Talk by Andrew Musters

Clean Tech Private Equity Investing 1

Clean Tech Private Equity Investing:

Market Dynamics, our Approach and our Experiences so far

Andrew Musters, Partner, Robeco Private Equity

TBLI Europe 2006Paris, 9 November 2006

For discussion purposes only

2Clean Tech Private Equity Investing

Clean tech market dynamics


The combined markets for biofuels, wind power, solar power and fuel cells are expected togrow from USD 40 billion in 2005 to USD 167 billion in 2015. Clean Edge 2006

Clean tech has become the fifth largest venture investment category in North America withnearly 10% market share – ahead of semiconductors. Cleantech Venture Network 2006

Clean tech market growth


Clean tech defined

Clean tech embraces knowledge-based products and services that optimize the use of natural resources while reducing ecological impact and adding economic value

Main investment areas:– Energy– Water– Manufacturing– Agriculture– Transportation

Source: Cleantech Venture Network

Clean tech is becoming increasingly important in the private equity market:

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U.S. and Canadian Cleantech Venture Deals by Quarter and as a percentage of total Venture Capital (by amount), 1999-2005


Green technologies are on the verge of becoming one of the next waves in the knowledge economy revolution Tony Blair Prime Minister Great Britain

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Source: International Energy Agency

Clean tech private equity market prospects

The market dynamics for clean tech investing are very favorable:


Clean tech performance characteristics

Cleantech Venture Investing: Patterns and Performance (Cleantech Venture Network, 2005):

– Research study covers 67 IPOs and 730 M&A transactions over a 15 year period

– Average return approximately 30% per annum

– Average IPO delivers 5.3 times invested capital

– Average trade sale (M&A transaction) delivers 4.3 times invested capital

The value of your investment may fluctuate. Results achieved in the past are no guarantee of future results


Our approach to clean tech investing

– Our approach combines an explicit top-down view on the private equity and clean tech markets with a bottom-up investment selection process

– Top-down Allocation:– With respect to allocation rules in selecting clean tech private equity

funds, up-front defined investment guidelines and allocation bandwidths will be used for the various geographical regions (North America, Western Europe and the Emerging Markets), as well as the stages of investment and sectors. These are dependent on the long term relative attractiveness of the categories and the available investment alternatives.

Investment Tactics

• Economic research• Analyst Reports, Trends

and Outlooks• Discover attractive

segments within • Regions

• Finance stages

• Risk-Return profile• Diversification

analysis• Regions• Finance stages• Vintage years

• Strategic planning of• Liquidity• Risk parameters• Investment Exposure

• Tactical asset allocation and fund selection

• Capital required• Risk management

• Stress testing• Motoring current

risks in comparison to predefined barriers

• Sensitivity analysis

• Projectionsof cash flows

Investment Tactics

MacroeconomicAnalysis

ModelingPortfolio Design

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Investment Tactics

MacroeconomicAnalysis

ModelingPortfolio Design


– Bottom-up investment selection:We evaluate a significant number clean tech investment opportunities annually. As a result of this large deal flow the core of the organization entails a systematic investment process which is necessary for identifying and making well-evaluated investment choices. This investment process can be illustrated as follows:

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Intermediaries

Exit and Distribution Management

Clean Tech Investment Opportunitiesu

Research

Monitoring & Reporting

Investment

Commitment

Negotiation & Legal/Fiscal Review

Investment Committee

Due Diligence

Deal Flow Screening

Deal Flow

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Our approach to clean tech investing

Due diligence of clean tech funds requires specific knowledge in order to assess:- young teams- many unrealized investments- specific terms and conditions


Investment portfolio: our experiences so far

Deal flow:– Building clean tech database since 2004– Approximately 160 clean tech funds in our database– Overweighting U.S. versus Europe and Emerging Markets– Overweighting venture capital versus development/growth capital

and buyouts– Overweighting energy versus other clean tech sectors

Lessons learned so far:– Quality clean tech funds becoming comparable to mainstream

venture capital funds – Market potential is enormous– Valuations are still attractive although some areas are overheated

(e.g. solar)


Conclusion

– Clean tech is an untapped investment field

– Many trends are currently in favor of clean tech

– Private equity is well positioned to take advantage of the opportunity


Disclaimer

THE INFORMATION CONTAINED IN THIS DOCUMENT IS SOLELY INTENDED FOR QUALIFIED INVESTORS WITHIN THE MEANING OF THE EXEMPTION REGULATION UNDER THE DUTCH ACT ON THE SUPERVISION OF SECURITIES TRADE 1995 (Wet toezicht effectenverkeer 1995) and the Dutch Act on the Supervision of Collective Investment Schemes (Wet toezicht beleggingsinstellingen).No rights whatsoever are licensed or assigned or shall pass to persons accessing this information. This document has been carefully prepared and is presented by Robeco Alternative Investments. The content of this document is based upon sources of information believed to be reliable, but no warranty or declaration, either explicit or implicit, is given as to their accuracy or completeness. This documentation has been prepared on a confidential one on one basis for private use by the recipient only, solely for discussion purposes with respect to Robeco Alternative Investments' specific capabilities. Any reproduction or distribution of this documentation, in whole or in part, or the disclosure of its contents, without the prior written consent of Robeco Alternative Investments, is prohibited. By accepting this documentation, the recipient agrees to the foregoing. This documentation is solely intended to supply the reader with information and reference on Robeco Alternative Investments' specific capabilities and does not constitute an offer, an invitation to subscribe for or investment advice in connection with any private equity funds or any other security or investment product. Investment decisions should be solely based on the complete set of documentation relating to the investment including the Private Placement Memoranda. The information relating to performance is for historical information only.The value of your investment may fluctuate. Results achieved in the past are no guarantee of future resultsTHIS PRESENTATION IS PREPARED BY ROBECO INSTITUTIONAL ASSET MANAGEMENT B.V. ("ROBECO") TRADING AS ROBECO ALTERNATIVE INVESTMENTS. ROBECO IS REGISTERED WITH THE NETHERLANDS AUTHORITY FOR THE FINANCIAL MARKETS (AUTORITEIT FINANCIËLE MARKTEN) IN AMSTERDAM.RABOBANK NEDERLAND IS A REGULATED ENTITY AS SET OUT UNDER THE ACT ON THE SUPERVISION OF CREDIT INSTITUTIONS 1992 (WET TOEZICHT KREDIETWEZEN 1992).

Economy & Finance

Talk by Andrew Musters