Cleantech for the Water Sector

Nicholas Parker

Executive Chairman

Cleantech Group, LLC

June 16 2010

Canadian Water Summit, Toronto

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Urban Infrastructure Needs Makeover

The World’s Urban Infrastructure Needs a $40 Trillion Makeover.

Framing our water focus

• Water risk exposure is reality for businesses – in a world where water demand outstrips supply, businesses must improve their water productivity and learn to do more with less!

Framing our water focus cont’d

• By some estimates, it could require $50 billion to $60 billion annually over the next two decades to close the gap between supply and demand.

• And technology improvements to water productivity or efficiency cuts across all industry value chains!

Inputs/ Raw

Materials

Process/ Productio

n

Delivery/ Distributio

n

Product/ Service

Use

Disposition

IndustryAgriculture Municipal/Domestic

Automated irrigation and crop yield enhancing technologies to improve agriculture’s heavy water use

Improved power production and other heavy-water use industrial processes.

Improved water treatment and distribution productivity

Where there is opportunity, there are challenges!

• The price of water does not reflect its scarce nature and ultimately betrays its value.

• Holistic water policies and regulatory structures that incentivize water efficiency or improved water productivity are slowly emerging.

• The water sector is currently a diffuse array of businesses including: – Steel & concrete pipe manufacturers, specialty chemical producers,

measurement, monitoring & testing firms, tank manufacturers, manufacturers representatives, Consultants and engineers and various other new technology developers, etc.

• Buyers of water related goods & services ranging across public and private sectors have very different needs!

All of which make for a challenging investment environment!

Describing water sector winners

• Successful water services providers will migrate from selling equipment and components to selling solutions aimed at helping business customers reduce their water and energy use.

Key Takeaways from 2009 Venture Investments in Water

Energy water relationship heats up. Traditional ‘mousetrap’ technologies have been replaced by energy efficient treatment technologies that fundamentally aim to improve the productivity of water treatment and distribution.

 Water reuse is another twist on the energy efficiency play. Reducing water conveyance has

an energy component built into its purchase cost making another attractive energy efficiency twist for venture investors. To that end, alternative sources of water supply are top of mind for industries facing water risk exposure.

 Water analytics are the safe bet. As the saying goes, you cannot manage what you do not

know. The water sector has a clear need for the collection and analysis of water data at both the industry and government levels. And water analytics are proving critical for businesses across all sectors and geographies.

Commodity tradeoff debates intensify

• Watch for these tradeoffs to hit the headlines in 2010– Water-energy– Land-energy– Land-water– Carbon-water

• Growing recognition of tradeoffs– The internal combustion engine is far more water

efficient than fuel cell or biofuel alternatives– Solar thermal plants require large amounts of

water– Environmentalists beginning to object to wind and

solar farms for land use reasons

• Water is going to be an increasingly important variable in energy production economics– In some places, such as Alberta and Australia,

water for coal and oil mining may soon compete with that for food production

Water innovation surges despite drop in venture dollars

• 2009 deal activity reached a record high of 50 deals, raising a total of $149 million.

• 1Q10 venture investments is the largest 1Q total next to 2007.

Water innovation surges despite drop in venture dollars

• 2009 deal activity reached a record high of 50 deals.• The share of early-stage deal activity reached a 60 percent record high in

2009 continuing an increasing trend since 2007.

Canada

Select Venture-Backed Water Companies

Raw Water Treatment

Distribution

Wastewater Treatment &

Reuse

Use

Seed/Early Stage Late Stage

Smart Water/

Analytics

Water M&A activity on pace for a record year

• Canada-based H20 Innovation is the most active water company acquirer with 6 acquisitions since 2005 followed by Aqua America (3) and Siemens (3).

1

2

3

China leads the pack in 2010 ytd water IPO activity

• All 5 IPOs to date in 2010 are Chinese companies: Beijing Water Business Doctor, Zheijang Weixing New Building Materials, Jiangxi Sanchuan Water Meter, Chongqing Water Group and Beijing Origin Water Technology.

Select Public Water Companies

Other water services players:

16

Building a green recovery: USD521bn

Total Package- $977bnGreen- 12%CC-33%, EE-50%, WW-17%

Total Package- $32bnGreen- 9%CC-39%, EE-51%, WW-10%

Total Package- $537bnGreen- 10%CC-30%, EE-68%, WW-2%

Total Package- $44bnGreen- 23%CC-35%, EE-65%

Total Package- $649bnGreen- 34%EE-84%, WW-16%

Total Package- $712bnGreen- 6% CC-32%, EE-67%

Total Package- $8bnGreen Component- 11%EE-88%, WW-12%

Total Package- $76bnGreen- 79%CC-51%, EE-25%, WW-23%

CC- Low carbon powerEE- energy efficiencyWW- water & waste

Source: HSBC estimates, government websites, others

Asia leads the way with almost 2/3rd of green stimulus

Cleantech: The First Global Innovation Revolution

Cleantech

The Present Day: Multiple regional sources of cleantech innovation are rapidly spreading globally.

Innovation Centre(s)Initial Spread

Mathematics IndustrialGunpowder IT

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www.cleantech.comnick@cleantech.com

See you at Cleantech Forum XXVIII, New York, October 12-13