Slides from the second afternoon panel session at the Eversheds event: Attracting and Maintaining Institutional Investment in Renewable Energy - 2nd July 2012

1. Market of opportunity
A workshop on attracting and maintaining
institutional investment in renewable Energy
London
2 July 2012

2. Welcome and introduction
Chair:
Michelle T Davies
Head of Clean Energy and Sustainability
Eversheds

3. Resource Revolution:
Meeting the world’s energy,
materials, land and water needs
McKinsey Global Institute
Sustainability and Resource Productivity Practice
Eversheds presentation
July 2, 2011
CONFIDENTIAL AND PROPRIETARY
Any use of this material without specific permission of McKinsey & Company is strictly prohibited

4. Main messages
▪ The resource challenge of the next 20 years will be quite different
from any we have seen in the past in five main ways
1. 3 billion new middle class consumers
2. Increasingly challenging and expensive sources of new supply
3. Increasing linkages between resources
4. Environmental factors creating negative feedback loops
5. Growing concern about resource access of the poorest
households
▪ This new resource era creates large upside and downside risks
for renewables
– Large emerging market demand
– New technological innovations such as shale gas could reduce
penetration of renewables
– Uncertain learning curves for renewables, highly dependent on
manufacturing and supply chain efficiencies
– Policy framework which is uncertain and shifting from climate
concerns, to other issues such as energy cost, access and jobs
McKinsey & Company | 1

5. Contents
What are the emerging resource
trends?
What are the implications for the
energy sector?
McKinsey & Company | 2

6. Resource markets are changing fundamentally
Commodity prices have increased sharply since 2000
McKinsey Commodity Price Index
260 World
War I
240
1970s
220
oil shock ▪ Prices are
200 increasing
World
180 War II
▪ Resource
prices are
160 becoming more
volatile
140
▪ Resources are
120 increasingly
inter-linked
100
80 Post-war Great
depression depression
60
40
1900 10 20 30 40 50 60 70 80 90 2000 2011
SOURCE: Resource Revolution McKinsey & Company | 3

7. The emergence of 3 billion middle-class consumers will fuel future
Global middle class1, Billions of people
demand
4.88
0.11
0.23
0.31
0.32
3.25 0.68
0.06 3 billion
0.17
0.25
0.33
Sub-Saharan Africa 1.85 0.70
Middle East and North Africa 0.11 0.03
0.18 3.23
Central and South America
0.34
North America
Europe 0.66 1.74
Asia-Pacific 0.53
2009 2020 2030
1 Based on daily consumption per capita ranging from $10 to $100 (in purchasing power parity terms)
SOURCE: OECD McKinsey & Company | 4

8. Many countries have shown that as incomes rise, ENERGY EXAMPLE
demand for resource increases—and a similar curve
is likely in China and India Historic (1970-2008)
Per capita energy consumption, 1970–2008, projected to 2030 for India and China Projected
Million British thermal units per person
250
United States
200
150 Australia
Historical range
Germany for energy
consumption
France
100 evolution
South Korea Japan
United Kingdom
2030 projected
50
China 2030 projected
India
0
0 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 45,000
Per capita GDP
Real 2005 $PPP per person
SOURCE: IEA; Global Insight; McKinsey analysis McKinsey & Company | 5

9. Major new drivers
There is a significant risk of real price increases of production
and greater volatility as we approach short-term supply limits to 2020
2020 cost curve – maximum production potential
2030 demand:
Breakeven price1 104 Mbpd
$/bbl (real 2008$), WTI
120
110 2020 demand:
100 96 Mbpd
90
80 2010 demand:
87 Mbpd
70
60
50
40
existing oil sands
Coal to liquids
30
Next phase of
Gas to liquids
New offshore
Oil shale
New Iraq
20
10
Capacity
Mbpd -2 0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95 100 105 110 115 120
1 Assumes an IRR of 10% for new capacity additions and cash break-even for existing production capacity
2 Includes 3 mbpd and 3 mbd incremental capacity from Iraq and deepwater, respectively
SOURCE: Wood Mackenzie; BP Stat; IOGCC; McKinsey Oil Supply Model team analysis McKinsey & Company | 6

10. Commodity price movements have become more closely linked
Correlation with oil prices
1980–1999 2000–04 2005–11
Maize -0.01 0.74 0.96
Wheat -0.07 0.59 0.94
Rice 0.32 0.96 0.61
Beef -0.11 0.75 0.74
Steel -0.01 0.99 0.99
Timber -0.52 0.67 0.91
SOURCE: McKinsey analysis McKinsey & Company | 7

11. Governments care about these resource issues for different reasons
Description Examples
▪ Threats to access to critical inputs (e.g.,
Resource
water, rare earth metals, etc)
security
▪ Risks to competitiveness of local firms in
Firm
face of rising input costs and constraints
competitiveness on resource access
▪ Resource prices raising the cost of living
Inflation for households and putting pressure on
inflation and growth
▪ Potential for local firms to capture global
New growth
resource productivity growth
opportunities opportunities
▪ Rising cost of government subsidies in
Public finances the face of higher resource prices
▪ Concerns with resource trends on
Environmental
environmental factors
resilience
McKinsey & Company | 8

12. Contents
What are the emerging resource
trends?
What are the implications for the
energy sector?
McKinsey & Company | 9

13. Four major uncertainties
1 Emerging market energy demand
2 The shale gas revolution
2 Learning curves of renewable technologies
3 Regulatory frameworks
McKinsey & Company | 10

14. EMERGING MARKET DEMAND GROWTH
In energy, the developing world will account for over 90% of the Developing
1 growth in energy demand by 2030 with 60% coming from China Developed
and India
Primary energy demand; QBTU CAGR, Share of
2010-30 growth
664 % %
587
173 China 2.8 43
494 148
57 India 4.3 19
100
39
25
Rest of 1.3 31
222
195 Non-OECD
170
81 81 81 USA >0.1 >1
0.3 4
94 98 101 Rest of OECD
27 29 Global 1.0 3
24
2010 2020 2030
* Includes cross-border energy use, e.g., sea, air travel
SOURCE: McKinsey analysis (Cost Curve v3.0); McKinsey Global Energy Perspective (GEP) McKinsey & Company | 11

15. SHALE GAS
Renewables1
In the US, cheap gas displaces coal, becoming the
2 majority fuel at a price of between $3/MMBTU and $4/MMBTU
Petroleum
Nuclear
Power sector generation by fuel; Henry Hub price, TWh; $/MMBTU Gas
Coal
2012 2020 2030
4,421 4,476
4,243 4,336
3,947 4,011 4,061
3,823 727 727
3,765 793
555 555 888 0
558 0
444 567 14 0 28
26 27 29
27 872 872
848 848 872
799 848 872
848
746 975 823 1,207
843 615 657
1,423 1,715
1,653 1,766 1,768 1,619 1,797 1,820 1,615
1,235 1,162
3.5 10 6 4 3 10 6 4 3
1 Including hydro
SOURCE: EIA, US Low Carbon Economics Tool McKinsey & Company | 12

16. LEARNING CURVES
Depending on the learning curve improvements of different renewable
3 technologies, they could become cost competitive in next 5-10 years
LCOE at 7% WACC
Annual average
x
cost reduction
LCOE 2011-2025
EUR/MWh
200
190 Solar PV 9
180
170
160
150
140 Wind offshore 5
130
120
110
100 Biomass 3
Coal/gas today 90
80
Coal Europe 70
CCGT Europe1 60
Coal US 50
CCGT US 1 40
30 Wind onshore 1
20
10
0
2011 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Year
1 CO2 price in Europe today at 10 EUR/ton
McKinsey & Company | 13
SOURCE: IEA; Eurostat; Platt’s; EIA; Team analysis

17. LEARNING CURVES
Across several technologies, performance improvement levers result
3 primarily from manufacturing & SC maturing and technology gains
Relative improvement of LCOE PRELIMINARY ESTIMATES
Lever with highest impact
Cost reduction potential until 2025
PV Wind Wind Biomass Batteries for
(until 2020) onshore offshore greenfield vehicles
Total
66% 18% 50% 38% 71%
improvement
Manufacturing
& Supply 31% 12% 30% 13% 23%
Chain
Materials 11% 0% 0% 0% 18%
O&M 0% 5% 10% ~0% 0%
Technology
24% 2% 10% 25% 30%
improvement
SOURCE: Solar KIP, Battery KIP, Wind onshore & offshore model; Biomass model; Team analysis McKinsey & Company | 14

18. POLICY UNCERTAINTY
Climate and energy policies are seen to be largely driven by energy
4 costs, energy security and local jobs, rather than GHG mitigation
Which of the following policy priorities are the most important in determining your country's
future climate and energy policies over the next ten years?
North Policy makers
World Europe America China world total
Lowering energy costs 31% 31% 33% 24% 38%
Increasing energy security 21% 21% 27% 16% 16%
Promoting local jobs and investments 21% 17% 27% 16% 30%
Reducing GHG emissions & global warming 11% 14% 6% 16% 12%
Reducing local air pollution 9% 8% 3% 25% 4%
Increasing physical security
5% 9% 1% 2% 0%
(e.g., avoiding nuclear power)
N= 3.954 1.409 1.082 148 80
SOURCE: Global McKinsey Quarterly survey, November 2011 McKinsey & Company | 15

19. POLICY UNCERTAINTY
For those companies that use a CO2 price, the average assumption is 31-
4 36 USD/tCO2 by 2020, and 37-42 USD/tCO2e by 2030 across regions
Avg. price USD / tCO2e by 2020
If you use a CO2 price what level of CO2 price do you use when planning
for future investment decisions, in each economy by 2020? Between 2020-2030? Avg. price USD / tCO2e 2020-2030
Average CO2 price for the Average CO2 price for the Average CO2 price for the
EU market US market Chinese market
Ø 36 Ø 41 Ø 36 Ø 42 Ø 31 Ø 37
N= N= N=
Energy sector 31 20 7
Europe 36 43 34 41 30 38
30 13 7
Energy sector 13 10 11
dev. markets incl. 34 42 36 41 25 29
China and India 13 8 11
Energy sector 11 32 4
32 38 32 41 34 41
North America
11 20 5
Energy sector 4 7 3
Asia Pacific 43 41 41 46 37 40
OECD countries 4 4 3
SOURCE: Global McKinsey Quarterly survey, November 2011 McKinsey & Company | 16

20. Institutional Investment Trends in EU Renewables
and
A Pension Fund Primer
EVERSHEDS WORKSHOP:
Attracting and Maintaining Institutional
Investment in Renewable Energy
London, 2 July 2012
Tom Murley, Director & Head of Renewable Energy, HgCapital
Jens Thomassen

21. HgCapital Introduction to HgCapital RPP and HgCapital
FIRM SNAPSHOT
INVESTMENT STRATEGY:
ϒ Europe’s largest pure-play renewable energy infrastructure
investor “Sector expert investors building strategic
ϒ Over €900 million of dedicated renewable institutional equity renewable energy platforms.”
capital raised since 2006
ϒ Backed by over 30 leading global institutional investors
ϒ Invested in over 70 European renewable projects valued >€1.7 THE EU ENERGY FINANCE GAP (the
billion numbers)
ϒ Largest financial investor in Nordic onshore wind €1 Trillion: The required investment in European power
infrastructure to 2020
ϒ Dedicated team with over 75 years power sector experience
€600 billion: The finance gap, that utilities and Governments are
seeking to bridge with private institutional capital €400 billion: The
estimated finance capacity of the EU electric utilities to 2020,
ϒ Part of HgCapital, a leading European Private Equity Firmw
ϒ Founded in 1989champions
HGCAPITAL RENEWABLE POWER
PARTNERS – BRIDGING THE GAP
ϒ Over €5 billion of capital committed across nine funds
HgCapital supplying equity to over €1.5 billion in EU renewable
ϒ Equity for growth buyouts and renewable energy infrastructure projects. Not only are we a proven partner for developers, but our
experience, track record, exclusive focus EU renewable energy and
ϒ Large team: more than 90 people in two offices (London and access investment opportunities makes HgCapital the leading
Munich) bridge to the institutional investor market.
ϒ Independent: owned by its Partners Our goal is to be the investor of choice for EU renewable energy
projects
Sector expert investors building strategic renewable energy platforms © Copyright 2011 HgCapital 2

22. HgCapital >€900 AUM, largest dedicated EU renewable energy investor
Supporting over 1200MW of EU renewable energy projects
RPP Investments as of 10 January 2012
ϒ 3 operating / construction wind farms – 120MW
ϒ 10+ development wind farms - >250MW
ϒ 6 operating wind farms -113MW
ϒ 2 wind farms in construction - 44MW
ϒ 3 Permitted wind farms - 48MW
ϒ 5+ wind farms in development - >250MW
ϒ 34 operating hydro electric projects - 130MW
ϒ 2 hydro projects in construction - 10MW
ϒ 7 operating solar PV plants - 61MW
ϒ 2 operating wind farms -140MW
ϒ 1 wind farms in construction - 50MW
ϒ 2 operating wind farms - 24MW
ϒ 4 wind farms in planning - 120MW
Sector expert investors building strategic renewable energy platforms © Copyright 2011 HgCapital 3

23. HgCapital Who are our investors?
ϒ Jean Frazier
ϒ Indiana University Teaching Degree, 1946 (Delayed due
to working a drill press in an aircraft factory 1942-1945)
ϒ 35 Years 6th grade schoolteacher in Los Angeles
ϒ Recognized as a California “Master Teacher” from 1965
until retirement in 1981
ϒ 91 years old, lives in Laguna Woods California
ϒ Pension paid by California State Teachers Retirement
System, an investor in RPP Fund 1 and RPP Fund 2
ϒ One of 856,000 members and beneficiaries of a pension
fund with $150 billion in investments - the second largest
pension fund in the United States
Sector expert investors building strategic renewable energy platforms © Copyright 2011 HgCapital 4

24. EU RE EU Renewable Project Investment
Market Resilience being tested; infrastructure investment falling
EU RENEWABLE PROJECT INVESTMENT – NEW BUILD AND EXISTING ASSETS, DEBT, EQUITY, M&A, REFINANCING
2007-2012
25,000
22,378
21,946
20,000 19,483
18,486
16,995 17,362
16,432
€ Millions
15,647
15,000
12,941
12,301 12,469
11,793 11,975
10,737 10,910 Refinancing
10,000 8,956
7,368
8,071 7,949 M&A
6,862
New Build
5,000
2,942
0
Q1 2007
Q2 2007
Q3 2007
Q4 2007
Q1 2008
Q2 2008
Q3 2008
Q4 2008
Q1 2009
Q2 2009
Q3 2009
Q4 2009
Q1 2010
Q2 2010
Q3 2010
Q4 2010
Q1 2011
Q2 2011
Q3 2011
Q4 2011
Q1 2012
Source: Bloomberg / New Energy Finance
Sector expert investors building strategic renewable energy platforms © Copyright 2011 HgCapital 5

25. Investment Institutional Equity Investment in EU Renewables 2004-2011
Survey Dataset and methodology
OBJECTIVE ϒ Map institutional / financial investor equity investment activity in EU renewable energy projects and companies
from 1 Since 2004
DATA COLLECTED ϒ 263 investments, €9.1 billion equity investments by 38 active investors, including
AND ANALZED ϒ Dedicated renewable infrastructure funds
ϒ Dedicated renewable private equity funds
ϒ General infrastructure funds
ϒ Hedge funds
ϒ General private equity funds
ϒ Direct investors – pension funds, family offices and insurance companies
ϒ Excluded
ϒ German and Danish retail investor funds
ϒ Regional and small sector funds with <€75m or less in capital (e.g. small solar funds)
SOURCES AND ϒ Sources: Prequin, Bloomberg New Energy Finance, New World Energy Network, Sparkspread, Infrastructure
METHOLOGIES Journal, Fund Manager Websites, HgCapital discussions, Fund manager conference presentations
ϒ Equity invested based on reported data sources, or if not reported using standard industry comparable (e.g.
average selling price of German wind farms circa€1.6m/MW and 75% average gearing, average Italian solar pv
deal equity circa €600k per MW). +/- 10% error on deployment.
ϒ Certain ungeared investors to geared basis assuming 25% equity
Sector expert investors building strategic renewable energy platforms © Copyright 2011 HgCapital 6

26. Investment
EU Renewable Project Equity From Financial Investors 2004-2012
Survey
Financial Investor Equity Investment in EU RE Projects
2004-2012
STEADY GROWTH IN
Equity Invested (€Millions)
€5,000
INSTITUTIONAL INVESTMENT €3,963
€4,000
ϒ 37% CAGR since 2004 €3,000
€2,000
ϒ From 2% to 8-11% of total EU asset €1,179
€692 €806 €867
investment since 2009 €1,000
€348 €451 €550
€263
ϒ 2010-2011 growth driven by investments €0
2004 2005 2006 2007 2008 2009 2010 2011 2012
by general infrastructure funds and
pensions and insurance companies in:
– Single large operating assets (solar
thermal and offshore wind); and Financial Investor Equity Investment in EU RE Projects
% of Total Debt and Equity Investment
– Large operating portfolios (onshore 12% 2004-2012
11%
wind and solar PV)
10%
8%
ϒ Coincides with reduced utility activity due 8%
to balance sheet constraints and an
6%
increase in ungeared investment as 4%
lending falls 4%
2% 2% 2% 2%
1% 1%
2%
0%
2004 2005 2006 2007 2008 2009 2010 2011 2012
Source: HgCapital Research
Sector expert investors building strategic renewable energy platforms © Copyright 2011 HgCapital 7

27. Investment
EU renewable project equity from financial investors 2004-2011
Survey
INVESTMENT BY COUNTRY Financial Investor Investment in EU Renewable Energy Projects
€4,500 2004-2012 by Country
3,963
ϒ Leading destinations €4,000
Other
− Germany
Equity Invested (€ Millions)
€3,500
S weden
− Spain Italy
€3,000
France
− France
UK
€2,500
− UK S pain
Germany
− Italy €2,000
ϒ Destination conclusions €1,500
1,179
− Preference for feed in tariffs
€1,000 806 867
692
− Higher returns outweigh PIGS and 550
451
regulatory risks €500 263
348
− Nordics emerging but limited
€0
market to date 2004 2005 2006 2007 2008 2009 2010 2011 2012
Source: HgCapital Research
Sector expert investors building strategic renewable energy platforms © Copyright 2011 HgCapital 8

28. Investment
EU Renewable Project Equity From Financial Investors 2004-2012
Survey
RENEWABLE INFRASTRUCTURE, Financial Investor Investment in EU Renewable Energy Projects
DIRECT INVESTORS AND GENERAL €4,500 2004-2012 by Investor Type
INFRASTRUCTURE LEAD
3,963
€4,000
ϒ Investment entry points
Equity Invested (€ Millions)
– Renewable Infra – development > operation €3,500 Renewable Infra Fund
– Direct investors – operation Direct Investor
€3,000
– General infra – construction – operation General Infra Fund
€2,500 General PE Fund
– General and Renewable PE – development
Energy Infra Fund
– Energy Infra – construction> operation €2,000
Renewable PE Fund
– Hedge Fund – development>construction
€1,500 Hedge Fund
ϒ What it means? 1,179
€1,000 867
– Directs and general infrastructure emerging 692
806
as buyers of mature assets 451
550
€500 263
348
– Large infrastructure likely to be exiting
investments in 2015-17
€0
2004 2005 2006 2007 2008 2009 2010 2011 2012
Source: HgCapital Research
Sector expert investors building strategic renewable energy platforms © Copyright 2011 HgCapital 9

29. Investment
EU renewable project equity from financial investors 2004-2011
Survey
. . . BUT NEGATIVE RECENT
QUARTERLY TREND
€1,800 Institutional Equity in EU Renewable Projects 2008-2012
€ Millions
ϒ Q3 2011 driven by large Spanish €1,600
transactions and not likely to be €1,400
repeated
€1,200
ϒ Removing Offshore wind investments
€ Millions
shows real underlying trend €1,000
€800
€600
€400
€200
€0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
2008 2008 2008 2008 2009 2009 2009 2009 2010 2010 2010 2010 2011 2011 2011 2011 2012
Offshore Wind €0 €0 €0 €0 €0 €0 €0 €0 €0 € 53 € 52 € 26 €0 € 800 € 378 €0 € 630
Other Technologies €134 €308 €76 €168 €76 €336 €54 €340 €72 €381 €65 €515 €308 €766 €1,071 €626 €173
Source: HgCapital Research
Sector expert investors building strategic renewable energy platforms © Copyright 2011 HgCapital 10

30. Investment
Not all investors are looking for the same thing
Survey
Source: HgCapital Research
Sector expert investors building strategic renewable energy platforms © Copyright 2011 HgCapital 11

31. EU RE Institutional investor appetite for EU renewable markets
Market PIGS out, CEE a question, UK and Nordics in flux
ϒ Fully open to institutional investment
ϒ Open to institutional investment but
changes could make less attractive
ϒ Limited attractiveness to institutional
investment, high returns expected
ϒ Potentially closing to institutional
investment
ϒ Closed to institutional investment
Sector expert investors building strategic renewable energy platforms © Copyright 2011 HgCapital 12

32. Fundraising Global infrastructure and private equity fund fundraising
Environment Hard hit by financial crisis, history suggests slow recovery
Global PE and Infrastructure Fundraising
2003-2011
$645
$627
$700
$535
Final Cliosings $ Billions
$600
PE Funds
$500 Infrastructure Funds
$345
$400
$263
$246
$225
$206
$300
$200 $97
$41
$35
$28
$25
$16
$10
$100
$8
$4
$1
$-
2003
2004
2005
2006
2007
2008
2009
2010
2011
Private Equity / Alternative Funds
Global Funds Raised 1995-20010
$645
$627
$700
$535
$600
Final Clisings $ Billions
$500
$345
$400
$273
$263
$246
$225
$206
$300
$166
$164
$141
$200
$99
$97
$84
$60
$50
$100
$0
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
Source: Prequin, Venture Economics, Thomson Reuters
Sector expert investors building strategic renewable energy platforms © Copyright 2011 HgCapital 13

33. Investment
Challenging fundraising environment
Survey
EU RENEWABLE ENERGY PROJECT FUNDS FUNDRAISING RECORD
EU REN EW ABLE EN ERGY PROJECT FUN DS FUN DRAISIN G RECORD
FUNDRAISING:
CAPITAL % OF TARGET MON THS IN
LONGER; LESS FUN D FUN D TYPE TARGET RAISED RAISED FUN D RAISING STATUS
FUNDS HgCapital RPP Private € 500 € 545 109% 22 Final Close
ϒ Fundraising since 2008
Fund 1 Private € 200 € 230 115% 12 Final Close
ϒ Average time to first Fund 2 Private € 500 € 571 114% 30 Final Close
close 12 months Fund 3 Private € 450 € 437 97% 27 Final Close
Fund 4 Private € 250 € 209 84% 30 Final Close
ϒ Average time to final
close 24 months Fund 5 Private € 400 € 330 83% 27 Final Close
Fund 6 Private € 500 € 320 64% 18 First Close
ϒ Average fund 61% of Fund 7 Private € 600 € 320 53% 6 First Close
target Fund 8 Private € 500 € 213 43% 26 Final Close
ϒ Several funds Fund 9 Private € 300 € 69 23% 29 Second Close
abandoned Fund 13 Private € 1,100 € 200 18% 14 First Close
Fund 10 Private € 300 € 50 17% 48 First Close
ϒ New funds face general Fund 11 Private € 500 € 15 3% 24 Launched
fundraising environment
Fund 14 Private € 400 €0 0% 13 Launched
and first time fund
Fund 12 Private € 200 €0 0% 12 First Close
hurdles
Fund 16 Public € 230 €0 0% 4 Abandoned
Fund 17 Public € 700 €0 0% 9 Abandoned
Fund 15 Private € 200 €0 0% 24 Abandoned
Fund 18 Private € 250 €0 0% 24 Abandoned
Fund 19 Private € 750 €0 0% 33 Abandoned
Source: Prequin, HgCapital Research
Sector expert investors building strategic renewable energy platforms © Copyright 2011 HgCapital 14

34. Pensions & Where is the real money?
Allocations Defined benefit plans and the US
US, EU & JAPAN DEFINED BENEFIT PLANS - $18.9 TRILLION US, EU & JAPAN DEFINED CONTRIBUTION PLANS - $9.0 TRILLION
ϒ Longer investment horizon ϒ Shorter investment horizon
ϒ Trustee directed ϒ Beneficiary directed
ϒ Declining market share ϒ Increasing market share
ϒ Structurally more likely to invest in illiquid assets ϒ Structurally less likely to invest in illiquid assets
J
apan
$3,266
UK
UK US
$933
$1,460 $6,914
US
Switzerland
$9,166
$416
Canada
$1,251 Australia
$247
Germany
Australia $94
$1,054 Netherlands
Netherlands $73
DE, CH, FR, IE $973 J CN, FR, IE
PN,
$868 $172
Source:: Towers Watson
Sector expert investors building strategic renewable energy platforms © Copyright 2011 HgCapital 15

35. Pensions & How pensions allocate capital
Allocations
ϒ FIRST, DETERMINE THE REQUIRED RATE OF RETURN
− Determine inflows (contributions) and outflows (benefits) over life of fund (40-100 years)
− Value current assets
− Arithmetic will tell you how much return you need – typically 7-9% on all investments
ϒ SECOND, MAKE CAPITAL ALLOCATIONS BASED ON RETURN REQUIREMENTS AND LIQUIDITY NEEDS
− Liquidity
− 70-80% of investment will always be in tradeable/listed bonds and equities.
− The more mature the plan, the greater the listed allocation and the greater the bond allocation.
− Returns
− Liquid asset returns at market levels, typically lower than total return target
− Balance allocated to illiquid assets seeking higher returns and greater risk – real estate, private equity, venture,
infrastructure
ϒ ALL PENSION FUNDS HAVE AN OVERALL RETURN TARGET
FOR EVERY €1 OR £1 RETURNING LESS THAN THE TARGET,
€1 OR £1 MUST BE INVESTED AT A LIKE RETURN ABOVE THE TARGET
Sector expert investors building strategic renewable energy platforms © Copyright 2011 HgCapital 16

36. Pensions & Current defined benefit plan allocation model
Allocations Infrastructure increasing – but arithmetic means higher returns
Historic Average (Circa 2005)
THE GILTS DILEMMA Asset Class Principle Allocation % Expected Return Cash Yield
Public Equities £55,000,000 55% 8% £4,400,000
A PERFECT STORM FOR PENSIONS Bonds £36,000,000 36% 6% £1,980,000
Real Estate £6,000,000 6% 10% £600,000
Hedge Funds £0 0% 0% £0
ϒ Low interest rate policy, demand for low risk investments has Private Equity £2,000,000 2% 20% £400,000
driven gilt and bond yields to historic lows (<2% on 10-year Infrastructure £0 0% 0% £0
gilts Cash £1,000,000 1% 3% £30,000
Total Principle £100,000,000 100% £7,410,000
ϒ Low gilt yields increase pension deficits Average Return 7.41%
Current Averages (Assuming no Principle Loss since 2007)
ϒ Liquidity concerns do not allow significant reduction in bonds Asset Class Principle Allocation % Expected Return Cash Yield
Public Equities £43,000,000 43% 6% £2,580,000
ϒ Pensions need substantially higher returns fro other assets Bonds £39,000,000 39% 4% £1,560,000
Real Estate £7,000,000 7% 7% £490,000
Hedge Funds £4,000,000 4% 25% £1,000,000
ALLOCATION MODEL MOVING – SLOWLY Private Equity £4,000,000 4% 25% £1,000,000
Infrastructure £1,000,000 1% 12% £120,000
BUT HIGHER RETURNS ARE NEEDED Cash £2,000,000 2% 2% £40,000
Total Principle £100,000,000 100% £6,790,000
ϒ Average UK pension fund seeking 7.5% total return Average Return 6.79%
ϒ Assumes no loss of principal since financial crisis Illustratrive Averages To Reach Return Target (Before Market Losses)
Asset Class Principle Allocation % Expected Return Cash Yield
ϒ Assumes standard 10% underfunding Public Equities £40,000,000 40% 6% £2,400,000
Bonds £38,000,000 38% 4% £1,520,000
ϒ Current allocation model does not provide required returns Real Estate £7,000,000 7% 7% £490,000
Hedge Funds £4,000,000 4% 25% £1,000,000
ϒ Illustrative allocation shows returns required from Private Equity £5,000,000 5% 25% £1,250,000
Infrastructure £5,000,000 5% 15% £750,000
infrastructure to fill gap
Cash £1,000,000 1% 2% £20,000
Total Principle £100,000,000 100% £7,430,000
Average Return 7.43%
Sector expert investors building strategic renewable energy platforms © Copyright 2011 HgCapital 17

37. Pensions &
Direct investors – potential and limitations
Allocations
DISTRITUBTION OF UK FINAL SALARY SCHEMES 2009
LIMITED UNIVERSE – MATERIAL RESTRICTIONS
ϒ Circa 8000 final salary schemes
ϒ £1 trillion in funds under management
ϒ Only 7 “pure” direct investors presently active in EU
(investors that will invest on their own) ϒ 40 largest (BT, Railpen, RBS, etc.) account for 46% of
total assets
− Allianz, Kirkbi, Oticon, MEAG, PensionDanmark,
PGGM PKA Pension ϒ £700,000: Average size remaining scheme
ϒ Only the largest funds have the ability to make direct
investments (in the UK this means a maximum
capital pool for all infrastructure of £23 billion
ϒ 30% maximum ownership limits on most pension
fund investments; so for each deal you need 3-4,
not 1 40 Largest UK
DB Plans
ϒ Pensions most likely to “co-invest” alongside fund £460 Remaining UK
managers DB Plans
£540
− 2 Hg investors have co-invested Ytterberg and
Amliden
− Typical in other infrastructure (Thames Water, Gas
Pipelines)
Source: HgCapital Research, Prequin, Towers Watson
Sector expert investors building strategic renewable energy platforms © Copyright 2011 HgCapital 18

38. Thank You
Tom Murley
Thank You
HgCapital
Email: tom.murley@hgcapital.com
Tom Murley
Phone:HgCapital
+44 207 089 7962
Email: tom.murley@HgCapital.com
Phone: +44 207 089 7962
Sector expert investors building strategic renewable energy platforms © Copyright 2011 HgCapital 19

39. Appendices
• Appendix 1: Institutional Investment in EU Renewable Energy Projects – Hg Proprietary
Research
• Appendix 2: Fundraising Trends and Outlook
• Appendix 3: Pension Fund Capital and Allocations
Sector expert investors building strategic renewable energy platforms © Copyright 2011 HgCapital 20

40. Investment
EU renewable project equity from financial investors 2004-2012
Survey
Financial Investor Investment in EU Renewable Energy Projects
STEADY GROWTH IN INSTITUTIONAL 2004-2012
4,500
INVESTMENT €3,963
4,000
3,500
Equity Invested (€Millions)
ϒ 37% CAGR since 2004 3,000
ϒ 2010-2011 Growth driven by 2,500
increasing participation of general 2,000
infrastructure funds due to: 1,500 €1,179
€806 €867
− Utility capital constraints
1,000 €692
€451 €550
500 €263 €348
− Rising returns 0
2004 2005 2006 2007 2008 2009 2010 2011 2012
− Falling investment in other
infrastructure sectors (transport, Financial Investor Investment in EU Renewable Energy Projects
(Ex Offshore) 2004-2012
PFI)
4,500
− Projects and portfolios of sufficient 4,000
scale 3,500
Equity Invested (€Millions)
3,000 €2,785
2,500
2,000
1,500
€948
1,000 €692 €714
€451 €460
500 €263 €348 €237
0
2004 2005 2006 2007 2008 2009 2010 2011 2012
Sector expert investors building strategic renewable energy platforms © Copyright 2011 HgCapital 21

41. Investment
Financial investor investment by country 2004-2012
Survey
Financial Investor Financial Investor
Equity Investment by Country 2004-12 Equity Investment by Country 2004-12
By Capital (€MM) (Ex Offshore) By Capital (€MM)
Germany Spain
Spain €1,511 €1,906
€1,906 17% 27%
21% Germany
€1,133
16%
Sweden
€231 Sweden
2% €231
UK 3%
€1,459
Other 16%
€644 Other
7% €644
9% UK
€1,281
18%
Italy
€872
10% France
€1,007 Italy
11% €872
Denmark 13% France
€1,483 €1,007
16% 14%
Sector expert investors building strategic renewable energy platforms © Copyright 2011 HgCapital 22

42. Investment
Financial investor investment by sector 2004-2012
Survey
EU Renewable Financial Investors EU Renewable Financial Investors
Equity Investment by Sector 2004-12 Equity Investment by Sector 2004-12
By Capital (€MM) (Ex Offshore) By Capital (€MM)
Solar PV
€1,605
Solar PV 23%
€1,605
17%
Onshore W ind
€4,187
46% Onshore W ind
€4,217
61%
Offshore W ind
€2,173 Biomass/Biogas
24% €477
7%
Solar Thermal
€437
Offshore 7%
Hydro
Transmission Biomass/Biogas €157
€78 Hydro Solar Thermal
€157 €437 €477 2%
1% 5%
2% 5%
Sector expert investors building strategic renewable energy platforms © Copyright 2011 HgCapital 23