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July 2012

The Digital Energy Company. July 2012. We Make Energy Better. Safe Harbor Statement.

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July 2012

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  1. The Digital Energy Company July 2012 We Make Energy Better

  2. Safe Harbor Statement Certain of the matters discussed in this presentation contains statements that are forward-looking, such as statements relating to results of operations, financial condition, business development activities and market dynamics. Such forward-looking information involves important risks and uncertainties that could significantly affect anticipated results in the future and, accordingly, such results may differ materially from those expressed in any forward-looking statements made on or behalf of Acorn Energy. All statements other than statements of historical fact in this presentation regarding Acorn Energy’s future performance, revenues, margins, market share and any future events or prospects are forward-looking statements. For more information regarding risks and uncertainties that could affect Acorn Energy’s results of operations or financial condition review Acorn Energy’s filings with the Securities and Exchange Commission (in particular, it’s most recently filed Form 10-K and Form 10-Q). Acorn Energy’s forward-looking statements are not guarantees of future performance and the actual results or developments may differ materially from the expectations expressed in the forward-looking statements. As for the forward-looking statements that relate to future financial results and other projections, actual results will be different due to the inherent uncertainties of estimates, forecasts and projections and may be better or worse than projected and such differences could be material. Acorn Energy undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

  3. The Digital Energy Company • Why should you own ACFN today? • Proven track record • Compelling core themes: • Prosperity through energy intelligence • Extracting maximum value out of existing assets • Condition-based monitoring vs. time-based monitoring • Digital oilfield and grid • Strategy: Take controlling positions in companies led by great entrepreneurs and assist in extracting untapped value • Strong balance sheet and dividend policy • Over $2.50 per share in cash • No corporate debt • New quarterly dividend policy of $0.035

  4. Growth Story Enabling a self-healing, self-balancing grid Accelerating the digital oilfield revolution Securing the world’s energy assets 24/7 monitoring of power generation infrastructure • Grow revenues 5-10x by 2014 • Majority controlled platform investments (energy, security) • Growth capital to accelerate organic development of existing businesses • Opportunistic M&A • 4 strong businesses • Great customer interest • Management we know and feel comfortable with

  5. Proven Model March 2006 April 2007 December 2007 • John Moore Appointed CEO • $10MM Market Cap • Pink sheets • COMV IPO @ $250MM Valuation • 8x Trailing Revenue of $33MM • ACFN owns 16% • COMV Secondary @ $600MM Valuation • 16x Trailing Revenue • ACFN Sells entire position for $50MM • 19 Analysts Cover COMV

  6. Proven Model US leader in power plant catalyst regeneration Invest Nov 2007 Build 2008-2010 Sell 2011 • $9.6MM valuation • FY 2007 revenue of $4.5MM • Major holder • Invest ahead of growth curve • Management incentive • $9MM follow-on investment • FY 2010 revenue of $21.5MM (68.9% CAGR) • Prestigious board • Long term contracts • Defend IP • ECP buys CoaLogix • $101MM Valuation • 3.4x CoC Multiple • 42.8% IRR • Growth vs. dilution tradeoff • Hired bankers • Closed 08/31/11

  7. Evolution Of Oil Well Technology

  8. History and Future of Seismic Evolution from 2D to 4D Seismic

  9. Value Proposition Replace This… With This Electronic-based Sensors Optical Fiber Sensor • USSI Replaces Bulky, Expensive, Unreliable Electronic Sensors with Fiber Sensors • No copper wire, electronics, or electrical power at the sensor • Sensors are inherently safe – no sparks or heat generated • Sensor data can be transmitted for miles without any performance degradation

  10. How It Works

  11. Proven Fiber Optic Technology • LWWAA is the largest fiber optic sensor system in production, valued at more than $450mm • USSI CEO (Jim Andersen) started and led Litton’s (now NG) fiber optic strategic business unit • Key members of the LWWAA team have migrated over to USSI • USSI has commercialized the • technology which has resulted in • improved reliability and lower cost • USSI has its own IP • USSI licensed NG technology

  12. Superior Performance Verified in the Lab • Side-by-Side testing was conducted at the DOE LBNL on 1/13/10 • USSI’s geophone was compared to two ultra-sensitive seismometers, considered to be the LBNL “Gold Standard” (monitors worldwide seismic activity) • Testing showed USSI’s performance to be more than comparable to LBNL’s “Gold Standard” LBNL “Gold Standard” Seismometers USSI Fiber Optic Geophone

  13. USSI’s Fiber Optic Geophone vs. Conventional Geophone • Side-by-Side Comparison • USSI’s 3-Axis Fiber Optic Geophone vs. Conventional 3-Axis Geophone • Both at approximately 300 ft well depth • USSI’s product demonstrated superior performance under actual oilfield conditions USSI Geophone Electronic Geophone Well Head

  14. Competitive Advantage US DOE Lawrence Berkeley National Laboratory (LBNL) Richmond Field test site

  15. USSI Annual Potential Market (Seismic Equipment) In Million USD

  16. What is Hydrofrac Monitoring?

  17. 100% Monitoring Can Alleviate Concerns • Problem: Cost of monitoring with today’s technology cannot be supported based upon current and projected gas prices, and performance is marginal • USSI’s fiber optic technology performs better • USSI believes regulators will require monitoring of hydrofracking and possibly monitoring gas migration along the well bore • At about 20,000 wells per year in the US alone, this is our sweet spot Pennsylvania Governor Corbett proposes new Marcellus Shale regulations   Source: Office of Governor Corbett (October 4, 2011) Expanding an unconventional gas operator’s “presumed liability” for impairing water quality from 1,000 feet to 2,500 feet from a gas well, and extending the duration of presumed liability from 6 months after well completion to 12 months;

  18. USSI Proprietary Information The SEAB Seems to Have Reached the Same Conclusion Secretary of Energy Advisory Board Natural Gas Subcommittee Shale Gas Production Second Ninety Day Report November 18, 2011 Annex C – Subcommittee Recommendations 10. Adopt best practices in well development and construction, especially casing, cementing, and pressure management. Pressure testing of cemented casing and state-of-the-art cement bond logs should be used to confirm formation isolation. Microseismic surveys should be carried out to assure that hydraulic fracture growth is limited to the gas producing formations. Regulations and inspections are needed to confirm that operators have taken prompt action to repair defective cementing jobs. The regulation of shale gas development should include inspections at safety-critical stages of well construction and hydraulic fracturing. 11. Additional field studies on possible methane leakage from shale gas wells to water reservoirs.

  19. Real-Time Microseismic Monitoring can Prevent Problems Industry Experts also Agree …“Microseismic monitoring is for design calibration and also for shutting down jobs going toward some geohazard you don’t want,” he noted. “A classic example is the Barnett shale, where karsts and faults lead down into the Ellenberger salt water below the Barnett. “When we see the fracture microseismic events going in that direction, we shut that stage down and move on to the next stage,” LaFollette said. “We’re developing predictive capability,” he said. “We don’t want to waste frac material and the customers’ money to create fractures that aren’t beneficial.” (Randy LaFollette, is manager of shale gas technology at BJ Services in Tomball, Texas)

  20. The Benefits of Frac Monitoring are More than just Environmental Case Study: Gas Production Increases by 35% in Cotton Valley Sand Formation Challenge Determine actual geometry of induced hydraulic fractures to improve efficiency of fracturing design, optimize reservoir performance, and increase production. Solution Used StimMAP* hydraulic fracture stimulation diagnostics service, which maps hydraulic fracture systems in 3D as they are created. Results Increased production by an estimated 35%.

  21. Fiber optic geophones for microseismic • Market Drivers • 4-D mapping • Need for more sensitive, more rugged, cheaper sensors • STEP-change • Address environmental concerns • Highlights • Congressional Subcommittee • Shipped world’s largest downhole optical array (June ’12) • Shipped all optical marine seismic array (June ‘12) • NG license for interrogator • 6 demos to date • Financial Snapshot • $1.3M Rev in 2011 • $0.9M in backlog as @ Q2’12 • Implementing efficiency improvements • 81% ownership* $1Bn+ TAM • 20,000 wells fractured in 2010 (less than 3% use micro-seismic) • $700K per well * Fully-diluted stake

  22. Sensing technologies to detect and alert security teams to the presence of U-W threats to critical energy infrastructure • Market Drivers • Emerging market economy heavily reliant on port and energy infrastructure • Global insecurity on the rise/growing awareness of underwater threats • Credibility of Israeli technology • Highlights • 70% Global Market Share; 5 Reference Clients • BIRD funding for world’s first passive/active sonar system • Selected for strategic tunnel detection project • Financial Snapshot • $10.5M Rev in 2011 • $9M in backlog as @ Q2’12 • 35% Gross Margin in 2011 • 84% Ownership Stake $1B+ TAM • 3,500 water-based energy terminals at $1M per terminal

  23. Cost-effective sensors for transformers and power lines (easy retrofit) to help utilities improve electric grid • Market Drivers • Aging transformer fleet • Need for digital age reliability • Power quality issues related to renewable power and electric cars • Availability of communication and sensor technology for real-time condition monitoring • Highlights • Partnership with CA utility to measure PV’s effect on grid • 2 utilities use LineIQ to monitor substations • Recruited Alain Steven to the board • Testing web-based platform for 24/7 access to sensors • Financial Snapshot • $7.1M Rev in 2011 • 47% Gross Margin in 2011 • 100% ownership* $1B+ TAM • 1M large and medium transformers • Less than 2% of transformers being monitored (1-2 000 per unit) * 16% phantom option plan

  24. Transformer Asset Wall  • Analysis of transformer failures by Hartford Steam Boiler Inspection & Insurance Co., 2012: • Although we have not yet seen an alarming increase in end of life failures, such a rise must be expected eventually. • - The most difficult task for the utility engineer is to predict the future reliability of the transformer fleet, and to replace each one the day before it fails. • - Meeting the growing demand of the grid and at the same time maintaining system reliability with this aging fleet will require significant changes in the way the utility operates and cares for its transformers. Peak estimated: next 5-10 years

  25. Remote monitoring solutions for back-power as well as pipelines • Market Drivers • Aging grid • Need for uninterrupted power • Regulatory requirements • Availability of communication and sensor technology for real-time condition monitoring • Highlights • Business model innovation • 4G radio implementation • Recruited sales force • Converting consignment units to subscription • Financial Snapshot • $3.0M Rev in 2011 • 70% gross margin • 100% ownership* $1B+ TAM • Over 2M permanently-installed generators (50% residential, 50% C&I) • Less than 2% of generators being monitored • Less than 2% of households have generator * Pre- management option pool

  26. Balance Sheet

  27. Income Statement

  28. Statement of Cash Flows

  29. The Digital Energy Company Thank You! We Make Energy Better

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