The Quantum Leap Company Limitedbuilding value in energy & efficiency
The Quantum Leap Company Limited
building value in energy & efficiency
The Quantum Leap Company Limitedbuilding value in energy & efficiency
CANADIAN ELECTRICITY ASSOCIATIONand
NATURAL RESOURCES CANADA
Diversifying the Mix:A Workshop on
Alternatives to Conventional Generation Technology
25 November 2002
Approaches to Advancing Alternative Technologies
A Capital Markets ApproachFinancing Non Conventional Generation Technology
The Quantum Leap Company Limited building value in energy & efficiency
The Quantum Leap Company Limitedbuilding value in energy & efficiency
• Shell estimates that 10 to 15 new sources of energy supply will command up to 50% of the primary energy markets by 2050.
• The surge in alternative energy demand will be driven by regulatory change in the $350 billion North American energy industry and the resulting growth in distributed generation.
TECHNOLOGIESActive
Fuel CellsDual FuelMicro TurbinesClean Coal
PassiveWaterWindSunEarth Energy
FUELSActive
HydrogenEthanolMethanolBiomassCoalNatural GasPropane
PassiveMicro HydroWind TurbinesSolar ThermalPhotoVoltaic CellsGeothermalGeoExchange
CONVERGENCECommunications &
NetworkingCustomer Premise
Products & ServicesAggregation of
Services & ProductsMetering & monitoring
Performance
INTERFACING APPLICATIONS & SYSTEMS INTEGRATION- Information Technology - Universal Power Supply and Systems Integration - Asset Utilization and Efficiency- Cogeneration - Storage and Load Management
CUSTOMERS
ENE
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the alternative energy sector
The Quantum Leap Company Limitedbuilding value in energy & efficiency
the alternative energydrivers
energy demand
energy depletion
emission regulation
industry deregulation
favourable
market conditions + increasingly favourable
government legislation
innovation=
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The Quantum Leap Company Limitedbuilding value in energy & efficiency
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20
40
60
80
100
120
140
160
-3 -2 -1 0 1 2 3 4 5 6 7 8 9 10 11
Utility Bill Project Cost Client Benefit
ConstructionRisk Savings Shortfall
Performance Risk
The reality of the business opportunity is thatthe viability of each alternative is a function of electrical efficiency,
economics and competition from existing upgradeable infrastructure.
financingthe economics
basic theme – AE/DG must pay for itself
Payback or Contract Term
Construction Phase
The Quantum Leap Company Limitedbuilding value in energy & efficiency
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MicroGeneration
PEMFuel Cells
ConventionalGenerator
Diesel GenSet
SOFCTubular
22%
32%34% 36%
47%
financingthe science
electrical efficiencies of various technologies
The reality of the business opportunity is thatthe viability of each alternative is a function of electrical efficiency, economics and competition from existing upgradeable infrastructure.
Source The Quantum Leap Company Limited, Nov. 2002 Fuel Cell Technology, Kingston, Nov 2002
TECHNOLOGIESActive
Fuel CellsDual FuelMicro TurbinesClean Coal
PassiveMicro HydroWind TurbinesSolar ThermalPhotoVoltaic CellsGeothermalGeoExchange
The Quantum Leap Company Limitedbuilding value in energy & efficiency
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financingthe economics : an example - SOFC
basic SOFC economics very compelling …
Source The Quantum Leap Company Limited, Nov. 2002 Fuel Cell Technology, Kingston, Nov 2002
SOFC VS Grid operating Cost ComparisonElectricity unit cost ($/kWh): $011Natural gas unit cost ($/m3): $033
MONTHLY COSTSCost of grid provided electricity: $185 $ 0Cost of Natural Gas:
For heat: $ 69 $ 29for electricity: $ 0 $109
Total Monthly Cost: $254 $138
MONTHLY Savings $116
% savings using SOFC 46%
Home w/ Furnace & Grid Connect
Home w/ Tubular SOFC
SAMPLE U.S. New England Home
The Quantum Leap Company Limitedbuilding value in energy & efficiency
1 yr payback
2 yr payback
3 yr payback
2003 2004 2005 2006 2007
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financingthe science : an example - SOFC
equity investment will drive cost down
An estimated 600,000 unit SOFC “niche market” exists in Canada at $20,000/unit with a one year payback. That won’t exist until 2006 and mass market penetration remains elusive for the next 10+ years at > $1,500/unit.
Research & Remote
Application
High ElectricityCosts Areas & Early Adopters
UnitsSold5,000
4,500
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
0
Residential& Small
CommercialApplication
$/5kwUnit
- 140k
- 120k
- 100k
- 80k
- 60k
- 40k
- 20k
Source The Quantum Leap Company Limited, Nov. 2002 Fuel Cell Technology, Kingston, Nov 2002
The Quantum Leap Company Limitedbuilding value in energy & efficiency
Stages of Technology Development
Source Sustainable Development Technology Canada, Nov. 2002
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Risk Profile
Development
Financial
Development
Market
Financial
Development
Market
Financial
Market
Financial
Market
Financial
Fundamental Research
Fundamental Research
PrototypeDevelopment(Bench Scale)
PrototypeDevelopment(Bench Scale)
Product Demonstration
(Full Scale)
Product Demonstration
(Full Scale)
ProductCommercialization
& MarketDevelopment
ProductCommercialization
& MarketDevelopment
MarketReady Product
MarketReady Product
Market Entry
financing the innovation chain
The Quantum Leap Company Limitedbuilding value in energy & efficiency
Source Sustainable Development Technology Canada, Nov. 2002 MacDonald & Associates, Oct., 2002
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Fundamental Research
Prototype Development(Bench Scale)
ProductDemonstration
(Full Scale)
ProductCommercialization
& MarketDevelopment
MarketEntry
MarketReady Product
Governments
Venture Capital
Industry
Angel Investors
Funding Intensity
BanksPre – VC
Gap
Pre – IPOGap
# of Energy and Environment Deals by Stage* 7 101 12
financing current funding gaps
The Quantum Leap Company Limitedbuilding value in energy & efficiency
Source The Quantum Leap Company Limited, Nov. 2002 Sustainable Development Technology Canada, Nov. 2002 MacDonald & Associates, Oct., 2002 L
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Fundamental Research
Prototype Development(Bench Scale)
ProductDemonstration
(Full Scale)
ProductCommercialization
& MarketDevelopment
MarketEntry
MarketReady Product
Governments……………………..……
Venture Capital
• Traditional …………………………….……………………………………………………………………………………………….
• Specialty (Strategics) ………………..………………………………………………………………………………………
• Tax Driven (LSIF – 30%) ………………..………………………………………………………………………………..
• Specialty Tax Driven (ROIF – 35%)…………………………………………….…..
Industry (non VC) ……………………………………………………………………………………………………………………………
Angel Investors ………………………………………………………………………………………………………….
Funding Intensity
Banks ………………………………………….……………………………………………………………………………………………………………………
SDTC ……………………..…… ……………………..…… ……………………..…… ……………………..……
US Angels
Tax driven VC is > 50% of the Canadian marketand 4-5% in the US.
financing players actually in the funding gaps
The Quantum Leap Company Limitedbuilding value in energy & efficiency
BCHydro…………………
TransAlta………………….
EPCOR……………………….
CU……………………………….
SaskPower………………..
Manitoba Hydro…………….
OPG……………………….
Hydro Quebec……………
Nova Scotia Power……..
Fortis……………………..
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes - tbd
No
Yes
No
No
No
Yes
Yes
No
Yes
tbd
Yes
Yes
No
No
No
SAM, Nth
SAM, Nth, EnE
EnT
No
tbd
na
No
No
na
na
Yes
Yes
na
Yes
na
na
na
na
na
na
Yes
Yes
na
Yes
$5-10mln - Soft
$10mln – Soft*
us$10mln hard - $60mln soft
na
na
na
$100mln hard
$340mln hard (++)
$1mln hard
na
In-House “Commitment”
To VentureInvesting
Fund of FundsInvestment
Strategy
Full FundedVenture Capital
Subsidiary(Round 1)
Full FundedVenture Capital
Subsidiary(Round 2 + + )
Estimate of Commitment
financing utility players addressing the funding gaps
The Quantum Leap Company Limitedbuilding value in energy & efficiency
Penetr
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Alternative Energy Early Stage
The Internet
Computers
Alternative EnergyValue
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• Total present value market potential of energy technology estimated at $1 trillion
• Volatility in the sector is resulting in opportunity
• Many market leaders are Canadian:
Recent Private, Primary & Secondary Activity
in North America
•Ballard Power US$345,000.000 C
•Global ThermoElectric US$45,000,000 C
•Stuart Energy US$120,000,000 C
•Next Phase US$45,000,000 C
•Hydrogenics US$50,000,000 C
•Xantrex US$58,000,000 C
•Fuelcell Energy US$60,000,000 US
•H-Power US$100,000,000 US
•Millennium US$45,000,000 US
US$868,000,000
C = CanadianUS = United States
Source: Warburgs Europe
alternative energy Canadian advantage
The Quantum Leap Company Limitedbuilding value in energy & efficiency
our approach
• LEAP invests in private alternative energy companies for aggressive capital appreciation
• LEAP capitalizes on disparities between economic value and
market opportunity
• LEAP focuses on financing 1 - 2 steps prior to the public market
financing stage, targeting a higher reward profile for maximum equity leverage
• Successful investing in early-stage ventures is our area of expertise
Quantum Leap
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• First Mover advantage
• Dedicated industry focus
• Experienced management
• Favourable market conditions
• Active involvement with investee companies
• Strong network and deal flow
our benefits
The Quantum Leap Company Limitedbuilding value in energy & efficiency
Quantum Leap a model portfolio
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0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0%
Proprietary Energy Tech.
Power Quality Control Delivery
Micro Utility / Small Gen
Geothermal / Earth Energy
Fuel Cell - Balance of Plant
Wind - Energy Conversion
Solar/PV - Energy Conversion
Micro Turbine - Energy Conversion
Dual Fuel Technology
Fuel Cell - Energy conversion
We
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In
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A Model LEAP Portfolio (10 yrs +) The Quantum Leap Company Limitedbuilding value in energy & efficiency
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North American
Universities and Research
I nstitutions
UtilityInvestors
StrategicInvestors
Direct Investments
I ndustry Associations
and North AmericanLobbyists
Governments
I nvestee Company Portfolio
CoordinatedI nvestment
Effort
FinancialInvestors
balance in partners
balance in portfolio
The Quantum Leap Company Limitedbuilding value in energy & efficiency
Quantum Leap current portfolio
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Portfolio Energy Conversion Fuel
Power Control
ElectronicsEnergy
Convergence Other Emissions WaterWaste
Remediation Recycling Other
The Telemetry Company a
mr
Oxegen Corp.
Rtica Inc.
[EnerWorks
Inc.] so
lar
[Adventus Remediation
Corp.]
[Fuel CellTechnologies]
sofc
BofP
X
vs elec
73 Companies Visited
14 6 6 3 5 5 5 14 6 9
Energy Efficiency
180 Ontario Based Companies Reviewed in 9 Months[6] investment closed by December 1st, 2002
Up to 2 more by year end . . . The same for 2003
The Quantum Leap Company Limitedbuilding value in energy & efficiency
Drivers that will advance the market, if enabled properly:• Industry
• Formal commitment of capital• Corporate Leadership with demonstrable projects• Commercial successes for existing generators • Progressive partnerships• More support for Motivated Entrepreneurs
• Government• Positive tax drivers
• Reconstituted 43.1• Broadened definition for flow through
• Enable Government to benefit from equity interests – with proceeds used for re-investment
moving DG forward
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The Quantum Leap Company Limitedbuilding value in energy & efficiency
The Quantum Leap Company Limited
The Canadian Pacific Building
Suite 711, 69 Yonge Street
Toronto, Ontario
Canada
www.quantumleapco.com
for information
The Quantum Leap Company Limitedbuilding value in energy & efficiency
The Quantum Leap Company Limited
building value in energy & efficiency
www.quantumleapco.com