BizIt 2007 Presentation

Rainwater, Inc ET CitySmart Smart Irrigation for the Future [Karen Cheng] [Eddy Fong] [Paras Gandhi] [Julia Pashin]

Background – Water Conservation

Austin Key Measures

Total Usage/Peak Day

Outdoor summer water use

Water Conservation Task force

Conservation initiatives

Goal: 1% water use reduction

Grant

$500,000

Solution for outdoor water use

STRATEGY SOLUTION TECHNOLOGY IMPLEMENTATION RISK BOTTOM LINE BACKGROUND

Background - Rainwater, Inc

4 th : irrigation industry

Products: sprinkler/drip irrigation systems, basic controllers

Develops, manufactures and markets

Goal: product differentiation

Pursue enhanced technology

Utilize strategic conservation strategy

Grant competition as launching pad

Assume

Existing research/production facilities

BACKGROUND STRATEGY SOLUTION TECHNOLOGY IMPLEMENTATION RISK BOTTOM LINE

Strategy

The Genesis Way

Current Technology

Competitive Environment

Overall Strategy – The Genesis Way Grant & Partnership Utility Savings Rebates STRATEGY SOLUTION TECHNOLOGY IMPLEMENTATION RISK BOTTOM LINE BACKGROUND

Overall Strategy: Current Tech

Basic controllers – timer feature

ET ‘smart’ controllers:

Calculate optimal water need creates watering schedule

Methods to adjust original schedules

Solar/rain/soil moisture sensors

Real-time weather data

Proven successful

SWAT testing

Experimentation

Overall Strategy – Competitive Environment STRATEGY SOLUTION TECHNOLOGY IMPLEMENTATION RISK BOTTOM LINE BACKGROUND

Our Solution

The ET CitySmart

Competitive Environment

Our Solution – The ET CitySmart

Expand into the smart controller market

Best available technology

Differentiate:

Utilize LCRA water usage data

Emphasize low cost to customers

Bigger rebates

Using phone line

Using minimal sensors

Our Solution – Competitive Environment SOLUTION STRATEGY TECHNOLOGY IMPLEMENTATION RISK BOTTOM LINE BACKGROUND

Technology

ET

Healthy Range

How It Works

Database

NRE Costs

Current ET algorithms combine

Sensors

Weather forecasts

Landscape information

Calculates optimal level of water needed

Technology - ET STRATEGY SOLUTION TECHNOLOGY IMPLEMENTATION RISK BOTTOM LINE BACKGROUND

TECHNOLOGY Customize your Water Zone STRATEGY SOLUTION IMPLEMENTATION RISK BOTTOM LINE BACKGROUND

1. Data is collected at home TECHNOLOGY 1 2 3 4 Solar Sensor Homeowner Profile Rainwater Servers City Water Data Weather Forecast STRATEGY SOLUTION IMPLEMENTATION RISK BOTTOM LINE BACKGROUND

1. Data is collected at home 2. ET CitySmart sends data to servers TECHNOLOGY Solar Sensor Homeowner Profile Rainwater Servers City Water Data Weather Forecast 1 2 3 4 STRATEGY SOLUTION IMPLEMENTATION RISK BOTTOM LINE BACKGROUND

1. Data is collected at home 2. ET CitySmart sends data to servers 3. Rainwater servers are updated hourly TECHNOLOGY Solar Sensor Homeowner Profile Rainwater Servers City Water Data Weather Forecast 1 2 3 4 STRATEGY SOLUTION IMPLEMENTATION RISK BOTTOM LINE BACKGROUND

1. Data is collected at home 2. ET CitySmart sends data to servers 3. Rainwater servers are updated hourly 4. Rainwater sends customized water schedule to household TECHNOLOGY Solar Sensor Homeowner Profile Rainwater Servers City Water Data Weather Forecast 1 2 3 4 STRATEGY SOLUTION IMPLEMENTATION RISK BOTTOM LINE BACKGROUND

Technology: Database TECHNOLOGY STRATEGY SOLUTION IMPLEMENTATION RISK BOTTOM LINE BACKGROUND

TECHNOLOGY STRATEGY SOLUTION IMPLEMENTATION RISK BOTTOM LINE BACKGROUND

Software engineering:

Algorithm revisions $115,000

Web interface $65,000

Mechanical engineering:

Engineering/Circuit Development $85,000

Prototype Development $35,000

Testing: $37,500

IBM Server: $17,500

LCRA Link: $25,000

Training: $112,500

Technology - NRE Costs TECHNOLOGY Total NRE: $492,500 STRATEGY SOLUTION IMPLEMENTATION RISK BOTTOM LINE BACKGROUND

Implementation

Timeline

Partnerships

Marketing/Distribution

Sustainability

Scalability

Implementation - Timeline Partner with LCRA/Austin R&D: Design, Build and Test Prototype Manufacture Controllers Sell Controllers Target High-Water Users Widespread Advertising 2 4 6 8 10 20 25 30 35 15 Months Year 1 Year 2 Year 3 STRATEGY SOLUTION TECHNOLOGY IMPLEMENTATION RISK BOTTOM LINE BACKGROUND

Implementation – Partnerships

Partner with the City of Austin

City provides:

$200 rebates

Utilities bill mailings

Access to usage database

Rainwater provides:

Water consumption decrease of over 1% by 2011

Partner with Home Builders/Landscapers/Irrigators

Target new homes

IMPLEMENTATION STRATEGY SOLUTION TECHNOLOGY RISK BOTTOM LINE BACKGROUND

Implementation - Marketing

Marketing

High vs. General users

High users consume over 25,000 gallons a month

Target High users initially

Extend advertising to general public after 2 years

Pricing

Controller: $249

After rebate: $49

Annual subscription fee: $36

Implementation - Distribution

Sales Channels

Hardware stores

Website

Landscapers

Irrigation Installers

Implementation - Sustainability

Short-Term

Low price

Quickly and aggressively penetrate market

Long-Term

New Homes: Maintain home builders partnership

Communication: Include broadband/wireless

Implementation - Scalability

Expand into other cities

Las Virgenes, CA (76.2% outdoor)

Scottsdale/Tempe, AZ (66.5%)

Walnut, CA (63.9%)

San Diego, CA (62.8%)

Denver, CO (59.7%)

Phoenix, AZ (58.7%)

Risk Analysis

City of Austin Partnership

LCRA Partnership

Price Match

Risk Analysis

No City of Austin Partnership

Unlikely because Rainwater saves water and money for Austin

Marketing

Rebates

Contingency (No Partnership)

Higher Prices = Lower Market Share (3%)

2008: 151% ROI

2011: 254% ROI

Risk Analysis

No LCRA Partnership - minimal risk

LCRA statistics are a core component

Publicly available

Competitors Price-Match

Low price is competitive advantage

City Partnership: Cost below Manufacture

No Partnership: Cost still below Manufacture

RISK STRATEGY SOLUTION TECHNOLOGY IMPLEMENTATION BOTTOM LINE BACKGROUND

Bottom Line

Rainwater

City of Austin

Consumers

Net Income 2011: $2,000,000

Cash Flows 2011: $1,300,000

Bottom Line: Rainwater STRATEGY SOLUTION TECHNOLOGY IMPLEMENTATION RISK BOTTOM LINE BACKGROUND Year ROI 2008 271% 2009 306% 2010 351% 2011 410%

Bottom Line: City of Austin BOTTOM LINE STRATEGY SOLUTION TECHNOLOGY IMPLEMENTATION RISK BACKGROUND Year Total Water Saved 2008 0.78% 2009 0.86% 2010 0.97% 2011 1.11%

Bottom Line: Consumers BOTTOM LINE STRATEGY SOLUTION TECHNOLOGY IMPLEMENTATION RISK BACKGROUND Consumer Years to Break Even High 1.01 General 1.55

The Genesis Result

Rainwater

City of Austin

Consumers

The Genesis Result Grant & Partnership Utility Savings Rebates BOTTOM LINE STRATEGY SOLUTION TECHNOLOGY IMPLEMENTATION RISK BACKGROUND

The Genesis Result Utility Savings Rebates Grant & Partnership BOTTOM LINE STRATEGY SOLUTION TECHNOLOGY IMPLEMENTATION RISK BACKGROUND

Thank you.

Appendices STRATEGY SOLUTION TECHNOLOGY IMPLEMENTATION RISK BOTTOM LINE BACKGROUND

Appendix: Rainwater Projected Financials

Appendix: Water Conservation and Costs

Appendix: Consumer Costs and Savings

Appendix – Water Assumptions

- Percent Households – High Water vs. General : normalized distribution graph of water use by frequency (16,000 household sample); sample from Austin Green Building Program Database March 2001-2003

- Average Water Use –180 gallons per day (TWDB Water Use Survey X 3 ppl per household (US Census data) X % High Use/General

water use growth rate equal to household growth rate

- 58% Outdoor Water Use – given in case

- 12% Outdoor Water Saved - Study

Appendix – Market Assumptions

Number of Austin households: City of Austin data for 2005 and 2010, annualized for growth rate)

Market penetration estimates

General: 5%, 9, 10, 11, 12; growth rate in teens

High: 5%, 9, 10, 11, 12, 15; growth rate in teens

Appendix – Product Cost/Price Assumptions

Product cost: $165

cost comparison of competitor products (based on 80% mark-ups)

closest product from ET Water

save about $30 from using only a phone line (no broadband) for internet access

Selling price: $249 ; 50% markup of cost

Appendix – City Cost Assumptions

Amount of rebate: $200 : existing rebate is $100 for replacing residential controllers with smart controller equivalents

Justification: cost analysis to city of Austin: percent of water conservation budget that will go toward rebates net of savings in water bought (under 10% after 2007)