the quantum leap company limited building value in energy & efficiency the quantum leap company...

The Quantum Leap Company Limitedbuilding value in energy & efficiency

The Quantum Leap Company Limited

building 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


• 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

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the alternative energy sector


the alternative energydrivers

energy demand

energy depletion

emission regulation

industry deregulation

favourable

market conditions + increasingly favourable

government legislation

innovation=

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0

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


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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


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financingthe economics : an example - SOFC

basic SOFC economics very compelling …


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


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



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


PrototypeDevelopment(Bench Scale)

PrototypeDevelopment(Bench Scale)

Product Demonstration

(Full Scale)

Product Demonstration

(Full Scale)

ProductCommercialization

& MarketDevelopment


& MarketDevelopment

MarketReady Product

MarketReady Product

Market Entry

financing the innovation chain


Source Sustainable Development Technology Canada, Nov. 2002 MacDonald & Associates, Oct., 2002

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Prototype Development(Bench Scale)

ProductDemonstration

(Full Scale)


& 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


Source The Quantum Leap Company Limited, Nov. 2002 Sustainable Development Technology Canada, Nov. 2002 MacDonald & Associates, Oct., 2002 L

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Prototype Development(Bench Scale)

ProductDemonstration

(Full Scale)


& 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


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


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


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


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

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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


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


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 Canadian Pacific Building

Suite 711, 69 Yonge Street

Toronto, Ontario

Canada

www.quantumleapco.com

for information



building value in energy & efficiency

www.quantumleapco.com

the quantum leap company limited building value in energy & efficiency the quantum leap company...

Documents

t e r n

d i n g e d g e

e p o w e r slide

energy efficiency slide

alternative energy demand

primary energy markets

efficiency cogeneration

north american energy