Finance Group

1. Finance Group Marketing 606 Baha, Chris, Guillermo, Katie, Tim, Vincent

2. Current Finance

3. Seed (Angel) Investors—Financing Startup of Private Companies Business Loans Municipal Bonds Funding for Government Water Districts Wall Street Bond Investors Managed Municipal Bond Portfolios Tax Free Income, Highest Paying $1.26 billion nationally Ballot Measures How do I Invest in Water?

4. Mutual Funds Bond Funds Natural Resources Fund (increasing exposure) Stocks Private Water Companies, IPO’s More Investor Options

5. Identify companies that have strong connections to various regions of the world where water is most scarce. • Invest in several different kinds of water companies. Water companies involved in purification and distribution each play different roles. • Look for the formation of new mutual funds, ETFs such as the PFW Water Fund, which trades under the ticker symbol. • Watch for large companies that are beginning to focus on desalination (e.g. General Electric and Hyflux). STEPS OF HOW TO INVEST IN WATER

6. Investing in water stocks is simply the investment of a lifetime • Put $10,000 in Consolidated Water in 2000 • Gained $81,061 by February of 2007 WATER STOCKS

7. No substitute for water • Demand unaffected by inflation, recession, interest rates • Strong and consistent growth • Price does not yet reflect real economic value • The outlook for water stocks much better than 25 years ago FEATURES OF WATER STOCKS

8. 20 year RETURNS - from 1983 to 2003

9. BLUE CHIPS OR WATER UTILITIES - FROM 96 TO 06

10. Water ETFs invest in a basket of different water companies • Benefit of owning water ETFs vs. a stock-ETFs reduce risk • ETF investment • Water ETFs provide 2 perspectives • Infrastructure investment • A commodities play • ETF with a water focus can be opportunity • Fresh water supplies exhausted • World’s population growing at a 2% rate • US water supplies under pressure in CA, Hawaii and parts of the Southwest WATER ETFs

11. PowerShares Water Resources Portfolio (PHO) • Investment in infrastructure • Portable water, water treatment • Tracks the Palisades Water Index (PWI) • Claymore S&P Global Water Index (CGW) • Tracks S&P global water index • Capture demand for the precious natural resource • First Trust ISE Water Index( FIW) • ISE Water Index • PowerShares Global Water Portfolio (PIO) • Tracks the PWI • Investments in Britain, Japan, and the U.S. MAJOR WATER ETFs

12. Acc. to UN, 2 billion people will face severe water shortages by 2025 • $660 billion over the next 20 years to develop water infrastructure • Acc. To EPA, at least %25 of the nation’s pipes are in poor condition and by 2020 , this will be %45. • These situations could be another major boost to water ETFs. WHY ETFs ARE ATTRACTIVE?

13. Clean drinking water is a far more precious commodity than oil. • Bottled water is a 50-billion dollar industry worldwide with bottling companies like Arrowhead, Poland Springs, Crystal Geyser, and Saratoga Springs REASONS TO INVEST IN WATER BOTTLING COMPANIES

14. Invest in California. It is home to an estimated 40 percent of the nation’s 300 water bottling operations • More water bottling companies in California will lead to more jobs and more revenue coming into the state. • Also invest overseas. The United States only contributes 15 billion dollars to the water bottle industry.

15. I would look into investing in water bottling companies. • Since only 3 percent of the world has fresh water to bottle then in time the world will struggle to keep up with the demand. The result will be high prices for bottled water and also high stock prices. If I was a CFO of a Bank

16. San Francisco- $34.33 a month • Sacramento- $30.17 • Bakersfield- $26.75 • Santa Barbara- $55.08 • San Diego- $72.44 • The more south you go the more expensive your water bill will be. Average Water Bills

17. Land is much more valuable if you have water. • Milwaukee example Property values with Water VS Property values without Water

18. Comparison Between the Value of Irrigated and Non-Irrigated Pasture Land in the San Joaquin Valley (1985 dollars) Year Irrigated Pasture Non-Irrigated Pasture Difference in Value 1982 $2,725 $1,475 $1,250 1983 2,738 1,310 1,429 1984 2,490 1,251 1,239 1985 2,300 1,050 1,250 1986 1,949 877 1,072 1987 1,936 803 1,133 1988 2,089 817 1,272 1989 2,045 914 1,131 1990 2,083 875 1,208 1991 2,167 883 1,284

19. Future Finance

20. Privatization • What is privatization? • Covers wide spectrum of water utility operations including operations, management and ownership arrangements • At a high level, three categories • Outsourcing • Design, build and operate • Asset sale • In US contracting of Operations & Maintenance is more common than sale

21. Privatization • History of Privatization • Historically, 50% of water systems were privately owned (dominated in 19th century) • Public health concerns caused government to take over water • Water quality issues have been primarily driven by deteriorating infrastructure during our most recent years • A huge investment is required! • Shortfall of approximately $11b/yr in funding after Government contribution • CAPEX cost of $331-$450billion through 2019 required • In 2002 the U.N. recognized water as a human right • About 90% of the US population gets it water from public-supply systems and the US is identified as one of the largest public water markets in the world (7% or better growth)

22. Privatization • History of Privatization • World Context • World Bank estimated global water services $800b market in late 90s • Private companies saw opportunity and lobbied • Latin America and East Asia started in mid 80s • South Asia and Africa followed in late 90s • We began to see water quality issues thereafter • RWE (German owned) purchased American Water Works in 2003 and then divested in 2006

23. Privatization • Reasons to Privatize • Defer investment cost to private organizations • Private organizations should be more efficient at operating • Economies of scale • Public organizations will have to meet stakeholder demands • Improvement of quality • Access to technical expertise in the “corporate” market

24. Privatization • Reasons against Privatizing • Rate increases • Privatization undermines water quality • Companies are accountable to shareholders, not consumers • Reduces local control • Private financing costs more than government • Can result in job losses • Can be difficult to reverse • Could leave poor with no access to clean water (unlikely in US) • Could lead to bulk water exports • Ecologists suggest it severely disrupts environment

25. The degree at which municipal gvmts. will privatize water systems would depend may govern the pace at which industry transforms. • Globalization of the water business. • Population increases • Demographic shifts Factors Affecting Water Utility Future

26. Shift Responsibility • Attractive for countries with urgent needs and little capital. • Mechanism for rapidly organizing private capital Build Own Transfer (BOT) & Build Own Operate (BOO) Projects

27. Privatization Process Adapted from: Private Capital in Water and Sanitation, World Bank

28. Cash Flow and Risk Adapted from: Private Capital in Water and Sanitation, World Bank

29. Water projects rarely generates foreign exchange. • Projects financed with foreign exchange debt are more exposed to foreign exchange risk • Difficult to obtain debt at reasonable interest rates Risks

30. Private/Public Owned Water Systems Revenues Source: Privatization of Water Services in the United States: An Assessment of Issues and Experience (2002)

31. Private/Public Presence in Water Systems *Ancillary systems deliver drinking water as an adjunct to their primary business (e.g., mobile home parks, retirement homes). Adapted from: Privatization of Water Services in the United States: An Assessment of Issues and Experience (2002)

32. ICEBERGS are the future water resource

33. Icebergs are blocks of fresh-water ice that break off from glaciers and float out to sea. • Glaciers are formed in polar regions where snowfall lasts for centuries, or even millennia, without entirely melting, and is eventually compressed into ice • Iceberg Web Resources for Students Icebergs

34. Qikiqtaaluk Corp. and Pure Berg of Canada • Plan to harvest icebergs that have calved off nearby glaciers, melt them, bottle the water, and market it as clean drinking water to those who crave a taste of the Arctic. • Matthew Spence, the development manager Bottled Icebergs

36. Pay $200 a ton for icebergs • These icebergs break off the glaciers by the thousands during the summer and float into Cumberland Sound and Davis Strait. • Haul onto ships and store in waterproof containers • Transport to bottling plants Process

37. Cumberland Sound

40. Solid Water

41. Chinese scientists have developed solid water, which can be use for planting trees in deserts • 97 % actual water , 3% is a kind of macromolecular polymer extracted from animals and plants • packed in degradable paper, is not pollutive and can be placed deep in the earth together with the root of plant.

42. A real advantage to China • It has currently 2.67 million square kilometers of desert land (27.9% of China´s total territory) • with an average expansion of desert areas of about 10,400 square kilometers per year Fact

43. How to finance water • Find angel investor • It is an affluent individual who provides capital for a businessstart-up, usually in exchange for convertible debt or ownership equity. • Angle groups or Angle networks

44. Issue corporate bond • The term is usually applied to longer-term debt instruments, generally with a maturity date falling at least a year after their issue date `

45. Trade like commodities • Purchase water commodities in CME • Chicago Mercantile Exchange Holdings, Inc. How can we invest in water

47. Water trade – e.g Queensland water trade • water trading is the voluntary buying and selling of a water entitlement or the water that is available under a water entitlement, with price determined by market conditions • Water users can buy water to expand their operation and sell any they do not need.