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Presentation by Julia Balandina at TBLI CONFERENCE EUROPE 2008.
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INVESTING IN CLEANTECH FROM PHILANTHROPY TO THE NEXT BIG THING
November 2008
Julia Balandina JaquierAIG Investments
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INVESTOR APPETITE FOR CLEANTECH
a luxury
a niche market driven by environmentalists
regulated/driven by subsidies= dependency + low economic viability
primarily Wind/Solar = not applicable for base load
energy is “OLD ECONOMY” and “BORING”
an answer to energy security, rising energy demand and climate change
billion $ market, ↑growth, driven by irreversible global trends
regulated /driven by subsidies = stability + visibility of revenues
primarily Wind/Solar = no feedstock risk, good for peak supply
energy is “KEY” and “SEXY”
5 YEARS AGO NOW
CLEANTECH IS….
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Mega-trends
Commodity/feedstock risk
Peak load
Regulation
Markets
Subsidy regimes
Technological maturity
Grid parity is a reality
JUST A CHANGE OF PERCEPTION OR A CHANGE OF FUNDAMENTALS?
PERCEPTION CHANGES FUNDAMENTAL CHANGES
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HUGE CAPITAL INFLOW INTO CLEANTECH
Source: New Energy Finance.
USD 200 bnINVESTED IN CLEANTECH IN 2007
RENEWABLE ENERGY SHARE OF TOTAL NEW CAPACITY IN 2007
23%
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WILL ALL THIS MONEY BE INVESTED SUSTAINABLY?
CONTROVERSIAL AREAS EXIST:
BEST COMBINATION OF GOING GOOD AND GOING WELL…
CLEANTECH IS PROBABLY BEST EXAMPLE OF TBLI INVESTING:
SOCIALJob creation, social benefits of core
activities, support of young companies
ENVIRONMENTALEnvironmental innovation /solutions
are core of operations
Quick pre-IPO roundsFirst generation biofuels
ECONOMICGenerates exceptional returns
Hedge fundsDrinking water
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PRIVATE EQUITY IN CLEANTECH – WHO WILL MAKE MONEY?
STAY AHEAD OF THE PACK BE A VALUE-ADD INVESTOR
POSSESS STRONG SECTOR EXPERTISE
LOOK FOR SPECIAL SITUATIONS
4 STRATEGIES TO GET THE DIAMONDS OF CLEANTECH:
AVOID COMPETITION WIN OVER COMPETITION
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STRATEGY I: POSSESS STRONG SECTOR EXPERTISE
Sector is broad and diverseRegulatory environment is key, complex and changingTechnological innovation is inevitable
Valuations vary across geographies
Young companies with multiple activities
Management teams seek partners who understand market and technology
Deal experience is keyDevelop internal knowledge, sector focusMaintain it (tradeshows, market insights, etc..)Use, involve and incentivize experts Speak to peers
BE/BECOME THE EXPERT
WHY HOW
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EXAMPLE: THIN FILM SOLAR
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STRATEGY II: STAY AHEAD OF THE PACK
Many great deals at high valuations
Cleantech is much more than wind, solar, and biomass …
Addresses any old-economy sector …
Identify overlooked subsectors
Resolve supply chain bottlenecks
Create deals
DO NOT WAIT FOR DEALS COMING TO YOU FIND/CREATE TOMORROW’S “FLAVOR OF THE DAY”
WHY HOW
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EXAMPLES: SIMPLE SOLUTIONS
PICTURE OF THE PARKING LOT – THE DEAL IS ABOUT ASPHALT SUBSTITUTE
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STRATEGY III: LOOK FOR SPECIAL SITUATIONS
Potential challenges:
Cost-overruns
Slower revenue ramp-up
Regulation/market sentiment
Debt facilitiesResulting in:
Need for additional capital infusion
Reasonable valuations
Stay close to companies
Get a good insight over time before company is struggling
Be able to act quickly
Fundamentals should still work!
STAY PATIENT AND BE PREPARED
WHY HOW
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EXAMPLE: SPECIAL SITUATIONS
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Global markets require global strategies
Capital is not enough
Differentiation in competitive situations
Shifts focus from valuation
Value enhancement
Team enhancement
Strategic guidance
Financial discipline
Global strategy:
Market entry/expansion
Global sourcing/offshore production
Raising capital globally
STRATEGY IV: BE A VALUE-ADD INVESTOR
DEVELOP/IMPLEMENT VALUE-ADD STRATEGIESWORK CLOSELY WITH THE PORTFOLIO COMPANY
WHY HOW
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EXAMPLE: WIND COMPONENTS SOLUTIONS
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TRAPS TO AVOID
Interim solutions
Wonderful companies with mediocre management
Early stage deals
Long sales cycles
Competition with “big boys”
“Next Google” deals at current Google valuations..
Too eager to go public, or already there…
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Disclosure Statement
AIG Investments is a group of international companies that provide investment advice and market asset management products and services to clients around the world.
AIG Investments is a service mark of American International Group, Inc. (AIG). Services and products are provided by one or more affiliates of AIG.
Readership: This document is intended solely for the addressee(s). Its content may be legally privileged and/or confidential.
Opinions: Any opinions expressed in this document may be subject to change without notice. We are not soliciting or recommending any action based on this material.
Risk Warning: Past performance is not indicative of future results. Our investment management services relate to a variety of investments, each of which can fluctuate in value. The value of portfolios we manage may fall as well as rise, and the investor may not get back the full amount originally invested. The investment risks vary between different types of instruments. For example, for investments involving exposure to a currency other than that in which the portfolio is denominated, changes in the rate of exchange may cause the value of investments, and consequently the value of the portfolio, to go up or down. In the case of a higher volatility portfolio the loss on realization or cancellation may be very high (including total loss of investment), as the value of such an investment may fall suddenly and substantially.
In making an investment decision, prospective investors must rely on their own examination of the merits and risks involved.
Unless otherwise noted, all information contained herein is sourced with AIG and/or AIG Investments internal data.
The content included herein has been shared with various in-house departments within the member companies of AIG Investments and/or AIG Private Bank Ltd., in the ordinary course of completion. All AIG Investments member companies comply with the confidentiality requirements of their respective jurisdictions.
Parts of this presentation may be based on information received from sources we consider reliable. We do not represent that all of this information is accurate or complete, however, and it may not be relied upon as such.
AIG Global Investment Corp. (Switzerland) Ltd. is a wholly owned subsidiary of AIG Private Bank Ltd.
In the UK this document is intended for Intermediate Customers only and has been approved by AIG Global Investment Corp. (Europe) Ltd., authorized and regulated by the Financial Services Authority.
AIG Global Real Estate Investment (Europe) Ltd. is an Appointed Representative of AIG Global Investment Corp. (Europe) Ltd.
AIG Global Investment Corp. (Switzerland) Ltd. is a wholly owned subsidiary of AIG Private Bank Ltd.
In the UK this document is intended for Intermediate Customers only and has been approved by AIG Global Investment Corp. (Europe) Ltd., authorized and regulated by the Financial Services Authority.
AIG Global Real Estate Investment (Europe) Ltd. is an Appointed Representative of AIG Global Investment Corp. (Europe) Ltd.
Approved by AIG Global Investment Corp. (Ireland) Ltd. and AIG Global Investment Fund Management Ltd., both authorized and regulated by the Irish Financial Services Regulatory Authority (“IFSRA”).
In Australia, this document is intended for a limited number of wholesale clients as such term is defined in chapter 7 of the Corporations Act 2001 (CTH). The entity receiving this document represents that if it is in Australia, it is a wholesale client and it will not distribute this document to any other person whether in or outside of Australia.
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