Eversheds IPO seminar that examines the challenges facing the IPO market within the clean energy sector.

1. Renewables IPO Seminar
A changing climate for IPOs?
4th April 2011
Neil Matthews

2. The IPO Voyage
What we will cover today:
• Market conditions and outlook
• Current trends in the markets
• Choice of markets – influencing
factors
• Preparing for the IPO – particular
issues facing the clean energy sector
• Practical tips for a successful IPO

3. Climatic conditions
London markets - 2010 in review
• IPOs - Total 89 IPOs raising £10bn (2009 = 22 / £1.7bn)
– Main Market = 46 IPOs raising £9bn (2009 = 9 / £0.9bn)
– AIM = 43 IPOs raising £1bn (2009 = 13 / £0.6bn)
• 2010 highlights include:
– Main Market – Essar, Ocado, Betfair, SuperGroup,
Flybe, AZE
– AIM – EMIS Group, Halosource Inc, Ncondezi Coal
– Natural resouces / energy still dominate (esp. AIM)
• AIM generally out of favour; lack of good UK candidates
• Slow start to 2011. Funds flow out of bonds into equities
continues but recent volatility threatens IPO chances

4. Climatic conditions
Outlook:
• Market sentiment improving for IPOs after sole focus
on secondary issues in 2008/9
• Investor preference remaining for Main Market IPOs
• Our experience:
– Flybe Group plc, AZ Electronics etc
• AIM = will remain tough but some successes (e.g.
Ilika plc)
• Increasing competition from other stock markets

5. Current Trends (1) – favoured listing
locations?
• Hong Kong 
New York 
London
• Key determinants
– Sizeable capital raising?
– Valuation / rating?
– Creation of liquidity?
– Exposure/ profile raising in local
jurisdiction?
• Cleantech/energy …………?? …still up for grabs !!

6. Current Trends (2) – emerging markets
Emerging markets companies in London:
– Russia – active again (particularly GDR offerings)
– China – difficult and looking elsewhere
(e.g. Frankfurt?)
– India – a little patchy
– Other jurisdictions

7. Choice of Markets: London
• AIM:
– still reputational challenges although fundamentally a
robust and appropriately regulated environment.
– needs more fiscal incentives / liquidity drivers to kick
start it again
– Nomad concerns over increasing burden on them
• Main Market: Premium listing:
– back in favour although highly regulated and thus
compliance is expensive
• Main Market: Standard listing:
– limited regulation although voluntary compliance with
higher standards not uncommon. Used in specific
circumstances.

8. What is required to join the UK’s markets?
Investor expectations of an applicant are:
strong market appetite
management
team for the sector
long term
commitment from viable business plan
directors/key
shareholders
transparency
good corporate of ownership
governance and accounting

9. Preparing for the IPO (1)
Key issues – corporate structuring
• Creating the IPO structure
• For UK companies:
– converting to / re-registering as a PLC
– …or establish Newco and effect share
exchange
– careful handing – a clear steps-plan
– early involvement/implementation
is key
• For overseas entities:
– Choice of Holdco jurisdiction (drivers =
tax, investor protection, settlement issues,
reputation etc)
– Again, early stage planning

10. Preparing for the IPO (2)
Due diligence issues - protecting your assets
• capture your assets
– make sure you own them
• protect your assets
– eg patents/design rights etc
– confidential information
• exploit your assets
– jvs/sale of IPR/licensing
• remove non-core assets

11. Preparing for the IPO (3)
Other issues
• optimise financing structures
• pre-IPO housekeeping (e.g. any disputes,
claims, litigation etc)
• corporate governance – strengthening the
board – this takes time
• financial systems/ reporting
procedures?
• new share/ incentive schemes.
NB: identify issues at an early stage!!

12. The process
Why does it take so long?
• selecting the advisory team
• legal & financial due diligence
• pre-IPO restructuring
• preparing the Prospectus / Typically -
Admission Document 6 - 12
• verification months
• marketing - the roadshow
• placing and pricing
• Admission and dealings
commence

13. Smoothing the way for a successful IPO
Top tips
• Don’t under-estimate the time
commitment needed
• Plan ahead – don’t leave issues until
the last minute
• Ensure you have adequate internal &
external resource available
• Pick the right advisory team
• Expect some highs and lows
along the way

14. Neil Matthews
Head of equity capital markets group
Tel: +44 (0) 845 497 4880
Mobile: +44 (0) 776 786 3390
E-mail: neilmatthews@eversheds.com
Address: One Wood Street
London EC2V 7WS
Eversheds LLP
• One of the leading mid-market ECM practices
• 92 UK stock market clients (over 60 listed on Main
Market)
• AIM Law Firm of the Year 2008/9 & 2009/10
• Member of LSE AIM Advisory Group
• Acted on approx 10% of all UK public company
acquisitions in last 5 years

15. Equity Capital Markets
A selection of our recent deals

16. © EVERSHEDS LLP 2010. Eversheds LLP is a limited liability partnership.

17. Renewables IPO Seminar
4 April 2010

18. Global leader for capital raising
• World’s leading market in terms of access to international investors and capital
• World’s most diverse market in terms of international quoted companies
• 3rd largest global equity market by market capitalsiation
• Europe’s highly traded equity market by value traded
• Supported by one of the World’s most highly experienced advisory communities
2

19. Routes to market
• The London Stock Exchange offers a range offers different routes to raise capital from
the equity market, each designed to appeal to different companies and investors
• Three options for commercial companies:
– AIM
– growth market aimed at smaller and/or younger companies
– unique regulatory framework
– AIM focused indices available
– Main Market, Premium
– premium product weighted more towards established and/or larger companies
– highest level of regulation applies
– UK index inclusion
– Main Market, Standard
– lower level of regulation compared with Premium listing and AIM
– useful for special situations (special acquisition vehicle, nearly eligible for Premium)
– no index inclusion
• Specialist Fund Market also available to funds focused at sophisticated investors
3

20. Cleantech companies at a glance
Main Market AIM
Number of cleantech companies 39 80
Average amount raised at admission £34m £36m
Total amount raised at admission £4,702m £4,589m
Total raised in further issues £5,292.75m £5,060.42m
Total market capitalisation £59,513,685m £51,742,221m
Number of UK companies 38 62
Source: London Stock Exchange statistics and ProQuote data 31.03.2011 4

21. Cleantech sectors represented on AIM & MM
Renewable & Alternative Energy
34
Energy Efficiency
37
Waste Management & Technologies
20
Environmental Support Services
20
Pollution Control
11
Water Infrastructure & Technologies
12
Financial Services
2
Electricity
3
Alternative Energy
1
Source: London Stock Exchange Statistics 31.03.11, FTSE Environmental Markets Classification System
definitions used where relevant 5

22. Number of Cleantech companies (AIM & MM) by
market capitalisation (£m)
47
25
16
8 8
5 4 4
1
0-25 25-75 75-125 125-200 200- 350 350-700 700-1,000 1,000- 10,000+
10,000
Source: London Stock Exchange Statistic, and ProQuote 31.03.2011 6

23. IPO activity – Q1 2011
Mkt cap Funds
Date Company Market Sector (£m) raised (£m)
10 Jan-11 Hazel Renewable Energy VCT 1 Premium Equity Investment Instruments 5.4 5.4
10 Jan-11 Hazel Renewable Energy VCT 2 Premium Equity Investment Instruments 5.4 5.4
12 Jan-11 Marwyn Mngt Partners Plc Standard General Financial 6 6
20 Jan-11 Farglory Land Development Co Standard Real Estate Investments & Serv 131.6 131.6
31 Jan-11 Frontier IP Group Plc AIM Support Services 3.4 1
17 Feb-11 Justice Holdings Limited Standard Special Purpose Acquisition Co 900 900
1 Mar-11 Octopus Titan VCT 5 PLC Premium Equity Investment Instruments 5.5 5.5
14 Mar-11 Duet Real Estate Finance Limited Premium Equity Investment Instruments 50 50
17 Mar-11 Trap Oil Group plc AIM Oil and Gas 78.3 60
23 Mar-11 Hoang Anh Gia Lai JSC PSM Diversified 38 38
31 Mar-11 Top Creation Investments Ltd AIM Equity Investment Instruments 3 3
7

24. IPO activity – live Intention to Floats
Date Country Mkt cap
announced Company Market of origin Sector (£m)
28 Feb-11 Skrill Group plc Premium UK Financial Services 415
3 Mar-11 Diverse Income Trust Premium UK Equity Investment Instrument 50
10 Mar-11 Perform Group plc Premium UK Media 700
14 Mar-11 Edwards Group Premium UK Industrial Engineering 1,300
23 Mar-11 Etalon Group Limited Standard Russia Real Estate 310
23 Mar 11 Nomos Bank Standard Russia Banks 370
8

25. IPO Outlook
• Economic growth slow in developed countries, higher in emerging
• IPO activity increased during Q4 2010
• Moderate Q1, anticipate stronger Q2 2011
• “Operating companies” return to IPO
• M&A activity underpinning valuations and recycling cash for investors
• Institutional investors long on cash / low interest rates / appetite for
risk to deliver returns
• Lack of debt / trade sales and PE secondary sales still slow
• Geo-political uncertainty & oil prices
9

26. Eversheds IPO Seminar
Presentation by Novusmodus

27.  Novusmodus is a VC/Development Capital investment firm
in the renewable and cleantech sector
 We are the adviser to ESB Novusmodus Fund LP, a
€200m fund established in August 2009 where ESB is the
only investor
 ESB provides a unique perspective on the utility market, and direct
access to engineering and sector specialist expertise
 The team is based in London, Dublin, and Munich
 a European focus, a global mandate
1

28.  All things to do with clean, low-carbon generation, and
the efficient delivery and usage of electricity and heat
 €3m - €20m equity investments
 Significant minority positions and board representation
 5-6 year investment horizon
 Open to consider co-investments with other funds
2

29.  Albeit independent, we have a deep relationship with
ESB
 Leverage expertise within dedicated ESB teams
 Provide expert skills and management support to
investee companies
Utility Expertise and Engineering
• Carbon neutral by 2035
International Reach • c.€20bn investment program
• €6.5bn asset value
• International presence in over 50
Cornerstone Investor countries
• 1,100 consulting engineers out of 7,000
3
staff

30. Bridging the Financing Gap
Between the VC and PE stages
4

31. EU 20:20:20 Targets $$$$$$$$$ Huge investment
 €200 billion per major economy
 DECC spending = 1/3 of defence spending by 2020
 DECC will be spending more than police + justice +
prisons
Utilities $$ Cash constrained
 Focusing on large projects e.g. Offshore or nuclear
 Don’t really buy the green story... Will governments
really do something economically irrational?
5 Investment in renewable infrastructure companies is a must

32.  Debt
 Venture Capital
 Private Equity
 Infrastructure Funds
 Retail Investors
 Institutional investors
6

33. Renewable Energy
EDF Energies Nouvelles
Generation
60 140
Share Price (£p)
120
Share Price (€)
50
100
40
80
30
60
20 40
10 20
N ov-06 Jul-07 Mar-08 N ov-08 Jul-09 Mar-10 N ov-10 Dec-06 Aug-07 Apr-08 Dec-08 Aug-09 Apr-10 Dec-10
Iberdrola Renovable EDP Renováveis
7 10
6
Share Price (€)
Share Price (€)
8
5
4 6
3
4
2
1 2
Dec-07 Jun-08 Dec-08 Jun-09 Dec-09 Jun-10 Dec-10 Jun-08 Dec-08 Jun-09 Dec-09 Jun-10 Dec-10
7

34. Interest Rates* at all time
Inflation** high and rising
low
8.0% 6.0%
3-mth LIBOR (U K)
Change over LTM
5.0%
6.0%
4.0%
4.0% 3.0%
2.0%
2.0%
1.0%
0.0% 0.0%
Mar-06 Mar-07 Mar-08 Mar-09 Mar-10 Mar-11 Mar-06 Mar-07 Mar-08 Mar-09 Mar-10
FTSE 100 – Same level as 5 years ago
7,000
6,000
5,000
4,000
3,000
Mar-06 Mar-07 Mar-08 Mar-09 Mar-10 Mar-11
8
* 3-month UK BBA LIBOR
* *All items excluding mortgage interest payments and indirect taxes

35.  Proven technology
 Strong levels of government support
 Grandfathering
 Long dated
 Predictable
 Inflation-linked
The perfect investment!
9

36. Renewable infrastructure assets =
higher return for same given level of risk
Risk
Toll
Road
Airport
Water
Biomas
s
PFI Wind
Solar
10
Source: Richard Nourse Return

37. Access to investors
who focus on absolute low risk-return
 Deep pockets
 Long arms
8-10% nominal return is amazing
compared to other investments
 Strong yield
 Low risk
11

38. Small sector Just 1 GW /year of onshore wind consented in the
UK
Offshore is risky No real track record
Biomass is risky Sustainability issues
Government risk FIT row back not a shining example
Complex drivers Each country has its own regulations / support
Developing thinking Green deal is massive but who takes the risk?
12

39.  Government must be more thoughtful
 Lower complexity
 Mergers & acquisitions
 Professionalise management
 Private placement? Like USPP
13

40. Nomura Code Securities Limited
What investors look for in an IPO
Eversheds Renewables IPO seminar
4th April 2011
Ken Rumph
Nomura Code
kcr@nomuracode.com
0207 776 1242
© Nomura International plc

41. Important Notice
Disclaimer
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Page 2

42. Focus on water and efficiency, as well as renewables
 Most Cleantech investment banks are focussed on renewables, particularly
solar…
 … but Nomura has a global focus on efficiency
 Investors prefer the economic and regulatory drivers for efficiency, vs. the subsidy-
dependence of solar PV in particular
 Process efficiency stocks in London and elsewhere have performed well
 Smart grids (power and water) attracting attention from investors and corporates
 Water is a growing theme for investors
 Shortage of fresh water (desalination, recycling, efficiency/leaks)
 Waste water treatment
 Water purification
 Overlap with agricultural/irrigation demand – another theme for investors
 Fitting in with these trends is important for smaller/earlier stage companies to gain attention
from investors or attract premiums in M&A
Page 3

43. Nomura Code research on public companies …
Page 4

44. … and on private VC-backed companies
The ability to produce research from the same analysts and in the same format as listed company equity
research is a differentiating factor, adding credibility and familiarity for investors
Page 5

45. Nomura’s global coverage of water, renewables and the energy-
efficiency/climate change aspect is second to none
Page 6

46. Page 7

47. Cleantech – early stage companies
Many cleantech or environmental companies at IPO are early stage –
perhaps pre-revenue, often not yet profitable. In these circumstances,
investors will expect, and benefit from
 Milestones, past and future
 Provide a measure of performance, financial, operational or technical
 Past progress provides a sense of development and momentum
 Ideally future milestones should be well spaced (to provide regular indications
that the company is on schedule) and have room for (inevitable) delays
 Management skills
 A business may be young, but (some of) its management should display
experience of success in similar early stage businesses
 Investors expect management to be enthusiastic but realistic
 Funds raised for acquisitions
 If you‟re raising funds to acquire assets or businesses
 Why will you get a better deal than other buyers?
 Why are the sellers selling?
Page 8

48. Cleantech – valuation
 Peers, real and apparent
 Investors will tend to draw comparisons with similar companies, UK and
elsewhere
 Your broker should identify the types of company investors will compare your
company with – not necessarily by industry sector, but by stage of development
 Some sub-sectors are well defined and have many peers – eg solar – in which
case you will meet more experienced investors and tend to define yourself
versus that peer group
 Other companies will find themselves „alone‟ – Modern Water, Zenergy and
SeaEnergy are all examples (tomorrow) – more general comparisons are made,
and more work is needed in educating investors about the sector
 Investors may identify peers that you don‟t accept – explain why
 Your competitors are not your (investment) competitors
 Past funding sets a benchmark
 Previous share transactions or funding rounds set a benchmark
 If investors see that a private funding round occurred recently at a given price,
they will generally be reluctant to pay a much higher price
Page 9

49. Cleantech – pros and cons
Pros
 A strong theme, with specialist and generalist investors‟ attention
 But specialists want the same things as generalists – a good investment
case
 Generalists are wary of (past) hype and overvaluation
 „Saving the world‟ alone will not be a sufficient case for investment
 Making money alone will also not be sufficient (in the environmental,
cleantech space)
Cons
 „Cleantech‟ or environment is not a well-defined sector
 Investors will want to understand the specific drivers for a business
 Most investors in small- and mid-sized IPOs are generalists, so education
about the drivers and the business is always needed
 Is this a regulation-driven business, supported by subsidies, or influenced
by market prices (carbon, fossil fuels) – each will have its specifics and
vulnerabilities
Page 10

50. Investors want: the perfect company
They know they won‟t get a perfect company, but each defect will have a
price. Common defects are:
 Existing shareholders are selling
 For entrepreneurs, this is understandable
 Investors will expect the entrepreneur to retain a stake
 And sales at IPO are better than later – a lock-in would be normal
 VCs are also expected to sell in time
 Willingness to accept PE LBO-type exits is limited (currently)
 Funds raised to reduce debt
 Investors will accept some debt reduction, but prefer companies to raise
funds to grow the value of the business
 Lack of a complete or conforming management/board
 Investors expect a CEO, CFO, Chairman, independent directors
 The roadshow team should involve operations and finance
Page 11

51. Know your investors
 Before the IPO – find the right investors
 What sort of investor should be buying into your IPO?
 It might seem desirable to take anyone‟s money, but the consequences of
having the wrong kind of investor, or investors with the wrong expectations
will be bad for your company‟s strategy and share price
 Many large institutions have many different potential buyers of your shares
– different fund managers, different funds, different locations and business
units – expect to meet more than one individual in many firms
 Your broker should help you navigate this terrain (before and after the IPO),
describing the type of fund manager, providing feedback
 Shareholders will sell
 As fund managers change their views, the company changes, individuals
change, the fund needs to raise cash, or the holding becomes too large (or
small) – don‟t be surprised or hold grudges
 Continue to market your company to new (and previous) shareholders – the
best recipe for a good share price is new buyers to take stock from
inevitable sellers (insiders included)
Page 12

52. After the IPO – when things go wrong
• Not the rating, but the earnings
 What ever the valuation basis, investors know from experience with small-
and mid-cap companies, that disappointing performance after IPO comes
far more often from failure to meet forecasts than from paying the wrong
valuation of those forecasts (larger mature companies may differ)
 What is the basis of the earnings forecasts investors have read in broker
research (which will determine „consensus‟ expectations) and what are
the risks
• When things go wrong
 Investors are realistic
 But they want to know as early as possible when things go wrong
 Handle inevitable problems well and you will benefit
 Early disclosure builds confidence and support
 Missing expectations significantly on the upside also gives an
impression of riskiness
Page 13

53. After the IPO
 Keep communicating
 You became a public company for a reason – be public
 Even if you don‟t need to raise capital now, a languishing share price can be a
vulnerability or present an image of decline
 Be aware of what „peers‟ are doing, saying, how they are performing
 Communication is not just results, or even „news‟
 Expect to visit UK investors twice a year at least, in person
 Visits to sites, conference presentations, etc also count
 Investors like to support successful companies with more money
 In general, small- and mid-cap managers want small companies to grow – both
organically, but often via secondary equity issues, provided the business is
going to plan
 Investors generally like to invest more money for the right reasons (growth) but
not for the wrong reasons („we used up the first lot‟)
Page 14

54. IPO companies – questions that need answers
 Why isn‟t someone else doing this already (if its so great)? Or, who are
your competitors, and how do they compare?
 Why will customers buy your product/service? Explain the economic value
proposition!
 How do you (and hence the investors) make money? Explain your
business model!
 Why are you selling (part of) your company? How long are VCs, directors
locked up for?
 What policies, subsidies, prices affect your business? With what sensitivity
 What worries you? What could go wrong? What are the upside/downside
risks?
 (When) will there be value-enhancing newsflow?
Page 15

55. Pitching: Less Greenery. More Greenbacks
Focus will tend to be on commercialisation – not technology or
green credentials.
 Who is going to buy your product/service?
 Why? At what price versus competition? What are the economics for
the customer?
 How will you find and convert your customer? Do you understand the
distribution channels, and the motives of the participants? Why will they
buy from you, a small early stage company?
 Market segmentation may be appropriate? Niche sales first, versus the
mass market?
 Who is your head salesperson?
 Timetables – enthusiastic but realistic
Page 16

56. What Investors like and don’t like…
• More than particular sectors, investors like/dislike characteristics
• Best of all, an economic case that doesn’t rely on external help
• Regulations preferred to subsidies: due to widespread public spending
cuts and bad experiences in Spain, investors are wary of reliance on
subsidies (eg renewable tariffs, etc) and turning towards regulation-driven
sectors
 E.g. REACH, Landfill tax/targets, fuel efficiency, product bans
 Or businesses where any subsidy is privately funded
• Global statistics on investment are often mis-leading:
 ‘VC’ investment is mixed with private equity/infrastructure finance –
investing in a new waste treatment technology company is pure
cleantech investment, financing a windfarm or a landfill gas or waste
treatment plant may be more utility/infrastructure
 Sector is hard to define – more efficient coal fired power stations and
insulating lofts are cleantech in emissions reduction terms.
Page 17

57. Cleantech Funding and M&A conditions
Trends in VC/PE, M&A and IPOs in Cleantech
$200bn
$180bn
 VC/PE, IPOs and M&A all show similar $160bn VC/PE
$140bn M&A
patterns, tentative signs of recovery during
$120bn IPOs
2010 $100bn
 Figures often include utilities or general $80bn
$60bn
industrials as cleantech
$40bn
$20bn
$0bn
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
ytd
VC vs. PE investment
 Venture Capital & Private Equity flows are $60bn
large
$50bn
 But dominated by major corporate buyouts
PE - buy-outs, etc
$40bn
 VC-type funding is a small portion PE - expansion capital
$30bn
VC
$20bn
$10bn
$0bn
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Page 18
ytd
Page 18

58. Cleantech Funding and M&A conditions
Share of 1996-2010 VC funding by sub-sector
Solar
Other 27%
Biomass & 6%
Waste
4%
Wind
4%
Fuel Cells EE transport
5% 11%
Power
Storage EE built
8% environment
10%
Biofuels
10% EE digital
EE supply energy
EE industry 8%
side
2%
5%
 Although „Solar‟ has been a large part of VC funding, this has been dominated by solar PV
utilities/park developers, and by solar PV technology companies
Source: Bloomberg New Energy Finance
Page 19

59. Ken Rumph
Ken Rumph joined Nomura Code in September 2009 having built Clear Capital/Noble‟s climate
change coverage between 2007 - 2009.
Ken specialises in energy and resource efficiency, including water, waste and recycling.
Ken graduated in Natural Sciences from Trinity, Cambridge and had held roles as a fund
manager and buy-side analyst at Scottish Amicable and as a sell-side global building materials
analyst at UBS and Merrill Lynch.
Repenting his emissions-intensive ways, Ken undertook a masters in Environmental
Management at Cranfield in 2006/7 and is a member of the Institute of Environmental
Management and Assessment
Page 20

60. Regulation and
getting the finances right
Andrew Perkins and David Wilkinson

61. Agenda
► Introduction to Ernst & Young
► Renewable energy market outlook
► Diversifying global portfolios
► Accessing capital
Andrew Perkins
Partner
Energy and Environmental Infrastructure Advisory
Ernst & Young
aperkins@uk.ey.com
Tel +44 (0)11 7981 2325
Mob: +44 (0)7799 072523
Page 2

62. Ernst & Young EU network of renewable
energy specialists
Transaction Advisory
Services
UK global
centre of
Tax Assurance
renewable
expertise
Investment Banking
Page 3

63. The need for regulatory certainty
Short term market volatility Long term market outlook
► The threat of cuts in European feed in tariff’s ► Fundamental drivers of renewable energy
have created uncertainty amongst the investment still remain:
investment community e.g. Spain, UK, Italy ► Increasing energy requirements
► Arguably only Spanish Solar was retrospective ► EU 2020 renewable energy targets
► Returns on sovereign risk often makes ► Security of supply
renewables look expensive
► EU GHG emission limits
► Uncertainty due to new legislative requirements
e.g. UK Electricity market reform ► Consumer demand
► Fluid planning regimes and long lead times ► Transparent, long term policies can stimulate
make feed in tariff allocation uncertain investment and the development of global
supply chains e.g. German feed in tariff regime
► Lack of a universal carbon price to support
renewables investment ► Innovative policies to encourage domestic
supply chain growth e.g. Tariff premium in
Turkey
Page 4

64. Diversifying global investments
► Developing a balanced, global portfolio across multiple sectors can help reduce exposure to policy and
individual country market risk
► Investment risk decreases with market maturity as additional benefits are realised e.g. Jobs growth,
development of manufacturing bases
► Tailoring investment to resource availability may hedge against market volatility e.g. UK offshore wind
High
Global
component
manufacturer
Manufacturing
Portfolio Global
investment
diversification project
portfolio
Single
country
portfolio of
projects
Single
country Single
project
Low
Low Risk Profile High
Page 5

65. Likely funding gap
Funding requirements excluding energy efficiency investments of £230 billion
300
250
250 236
Capital expenditure (£ billion)
222
206
200 190 Utilities funding
173
156
Bank debt
150 140
124
109 Pension funds
94 and insurance
100
72 Funding gap
54
50 35
18
4
-
201
201
201
201
201
201
201
201
201
201
202
202
202
202
202
202
0
1
2
3
4
5
6
7
8
9
0
1
2
3
4
5
► Some estimates of capital expenditure required of UK PLC for energy efficiency of £230 billion
► This doubles the requirement to £450 billion
► Only £50-80 billion funding available from current sources:
► Utilities (£30 – 45 billion),
► Project finance debt and equity (£20 - £22 billion)
► Infrastructure funds (£7 – 15 billion)
► Funding gap of £330 - £360 billion
6

66. Green investments – the need for new funding
► Significant funding gap to reach targets
► Investment barriers in offshore wind generation, carbon capture (&) storage, energy efficiency and
micro-generation
► Capital needs to be mobilised through a variety of structures, risk and financial products
► Other issues for consideration in
► Flexibilityof funds
► Competitiveness of green investment opportunities
► Risk of investments ie how proven is the technology
► Time taken to access funds
► Significant funds are needed for the large energy generating infrastructure and its enabling
components
7

67. Agenda
► What the market is looking for in volatile times
► Financial track record
► Financial reporting procedures
David Wilkinson
Partner
Domestic IPO Leader
Ernst & Young
dwilkinson@uk.ey.com
Tel +44 (0)207 951 2335
Mob: +44 (0)7774 741 277
Page 8

68. What the market is looking for in volatile times
► Equity growth story – risk and reward
► Depth and breadth of team to execute
► Financial track record to support the story
► Quality of governance and financial reporting procedures
9

69. Financial track record – cleantech issues
► Quality and period of track record
► Tracking and capitalisation of development costs
► Identifying components of infrastructure and impairment testing
► Accounting implications of funding structure
► Accounting for emissions allowances and incentive schemes
► Embedded derivatives in power sales and purchase contracts
► Accounting for complex investment structures
10

70. Financial reporting procedures – cleantech
issues
Expectations Challenges
► IFRS budgeting, forecasting ► Forecasts dependent upon
and working capital reporting project milestones
► Effective prospects ► Young businesses without
management deeply embedded processes
► Effective monitoring and ► Sales and operational priorities
reporting on controls ahead of controls
► Appropriate corporate ► Remediation of FRP requires
governance architecture time
► Process for disclosure of timely ► Underestimation of time and
key information to the market effort to achieve goals
Page 11 25 March 2010 Financial Reporting in the IPO Process

71. Thank you
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