beyond the public markets: alternative investments in the environmental economy april 20, 2005 cross...
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Beyond the Public Markets: Alternative Investments in the Environmental Economy
April 20, 2005
Cross Over Funding:
Private Equity to Project Finance
David Eva
Manager Renewable Power Project Development
Quantum Leap Asset Management
Today’s Discussion
Market
Context
Need for clean, economical infrastructure No ‘magic bullet’ solutions are expected Many technologies in various stages being developed
Cross-Over
Requirements
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
‘Crossing-over’ into project finance requires major reduction in risk and substantial increases in capital outlay
Investors are looking for more than ‘proven technologies’
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
Ge
ne
rati
on
Ca
pa
cit
y (
MW
)
Aggressive Renewables
Ontario Electricity Peak Demand*
Existing Generation Capacity
SupplyGap
Ontario electricity supply and demand outlook
How to meet energy infrastructure needs in a clean (yet economical) fashion?
18801860
1500
0
1000
1500
1900 1920 1940 1960 1980 2000 2020 2040 2060
Surprise
Geothermal
Solar
New Biomass
Wind
Nuclear
Hydro
Gas
Oil & NGL
Coal
Traditional Biomass
Exajo
ule
s
SHELL: 2003
No ‘magic bullet’ – it will likely take a portfolio approach to meeting our growing power needs
Many technologies are being developed to address this opportunity
Fundamental Research
Prototype Development
Initial Mass Production/ Deployment
Product
Demonstration“Proven”
NON-EXHAUSTIVE
Generationand FuelsSupply
DemandManagement/Reduction
District Cooling
Geoexchange
Small WindSolar PV
Geothermal
Small Hydro
Large Scale Wind
• Hydrogen (Fuel Cells, and IC)
• Fly Wheels• Super
Capacitors
Smart Meters
MSW and Biomass
Solar Thermal
• Tidal Power• Clean Coal
Today’s Discussion
Market
Context
Need for clean, economical infrastructure No ‘magic bullet’ solutions are expected Many technologies in various stages being developed
Cross-Over
Requirements
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
‘Crossing-over’ into project finance requires major reduction in risk and substantial increases in capital outlay
Investors are looking for more than ‘proven technologies’
Governments / Foundations / IndustryTypical
sources
of financing Angel Investors
Fundamental Research
Prototype Development
Product
Demonstration“Proven”
Venture Capital
Traditional Project Finance
(Debt & Equity)
“Crossing over” into project finance requires reductions in risk and large capital outlays
Initial Mass Production/ Deployment
“Cross-over”
Returns
Risk
Capital
20%+
High
Tens of millions
Equity 12-20%; Debt 6-11%
Moderate/Low
Hundreds of millions to billions
Being a “proven technology” isn’t enough for project finance investors
Proven
Technologies
100 operating wind turbines of a given model before able to secure bank financing
Quantifiable and manageable risks
Investors Needs
2
1
2+ years of hydrology data plus 20 year correlation
Long-term pricing on outputs
Stable Regulatory Regime and Gov’t Policy
3 Status of 1000 MW+ of wind farm contracts if WPPI not reinstated?
US wind industry: roller coaster PTC
Solid development partners4 Developers must be professionals
able to anticipate project needs/requirements
+
+
+
Examples
With all these requirements, how can emerging technologies achieve mass deployment and access capital?
Today’s Discussion
Market
Context
Need for clean, economical infrastructure No ‘magic bullet’ solutions are expected Many technologies in various stages being developed
Cross-Over
Requirements
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
‘Crossing-over’ into project finance requires major reduction in risk and substantial increases in capital outlay
Investors are looking for more than ‘proven technologies’
• 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)
Example #1: Clean Energy Developments
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)
Example #2: Encelium Technologies
Today’s Discussion
Market
Context
Need for clean, economical infrastructure No ‘magic bullet’ solutions are expected Many technologies in various stages being developed
Cross-Over
Requirements
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
‘Crossing-over’ into project finance requires major reduction in risk and substantial increases in capital outlay
Investors are looking for more than ‘proven technologies’
Quantum Leap – Business Overview
Asset Management Venture Services Principal Business
• Venture Capital• Project Finance
A Toronto based asset management and advisory
firm focused on building value in the areas of Energy
and Efficiency
Portfolio Companies
Energy Conversion
Power Control
Electronics
Energy Convergence
Emissions Reduction
Water Purification
Remediation and
Recycling
1. Adventus Remediation
2. Eco Waste
3. Encelium
4. Enerworks
5. Fuel Cell Technologies
6. Oxegen
7. Rtica
8. RuggedCom
9. MeterCo
10. Ventus Wind
11. Clean Energy Developments
Technology applications
Quantum Leap – Private Equity Venture Portfolio
NS
SK
ON
ON
ON
ON
BC
NS
NS
BC
Province
WindCape Breton Power Inc.
WindWindSwept Power Inc.
WindSchneider Power Inc.
WindVector Wind Energy Inc.
WindSkyPower Corp.
WindVentus Energy Inc.
HydroSpuzzum Creek Power Corp.
WindSpringhill Riverhurst Wind Power Ltd.
WindGlace Bay Lingan Wind Power Ltd.
HydroObservatory Inlet Development Corp.
SectorInvestee
Quantum Leap – Project Finance and Power Development
Thank you !
www.quantumleapco.com