Private Equity

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Private Equity the role of the IPP

• Mike ONeill
• CEO, Element Power

2
Element Power

• Global renewable energy development IPP
• Backed by Hudson Clean Energy PE fund
• Established late 2008
• Acquired Helium Energy Sept 2008
• Extensive portfolio of wind and solar PV assets

3
Element Power
establishing its footprint
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Management Team
establishing its footprint
Chairman Pedro Barriuso
CEO Mike ONeill
CEO North America Ty Daul
COO North America Raimund Grube
Founder Helium Energy Headed Renewable Energy
and Engineering Units Iberdrola
Commercial Director RES 15 years in the sector
Head of development in the US PPM Energy Lead
role in unregulated power business Entergy
Managing Director, Midwest Western US PPM
Energy Gas Project Developer Enron
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Hudson Clean Energy Partners

• Tremendous sector knowledge 150 years combined
  clean energy experience
• Extensive experience making and profitably
  monetizing investments
• Over 1.5 billion invested in leading clean
  energy franchises and assets at Goldman Sachs
• Generated a 82 gross IRR, 2.2x multiple, 2.2
  year average holding period

Solar
Wind
Biofuels
Other
6
Role of Private Equity in Renewable Energy
Investing

• Private equity plays a crucial role in investment
  life cycle of renewable energy
• Provides essential scale-up capital to grow
  companies beyond venture stage

Private Equity
7
Private Equity and the MA are Vital to the
Scale-Up of the Clean Energy Sector

• To achieve the appropriate scale, clean energy
  companies will require the investment discipline
  and capital typically found in the private equity
  and hedge fund sectors
• Venture-backed companies rarely access public
  market capital without private equity or hedge
  fund capital
• Since 2005, only a few notable exceptions
  Comverge, EnerNOC, Oxford Catalysts and Hoku
  Scientific

Strategic Sale
Equity Infusion
IPO
Hatch Companies
Secondary Sale
Scale-Up of Companies
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Massive Investment Needed to Roll Back C02
Emissions

• Cumulative Clean Energy investment to date
  (2008) 535.7 Billion
• The International Energy Agency projects
  substantial additional investments in Clean
  Energy to 2050, necessary to bring global CO2
  emissions back to current levels. Cumulative
  Clean Energy investments

• The ACT scenario (investment in existing
  technologies) predicts additional investment
  needs at 17 Trillion between now and 2050 an
  average of 400 Billion per year
• The BLUE Scenario (investment in future
  technologies including those not yet
  market-competitive) predicts additional
  investment needs of 45 Trillion between now and
  2050 an average of 1.1 Trillion per year

Source Cumulative Clean Energy investment to
date New Energy Finance. Projected additional
investment Energy Technology Perspectives
2008, International Energy Agency.
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New U.S Stimulus Offers Sizeable Demand Boost

• Congress has adopted a stimulus goal to double
  renewable energy generation by 2011 and is
  expected to adopt a 10 renewables penetration
  goal by 2012
• 134 billion of new capital investment and
  renewable energy infrastructure required by 2011
  217 billion required by 2012(1)
• Pace of investment in renewable energy and energy
  efficiency expected to increase dramatically over
  prior three-year period(2)

• Hudson Estimates
• (2) 2006 - 2008 cumulative installed
  capacity Alternative Energy e-Track 2009-
  2012 Hudson estimates

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Major Public Market Participants

• The largest renewable energy companies still have
  substantial room to grow before challenging the
  incumbent energy players
• Current clean energy public market caps a mere
  fraction of traditional energy firms
• Potential issues inability to deploy capital in
  scale, lack of liquidity and volatility

Source Bloomberg (6 March 2009)
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Main Wind Energy Share Prices, 2008 - Present

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Headwind Facing Clean Energy Sector

• In light of the current market turmoil, public
  market capital declined precipitously in Q4 2008
• However, private equity and hedge funds continue
  to invest at a steady pace

Equity Investments into Clean Energy Companies by
Quarter
(1)
Pronounced drop in investment H2 2008
Source New Energy Finance
(1) Includes Iberdrola Renovables initial public
offering
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Optimal Environment for Private Capital

• Institutional balance sheets dominate investments
• High quality opportunities are the scare resource
• Leverage and liquidity drive returns

Optimal Environments for Investment Banks and
Corporations
LOW Availability of Capital HIGH
Optimal Environments for Private Capital
We are here

• Private capital pools dominate investments
• Investment capital is the scare resource
• High quality opportunities drive returns

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Rising Scale of Private Equity
Estimates based on assumption that private equity
maintains its share of 2008 dollars invested in
renewable energy
Source New Energy Finance Hudson estimates
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Wind Energy Ownership

• Dominated by utilities but some key IPP owners

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The Role of the IPP

• Fills the gaps between utility ownership
• Critical to kick-start renewable energy
  investments in new markets
• Pre-consolidation warehousing for small,
  distributed operating RE assets
• Typically privately funded utilising structured
  finance based on monetisation of renewable
  incentives
• Increase in the presence of infrastructure funds
• - low risk, low yield, long term cash flow

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Challenges to the IPP Model

• Competition from utilities
• Global liquidity crisis in banking sector
• Leverage and tenure of project finance
  drastically reduced
• Private equity funding more selective
• Denominator effect
• The M word can no longer be mentioned
• - limited ability to take benefit of upside in
  electricity prices
• Current market benefits serious and well funded
  players

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Thank you!

• Mike ONeill
• CEO, Element Power
• mike.oneill_at_elpower.com
• www.elpower.com