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green capital
                        advisors




 Renewable Energies: a key player
    in future energy solutions
Strategic analysis, trends and potential investment areas




                       July 2012                            1
green capital
  AVISO LEGAL                                                                                                                                 advisors




Ni Green Capital Advisors, S.L., ni ninguna otra persona, representante o sociedad de su Grupo, garantizan la exactitud, veracidad o carácter completo de la información
contenida en el presente documento ni no asumen ninguna obligación de actualizar, completar, interpretar o aclarar dicha información ni de entregar ninguna otra
información.

La Información tiene carácter estrictamente privado y confidencial.                                                                                                    2
green capital
AGENDA FOR TODAY                                           advisors




    1. Renewable Energies in Today’s Broader Energy Context: a
       Basket Case or Future Mainstream?

    2. What’s in Electricity? An Introduction to the New Ecosystem

    3. Back to Basics. Competing with the Establishment.
       Technology + Market size = Competitiveness

    4. Value and Risk. Key Drivers along the Business Chain.

    5. Investing in a New Energy World. Where and how to put
       Capital at Work (…and at What Risk)?

    6. How Can We Help to Make Things Happen…?


                                                                       3
1. Renewable Energies in Today’s Broader                                                  green capital
                                                                                          advisors
   Energy Context

  Renewable Energies are already an important part of electricity markets
  worldwide. Their weight is set to increase dramatically in the next decade

 However, in terms of renewable energies contribution to final primary energy
           consuption, the industry still accounts for less than 2%




                   TACC = 26%                                            TACC = 38%




                                % of domestic electricity demand (2010/11e)
           Wind:    6.3% Solar: 2.0%                           Wind:   1.5% Solar: 0.1%

           Wind:    2.0% Solar: 0.1%                           Wind:   3.0% Solar: 0.1%

                                                                                                      4
           Wind: 15.6% Solar: 3.7%
green capital
2. What’s in Electricity? Production vs Consumption              advisors


                      Electricity             Electricity
                       Demand                  Supply




                                    Balance (sic)
                                     of Power




            Is this an optimized sector structure ? For whom…?
                                                                             5
green capital
2. What’s in Electricity? An introduction to the New                          advisors
  Ecosystem

      Meet the “Bipolar Electricity Consumer”: sophisticated and technology
        hungry but “tied” to its electric distribution & supply companies…


                                                                From a…
                                                                     Supply, engineering
...to a                                                              & regulation driven
          Demand, marketing &                                             business
           competition driven
              business                              • Does not know which company is
                                                      serving him
… but on the other hand he knows
and      cares    modern   kitchen                  • Does not know monthly
appliances,    TV   sets, laptops,                    consumption or contracted power
tablets,etc…                                        • Does not know the price of power
                                                      or supply availability

... And he knows perfectly what he
has, why he bought it (its value) at
which price and to whom



               … although as we will see some things are starting to move:
            Customer Service to become the main driver of energy markets
                                                                                           6
3. Back to Basics. Competing with the Establishment                                        green capital
                                                                                           advisors
… to Tomorrow’s Vision

     Spanish Government Tomorrow’s Vision (as of 2011) on competitiveness of
                  renewable energies … still a long-term goal?




                   Source: IDAE/Ministry of Industry, Commerce and Tourism (2011). Study
                            made with support from Boston Consulting Group




                           ... let’s have a closer look to reality…
                                                                                                       7
3. Back to Basics. Competing with the Establishment.                                                                                                          green capital
                                                                                                                                                                  advisors
       From Today’s Facts…
           Electricity prices going up despite sharp fall in                                 … and together with tecnological evolution,
          consumption due to higher oil prices and nuclear                                   enabling renewables to deliver their “value
                               “risks”…                                                                    proposition”
                                                                         EPIA estim.   250
                        Domestic consumer price (€/MWh)                   +5% CAGR              €/MWh
                                                                                                                                                 Annual system deficit
    150                                                                 1422011-20e
                                                                                                                                                  € 17,9 – 36,0/MWh
                                                                                                                                                                         Interest on total system
                                +58%                          125                                                              IVA € 30,50/MWh                                    deficit
    130                     (CAGR: +12%)                                               200                                                                                  € 4,8 – 9,6/MWh
                                                                                                                      Impuesto Especial
                                               115                                                                      Electricidad
    110                                                                                         Potencia/alquiler cont. € 7,86/MWh
                               93                                                                   € 14,69/MWh
                 90
     90                                                                                150


     70
                2.007         2.008            2.009          2.010    2.011           100
                         Average wholesale price (€/MWh)
     70                       64,4
                                                                                                                                   TUR
                                                                                                                              € 146,87/MWh

                                                                                        50
     60
                                                  +27%                49,9                                                         Spain’s final household consumer
     50                                       (CAGR: +6%)                                                                               electicity price (€/MWh)
                                                                                         0
                39,4
     40                                        37,0           37,0                                      PV systems cost evolution and Market size
                                                                                                                driven economies of scale
     30                                                                                  7,00                                                                                                       30
                2.007         2.008           2.009           2.010   2.011              6,00                                                                                                       25
                                      Volume (TWh)                                       5,00
   250                                                                                                                                                                                              20
                              222                      -18%                              4,00
   225                                        201 (CAGR:-6%)                                                                                                                                        15
               195                                                                       3,00
                                                          193
   200                                                                182                2,00
                                                                                                                                                                                                    10

   175                                                                                   1,00                                                                                                       5

   150                                                                                   0,00                                                                                                       0
               2.007         2.008            2.009       2.010       2.011                         2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011e

Sources: EPIA ,ASIF, Green Capital Advisors                                                                              Price (€/Wp)                Global Prod. (MW)
                                                                                                                                                                                                         8
3. Back to Basics. Competing with the Establishment                                                                                      green capital
                                                                                                                                          advisors
 … to Tomorrow’s Vision
            The official vision is already old (and biased): Market speed is surpassing initial
              predictions both for consumer electricity prices (up) and grid parity (earlier)

           PV systems competitiveness as an alternative to large centralized grid supply is
                     already a reality in Germany… (and even more inSpain!!)

                                                                                               €/MWh       PV systems costs vs Consumer Electricity price




                                TUR (1H2012)
                                14,2 c€/KWh                                    Adjusted TUR
                                                                                IDAE/MITYC




                                                                                                       New German FiT <10kW
                                                                                                       195 €/MWh (June 2012)




Source: IDAE/Ministry of Industry, Commerce and Tourism (2011). Study
         made with support from Boston Consulting Group

Note: TUR concept does not include VAT or electricity tax, nor fixed grid connection cost or                                                                9
3. Back to Basics. Competing with the Establishment                                                                     green capital
                                                                                                                            advisors
       Renewables as Keystone in the Energy Puzzle

        Renewable Energies*, born under the prevailing B2B centralized supply-side model of
       the electricity industry (Utility World) are the main driver pushing in the transformation
            of electricity in a B2C / C2C decentralized, customer oriented business model


                  Yesterday                                                     Today                                Tomorrow

                                      Electricity                                           Electricity
                                        Sector                                                Sector




                                                                                                                 Renewable
    Renewable                                                                                                    Energies*
    Energies*
                                                                                                                “Transformation of
   “A small world                                                      Renewable                          Energy Supply & Management
     by its own                                                        Energies*                          Customer Centered Service ”
       rules”
                                                               “Growth and integration in the
                                                                 larger Utility playing field”




* Includes all Efficiency & Energy management business areas                                                                            10
4. Value and Risk. Key Drivers along the                                                                         green capital
                                                                                                                 advisors
   Business Chain.

                      The traditional vision … (from actual 2009 analysis)

                                                                   MANUFACTURING
                                  DEVELOPMENT                                                            OPERATION
                                                                  AND CONSTRUCTION


 Need for financial                    LOW                                 HIGH                              VERY HIGH
                                 (<€ 0.1 mil/MW)                    (€ 0.7-4.0 mil/MW)                   (€ 1.3-6.0 mil/MW)
 resources

                                    MEDIUM                        SHORT to MEDIUM                              LONG
 Investment                                                        (6-24 months WC                          (20-30 years)
                                   (3-5 years)
 period                                                            vs factories, R&D)

                               MEDIUM / HIGH                             MEDIUM                            MEDIUM / LOW
 Risk profile                    (Regulatory /               (Construction / manufacturer risk)       (Technological / regulatory /
                               development risk)                                                             market risk)

                        • Identification of locations          • Technology & industrial               • Margin and income
 Success factors        • Speed, flexibility                     organization                            management
                        • Relations with the Public            • Client relationship                   • O&M management
                          Administrations                      • EPCs management
                          LARGE NUMBER OF PLAYERS            VERY SMALL NUMBER OF PLAYERS           SMALL NUMBER OF PLAYERS
 Market /               • Important Electricity companies      • Important manufacturers          • Important Electricity companies
 Competition              (IBE, END, UNF, EDP, Acciona, …)       (Gamesa, Vestas, GE, Alstom …)     (IBE, END, UNF, EDP, Acciona, …)
                        • Medium/small-sized developers        • Important EPC contractors        • Medium-sized operators



                                                                                                                                       11
4. Value and Risk. Key Drivers along the                                                                 green capital
                                                                                                         advisors
   Business Chain.

  Traditional vision was of wind as the overwhelmingly competitive renewable
    energy source to serve (within its limitations) large centralized systems

                      The traditional vision of different renewable energies
                                technologies … (from actual 2009 analysis)
                                         Wind                   Offshore     Solar CSP     Solar PV           Biofuel
                                         Farms                 Wind Farms     Plants        Plants            Plants

 Need for financial                      MEDIUM                   HIGH       VERY HIGH       HIGH              HIGH
 Resources (€/MW)                         1.3-1.4                2.7-3.0       5.5-6.5      3.0-4.0*      € 45-60 mil/plant


 Technological risk                        LOW                  MEDIUM         HIGH         MEDIUM            LOW



 Regulatory risk                           LOW                MEDIUM/HIGH    VERY HIGH     VERY HIGH           HIGH
 (premium €/MWh**)                         25-30                 ~ 120         ~ 220        ~ 220-270    5.8% Quota (2010)


Technology evolution /                                                                                      Low (plants)
                                         Limited /              Slow /        Slow / Low   High / High
Competition among                                                                                           High (fuels) /
                                         Low                    Unexisting                                  Medium
Manufacturers
 * Expected to be at € 2.5-2.7 in 2010 and €1.5-2.0 in 2012                                    The Status Quo
** Based on €50 / MWh market price                                                               Challenger                  12
4. Value and Risk. The forward vision (2012…)                                                         green capital
                                                                                                       advisors
      Moving from “a business” to “an environment”

From the old days                   …to Smart Household/Business                 …to individual & collective
    of intensive                      Networks and Appliances                     Transportation Systems
“light & power”…                      “negative use of power”…                         & Smart Cities
  Utilities rule (…2008):            Utilities vs Renewables (2008-2018?):         Consumers rule (2018…):
  Renewables as a nice               Who will lead in addressing Consumer      Adapting Renewables & “negative
  feature of the system                 needs (not just energy ones…)?         energy” paradigm to manage both
                                                                                      supply & demand




• Centralized supply grid:             • System’s progressive supply           • System’s supply to become mostly
  renewables as a regulated              decentralization: renewables as         decentralized: renewables fully
  system investment                      competitive energy source               integrated: generation seeks to
• No customer (just users &            • Technology brings competition and       optimize consumption
  accounts to be supplied)               lowers barriers (still high from      • Retail & business market with strong
• Artificial, limited competition        regulatory standpoint)                  competition: few barriers to entry
  with high entry barriers             • Customer approach generally limited   • Customer is king (again, finally)
• No externality costs                   to medium/large businesses            • Majority of the externality costs are
                                       • Increased weight of externalities       accounted for
                                                                                                                         13
5. Investing in a New Energy World. Where and how                          green capital
                                                                           advisors
   to put Capital at Work (…and at What Risk)?

               Where can we sensibly put capital at work…?

High         Disruptive
Risk   0                       Why A…?                or B…?               or C…?
            Technologies

                                   Developed Countries                 Developing C.
High
/Med        New Energy        Distributed &
Risk   1      Markets                             “Negative             Additional
                               Consumer       &    Energy”             Energy Needs
            Development         Oriented
 R
 I
 S
              Financial          Buy Large but                 Restructure & Sell (by
 K                                Diminishing                  Parts) to Specialized
       2   Restructuring of
                               Shares of Integrated             Operators and New
 L
 E
           “OldWorld” co.     Generation,T&D assets                  Entrants
 V
 E
 L
            Operational
                                  Buy                                        Sell
       3   Optimization of                            Optimize
                              Inneficiency                                Efficiency
Low        Existing Assets
risk

                                                                                        14
green capital
6. How Can We Help to Make Things Happen…?                                       advisors


       Specialized Energy & Renewables know-how & “hands-on” execution

   MARKET TRENDS                        TRANSACTION                 BUSINESS STRATEGY
   & INTELLIGENCE                         SUPPORT                  DESIGN & EXECUTION
Market views and analysis:
                                         Highly Specialized         Strategic plans & reviews
  - Value chain & business            Opportunity Identification      Add-on opportunities
    models
                                         and pre-screening
  - Regulation
  - Technology                                                      Board & Executive team
  - Strategic positioning &                                                support
    Competition
  - Financing & investors views          Initial Conversations
  -…
                                          Analysis, Indicative
                                            Offers & Due
                                              Diligence

                                            Final Bids &
                                            Negotiation
                                                                   Operating plans & reviews
 Periodic reports on trends in key
  markets; ad hoc specific reports                                 Portfolio companies
                                               Closing
 Investors & Fundraising                                          optimization & restructuring
  presentations                                                                                   15
green capital
6. How Can We Help to Make Things Happen…?   advisors



                 Building Long-Term Value




                          Focus
                        Teamwork
                       Commitment
                                                         16
green capital
     advisors

               José Espinosa
            Managing Partner

jespinosa@greencapitaladvisors.es

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Electric &amp; Renewables Industry Vision 201207

  • 1. green capital advisors Renewable Energies: a key player in future energy solutions Strategic analysis, trends and potential investment areas July 2012 1
  • 2. green capital AVISO LEGAL advisors Ni Green Capital Advisors, S.L., ni ninguna otra persona, representante o sociedad de su Grupo, garantizan la exactitud, veracidad o carácter completo de la información contenida en el presente documento ni no asumen ninguna obligación de actualizar, completar, interpretar o aclarar dicha información ni de entregar ninguna otra información. La Información tiene carácter estrictamente privado y confidencial. 2
  • 3. green capital AGENDA FOR TODAY advisors 1. Renewable Energies in Today’s Broader Energy Context: a Basket Case or Future Mainstream? 2. What’s in Electricity? An Introduction to the New Ecosystem 3. Back to Basics. Competing with the Establishment. Technology + Market size = Competitiveness 4. Value and Risk. Key Drivers along the Business Chain. 5. Investing in a New Energy World. Where and how to put Capital at Work (…and at What Risk)? 6. How Can We Help to Make Things Happen…? 3
  • 4. 1. Renewable Energies in Today’s Broader green capital advisors Energy Context Renewable Energies are already an important part of electricity markets worldwide. Their weight is set to increase dramatically in the next decade However, in terms of renewable energies contribution to final primary energy consuption, the industry still accounts for less than 2% TACC = 26% TACC = 38% % of domestic electricity demand (2010/11e) Wind: 6.3% Solar: 2.0% Wind: 1.5% Solar: 0.1% Wind: 2.0% Solar: 0.1% Wind: 3.0% Solar: 0.1% 4 Wind: 15.6% Solar: 3.7%
  • 5. green capital 2. What’s in Electricity? Production vs Consumption advisors Electricity Electricity Demand Supply Balance (sic) of Power Is this an optimized sector structure ? For whom…? 5
  • 6. green capital 2. What’s in Electricity? An introduction to the New advisors Ecosystem Meet the “Bipolar Electricity Consumer”: sophisticated and technology hungry but “tied” to its electric distribution & supply companies… From a… Supply, engineering ...to a & regulation driven Demand, marketing & business competition driven business • Does not know which company is serving him … but on the other hand he knows and cares modern kitchen • Does not know monthly appliances, TV sets, laptops, consumption or contracted power tablets,etc… • Does not know the price of power or supply availability ... And he knows perfectly what he has, why he bought it (its value) at which price and to whom … although as we will see some things are starting to move: Customer Service to become the main driver of energy markets 6
  • 7. 3. Back to Basics. Competing with the Establishment green capital advisors … to Tomorrow’s Vision Spanish Government Tomorrow’s Vision (as of 2011) on competitiveness of renewable energies … still a long-term goal? Source: IDAE/Ministry of Industry, Commerce and Tourism (2011). Study made with support from Boston Consulting Group ... let’s have a closer look to reality… 7
  • 8. 3. Back to Basics. Competing with the Establishment. green capital advisors From Today’s Facts… Electricity prices going up despite sharp fall in … and together with tecnological evolution, consumption due to higher oil prices and nuclear enabling renewables to deliver their “value “risks”… proposition” EPIA estim. 250 Domestic consumer price (€/MWh) +5% CAGR €/MWh Annual system deficit 150 1422011-20e € 17,9 – 36,0/MWh Interest on total system +58% 125 IVA € 30,50/MWh deficit 130 (CAGR: +12%) 200 € 4,8 – 9,6/MWh Impuesto Especial 115 Electricidad 110 Potencia/alquiler cont. € 7,86/MWh 93 € 14,69/MWh 90 90 150 70 2.007 2.008 2.009 2.010 2.011 100 Average wholesale price (€/MWh) 70 64,4 TUR € 146,87/MWh 50 60 +27% 49,9 Spain’s final household consumer 50 (CAGR: +6%) electicity price (€/MWh) 0 39,4 40 37,0 37,0 PV systems cost evolution and Market size driven economies of scale 30 7,00 30 2.007 2.008 2.009 2.010 2.011 6,00 25 Volume (TWh) 5,00 250 20 222 -18% 4,00 225 201 (CAGR:-6%) 15 195 3,00 193 200 182 2,00 10 175 1,00 5 150 0,00 0 2.007 2.008 2.009 2.010 2.011 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011e Sources: EPIA ,ASIF, Green Capital Advisors Price (€/Wp) Global Prod. (MW) 8
  • 9. 3. Back to Basics. Competing with the Establishment green capital advisors … to Tomorrow’s Vision The official vision is already old (and biased): Market speed is surpassing initial predictions both for consumer electricity prices (up) and grid parity (earlier) PV systems competitiveness as an alternative to large centralized grid supply is already a reality in Germany… (and even more inSpain!!) €/MWh PV systems costs vs Consumer Electricity price TUR (1H2012) 14,2 c€/KWh Adjusted TUR IDAE/MITYC New German FiT <10kW 195 €/MWh (June 2012) Source: IDAE/Ministry of Industry, Commerce and Tourism (2011). Study made with support from Boston Consulting Group Note: TUR concept does not include VAT or electricity tax, nor fixed grid connection cost or 9
  • 10. 3. Back to Basics. Competing with the Establishment green capital advisors Renewables as Keystone in the Energy Puzzle Renewable Energies*, born under the prevailing B2B centralized supply-side model of the electricity industry (Utility World) are the main driver pushing in the transformation of electricity in a B2C / C2C decentralized, customer oriented business model Yesterday Today Tomorrow Electricity Electricity Sector Sector Renewable Renewable Energies* Energies* “Transformation of “A small world Renewable Energy Supply & Management by its own Energies* Customer Centered Service ” rules” “Growth and integration in the larger Utility playing field” * Includes all Efficiency & Energy management business areas 10
  • 11. 4. Value and Risk. Key Drivers along the green capital advisors Business Chain. The traditional vision … (from actual 2009 analysis) MANUFACTURING DEVELOPMENT OPERATION AND CONSTRUCTION Need for financial LOW HIGH VERY HIGH (<€ 0.1 mil/MW) (€ 0.7-4.0 mil/MW) (€ 1.3-6.0 mil/MW) resources MEDIUM SHORT to MEDIUM LONG Investment (6-24 months WC (20-30 years) (3-5 years) period vs factories, R&D) MEDIUM / HIGH MEDIUM MEDIUM / LOW Risk profile (Regulatory / (Construction / manufacturer risk) (Technological / regulatory / development risk) market risk) • Identification of locations • Technology & industrial • Margin and income Success factors • Speed, flexibility organization management • Relations with the Public • Client relationship • O&M management Administrations • EPCs management LARGE NUMBER OF PLAYERS VERY SMALL NUMBER OF PLAYERS SMALL NUMBER OF PLAYERS Market / • Important Electricity companies • Important manufacturers • Important Electricity companies Competition (IBE, END, UNF, EDP, Acciona, …) (Gamesa, Vestas, GE, Alstom …) (IBE, END, UNF, EDP, Acciona, …) • Medium/small-sized developers • Important EPC contractors • Medium-sized operators 11
  • 12. 4. Value and Risk. Key Drivers along the green capital advisors Business Chain. Traditional vision was of wind as the overwhelmingly competitive renewable energy source to serve (within its limitations) large centralized systems The traditional vision of different renewable energies technologies … (from actual 2009 analysis) Wind Offshore Solar CSP Solar PV Biofuel Farms Wind Farms Plants Plants Plants Need for financial MEDIUM HIGH VERY HIGH HIGH HIGH Resources (€/MW) 1.3-1.4 2.7-3.0 5.5-6.5 3.0-4.0* € 45-60 mil/plant Technological risk LOW MEDIUM HIGH MEDIUM LOW Regulatory risk LOW MEDIUM/HIGH VERY HIGH VERY HIGH HIGH (premium €/MWh**) 25-30 ~ 120 ~ 220 ~ 220-270 5.8% Quota (2010) Technology evolution / Low (plants) Limited / Slow / Slow / Low High / High Competition among High (fuels) / Low Unexisting Medium Manufacturers * Expected to be at € 2.5-2.7 in 2010 and €1.5-2.0 in 2012 The Status Quo ** Based on €50 / MWh market price Challenger 12
  • 13. 4. Value and Risk. The forward vision (2012…) green capital advisors Moving from “a business” to “an environment” From the old days …to Smart Household/Business …to individual & collective of intensive Networks and Appliances Transportation Systems “light & power”… “negative use of power”… & Smart Cities Utilities rule (…2008): Utilities vs Renewables (2008-2018?): Consumers rule (2018…): Renewables as a nice Who will lead in addressing Consumer Adapting Renewables & “negative feature of the system needs (not just energy ones…)? energy” paradigm to manage both supply & demand • Centralized supply grid: • System’s progressive supply • System’s supply to become mostly renewables as a regulated decentralization: renewables as decentralized: renewables fully system investment competitive energy source integrated: generation seeks to • No customer (just users & • Technology brings competition and optimize consumption accounts to be supplied) lowers barriers (still high from • Retail & business market with strong • Artificial, limited competition regulatory standpoint) competition: few barriers to entry with high entry barriers • Customer approach generally limited • Customer is king (again, finally) • No externality costs to medium/large businesses • Majority of the externality costs are • Increased weight of externalities accounted for 13
  • 14. 5. Investing in a New Energy World. Where and how green capital advisors to put Capital at Work (…and at What Risk)? Where can we sensibly put capital at work…? High Disruptive Risk 0 Why A…? or B…? or C…? Technologies Developed Countries Developing C. High /Med New Energy Distributed & Risk 1 Markets “Negative Additional Consumer & Energy” Energy Needs Development Oriented R I S Financial Buy Large but Restructure & Sell (by K Diminishing Parts) to Specialized 2 Restructuring of Shares of Integrated Operators and New L E “OldWorld” co. Generation,T&D assets Entrants V E L Operational Buy Sell 3 Optimization of Optimize Inneficiency Efficiency Low Existing Assets risk 14
  • 15. green capital 6. How Can We Help to Make Things Happen…? advisors Specialized Energy & Renewables know-how & “hands-on” execution MARKET TRENDS TRANSACTION BUSINESS STRATEGY & INTELLIGENCE SUPPORT DESIGN & EXECUTION Market views and analysis: Highly Specialized Strategic plans & reviews - Value chain & business Opportunity Identification Add-on opportunities models and pre-screening - Regulation - Technology Board & Executive team - Strategic positioning & support Competition - Financing & investors views Initial Conversations -… Analysis, Indicative Offers & Due Diligence Final Bids & Negotiation Operating plans & reviews  Periodic reports on trends in key markets; ad hoc specific reports Portfolio companies Closing  Investors & Fundraising optimization & restructuring presentations 15
  • 16. green capital 6. How Can We Help to Make Things Happen…? advisors Building Long-Term Value Focus Teamwork Commitment 16
  • 17. green capital advisors José Espinosa Managing Partner jespinosa@greencapitaladvisors.es