#1Mr. Liu Shaojun, Chairman Hunan High-Tech Venture Capital Group Mr. Shaoqing Jiang, Partner Hunan Low Carbon Technology VC Fund 低碳技术创业投资基金介绍#2G STRATEGIC INVESTMENT OPPORTUNITIES BASED ON CLEAN TECHNOLOGY & FINANCIAL INNOVATION Hunan Low Carbon Technology Venture Capital Fund ADB#3目录 CONTENTS 目录 低碳技术创业投资基金介绍 01. 行业和政策 02. 金融服务优势 03. 本期基金简介 04. 基金管理体系 Sectors and Policies Service Advantages Fund Introduction Governance System#4Sector & Policy 低碳技术创业投资基金介绍#52014 Cleantech Investment Landscape After two years of downturn, clean technology industry showed a warming trend in 2014. According CVSource Statistics, there were 14 disclosed cleantech financing cases, decreased by 71% compared to 2013, with total financing of $ 1.165 billion, increased by 77% compared to 2013. With the IPO restarting, 12 clean technology companies were successfully listed, a significant increase compared with 2013. VC/PE in Cleantech from 2009 to 2014 2800 2,257.5 2.31 33 397.5 2300 97 1800 1,708.3 70 1.427.4 1300 ] 800 65 1.191.2 48 1.164.7 656.9 14 300 -200 2009 2010年 2011年 2012Œ 2013Œ 2014年 融资金额 USS M 案例数量 CVSource, 2015.01 www.ChinaVenture.com.cn#6Focused Sectors Battery & energy storage, clean energy, and energy-saving & environmental protection. Wherein, the Battery & energy storage sector is the most active one, with a total financing of $ 631 million, the number and amount accounting for respectively 50%, 54.2%. Followed by the clean energy industry, the number and amount ratios were 43%, 42.4%. Cases Largest domestic cleantech VC / PE financing in 2014: CDH invested $ 600 million in Nanfu Battery, the product of which accounted for 70% of the brand alkaline battery market sales. The second one: GIC, Value Partners Fund, OZ, Hillhouse Capital and Guangzhou City Development Fund injected about $ 450 million in Guangdong Nuclear Power. 2014年清洁技术行业细分领域VC/PE融资分布 40.00 环保节能 1 energy-saving & environmental protection 清洁能源 clean energy 493.41 631.26 电池与储能技术 7 Battery & energy storage ப 200 100 融资案例规模US$M融资案例数量 300 400 500 600 700 CVSource, 2015.01 www.ChinaVenture.com.cn#7• Cleantech IPO: According CVSource Statistics, 12 clean technology companies were successfully listed in 2014, increased by 1100% compared with 2013, raising $ 4.321 billion, increased by 65.58% compared with 2013. In addition, 5 of them has the background of VC/PE. M&A There were 481 announced transactions, increased by 62.5% compared with 2013, with transaction amount of $ 9.679 billion, increased by 20.9% compared with 2013. There were 133 completed transactions, increased by 12.71% compared with 2013, with transaction amount of $ 2.571 billion, declined by 28.73% compared with 2013. The largest one: Fujian Nan Fang acquired 100% of Fujian Fu Neng Energy with $ 258 million, and acquired 75% of Jinjiang Natural Gas with $ 204 million. Overall, the number and amount of the announced M & A transactions have reached maximum in recent years. Although the completed transaction number has gone up, the completed transaction scale suffered a cold again after the warming up of 2013. 2009年至2014年清洁技术行业并购宣布及完成趋势图 12000 10000 481 296 8000 201 230 183 141 6000 190 164 118 133 95 113 4000 2000 0 2009 2010年 2011 2012 2013 2014 宣布并购金额 US$M 宣布并购案例数量 完成并购金额 USSM 完成并购案例数量 CVSource, 2015.01 www.ChinaVenture.com.cn#8Integrated Values for Clean Tech Entrepreneurs 低碳技术创业投资基金介绍 We are more than a financial investor, we partner along growth with our clean technology entrepreneurs!#9低碳技术创业投资基金介绍 Clean Tech Companies are characterized with : .New technologies, yet to prove Large R&D investment in terms of funds and time Primarily Long term projects, lasting but low financial return on operation . Replacement of traditional operations, bringing both opportunities and obstacles Close combination of technology and business operation, like IT industry 20 years ago#10低碳技术创业投资基金介绍 Clean Tech Entrepreneurs Headaches Yet-to-boom Market demands, either out of policy push. from government or economic needs from customers . Under-funding from both public and private sources, partly due to mismatch between government' s funds and real company demands Insufficient /inefficient fund-raising channels Difficulty in human resources Difficulty in market promotion and expansion#11Financial service vs Investment 低碳技术创业投资基金介绍 M&A Project Incubating Venture Capital Transfer the Incubation Preliminary technology Industrial that meet the domestic zones Entrepreneur kinds of demand by cooperating boot-camp International government with international Communicatio procurement, technology partners. n & cooperation promotion review resource, all Mechanism Green Finance Innovations Carbon Market, Capitalization on Green assets from banks and investors, Crowd funding, inventory. etc#12低碳技术创业投资基金介绍 Financial service vs Fundraising Local investor network and strong endorsement of the local government will help overcome the obstacles of first phase fund. Low carbon pilot consultant Golden Oasis, Xiangtan High-tech, Valin and other intent investors Government think tank Endorsement of Hunan DRC International cooperation project Resource of CPPCC Carbon trading management Investment intent of high emission enterprise Low carbon finance Finance product recommendation#13Financial service scope 低碳技术创业投资基金介绍 • Venture mentor . Transactio n mentor Financing mentor Provide early guidance and incubation for low carbon startups, which will be achieved by boot camp and incubator. • Included in four 'one' work plan, implemented in Golden Oasis New Industrial Zone • Provide international M&A opportunities for large scale enterprise in Hunan, which will be achieved by cooperation with international partners. • IPEX, Carbon Trust, Korea Green Technology Center • Provide financing service, including equity/loan, to low carbon projects, which will be achieved by fund, joint investment, carbon crowd funding. Carbon credit policy innovation, internet finance platform, strategic equity fund.#14Financial service vs Post management Market Founder We uphold the simple idea that the success of the investment is based on the team, growing with entrepreneurs. We adhere to the value that government subsidies can not be equal to environmental externalities. Seek market-based business solutions. 低碳技术创业投资基金介绍 Fund In addition to equity, project- level debts (crowd funding, bonds) require Capital management Seek corporate value of startups by M&A and national SME equity exchange and quotations combination.#15低碳技术创业投资基金介绍 Fund Introduction Rooted in Hunan Province, the fund witnesses the cooperation between ADB and local government in past three years! 扎根本土,互联国际,亚行与湖南省合作三年的积淀作品!#16低碳技术创业投资基金介绍 Background * Sector: 15% annual growth of low carbon GDP nationwide. 4.5 trillion RMB forecasted in 2015. Hunan province reports 200 billion CNY, ranking the top ten nation wide. Policy: National PPP Encouraging Policy. The Central and Hunan governments will invest 100 million RMB. ( 创投计划参股创业基金) Opportunities: As one of the two chosen low carbon promotion pilot provinces, Hunan will receive a package of ADB supports including policy advice, capability development, financial access, international resources etc. Advantages: Hunan-based experts team and fund management team, competitiveness in green investment#17低碳技术创业投资基金介绍 Summary of the Fund 1st low carbon- focus VC fund in Hunan Maximum Opportunities Competition Edge Promising Return For LPs * * * RMB 300 million for Fund 1 Hunan based and focus; nationwide opportunities Governmental funding ⚫ new energy, energy efficiency, new materials, smart transportation, New-G manufacturing, modern agriculture * * * China is the largest clean technology market and strongly supported by government policies Low carbon policy and technology guidance Green finance innovation & support • Marketing and business promotion advice. Management training support Target IRR 30%+ 3+4 years fund life Unique investment exit channels#18Investment strategy 低碳技术创业投资基金介绍 Stage Inv. Size Quantity % Duration Expected (10K RMB) Return Early 500-1500 2-3 20% 5-7 years 10x or above Growth 2000-3000 6-8 60% 4-6 years 5-8x Later 4000-5000 1-2 20% 3-4 years 3-4x Sum 300million 8-10 100% 5-8x focus on early stage projects Areas: new-G manufacturing, new materials, clean energy, energy efficiency products, modern agriculture, internet and green high-tech Sourcing: at least 50% are Hunan-based. Exit: primarily M&A, IPO#19低碳技术创业投资基金介绍 Project pipeline Project 1: a phase change air conditioning manufacturing Sector Channel S building and industrial energy saving recommended by financial agencies for 14-month consulting service Investm ent 1. 20 national patents ts 2. Cooperation agreement between the highligh company and University of Colorado in the 4th Sino-America energy efficiency forum in Sep. 2013. the company also held international energy efficient technology exchange forum 3. Abundant cash flow and sound business growth. The annual return broke 8 million CNY in 2014. Project2: a chemical science and technology company Sector waterborne adhesive Channe 2-month matchmaking of experts from Is Economic and Technology Commission, CPPCC Invest ment highlig hts Growth 1. over 10 national patents, is applying for international ones 2. huge market potential 3.cost-effective supply chain 4.high-tech talent introduced by local government no market return temporally. Its potenti development depends on government policy subsidies. al Growth potentia time 2012 2013 2014 Net profit -400 600 800 ( 10 thousand CNY) Fund deman d Fund demand 30 million CNY, B round 5 million CNY, angle round (need on- going attention)#20低碳技术创业投资基金介绍 Project reserve Project 3: a energy saving science and technology company Sector distributed energy resources, waste recycling Invest 1. use gasified biomass, solar energy and sludge to drive the energy plant 2. established well and listed in ment highlig hts Hunan equity exchange 3. mature marketing team and central south market network Project 4: a electromechanical science and technology company Sector recycling equipment, battery recovering Channel recommended by environment and resources department of DRC 1. waste battery recycling technology and integrated equipment have been put in highligh use, being the first company in China to realize maintenance-free battery Investm ent ts 2. 2 patents for invention, 11 patents for utility and 1 for appearance Growt time 2012 2013 2014 h Growth time 2012 2013 2014 potent Net profit ( 10 -1400 -500 400 potenti ial thousand al Net profit (10 600 1100 300 CNY) thousand CNY) Fund above 10 million CNY, B round deman d Fund deman d above 10 million CNY, B round#21Project reserve Project 5: a environmental protection company outside Hunan Sector methane collection, clean energy Channel Recommended by investor Investm 1. the first company that use world- ent ts advanced purification system to realize highligh landfill gas recycling. It was awarded the pilot project issued by Ministry of Housing and Urban-Rural Development and passed the inspection. 2. the core technology can be widely applied in biomass methane purification 3. both local and international team Growth The first project has yet put into use, but it potentia is expected to reach over 200 million CNY Fund above 10 million CNY, A round demand 低碳技术创业投资基金介绍#22Governance System Deal Sourcing, Decision Making, Risk Control, Value-adding 低碳技术创业投资基金介绍#23低碳技术创业投资基金介绍 Deal Sourcing Sourcing through government channels - PDRC, Low Carbon Center, Env. Protection Commission, Sci. & Tech. Commission, industrial parks, etc ➤ Sourcing through non-governmental partners – universities, research organizationss, think tanks, financial institutions, agents, etc ➤ Sourcing through industrial & international partners – local enterprises & entrepreneurs, ADB, WWF, industrial peers, etc. government procurement list industrial parks Universities & Research Orgs low carbon tech promotion list international M&A platform Enterprises & entrepreneurs - pipeline due diligence shortlist follow-up group decision#24Project Categorization Construction 9% Iron&steel 5% Power Nonferrous 5% Food 5% Mechanic 10% Chemical 9% Waste treatment 33% 5% Transportati on 19% 低碳技术创业投资基金介绍 There are 121 projects in the pipeline, the category distribution is as above.#25Decision Process Early contacts Due diligence Lol signing Full due diligence 低碳技术创业投资基金介绍 Agreement signing Time Mission 1-4 weeks 1-2 weeks 1-2 weeks Contact with Sector research; Corporate 1-4 weeks value Corporate 1-4 weeks operation Contract entrepreneur; Entrepreneur evaluation; investigate; modification; On-site visit; interview; Internal discussion Customer interview Contract negotiation Financial due diligence; Legal due diligence Legal documents signing Content Corporate basic Sector information; Sector information research; basic Survey on sampled enterprises in chain; Survey on product and technology deep Investment cost; Bet terms; Redemption terms Deep operation Investment investigate; agreement; Financial and legal due Supplementary diligence; investment Other investigates agreement Document Project profile; Due diligence Investment Lol; Due diligence report; Investment Interview record question list; Survey record; Project implementation Third party due diligence; agreement; Investment proposal Project approval manual Supplementary investment report agreement Implementer Project manager Project manager; Project team Project team and third Project team and Executive partner party lawyer Decision-making Track Project Approva Investment Decision-making mechanism Week meeting Project approval meeting Decision-making meeting 湖南省联创低碳经济发展中心 06 90#26Risk Control Pre Control Risk Control • Strict screening procedure Detailed due diligence • Full risk disclosure • High-standard industrial reference Eligible investment agreement • Shareholder protection clause Investment control 低碳技术创业投资基金介绍 Post Control • Strict monthly reporting Key parameters monitoring Post due diligence • Precaution for emergency Legal risk/ Financial risk/ Operational risk/ Systematic risk Independent operation of risk control department Partner collective decision-making#27Value-added Services 01 long-term management capacity-building 03 Promotion Advise on 02 though various corporate platforms and strategies partners 低碳技术创业投资基金介绍 Technical integrative resources 05 network Green finance 50 04 innovations & capitalization Local governments recognition & favorite policies 06#28湖南省联创低碳经济发展中心 Innovative Low Carbon Center, Hunan www.lowcarbonhn.org