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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 technology presented by jane lindner

Energy & Environmental TechnologyPresented by Jane Lindner

Investing in China 2005 Symposium

www.janecapital.com

energy environmental opportunities
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

macro factors favoring energy environmental technology
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
china s unique problem
Dense Population

High Growth

Opportunity

Major Environmental Concerns

Huge Energy Demand

Weak Infrastructure

China’s Unique Problem

4

the environmental issue
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
the water issue
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
power issue
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
china macro factors
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
china s response
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
where might opportunities lie
Where Might Opportunities Lie?
  • Water
  • Power Generation
    • Renewables
    • Fuel Cells
    • Clean coal
  • Efficiency
    • Green building construction
water
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
infrastructure power choices
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
how about fuel cells
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
where do renewables fit
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%
efficiency
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
clean coal
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
what makes a chinese cleantech company attractive
What makes a Chinese Cleantech Company Attractive?
  • Innovation
  • Quality
  • Realistic pricing (valuation)
  • Sound business strategy
  • Compelling economics
summary
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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