China Energy Transition

1. Sean Maher
Will China’s ‘Green OPEC’ Ambitions Dominate Global Energy Transition?
As West Plays Catch-Up, Materials Science This Decade’s AI For Alpha Generation…
“The western companies have not invested (in lithium supply). They believe they are going to get the batteries from China. But what happensif the Chinese
say we are not going to export batteries, we are going to export EVs. Where are the batteries going to come from?” Glencore CEO
“From a U.S. perspective, this is something to be worried about – you are laying down the backbone of countries’ power systems, and there is a lot of hardware
and software involved. All of a sudden,you are in a Chinese ecosystem.” Phillip Cornell, energy specialist at the Atlantic Council
sean.maher@entext.com
ENTX on Bloomberg
Entext is an appointed representative of Messels Ltd, which is authorized and regulated by the UK FCA.

2. Sean Maher
Chronic Underinvestment in Energy Transition Ex China – Structural ‘Greenflation’ Trend
Most Raw Materials Face Physical Supply Deficit From Mid Decade - Copper to Oil and Lithium
China Scaling From Nuclear to Wind, Solar and Batteries/EVs – Already ~30% Cost Advantage in EVs/Wind
’…if understanding the rise of AI and data analytics was the biggest opportunity to generate alpha for active managers over the past
decade, understanding the nuances and material science bottlenecks of the energy transition will be for the next. Essentially,the
broadest and most liquid pool of green energy technology exposure is now increasingly Chinese – global ESG portfolios
have little if any exposure.’ Market Insight, June 30th 2022
We are reducing systemic energy intensity by pricing a negative externality in carbon – explicitly
via taxes ($100-150/mt+ by 2030?), implicitly via IRR on fossil fuel capex (15%+) vs. renewables (5%)
China adding another 25% wind/solar capacity (~160GW, or 4x US) on top of 2021 record –
creating dominant, vertically integrated clean energy manufacturing hub
US IRA bill/European Critical Raw Materials Act set high local content targets, but mid-stream
refining capacity for battery metals doesn’t exist – e.g. a single battery grade lithium hydroxide plant
ex China (IGO/Tianqi in Australia)
Renewables Create Less Energy/More Resource Intensive Grid, Offshore Wind Requires ~12x More
Materials Per MW Than Gas ‘Peaker’, EV ~6x More Than ICE
China’s Shift to Lithium Iron Phosphate (LFP) batteries was pivotal – lower density/range, but it pre-
empted looming metal shortages in nickel/cobalt and reduced fire safety risks – now going global
2
Energy
Transition

3. Sean Maher
Market Share of 60-80% From Solar Modules to Lithium Processing, Rare Earths and EVs
Official Target For 1200GW of Wind/Solar by 2030 - Implies >400GW of Annual New Capacity
LFP and Blade Designs From CATL/BYD Reflect Growing Innovation – Ambition to Export EVs, Not Just Batteries
• Over 80% of critical rare earth metals used in wind turbine motor magnets (e.g. Neodymium) – now beginning to
develop domestic lithium mining, but also key stakes in almost every major new mine ex China via Ganfeng/Tianqi
• China has deployed a record 31GW of new PV systems in H1 22 - cumulative capacity now at 340 GW
• Chinese transmission technology likely to dominate international renewables ‘supergrids’, setting global standards
Supply
Chains
3
0
200
400
600
800
1000
Lithium Nickel Cobalt Cathode Anode Battery
Cells
EV
IEA
-
%
Increase
from
2021
Level
Can Output of Key Inputs Soar 5-9x by 2030?
2030 - Stated Policies Scenario
2030 - Announced Pledges Scenario
0
20
40
60
80
100
Raw Materials Processed
Materials
Battery
Components
Cell Assembly
%
Battery
Market
Share
‘Full Stack’ Dominance of EV Supply Chain
Australia Chile China Argentina Korea
EU Japan US Others

4. Sean Maher
Aggregate Market Value of Chinese Energy Transition Sector Only Surpassed by US
Has Outperformed RoW (BYD/Tesla, CATL/LG Chem, Ming Yang/Vestas etc.) on Higher Margins, Faster Top Line
Unique Breadth of Transition Exposure From Raw Materials to Grid Software and Drives/Inverters
Green
Earnings
Tilt
East
4
40
100
160
220
280
340
400
20
60
100
140
180
220
Jan
21
=
100
Battery/Lithium Names Undervalued
Ganfeng Lithium EVE Energy
BYD CATL
Gotion Tianqi Lithium - RHS
60
80
100
120
140
160
Jan-21
Feb-21
Mar-21
Apr-21
May-21
Jun-21
Jul-21
Aug-21
Sep-21
Oct-21
Nov-21
Dec-21
Jan-22
Feb-22
Mar-22
Apr-22
May-22
Jun-22
Jul-22
Aug-22
Sep-22
Jan
21
=
100
China New Energy Has Outperformed
S&P Global Clean Energy CSI New Energy Index

5. Sean Maher
Recurrent Energy Deficits/Volatility ‘New Normal’ on Demand Growth Underestimation
Trend Demand Boosted by Climate Change Negative Feedback Loops (Less Offshore Wind, Aircon Demand Up 3x by 2050 etc.)
Solar/Wind Have ‘Energy Return on Energy Invested’ of >2 years, Lifespan of 15-20 Max – Nuclear Whole Life Cycle Lower Carbon
‘Greenflation’
5
0 5 10 15
Natural gas
Coal
Nuclear
Solar PV
Onshore Wind
Offfshore Wind
mt/MW incremental grid capacity
Renewables Hugely Materials Intensive
Copper Nickel Manganese Cobalt
Chromium Molybdenum Zinc Rare earths
Silicon Others
0
100
200
300
400
500
600
700
Singapore
Canada
US
S.Korea
Australia
Taiwan
OECD
Germany
HK
France
Japan
EU
Malaysia
UK
China
S.
Africa
Thailand
World
Asia
Pacific
Brazil
Mexico
Indonesia
India
Philippines
GJ
per
Capita
Primary Energy Consumption, 2017-21 avg.
Singapore Less of An Outlier by 2040s?

6. Sean Maher
Utopian Dreams Colliding With Reality of Green Energy Physics and Economics
Global Oil Demand Back at 100m+ bpd – Spare Capacity Stressed Pre-Russia, Including Grid (broadly 2-4%)
Energy Spend Heading Back to Late 1970s Level of ~10% of Global GDP? Almost 15% in Europe…
6
Energy
Deficit
• Energy spending as a share of global GDP fell to ~5%
versus 8% in 2007/8, almost 10% in late 1970s
• Renewables led energy system is less predictable/intensive -
mass grid storage crucial to offset intermittency but
lithium-ion only 4hrs – need chemical storage via hydrogen
etc, pumped hydro impacted by recurring drought
• Scale of investment in renewables inadequate; $2-3 trillion
incremental annual capex needed to achieve Paris goals, EU
carbon to €120/mt+ by 2030 as CBAM ‘carbon tariffs’
introduced?
• Rising systemic cost of energy becoming inflation driver
via spill-over effects into intermediate goods (chemicals,
plastics, fertilizers etc
• Global Lithium Deficit by 2030 Will Be ~4-5x Total Market
in 2021, on 25-30m EVs
0
5
10
15
20
25
30
0
500
1000
1500
2000
2500
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022E
2023E
2024E
2025E
Clean
energy
as
a%
of
total
Energy
capex
(US$
bn)
Aggregate Capex Short By ~$1trn
Annually on IEA Projections
Power Networks Renewables
Nuclear Coal & Gas Power
Biofuels Coal Mining & Infra.
Downstream O&G Upstream O&G
Clean energy % total Capex - RHS

7. Sean Maher
China Will Reach ~700GW of Connected Wind Capacity by 2030, 65-70% Global Share
‘Hybrid’ Deployment Model Harnesses Private Innovation to State Resources to Create National Champions
World Leader in Ultra High Voltage DC Grids to Connect Wind/Solar to Tier 1 Cities
Scale
Economies
Matter
7
0
5,000
10,000
15,000
20,000
25,000
New
offshore
wind
MW
Wind Now Following Solar Scale Economies
Europe China Rest of World
0
200
400
600
800
1000
1200
Renewable
Energy
Generation,
TWh
China Tops Europe in Wind/Solar Deployment
Europe China US Rest of World
20
60
100
140
180
Jan
21
=
100
US Climate Bill Boosts Rooftop Solar
Jinko Solar Tongwei
Longi Green Energy Enphase
First Solar

8. Sean Maher
Rapid Innovation – Sodium Ion, BYD’s Blade Design, Swappable Battery Standards/Infrastructure
Solid State Polymer to Replace Lithium in 2030s? Long Duration Grid Storage Game Changer
Scaling From Lab to Mass Production in Solid State Huge Challenge – Ganfeng in China, Prologium in Taiwan
• To manufacture an EV battery:
• 11mt of brine for the lithium
• 13mt of ore for the cobalt
• 2.3mt of nickel ore, 11mt of copper
ore
• Average EV (using NMC battery)
contains:
• 11kg of lithium
• 27kg of nickel
• 20kg of manganese
• 14kg of cobalt
• 91kg of copper
• 180kg of aluminum, steel, and
plastic
8
Next
Generation
Batteries

9. Sean Maher
China Innovating Rapidly in Nuclear Tech - HTR-PM Online, First to Launch SMR?
18+ Nuclear Units Under Construction - Only Supplies 10% of Global Grid, 5% of China’s
Massive Influx of Engineering Talent to Deepen Domestic Supply Chain, Build Export Platform for HTR/SMRs
Nuclear
2.0
9
• China grid share is just under 5%, rising to 8% by
2030, including innovative indigenous ‘third and fourth
generation designs’ first of two units at high-temperature
gas-cooled modular pebble bed (HTR-PM) demo
project - major global milestone
• On whole life basis at 50yr plus lifespan, nuclear has
lower carbon footprint than wind and solar (15-20yr
span, huge waste issues with turbine blades etc.)
• The IEA upgraded upper-end expectations for global
nuclear generation capacity by 10%, could double to
792 GW by 2050 – EU now allows new plant building
through 2035, Japan planning big expansion
• Over 60% increase in uranium demand in the next 20
years - existing uranium demand is about 180m pounds
and primary newly mined supply is just 120m
• Nuclear power producers are living off depleting stockpile,
bullish miners like Kazatomprom, as plant lives
extended, new reactors come online

10. Sean Maher
Hydrogen ‘Chemical Battery’ Mainstream by 2035? China Biggest H2 Producer
Decarbonization of Steel, Cement etc. Using Existing Gas Pipeline Infrastructure ‘Holy Grail’ – But H2 Molecules ‘Too Small’
Green Hydrogen Uneconomic ~ $4-6 per kg in Germany, 1100 JPY in Japan – Costs Need to Fall 80%+
10
Hydrogen
• Takes ~60 kWh of Electricity to Produce 1kg of hydrogen -
radical new approach by Japan’s Eneos/Chiyoda – plant
with annual production of 300k mt, to make hydrogen at
33% of current cost, using proprietary electrolysis
technology
• China starting to scale hybrid fuel cell
vehicles/infrastructure to decarbonize mining trucks,
construction machinery
• Process Engineering Key Plays (Linde, Air Liquide,
Itochu, Marubeni, Chiyoda etc) – also makers of
catalysts/membranes for electrolysis
• Chemicals/Fertilizer Also Key Role in Hydrogen Transition
Via Ammonia/methanol - volumetric hydrogen density
about 45% higher than pure liquid hydrogen (Australian
solar/wind to Japan etc.).
• Gas pipelines will only be able to transport some form
of diluted hydrogen (maybe 20-30% with natural gas, as
planned in UK

11. Sean Maher
Hydrogen and Ammonia - Chemicals And Materials Science The New AI
Energy Conversion Efficiency Poor, Needs Better Catalysts/Electrolysers
Japan Using Ammonia To ‘Capture’ H2 - Volumetric Density ~45% Higher vs Liquid H2 (Mitsui, Itochu)
Hydrogen
11
“Up to this point, we have made a business by selling the nitrogen value of the molecule. What’s really exciting about this is
now there is an opportunity and a market that values the hydrogen portion of the molecule.” CEO of leading ammonia
producer CF Industries
60
100
140
180
220
260
300
340
380
420
460
Jan
21
=
100
LT Ammonia Tailwind for Fertilizer Names
K+S Group CF Industries Mosaic
60
80
100
120
140
160
180
200
220
240
Jan
21
=
100
Process Engineering Key to Scale Hydrogen
Iwatani Fluor Corp. Linde
Air Liquide Itochu Marubeni

12. Sean Maher
Thinking Systematically About Energy Transition/China Decoupling Will Add Thematic Alpha
Focus on Supply Side Mining Bottlenecks and Materials Science IP – Multiyear Bull Market Like AI/Cloud From 2014
O/W Process Engineering (Hydrogen/Carbon Capture), Closed Loop Recycling, Greenfield Mining and Related Capex Plays
• China’s renewables supply chain dominance has clear geopolitical implications – driving vast US/European
subsidies to replace it and associated investment opportunities in ‘secure’ local sourcing - Vertical Integration down
to raw materials level going mainstream for auto OEMs
• ‘Closed Loop’ Recycling One way to Reduce China Reliance, Next Big ESG Theme - Iridium Demand to Soar on
Electrolysis Sibanye Stillwater (PGMs), Furuya Metal (Iridium), Aurubis (Copper) Cheap Thematic Recycling Plays
• Big ramp in mining energy capex looming through 2030 – focus on miners weighted to green energy buildout
(copper/lithium), undervalued niche plays from truck tyres to conveyor systems (Bridgestone, Weir)
• More complex grid will drive massive growth in futures trading for hedging (e.g. IEX in India) – also tailwind for
backup generator demand (Cummins) and cables (Nexans)
• Also drive demand for grid infrastructure, super capacitators/inverters (ABB, Nippon Chemi-Con, Murata etc)
and other charging infrastructure – power management hardware/software both for EVs and to manage load
swapping across grid storage/renewables/baseload has secular tailwind (Eaton etc.)
• Structurally overweight Japanese materials/chemicals and electronics hardware – world class expertise and
manufacturing scale in low power chips/capacitators, LNG/hydrogen and next generation battery technology – US
needs Japanese IP to play catchup with China
12
Summary