 83MW installed PV

• 3 million m2 solar thermal systems – 15m litres per day hot water

• Manufacture in India & China – India a net exporter of modules

• Technology still inefficient and expensive• Need a technology breakthrough to progress

• Silicon supply shortages


What’s Required Long Term

• Encouragement of energy efficiency• Education

• Cheaper Technology• Flexibility on intellectual property

• Government investment in R&D

• Mass manufacturing

• Favourable legislation• Long term incentives

• Target the consumer, not the producer• Low energy consumer products eg LED’s, Light bulbs

• Quicker planning process

• True costing of existing fossil fuel resources• Carbon credits

• International co-operation


India-EU Co-Operation

• EU-India Summit in 2005 covered energy• Created EU-India Energy Panel, with working groups on:

• Energy efficiency & renewables

• Coal & clean coal conversion

• Fusion energy

• India a huge market for E&E solutions

• Europe has leading E&E technology and operational know-how• Joint ventures

• Licensing

• Outsourcing manufacturing


India-China Co-operation

• January 2006 India-China Co-operation agreement on hydrocarbons

• Work together on various topics including:

• Sourcing supplies

• Refining

• R&D

• China has low cost manufacturing capability

• Outsource manufacturing

• China a large market for E&E goods


Contact Details

Simon Littlewood

London Asia Capital plc

www.londonasia.com

www.londoansiafunds.com

www.envirofinance.com

© london asia capital plc 1 global energy security november 2005 simon littlewood ceo

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