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Energy & Environmental Technology Presented by Jane Lindner. Investing in China 2005 Symposium. www.janecapital.com. Energy & Environmental Opportunities. Tremendous global opportunity in energy & environmental technology For the next 10 years China will be: A key market and

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Energy & Environmental TechnologyPresented by Jane Lindner

Investing in China 2005 Symposium

www.janecapital.com


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Energy & Environmental Opportunities

  • Tremendous global opportunity in energy & environmental technology

  • For the next 10 years China will be:

    • A key market

      and

    • A key market driver

2


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Macro Factors Favoring Energy & Environmental Technology

  • The world is demanding cleaner power, water & living space

  • Existing energy infrastructure is aging under a growing population

  • Traditional energy sources are getting more expensive

  • Globalization has exacerbated each of these issues


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Dense Population

High Growth

Opportunity

Major Environmental Concerns

Huge Energy Demand

Weak Infrastructure

China’s Unique Problem

4


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The Environmental Issue

  • World bank: China has 16 of the world's 20 most-polluted cities

  • Electricity production accounts for 34.2% of China’s air pollution (legacy of coal economy)

  • China is on pace to discharge 1.4 to 1.9 billion tons of carbon dioxide by 2020 – ranking it as the world’s top polluter

  • Industrial waste amounts to 650 million tons/year

  • The daily sewage rate of 3.7 tonnes requires 10,000 wastewater treatment plants = $48 billion to achieve a 50% treatment rate


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The Water Issue

  • Water shortage in 2/3rds of Chinese cities

  • 300 million rural residents in China lack clean drinking water

  • Only a small percentage of surface water meets domestic standards

  • Severe urban/rural divide exists

  • 70% of water in 5 of China’s 7 major rivers systems not suitable for human contact

  • The not talked about problem: water infrastructure soaks up power like a sponge


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Power Issue

  • Today per capita generation is small

    • 1/13th of the US; 1/8th of Japan

  • China needs 1.5 billion kW of generation capacity by 2010 (385 MM kW today)

    • 100 mm people lack access to power

  • China is the largest coal producer in the world

    • 58% for industrial use

    • Not a sustainable source for long-run growth

    • 2nd largest consumer of energy but lacks oil and gas resources

  • No growth without cheap efficient power

    • To fulfill the goal of quadrupling year 2000 GDP by 2010, China faces serious challenges in terms of energy supply and environmental protection


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China Macro Factors

  • Rapid economic growth

    • World Bank estimate: between 2004 and 2015 half of the world’s construction will be in China

  • Large population and abundant renewable energy resources

  • Big environmental problems today and getting worse with rapid development

  • World attention focused on China

    • “Green” 2008 Olympics and 2010 Expo Shanghai

    • Pledge to the United Nations – every rural family will have clean drinking water by 2020


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China’s Response

  • 10th 5 Year Period (2001-2005)

    • Construction of coal mines and coal processing plants - Promote development of clean coal tech

    • Accelerate local production of wind power equipment; find a solution for remote power supply

    • Implement pilot projects on energy conservation in large energy consuming industries

    • $85 billion to be invested in environmental production


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Where Might Opportunities Lie?

  • Water

  • Power Generation

    • Renewables

    • Fuel Cells

    • Clean coal

  • Efficiency

    • Green building construction


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Recent Case Study

  • Veolia Water

  • Acquired 45% of Shenzhen Water Group for $400 million in December 2003

  • Signed contract with Beijing municipal government to build wastewater treatment plant for Olympics

  • Has won a total of 13 water contracts and invested a total $1.2 billion

    Source: China Daily

Water

  • Water treatment alone is $500 billion industry globally

    • China will be a big piece of this market as it grows over the next 10 years

  • 5 Year Plan: $12 billion allocated to water and wastewater treatment

  • Drinking Water

    • Over the past 5 years, 800,000 new water treatment facilities went into operation

    • More than 14 million rural families have gained access to drinking water

  • Wastewater

    • Beijing will spend $1.45 billion on wastewater equipment

      • 9 sewage plants

      • 8 recycling treatment plants


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Oil/Natural gas

clean, rising prices, limited supply

Hydro

large domestic resources; huge environmental impact; big ticket item

Nuclear

moderate priced & clean, long-term environmental tradeoffs

Renewables

Great to talk about; but only a small dent in supply needs

Coal

Dirty, cheap, plentiful (for now)

China’s Power Today

  • 190 Gigawatts

  • 75% Coal

  • 25% Hydro & Nuclear

  • Very minimal other

    Source: EIA

Infrastructure – Power Choices


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How about Fuel Cells?

  • 60 domestic institutes & companies active in fuel cells

    • Electric bicycles one noted application (2.5 mm/year production)

  • Est. $300-$400 mm in investment in fuel cell and advanced hybrid technology in 2001-2005

  • China is not as big a player as the US, Japan, and Europe

    • But China is very active and huge potential market

  • Fuel cells are another area where China’s low cost manufacturing may make a difference


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Recent Case Study

  • Guangting Power Plant

  • World’s largest wind project

  • Beijing, China

  • Launched in October 2004

  • Xinfengda Technology Group is the project builder

  • Using large scale advanced wind power generation units from Germany

  • 400,000 KW with 2 billion KWh generation capacity

  • 2 Phases to be completed in 2006 and 2008

    Source: Interfax-China

Where Do Renewables Fit?

  • China’s Renewable Energy Development Project

    • Launched in December 2001

    • Total Budget of $139 million

  • Solar Photovoltaic (PV)

    • Solar energy will be principal energy source for 2008 Olympics.

      • Power 80-90% of streetlights

      • Heat up to 90% of hot water

    • Government grants to PV companies to accelerate installation of 300,000 – 400,000 PV systems (10 MW)

  • Wind Power

    • Largest exploitable wind power capacity in the world – 25.3 billion KW

    • Only 560,000 kW installed to date

    • Currently relying on imports – domestic products could reduce cost about 50%


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Recent Case Study

  • Century Prosper Center

  • 155,000 m2 twin office tower

  • Beijing Central Business District

  • Main green strategies: high performance chiller with energy recovery system, low emissivity window glazing, automatic dimming lighting, reduced lighting density

  • Annual energy Savings – 12 million kWh

  • Annual cost Savings – $ 1 million

  • Simple payback period – 1.1 years

    Source: The China Business Review

Efficiency

  • “Green” construction accelerating

    • A kilowatt saved is a kilowatt produced

  • Target 50% less energy use/sq foot from 1980s

    • All the major Western players are already there: Trane, Carrier, York, Delta, GE, Honeywell, Siemens, Caterpillar, Cummins

  • Possible areas of investment opportunity

    • Advanced roofing/building materials

    • BIPV (building integrated photovoltaics)

    • Insulation and prefab products

    • Heat recovery systems/variable speed drives

    • Power conserving lamps

  • Energy efficiency can mean rapid payback


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Clean Coal

  • Coal gasification-based technologies

    • Gasification technologies can supply electricity and liquid fuels as well as hydrogen and other chemicals and greatly reduce pollution

    • China is ideal candidate

      • Rich coal resources

      • Existing power and chemical industries

      • R&D ability

      • Positioned to acquire IP and become manufacturer of core equipment

      • Could become world leader

    • High Risk / High Reward


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What makes a Chinese Cleantech Company Attractive?

  • Innovation

  • Quality

  • Realistic pricing (valuation)

  • Sound business strategy

  • Compelling economics


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Summary

  • China is in a unique position to become a world leader in energy and environmental technology

    • Large population

    • Abundant natural resources

    • Rapid economic growth

  • Current limited infrastructure is a two-edged sword

    • Limits pace of growth

    • Clear path to use next generation technologies

  • Big opportunities for clean technology


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J

ane Capital

P a r t n e r s


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