ane capital p a r t n e r s j energy & environmental technology presented by jane lindner...

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Energy & Environmental

TechnologyPresented by Jane Lindner

Investing in China 2005 Symposium

www.janecapital.com

2ane CapitalP a r t n e r s

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Energy & Environmental Opportunities

Tremendous global opportunity in energy & environmental technology

For the next 10 years China will be:A key market

and

A key market driver

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Macro Factors Favoring Energy & Environmental

Technology

The world is demanding cleaner power, water & living space

Existing energy infrastructure is aging under a growing population

Traditional energy sources are getting more expensive

Globalization has exacerbated each of these issues

China’s Unique Problem

High Growth

Weak Infrastructure

Huge Energy Demand

Dense Population

Major Environmental

Concerns

Opportunity

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The Environmental Issue

World bank: China has 16 of the world's 20 most-polluted cities

Electricity production accounts for 34.2% of China’s air pollution

(legacy of coal economy)

China is on pace to discharge 1.4 to 1.9 billion tons of carbon

dioxide by 2020 – ranking it as the world’s top polluter

Industrial waste amounts to 650 million tons/year

The daily sewage rate of 3.7 tonnes requires 10,000 wastewater

treatment plants = $48 billion to achieve a 50% treatment rate


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The Water Issue

Water shortage in 2/3rds of Chinese cities

300 million rural residents in China lack clean drinking water

Only a small percentage of surface water meets domestic standards

Severe urban/rural divide exists

70% of water in 5 of China’s 7 major rivers systems not suitable for

human contact

The not talked about problem: water infrastructure soaks up power

like a sponge


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Power Issue

Today per capita generation is small1/13th of the US; 1/8th of Japan

China needs 1.5 billion kW of generation capacity by 2010 (385 MM kW today)

100 mm people lack access to power

China is the largest coal producer in the world58% for industrial useNot a sustainable source for long-run growth2nd largest consumer of energy but lacks oil and gas resources

No growth without cheap efficient powerTo fulfill the goal of quadrupling year 2000 GDP by 2010, China faces serious challenges in terms of energy supply and environmental protection


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China Macro Factors

Rapid economic growthWorld Bank estimate: between 2004 and 2015 half of the world’s construction will be in China

Large population and abundant renewable energy resources

Big environmental problems today and getting worse with rapid development

World attention focused on China“Green” 2008 Olympics and 2010 Expo ShanghaiPledge to the United Nations – every rural family will have clean drinking water by 2020


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China’s Response

10th 5 Year Period (2001-2005) Construction of coal mines and coal processing plants - Promote development of clean coal tech

Accelerate local production of wind power equipment; find a solution for remote power supply

Implement pilot projects on energy conservation in large energy

consuming industries

$85 billion to be invested in environmental production


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Where Might Opportunities Lie?

Water

Power Generation

Renewables

Fuel Cells

Clean coal

Efficiency

Green building construction


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Water

Water treatment alone is $500 billion industry globally

China will be a big piece of this market as it grows over the next 10 years

5 Year Plan: $12 billion allocated to water and wastewater treatment

Drinking Water Over the past 5 years, 800,000 new water treatment facilities went into operationMore than 14 million rural families have gained access to drinking water

WastewaterBeijing will spend $1.45 billion on wastewater equipment

9 sewage plants8 recycling treatment plants

Veolia Water

Acquired 45% of Shenzhen Water Group for $400 million in December 2003

Signed contract with Beijing municipal government to build wastewater treatment plant for Olympics

Has won a total of 13 water contracts and invested a total $1.2 billion

Source: China Daily

Recent Case Study


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Infrastructure – Power Choices

Oil/Natural gasclean, rising prices, limited supply

Hydrolarge domestic resources; huge environmental impact; big ticket item

Nuclearmoderate priced & clean, long-term environmental tradeoffs

RenewablesGreat to talk about; but only a small dent in supply needs

Coal Dirty, cheap, plentiful (for now)

190 Gigawatts75% Coal25% Hydro & NuclearVery minimal other

Source: EIA

China’s Power Today


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How about Fuel Cells?

60 domestic institutes & companies active in fuel cellsElectric bicycles one noted application (2.5 mm/year production)

Est. $300-$400 mm in investment in fuel cell and advanced hybrid technology in 2001-2005

China is not as big a player as the US, Japan, and Europe

But China is very active and huge potential market

Fuel cells are another area where China’s low cost manufacturing may make a difference


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Where Do Renewables Fit?

China’s Renewable Energy Development Project

Launched in December 2001Total Budget of $139 million

Solar Photovoltaic (PV)Solar energy will be principal energy source for 2008 Olympics.

Power 80-90% of streetlightsHeat up to 90% of hot water

Government grants to PV companies to accelerate installation of 300,000 – 400,000 PV systems (10 MW)

Wind PowerLargest exploitable wind power capacity in the world – 25.3 billion KWOnly 560,000 kW installed to dateCurrently relying on imports – domestic products could reduce cost about 50%

Guangting Power PlantWorld’s largest wind projectBeijing, China Launched in October 2004Xinfengda Technology Group is the project builderUsing large scale advanced wind power generation units from Germany400,000 KW with 2 billion KWh generation capacity2 Phases to be completed in 2006 and 2008

Source: Interfax-China

Recent Case Study


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Efficiency

“Green” construction accelerating

A kilowatt saved is a kilowatt produced

Target 50% less energy use/sq foot from 1980s

All the major Western players are already there: Trane, Carrier, York, Delta, GE, Honeywell, Siemens, Caterpillar, Cummins

Possible areas of investment opportunity

Advanced roofing/building materials

BIPV (building integrated photovoltaics)

Insulation and prefab products

Heat recovery systems/variable speed drives

Power conserving lamps

Energy efficiency can mean rapid payback

Century Prosper Center155,000 m2 twin office towerBeijing Central Business DistrictMain green strategies: high performance chiller with energy recovery system, low emissivity window glazing, automatic dimming lighting, reduced lighting densityAnnual energy Savings – 12 million kWhAnnual cost Savings – $ 1 millionSimple payback period – 1.1 years

Source: The China Business Review

Recent Case Study


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Clean Coal

Coal gasification-based technologiesGasification technologies can supply electricity and liquid fuels as well as hydrogen and other chemicals and greatly reduce pollution

China is ideal candidate

Rich coal resources

Existing power and chemical industries

R&D ability

Positioned to acquire IP and become manufacturer of core equipment

Could become world leader

High Risk / High Reward


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What makes a Chinese Cleantech Company

Attractive?

Innovation

Quality

Realistic pricing (valuation)

Sound business strategy

Compelling economics


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Summary

China is in a unique position to become a world leader

in energy and environmental technology

Large population

Abundant natural resources

Rapid economic growth

Current limited infrastructure is a two-edged sword

Limits pace of growth

Clear path to use next generation technologies

Big opportunities for clean technology

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