Eco Responsible Capital   The green microcap inefficiency César de Brito, cdebrito@erc-partners.com
1 2 3 4 5 Overview & Team The green microcap market inefficiency What are the options? Conclusion : active owners are requ...
<ul><li>1  Overview and Team </li></ul>
<ul><li>Eco Responsible Capital (ERC) Partners is an independent investment firm with the aim to : </li></ul><ul><ul><li>P...
Confidential - Fund under registration - Not for distribution Identification Selection Investment Active ownership Exist L...
ERC Partners’ Board Members Juan AGUIRIANO  –  Global Head Sustainability Solutions at DuPont in Geneva. Former Head of Du...
Hanalei Finance diversified Portfolio Confidential - Fund under registration - Not for distribution Energy  production Ser...
<ul><li>2 The green microcaps market inefficiency </li></ul>
Green microcap: market inefficiency <ul><li>Most affected segment after the  </li></ul><ul><li>2008 crisis </li></ul><ul><...
Green Microcap: untapped segment <ul><ul><li>Largest number of companies </li></ul></ul><ul><ul><li>Good diversification <...
Confidential - Fund under registration - Not for distribution Sub sector Market Cap EUR NB Employee Sales EBITDA P/B P/S A...
Confidential - Fund under registration - Not for distribution 1st category: mature but mispriced Company data   Market cap...
Confidential - Fund under registration - Not for distribution 1st category: mature but mispriced Company data   Market cap...
Confidential - Fund under registration - Not for distribution 2 nd  category: early stage Company data   Market capitalisa...
Confidential - Fund under registration - Not for distribution 2 nd  category: early stage Company data   Market capitalisa...
<ul><li>3- What are the options? </li></ul>
Confidential - Fund under registration - Not for distribution Solution 1: wait for industrial strategic  BOSCH bid on ERSO...
Confidential - Fund under registration - Not for distribution Solution 1: wait for industrial strategic Schneider Electric...
Confidential - Fund under registration - Not for distribution Solution 1: wait for industrial strategic GDF SUEZ bid on Ec...
Confidential - Fund under registration - Not for distribution Solution 2: merger between peers to raise capital. Geotherma...
Confidential - Fund under registration - Not for distribution Solution 3: delisting from stock market. CMR Fuel Cell  –  M...
Confidential - Fund under registration - Not for distribution Solution 3: delisting from stock market. Renegy Holdings Mar...
<ul><li>4- Conclusion : active owners are requested </li></ul>
Confidential - Fund under registration - Not for distribution 1- « Leverage expertise before investing » 2- « Review the b...
Active ownership on listed green microcaps is requested <ul><li>Management support </li></ul><ul><li>Strategy support </li...
ESG criteria integrated all over the invesment process  for micocaps  Confidential - Fund under registration - Not for dis...
Confidential - Fund under registration - Not for distribution «  The value generated by these “star deals” comes overwhelm...
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Active Ownership On Publicly Listed Green SMEs : Delivering Social, Environmental And Financial Returns

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César De Brito, Partner - Eco Responsible Capital Partners - France

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  • ECO RESPONSIBLE CAPITAL PARTNERS
  • Active Ownership On Publicly Listed Green SMEs : Delivering Social, Environmental And Financial Returns

    1. 1. Eco Responsible Capital The green microcap inefficiency César de Brito, cdebrito@erc-partners.com
    2. 2. 1 2 3 4 5 Overview & Team The green microcap market inefficiency What are the options? Conclusion : active owners are requested Appendix Agenda
    3. 3. <ul><li>1 Overview and Team </li></ul>
    4. 4. <ul><li>Eco Responsible Capital (ERC) Partners is an independent investment firm with the aim to : </li></ul><ul><ul><li>Provide efficiently capital to the green revolution </li></ul></ul><ul><ul><li>Active owner to support the growth of green companies </li></ul></ul><ul><ul><li>Create value for investors, companies and community </li></ul></ul><ul><ul><li>Share sector knowledge with Limited Partners </li></ul></ul><ul><ul><li>Promote sustainable and responsible practices </li></ul></ul>ERC Partners mission Confidential - Fund under registration - Not for distribution
    5. 5. Confidential - Fund under registration - Not for distribution Identification Selection Investment Active ownership Exist Listed euity track Company knowledge Sector knowledge Due diligence expertise Stock market rules Private equity experience Operational background Board seat Hands on Approach Large cap network IPO experience
    6. 6. ERC Partners’ Board Members Juan AGUIRIANO – Global Head Sustainability Solutions at DuPont in Geneva. Former Head of DuPont Safety Resources Europe, Middle East & Africa. Bernard CHABOT – Consultant Renewable energy feed in tariffs, Former Senior Expert on Renewables at ADEME in France. Bertrand CHARRIER, Former Director General of President J. Chirac’s foundation,  Vice President of Green Cross International for 12 years, Governor of the World Water Council, Foundation Captain Jacques Cousteau for 15 years . Jean Marie CHEVALIER – Professor of economics at the University of Paris-Dauphine, Director of CGEMP and IHS-CERA, member of the Board of Directors of Nexans, Ton RUNNEBOOM , Chairman of the Biobased Raw Material platform SenterNovem , President of the Foundation Warming Neutral in Amsterdam, Member of the boards of NatureWorks Inc, USA, BMCN NV, Europe, Novameer BV. Jean Francois FOUQUET, Founder of PCCa. Private Capital & Company Advisory. Investment banker at Indosuez then Head of Private Equity at Credit Agricole Geneva. Serge LEDERMANN , Partner and Head of Asset management at Banque Heritage Geneva and previously at Lombard Odier and UBP. Strategic Advisory Board Investment Advisory Board Confidential - Fund under registration - Not for distribution
    7. 7. Hanalei Finance diversified Portfolio Confidential - Fund under registration - Not for distribution Energy production Service providers France US
    8. 8. <ul><li>2 The green microcaps market inefficiency </li></ul>
    9. 9. Green microcap: market inefficiency <ul><li>Most affected segment after the </li></ul><ul><li>2008 crisis </li></ul><ul><li>Prices doesn’t reflect anymore </li></ul><ul><li>company value </li></ul><ul><li>Poor broker coverage of </li></ul><ul><li>microcap limit attraction </li></ul><ul><li>Very limited financing options </li></ul>-79% Wilderhill Clean energy Index Green Microcap index <ul><li> 2008 2009 </li></ul>Source: ERC, Bloomberg February 2009 Confidential - Fund under registration - Not for distribution
    10. 10. Green Microcap: untapped segment <ul><ul><li>Largest number of companies </li></ul></ul><ul><ul><li>Good diversification </li></ul></ul><ul><ul><li>Cheapest Sector with Limited Competition </li></ul></ul><ul><ul><li>Leaders of tomorrow </li></ul></ul><ul><ul><li>Expansion Capital Requirement </li></ul></ul><ul><ul><li>Limited Downsize Risk </li></ul></ul>+27 % - 16 % - 21 % The listed green equities universe by market cap. Confidential - Fund under registration - Not for distribution
    11. 11. Confidential - Fund under registration - Not for distribution Sub sector Market Cap EUR NB Employee Sales EBITDA P/B P/S Agriculture 13'646'103 280 19 0 1.1 0.7 Aquaculture 15'099'894 464 53 5 1.0 0.6 Bio 33'216'921 353 76 3 2.2 1.2 Biofuels 23'467'208 245 64 3 4.5 22.0 Biogas 26'270'963 187 30 -9 1.2 0.5 Biomass 31'545'303 823 9 1 2.8 0.9 Bioplastic 18'881'023 81 0 -2   8.9 Carbon 16'977'452 206 10 -3 10.1 1.0 CleanTransportation 62'769'058 5'032 357 -4 4.2 11.9 Decontamination 55'221'347 205 53 7 6.3 2.7 Divers 23'885'489 377 27 -1 4.5 14.8 Efficiency 43'757'970 531 88 2 3.5 15.3 Environmental Services 20'738'402 532 44 2 5.1 7.6 FuelCell 35'089'237 122 9 -10 2.1 12.5 Funds 32'287'322 324 17 4 2.1 6.1 Geothermal 58'592'166 615 65 7 2.7 8.8 GreenUtility 51'065'650 99 23 1 2.0 65.5 Healthy Living 5'987'449 125 4 1 0.8 0.4 Hydrogen 281'059 25 0 -3 0.1 0.6 Hydropower 14'826'238   12 1 1.6 3.2 LED 12'431'917 300 15 -1 11.9 0.9 NewMaterials 39'858'538 297 27 -3 4.1 18.3 Solar 47'660'966 366 87 1 7.0 112.7 Timber 34'437'601 802 119 17 1.7 3.4 Waste 35'518'753 677 60 5 2.3 5.2 Water 44'336'394 708 106 10 2.5 16.7 WavePower 12'089'458 57 1 -4 0.8 17.5 Wind 35'168'909 273 41 -5 3.2 27.4
    12. 12. Confidential - Fund under registration - Not for distribution 1st category: mature but mispriced Company data   Market capitalisation € 60 M Price to cash 0.5 Price to sales 16 Price to Book 0.44 Debt/Equity - Operating assets 15 MW N b employees 150
    13. 13. Confidential - Fund under registration - Not for distribution 1st category: mature but mispriced Company data   Market capitalisation € 15 M Price to cash 5 Price to sales 0.12 Price to Book 0.75 Debt/Equity 229% Assets Stores N b employees 186
    14. 14. Confidential - Fund under registration - Not for distribution 2 nd category: early stage Company data   Market capitalisation € 18 M Price to cash 6 Price to sales 18 Price to Book 0.6 Debt/Equity 0 Pipeline - N b employees 30
    15. 15. Confidential - Fund under registration - Not for distribution 2 nd category: early stage Company data   Market capitalisation € 8 M Price to cash 0.4 Price to sales 2.1 Price to Book 0.49 Debt/Equity 24% Assets - N b employees 174
    16. 16. <ul><li>3- What are the options? </li></ul>
    17. 17. Confidential - Fund under registration - Not for distribution Solution 1: wait for industrial strategic BOSCH bid on ERSOL AG - February 08 Company data   Bid Value € 1131M Price to Cash 40 Price to sales 3.66 Price to Book 3.67 EBITDA x 11 Debt/Equity 0.59% N b employees 1378
    18. 18. Confidential - Fund under registration - Not for distribution Solution 1: wait for industrial strategic Schneider Electric bid on Xantrex July 08 Company data   Bid Value $500 M Price to cash NA Price to sales 1.58 EBITDA x 19,7 Debt/Equity Assets - N b employees
    19. 19. Confidential - Fund under registration - Not for distribution Solution 1: wait for industrial strategic GDF SUEZ bid on Econergy - June 08 Company data   Bid Value £39 M Price to cash 5.8 Price to sales 0.8 EBITDA x 5.5 Debt/Equity 60% Assets - N b employees 65
    20. 20. Confidential - Fund under registration - Not for distribution Solution 2: merger between peers to raise capital. Geothermal case sept 09
    21. 21. Confidential - Fund under registration - Not for distribution Solution 3: delisting from stock market. CMR Fuel Cell – March 09 Signed ODM contract One of Founder left IPO raise 10M£ Delisting Cash return Company data   Market capitalisation € 2.5 M Cash € 9 M Price to sales 0 Price to Book 0 Debt/Equity 0 Cash burn € -3,5 M N b employees 28
    22. 22. Confidential - Fund under registration - Not for distribution Solution 3: delisting from stock market. Renegy Holdings March 09 Hanalei Finance owns 20% today Company data   Market capitalisation $9 M Price to Cash 1.1 Price to sales 0.8 Price to Book 0.15 Operating assets 24 MW Pipeline of projects 14 MW N b employees 28
    23. 23. <ul><li>4- Conclusion : active owners are requested </li></ul>
    24. 24. Confidential - Fund under registration - Not for distribution 1- « Leverage expertise before investing » 2- « Review the business plan periodically, created and monitored detailed operational – not just financial – metrics.» 3- « Over-invest time in the first 100 days within the company and with the management » 4- « Strengthen the management team if needed before closing » 5- « Institute substantial and focused incentives for performance among the company » The 5 rules for active ownership McKinsey, How do they do it? Active ownership in private equity
    25. 25. Active ownership on listed green microcaps is requested <ul><li>Management support </li></ul><ul><li>Strategy support </li></ul><ul><li>Execution support </li></ul><ul><li>Turnaround option </li></ul>Confidential - Fund under registration - Not for distribution <ul><li>Sector expertise </li></ul><ul><li>Company management track record </li></ul><ul><li>Deep network </li></ul><ul><li>Staffing network </li></ul><ul><li>Stable shareholders </li></ul><ul><li>Growth capital </li></ul><ul><li>Venture Capital </li></ul><ul><li>Dept access </li></ul><ul><li>Hands on, board seat investor </li></ul><ul><li>Long term commitment </li></ul>Company need Active Investor answer Operational Financial
    26. 26. ESG criteria integrated all over the invesment process for micocaps Confidential - Fund under registration - Not for distribution Identification Selection Investment Holding period Exist ESG assessment Management commitment, Business model assessment,, Environmental assessment, Social check, Governance assessment, Technology assessment, Financial risk assessment, Legal risk assessment, Product risk assessment, References checks, Customers’ checks, Supplier’ checks Competitors’ checks. ESG over ownership
    27. 27. Confidential - Fund under registration - Not for distribution «  The value generated by these “star deals” comes overwhelmingly not from market appreciation or from smart bets on rising sectors, but from the better performance of the target company in comparison with similar companies in the same industry. » McKinsey, How do they do it? Active ownership in private equity ESG performance is not part of the performance is creating the performance

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