Macro overview by Global Fund Exchange

INDUSTRY OVERVIEW
2

POPULATION & ENERGY DEMAND
We believe “Investing in the Future of Energy” is the most significant investment opportunity of our time.
Population and income growth are the two most
powerful forces behind the demand for energy
Over the last 20 years..
Population increased by 1.6 billion people
Real income rose by 87%
Over the next 20 years…
1.4 billion projected increase in population
100% projected increase in real income
As a result, by 2030…
Primary energy use expected to grow 40%
93% of growth to come from non-OECD economies
Developing countries to consume 2/3 of all global energy
We are witnessing a paradigm shift in global energy
New opportunities in both clean and traditional energy as
efficiencies improve
Fossil fuel energy sources are diversifying
1990-2010: Fossil fuels made up 83% of energy growth
2010-2030: Contribution projected to fall to 64%
Rise of coal & natural gas
China is building a new coal plant every week, tripling its consumption and becoming a net importer of coal
New drilling techniques are “revolutionizing” natural gas industry
Growing impact of climate concerns
Source: Sigma Xi

OIL DEPENDENCY
By 2025, global oil demand likely to be 60% greater than
today
Annual rate of oil consumption growing in developing powers: China - 7.5% & India - 5.5%
Both expected to take a “quantum leap” over the next decade
“Peak Oil” concerns
Experts say many of the Middle East oil nations, including Saudi Arabia, are already pumping oil from known “post peak” fields
Once an oil field has reached “peak oil” – the rate of decline is dramatic and can be as much as 10% per year
Growing interest in ‘unconventional’ oil plays
‘Big Oil’ shifting focus to shale gas, tar sands, offshore fields
Source: CIA World Factbook

INVESTMENT IN CLEAN ENERGY
The International Energy Agency (IEA) predicts low carbon energy investments will reach $1.6 trillion by 2050.
Global New Investment in Clean Energy (actual)
Annual Required Clean Energy Capital (projected)
Source: Bloomberg New Energy Finance, 2010

CLEAN ENERGY INVESTMENT TRENDS
Investing in clean energy is a top priority around the world.
Worldwide investment topped $243 billion in 2010 -
a 630% increase from 2004 levels
China:
As a percentage of GDP, China’s investment in alternative energy is already 10X that of the U.S.
United States:
$94.1 billion in U.S. stimulus funding dedicated to renewable energy sector over the next decade
Europe:
Germany, Spain, Italy focusing on solar energy
UK and Scotland developing significant off-shore wind and tidal resources
Middle East:
New programs to promote and develop solar and wind farms and solar-powered desalination
Using oil more efficiently through fuel cells, carbon sequestration, oil gasification, and green building.
City of Masdar in Abu Dhabi:
Aims to be the first carbon-neutral metropolis in the world and the center of global renewable energy research
Source: The Pew Charitable Trusts, 2010
Clean energy resources will affect all technologies and
have an impact on every region of the globe
Significant contributor to future energy demand
Total clean energy generating capacity nearly doubled over past 3 years due to strong incentives and falling costs
Projected sector growth to 934MW by 2020 –
a 431% increase over 10 years
Technology advancements increasing cost competitiveness
Wind turbine costs have fallen 15-20% over past few years
Energy storage and smart grid systems increasing energy efficiency

RENEWABLE ENERGY OLYMPICS
Sources: The Pew Charitable Trusts, 2011; SOPAC Applied Geoscience and Technology Division, 2011; Reuters; JDPower & Associates, 2011

With 17.5 million gallons used every second…
Water is our most critical resource.
GLOBAL DEMAND FOR FRESHWATER
The British non-profit International Alert released a study identifying 46 countries home to 2.7 billion people where water and climate stresses could ignite violent conflict by 2025
UN Secretary-General Ban Ki-moon: “The consequences for humanity are grave. Water scarcity threatens economic and social gains and is a potent fuel for wars and conflict.”
"We think there'll be world wars fought about water in the future," predicts the aptly named Peter Spillett of RWE/Thames Water, one of the three largest water companies in the world.
World Bank reports global demand for water is doubling every 21 years – supplies cannot remotely keep up with demand as population soars, nations develop and agriculture expands
Freshwater consumption has doubled since World War II and is expected to increase another 25% by 2030.
Humans are extracting freshwater at rates up to 100X the natural replacement rate (World Water Council)
Neyyar Reservoir Trivandrum, India
MiyunReservoir Beijing, China
Reservoir, Southern Spain
Lake Mead Reservoir, USA
Reservoir, Queensland, Australia

THE CASE FOR INVESTING IN WATER
The Water / Energy Conundrum
Energy and water are inextricably linked
It requires energy to produce and treat water, and vast water supplies to generate energy
Fossil fuel power plants consume more than 500 billion liters of freshwater every day in the U.S. alone
China’s reliance on coal will increase demand for water to 215 trillion gallons by 2030, 52 trillion more than currently available
Strain on global infrastructure will catalyze
new investment
Estimated $1 trillion needed over next 20 years to meet global demand for clean water
U.S.: $150 billion required to upgrade aging water infrastructure
China: $125 billion new funding to build wastewater treatment plants and expand distribution
Sector poised for tremendous growth
Global water sector currently valued at $425 billion
Over next 20 years expected to reach $6 trillion, with an annual growth rate of 14%.
On average, water costs are less than 1% of disposable income, making price increases inevitable
285 public water stocks / $750 billion market cap
Profit opportunities in:
Infrastructure
Smart meters
Water rights
Desalination
Purification
New technologies
Energy efficiency
Wastewater reclamation

GLOBAL AGRICULTURE CHALLENGES
Population, rising income and urbanization are shifting global
dietary patterns
World population to top 9 billion by 2050
Agricultural output needs to grow 70% to meet new demand
Newfound prosperity will catalyze a “historic shift” in global dietary patterns
Growing middle class shifts away from grains and vegetables to a more meat-centric (and more energy-intensive) diet.
FAO statistics show “remarkable” increase in consumption of livestock products in East Asia, mainly due to China.
Significant growth projected by 2030
Decreasing availability of arable land
Arable land per person decreasing in Asia, where demand for food is increasing the most
‘Land grab’ phenomenon
In 2009, foreign investors purchased 111 million acres of farmland in developing world - a tenfold increase over 10 years
The biggest buyers? Sovereign wealth funds from China, India & Middle East seeking agri resources
Competition from biofuels
New mandates will require 240 million more acres for biofuel crops; equivalent of 50% of arable land in North America and 6% of world total arable land
1 out of every 4 ears of harvested corn in the U.S. - the world’s largest producer - winds up in an ethanol plant.
Generating 1 gallon of fuel from irrigated corn requires 650 gallons of water

WHY INVEST IN AGRICULTURE?
Are we witnessing the “end of cheap food?”
Over next decade, Food & Agriculture Organization (FAO) predicts grain prices will remain 15-40% higher than 1997-2006 levels
Last year, the cost of total global food imports topped $1 trillion for only the second time in history.
In 2011, costs of food imports are on track to reach record highs, warns United Nations
Commodity volatility in an uncertain market
Sky high food prices are nearing 2008 records, prompting U.N. to warn of pending “food crisis”
Weather anomalies have devastated crops, leading to price jumps in wheat, soybeans, corn, coffee, sugar and other basic commodities.
Agriculture has a severe water problem
Nearly 70% of global water consumption is used for irrigation
Agriculture can command up to 90% of domestic water resources in developing nations
Every year, the global agricultural sector wastes approximately 60% of the 2,500 trillion liters of water it uses
Irrigation and crop yield challenges
Despite years of advances, gains in agriculture yield per acre have slowed down to less than 1% a year
New investment is crucial
FAO says new demand requires a 47% increase in annual investment in agriculture in the developing world
Current investments levels of $189bn must reach $279 billion/year at a minimum, and $479 billion/year to combat global hunger

INVESTING IN NATURAL RESOURCES
“ We are running a natural resources deficit. It takes 1 ½ years to replenish 1 year’s consumption of natural resources.
By 2030, meeting global resource demands will require the equivalent of two Planet Earths.”WWF, Living Planet Index Report 2010
Energetic Limits to Economic Growth
Resources and energy supplies are “limiting factors” to economic growth & development
Developing economies rely upon access to industrial metals & minerals
Resource demand from developing world to exceed that of developed world by 2015
China now consumes:
One-half of world’s iron ore
One-third of world’s aluminum
One-quarter of world’s copper
Increased spending on infrastructure worldwide
Resource scarcity prompts race for overseas supplies
Developing nations racing to make foreign acquisitions in a “global land grab”
China, India & Middle Eastern nations have struck notable deals in Australia, Africa & South America
Demand increasing for rare earth elements & lithium
Crucial for clean energy technologies, advanced batteries, electric vehicles and high technology manufacturing
China dominates rare earth market with 95% of supplies
A Nuclear Energy Comeback
China has 20 new nuclear plants under construction and plans for six-fold increase over next decade.
Global demand for mined uranium predicted to increase 4X over the next 30 years

HEDGE
SYSTEMATIC
CARBON
ENERGY
RESOURCES
AGRICULTURE
WATER
CLEAN ENERGY
PROFIT
PEOPLE
PLANET
COMMODITY
STRATEGIES
EQUITY
STRATEGIES
TREND
STRATEGIES
Population growth
79 million people/year
Energy demand to increase 50% by 2030
Diversification of energy resources
Significant profit opportunities
Economic, political & social catalysts
INVESTING IN THE FUTURE OF ENERGY
Dramatic increase in energy spending
Stimulus Spending
Energy security
Resources vs. Consumption
Largest global macro theme worldwide
Pollution & climate change
Water scarcity & increased demand
ENERGY – WATER – RESOURCES – CLIMATE
CONUNDRUM
MACRO SNAPSHOT
THE BRIDGE PERIOD
Traditional energy becomes cleaner & >>>
more energy efficient
<<< Clean energy becomes more cost efficient & accessible

Macro overview by Global Fund Exchange

by Anric Blatt

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