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©2013 1 GreenWorld Capital, LLCCapital for a Greener World

Opportunities for China FDI in U.S. Renewable Energy and Clean Technology

Presented by David Elkin

University of PennsylvaniaApril 16, 2013

GreenWorld Capital, LLCCapital for a Greener World



A Big Thank You to Our Sponsors at University of Pennsylvania

This presentation was generously sponsored by the University Pennsylvania Chapter of Global China Connection, The Center for East Asian Studies, and the International Relations Program

And co-sponsored by Penn Engineers Without Borders, Penn International Sustainability Association, Wharton Energy Club, Penn Oikos, and Wharton China Business Society



The Dragon Turns Green: China's Manufacturers Adapt to a New EraPublished : June 03, 2009 in Knowledge@Wharton



Growth in China Annual OFDI Flows

Source: Statistical Bulletin of China’s Outward Foreign Direct Investment by MOFCOM and Heritage; UNCTAD

~$80B in 2012:China was the

5th largest provider of FDI

in the world

~$80B in 2012:China was the

5th largest provider of FDI

in the world



China OFDI on the Cusp of Dramatic Growth

1. Source: OECD Statistics, World Bank, China’s National Bureau of Statistics, UNCTAD2. Source: “An American Open Door” by The Wilson Center, 20113. Based on Standard Chartered’s China’s projected 2020 GDP of $24.6 trillion

Transitional economies have average ODFI Stock/GDP of 15%2. At this level, China would have OFDI stock of $1.1 trillion in 2011, and $3.7 trillion by 20203. Actual China OFDI reached only $365 billion in 2011.

Relative Size of China OFDI vs. Advanced Economies in 2011



Market Potential for China OFDI to U.S.

U.S historically has been world’s largest recipient of global FDI at 17%, 3x larger than the next largest recipient

Market Potential provided that…1.China’s economy grows to $24.6 trillion by 2020 as forecast2.China’s OFDI stock/GDP = 15% transitional economy average3.U.S. receives 17% of China’s OFDI

Market Potential = $620 billion(equivalent to ½ of $1.2 trillion of U.S.

Treasuries that China holds in reserve)



Inbound FDI is Integral to U.S. Economy

According to the President’s Council of Economic Advisors,in 2008, U.S. majority owned affiliates of foreign companies:

•Employed 5.7 million U.S. workers, or 5% of private workforce, with 13% in manufacturing•Paid average wage of $71,000+ per employee (31% higher than national average)•Owned $11.7 trillion in U.S. assets•Generated $3.5 trillion in annual sales•Invested $188 billion in Capex, 11.3% of total private investment•Invested $40.5 billion in R&D, 14.3% of total private R&D•Source of 18.1% of U.S. exports



Presidential Support

President Obama – – “… business investment in the United States by

foreign firms is a major engine of economic growth and job creation. My administration is committed to enhancing the efforts of the United States to win the global competition for business investment by leveraging our advantages as the premier business location in the world”

Executive Order Creating Select USA. June 2011



U.S. Will Be Major Recipient of China OFDI:Push Factors from China



U.S. Will Be Major Recipient of China OFDI:Pull Factors from U.S.



Long-Term Pull Factor: U.S. Educated Future Chinese Leaders

“Today’s youth are tomorrow’s leaders.

International education creates strong, lasting

relationships between the U.S. and emerging leaders

worldwide.”

- Ann Strock, U.S. Asstnt Secretary of State for

Education & Cultural Affairs

“Today’s youth are tomorrow’s leaders.

International education creates strong, lasting

relationships between the U.S. and emerging leaders

worldwide.”

- Ann Strock, U.S. Asstnt Secretary of State for

Education & Cultural Affairs



U.S. Renewable Energy and Clean Tech Will Benefit from China OFDI to U.S.

Of the 7 strategic emerging industries (SEIs) identified by China’s 12th Fifth Year Plan, 3 are related to sustainability:

1.Biotechnology

2.New Energy3.High-End Equipment Manufacturing

4.Energy Conservation and Environmental Protection5.Clean Energy Vehicles6.New Materials7.Next Generation IT

2011: 2%2011: 2%

2015: 8%2015: 8%

2020: 15%2020: 15%

MOFCOM Target SEI Contribution as % GDP:

MOFCOM Target SEI Contribution as % GDP:



Key Areas of Opportunity for U.S. Renewable Energy and Clean Tech

Diversification into Hard Assets

Operating Companies and Technology:•U.S. is home to 7,000 clean tech companies (37% of worldwide)

•BUT MORE IMPORTANT – 58% of the “professionally sponsored” (PE, VC, etc) clean tech companies are in the U.S. GWC’s PED catalogues and analyzes the subset of companies likely to appeal to Chinese investors, tracking 1,050 clean tech firms with professional sponsors, covering each of the sustainability focused SEIs plus Advanced Materials

Operating Companies and Technology:•U.S. is home to 7,000 clean tech companies (37% of worldwide)

•BUT MORE IMPORTANT – 58% of the “professionally sponsored” (PE, VC, etc) clean tech companies are in the U.S. GWC’s PED catalogues and analyzes the subset of companies likely to appeal to Chinese investors, tracking 1,050 clean tech firms with professional sponsors, covering each of the sustainability focused SEIs plus Advanced Materials



Industry Breakdown of Companies In ThePortfolio Enhancement Database



Given the high volume of cross-order transactions involving Chinese investment, there will likely be additional instances where CFIUS may block certain deals. We expect these instances to be rare and most transactions that raise issues at CFIUS will be handled with negotiated mitigation.

Given the high volume of cross-order transactions involving Chinese investment, there will likely be additional instances where CFIUS may block certain deals. We expect these instances to be rare and most transactions that raise issues at CFIUS will be handled with negotiated mitigation.

After lobbying by A123’s creditors, the $256 million transaction received CFIUS approval after agreeing to exclude a $2.6 million military contract, approximately 1% of the transaction value.

After lobbying by A123’s creditors, the $256 million transaction received CFIUS approval after agreeing to exclude a $2.6 million military contract, approximately 1% of the transaction value.

A Word on the Committee on Foreign Investment in the U.S. (CFIUS)

Wanxiang’s recent acquisition of A123 out of bankruptcy: the transaction received opposition, but Wanxiang offered more than twice the $125 million bid of Johnson Controls.

Wanxiang’s recent acquisition of A123 out of bankruptcy: the transaction received opposition, but Wanxiang offered more than twice the $125 million bid of Johnson Controls.

Recent Case

Recent Case

ResolutionResolution

Our ViewOur View



Conclusion: Chinese OFDI to U.S….

• Provides a much-needed source of capital for U.S. public and private stakeholders in the renewable energy and clean tech industry

• Provides attractive investment returns to Chinese investors and useful technologies for Chinese companies

• Accelerates deployment of renewable energy and clean tech projects in the U.S., in turn preserving and creating U.S. jobs

• Facilitates U.S. companies’ access to the enormous Chinese market

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