GE

Energy Financial Services

Energy VC After the Reset

June 25, 2009
Kevin Skillern
Managing Director, Venture Capital
GE is a Difference-Maker in Clean Energy
• Industry leader in key sectors… Renewables, Smart Grid,
Carbon capture, Others

• Pre-eminent industry advocate and champion…

Ecomagination, Smart Grid, USCAP

• Energy Financial Services unit

– Leading global energy investor
– Deep expertise in infrastructure project finance
– Top ‘cleantech’ VC and growth equity investor

• World-class partner for emerging portfolio companies

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GE Energy… Creating the world’s largest
renewables business
Wind
• Leading N. American Solar
wind turbine supplier
• Residential, commercial
• 6x unit growth and utility applications
since ‘02
• Largest commercial
• 11,500+ 1.5MW solar project in Asia
installed globally
• Large utility projects in
Europe
Biogas • PrimeStar Solar thin film
technology investment
• Power range:
0.25 MW-4 MW • 10 manufacturing/assembly sites
• Fuel flexibility: Natural • 4,000 global employees
gas or a variety of renewable • Installed base: 14 GW
or alternative gases • Projects in 40+ countries
• $200M invested in supply chain
• 10,000 sub-supplier jobs created

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GE Company Proprietary
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Business Strategy Driving Innovation and Growth
of Profitable Environmental Solutions

1. Grow revenues to $25B

by 2010
2. Double R&D to $1.5B
3. Reduce GHG 1% absolute
by 2012
4. Reduce water 20% absolute
5. Inform & Engage public…
Transparency & Leadership ongoing

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GE Energy Financial Services: Who We Are Today
Power & •Over 100 investments in power plants around the globe -- with capacity to
Renewables produce 26 GW, equivalent to the installed generating capacity of Thailand
•Own stake in Fotowatio, leading European solar developer, with >1,100 MW
•Major stakeholder in US wind projects
•Preferred interest in power developer in India (KSK) with portfolio of >875 MW
•Power transmission and distribution: own 3 transmission lines in Chile

Oil & Gas • Leading capital provider in upstream O&G: >$1.8B invested

• Equity and debt for deepwater drill ship, floating oil & gas production units
and other production infrastructure

• Own a leading MLP (Regency) with 4400-mile gathering system and 11

processing facilities
• Own the largest gas pipeline in central US (Southern Star system)
• Own retail natural gas local distribution company, Source Gas, with 11,900-
mile distribution system

Other • Among most active VC investors in game-changing companies, leveraging

Sectors GE’s resources

• Water projects: 50% interest in GAMA for energy and water projects intitle/6
GE job

Turkey and surrounding region

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Why GE in VC?
VC Has Big Impact from Small Key Benefits to GE System
Share of Global Technology R&D
1200
• Attractive Financial Returns… top
1000 decile platform and performance
expectation
800
Billion USD

• Technology Window… see next

600 $bn platforms
400
• High Impact Collaborations…
200 technical, commercial

0
• Expertise & Network Effect
2004 2005 2006
Venture Capital Government
Universities Industry
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GE Energy Financial Services – VC / Growth Portfolio*
June 2009
Composite
Wind Blades
Rooftop CPV

Wave Energy
Renewables Small Wind Wind Gearboxes
Turbines
Permanent Magnet
Back-Contact PV
Generators
Industrial Enzymes

4G Smart Grid Compact E-beams

Li-Ion Batteries
Energy Efficiency Operating System
& Smart Grid High-Intensity
Smart Grid Fluorescents
Electric Cars Software & BPL

Advanced Coatings
Oil & Gas
Enterprise Compliance
Software

Proof of Pilot
Early Sales Growth Stage
Concept Stage GE job title/8

Note: * Excludes 2 undisclosed investments 8

What Makes Opportunities Attractive to GE?
Value to GE and
Standard VC factors
GE Ability to Add Value

9 Market 9 GE Supply Chain Partners

9 Technology 9 GE Channel Partners
9 Team 9 Advanced Technologies
9 Stage Applicable to GE Products

9 Geography 9 Large New Market Opportunities

Adjacent to GE Positions
9 Co-investors
9 Capital Intensity
9 Materiality
9 Risk / Return
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World Class Partner for Portfolio Companies
Collaboration Benefits
Commercial
• Access to GE companies, senior
executives, partners and customers
• Advocacy in GE relationships
• Credibility with customers, business
partners, governments, recruits
Technical
• Programs with GE Global Research
• Equipment supply & optimization
• IP licensing
How We Make It Happen
1) Dedicated resources
2) Formal plans for each company
3) Equity incentive structures
4) Internal operating rhythm
5) Specific events with GE leadership
Examples
Advanced
Electron Beams Southwest Windpower

Expertise / Advisory
• Board participation
• Supply chain
• Government affairs

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GE Global Research … GE’s innovation engine
• World-leading industrial R&D organization

• 2600+ Scientists (1200 PhDs) across four global centers

Niskayuna, NY striving for innovation

• Drive technology synergies across the company

Bangalore, India • >$500MM annual spend in support of all GE businesses

(~10% of total GE R&D). Energy is largest budget area

• Mix of sustaining, evolutionary & revolutionary programs

Shanghai, China
• Dedicated resources in Japan, Russia and Israel to
identify high-impact emerging technologies

• Active IP licensing program

Munich, Germany
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 Energy VC Market Has Reset
VC/PE Activity Level Down Sharply Valuations in Wind and Solar
Transaction activity ($B) TEV / Trailing EBITDA Multiples
4.0
20% of
all VC
60x
Wind Supply
Wind Turbine Chain
Generators
40x

20x
Blended Median
Solar System &
0.6
Installations
0x
Jun-06 Dec-06 Jun-07 Dec-07 Jun-08 Dec-08

2001 2002 2003 2004 2005 2006 2007 2008 2009

Source: New Energy Finance Source: GE Energy Financial Services Analysis

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A Look into the Crystal Ball
The Bull Case
• Strong long-term signals for new
technology: oil prices, carbon, BRICs
• Government support globally
• More realistic valuations
• Companies maturing... retiring risk,
increasing commercial sales
• IPO market (slowly) returning
• Shakeout will thin the field... Fittest
will survive and grow stronger
Reasons for Caution
• Renewable economics more
challenged… Lower natural gas
prices, higher cost of capital
• Difficult to raise project finance
• Capex constraints… customers have
less money to spend
• Unpredictability of policy moves and
timing
• Near-term exits difficult... IPO
window shut, strategic M&A limited
• Asset class challenge… attractive
returns in other investment sectors
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Markets and Economics are Real
Advanced Metering Behind the Meter Technologies
US Power Costs by Quintile (cents/kwh, 2006)
US Utilities Announcing Deployments
$0.20 Economic range for
35 emerging technologies

30 $0.10

25 $0.00

20%

40%

60%

Lowest
80%
Top

20-

40-

60-
20

20%
15
European Power Costs by Country
10 (US cents per kwh, at 1 US$ = 0.77 Euros)
$0.40
5 Economic range for
$0.30 emerging technologies
0
1997/98

1999/00

2001/02

2003/04

2005/06

2007/08

$0.20

$0.10

Source: FERC, Assessment of Demand Response $0.00

Denmark

Sweden

Spain
Austria

Switzerland

Finland
Belgium
Netherlands

France
UK
Italy

Germany
and Advanced Metering

Residential Commercial
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Sources: EIA, CERA, GE Analysis 14

Profound Drivers for Oil & Transport
Personal Mobility Demand… $10K GDP/Capita Threshold
Cars per 1,000 people versus GDP per Capita (logarithmic scale), 1990-2008

Canada
Germany UK

USA

Poland
Malaysia

Russia

Mexico
Turkey
Thailand
Brazil
India China

Source: Booz & Co. GE job title/15

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Transport Electrification… Can Technology and
Scale-up Deliver Performance at Cost?
Annual Net End-User Savings (ILLUSTRATIVE)
Key Assumptions: $7K extra per vehicle, 10% discount rate, 100K mile life, no residual
or tax credits, 4 miles per kwh

US Price and Tax Environment European Price and Tax Environment

Power (US c/Kwh) Power (US c/Kwh)
Oil ($/B) 7.5 10 12.5 Oil ($/B) 10 15 20
40 40
50 50
60 60
70 70
80 80

“In the Money” “Out of the Money”

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 Reasons for Caution Also Real
US Reserve Margin Outlook Dramatically Capital is Top Barrier to Achieving
Altered by Economic Slowdown Energy Efficiency in C&I Facilities
ERCOT Example

24%
Current View
16%

8%
June 2006 View

0%

Source: ERCOT, Citi

Source: Johnson Controls Energy Efficiency Indicator

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Concluding Remarks
• Energy represents one of great societal challenges
of our time

• Technology is an essential part of the solution

• Long-term opportunity for investment in emerging

technologies continues to be compelling…

• …but investors need patience and a strong stomach

• GE remains committed to invest, partner and make

a difference with emerging technology companies

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Contact:
Kevin Skillern
Managing Director, Venture Capital
GE
Energy Financial Services

100 California Street, 10th Floor

San Francisco, CA 94111
Email: kevin.skillern@ge.com
www.geenergyfinancialservices.com

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