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Home , Clean technology

November 2010

Welcome to the latest edition of ECOS News

CONTENT We have recently been asked to elaborate on private equity or venture capital funds that like ECOS, are active in the and/or clean sectors with a geographic focus on Latin America. There are some examples but for now, not many exist.

There are a great number of investors making commitments in the segments and geographies previously EDITORIAL mentioned; however, the combinations are not exact. One comes across global or international clean-tech funds that also invest in Latin America; or across non sector specific Latin American funds that also invest in clean tech / renewable energies. At ECOS, we feel privileged to have co-invested with fine partners and plan LATIN AMERICA to continue doing so, nonetheless the question remains - why are there just a few sector and market specific - Macro Trends , similar to ECOS in the Latin American markets today?

Market size does not seem to be the issue: Brazil or Mexico (and increasingly Chile or Colombia) have an impressive number of funds and active asset managers (not sector specific). Exit options may be a factor that SUSTAINABLE FORESTRY influences fund managers to not bet on just one sector or one market: “IPOability” is not yet a given in most - General Trends markets, so trade sale opportunities need to be screened as from the moment an investment is made. - News ECOForest Regulatory frameworks seem to be another crucial element; at the end, regulatory measures are the - Portfolio Companies backbone of the creation of many European and North American funds that opted for a sector specific investment mandate. With such support, they can satisfy their investors’ diversification expectations and bundle expertise & know-how, a very important component in technical industry segments.

CLEAN TECHNOLOGY Nonetheless, the investment activity is abundant in the region, and our focus (renewable energy, clean tech - General Trends and sustainable forestry) see an ever increasing investor interest. We predict that it will only be a matter of - News ECOEnergy time before the creation of specific fund activities contribute with the booming growth of the region. - Portfolio Companies In sustainable forestry, developments have been somewhat different: most of the timberland investment management organizations (TIMO’s) who do invest in Latin America may not have a dedicated Latin American focus. We believe that biomass is one of the most promising sources for energy generation, and NEWS ECOGEO woody biomass has its share of attractiveness in that context. Most Latin American countries have degraded land suitable for forestry investments, which could supply both European and increasingly also domestic needs with one of the oldest feedstock that we have known: wood. Species improvements will do its own to EVENTS & INFO make investment considerations in this area not only attractive over time, but already at this very moment. Having an eye open on both the sustainable forestry and the renewable energy industries will shed light on how these two eventually converge. Interesting times are ahead!

Enjoy the reading!

Andreas Eggenberg

• Private Equity Development (Growth / Expansion) Capital, occasionally Venture Capital. • Focus on boutique investments in small and medium sized companies, active in selected niche segments, mainly in Latin America: o Sustainable forestry o Cleantech (Renewable energy, Environmental engineering and services) • Usually minority shareholdings as active investors, accompanying portfolio companies at Board levels (corporate expertise, “door opening” capacities for portfolio companies). • Committed to a triple-bottom-line approach and business ethics, along with the aspiration of above market performance in economic returns of the Fund and its portfolio companies. • Functional and integrative governance, rigorous investment decision making process, meticulous dealflow and network management. LATIN AMERICA TRENDS José Guardiola - CFO LATIN AMERICAN TRENDS By Jose Guardiola & Ricardo Mesa

Latin American economies and their outlook for the future remain solid and economists believe the anticipated second half of the year global slowdown won’t be as bad as once feared. Economists expect GDP growth for 2010 in Latin American countries to be 5.8% compared to 3.8% for the rest of the world and 4.1% versus 3.4% for next year´s GDP growth. Central banks have stopped raising rates for the moment in fears this could affect negatively the recovery from the recent slowdown. However, inflation remains reasonably contained at 6.7%. Argentina´s economy is having a very promising 2010 so far as the The USD dollar lost value against most Latin American currencies since December annual variation for GDP growth stands at 7.8% and economists expect 2009 except against the Argentina’s Peso. The USD lost the most value against the 4.4% growth for next year. Colombian Peso (-12.1%) followed by the Mexican Peso (-5.8%), Chilean Peso (-4.2 %), Brazilian Real (-1.8%) and finally gained value against the Argentinean Peso Due to recent positive results, the international credit rating agency (4.1%). Standards & Poor´s raised its credit rating for Argentina´s sovereign debt from B- to B. Inflation expectations have remained similar throughout the year and economists forecast inflation to be at 11.2% by year end and at 11.8% for next year. In Brazil, the economy continues to run very smoothly as economists believe GDP growth for 2010 will be 7.6% and 4.6% for next year. Industrial production annual variation will most likely be 11.9% compared to -7.4% during 2009. Inflation has remained under control at 4.7% and forecast for next year are around 5.0%. The economy continues to grow supported by strong fundamentals including retail sales expanded 10.9% in July and unemployment falling to a historic low of 6.7% in August.

Chile continues on a strong recovery trail as economists believe GDP growth will be 5.3% in 2010 and 6.0% for next year. The economy had benefited much from high copper prices which promise to reinforce exports going forward. Cooper prices increased in September by 9.5% to reach US 3.65 per pound which is the highest level since late 2008. Cooper accounts for more than half of the country´s total exports. In Mayor Latin American Stock Markets have increased compared to same period last addition, economists forecast inflation will close the year at 3.5% and year in a strong way with an average growth rate of 27.0%. For the same period, next year will be 3.2 Mayor Stock markets in Europe and USA had an average growth rate of 3.0%. Since Colombia´s economic performance and outlook continues to be solid as the end of March 2010, Stock Market growth rates for Latin American countries are: economists believe GDP growth will be 4.4% this year and 4.6% next Argentina 11.3%, Brazil -0.2%, Colombia 21.3%, Chile 27.6% and Mexico 1.6% year. Inflation is expected to be 3.0% this year and 3.8% next year. At (LatAm average 12.4%). USA and European countries: Swiss -8.6%, Dax 0.9%, the sector level, the acceleration was lead by the services sector due to FTSE -1.5%, Madrid -4.1% and NYSE -1.5% (group average -2.9%). an increase in commerce from 4.3% in the first quarter to 5.4% in the Compared to same time last year, this upward curve was higher a year ago than second. Colombia’s biggest concern however is the unemployment level currently projected to finish the year at 11.8%. Mexico´s economy today as yields were higher . Argentina´s government bonds continue to offer the continues to improve as economist forecast GDP growth for this year will highest yields in the region with a 10.1% yield for a 7 year bond. Meanwhile, Brazil be 4.5% and 3.4% for next year. and Mexico offer very similar yields at 5.0% and 5.1% for a 30 year bond respectively. Chile doesn´t have any long-term bonds and their 3 year bond offers a Inflation remains stable and therefore the Central Bank decided to 3.3% yield. remain on hold with their interest rate for the moment. Economists forecast inflation at 4.5% this year and 3.9% next year. Ecos will continue to search for business opportunities that make economic sense whilst minimizing the environmental and optimizing the social impacts in Latin America. We will continue to invest and solidify our reputation as a good investment partner and a co-investor in the region.

More info: [email protected] SUSTAINABLE FORESTRY Claudio Cabezas – Investment Manager Benefits of Environmental Services "buyer" of a well -defined environmental service and natural forests. Such approach has been taken to a Whilst environmental services have been heard or the use of land which produces such service. level of declaring it a national forestry competitiveness of for quite some while in the context of In parallel, similar services have been gaining a argument, considerably restraining deforestation and sustainable forestry operations, only recently has lot of attention in the natural or native forests increasing forest cover at the same time. At one of Ecos’ this concept gained momentum to be taken in sector, where the main efforts have been geared portfolio companies, Ecoforest Panama, a project consideration when analyzing opportunities in towards the implementation of mechanisms of conserves and maintains 4,000 hectares of natural forests the forestry and timber sectors. Valuable deforestation avoidance by means of the sale of bordering the Panama Canal in addition to a large Teak environmental services provided by forest carbon credits (on some of the services listed plantation. Continuous commitments to train and educate ecosystems commonly include (list not above). local workforce in the protection of such forests, hunting exhaustive): controls and constant fire monitoring are some of the • Hydrological benefits – control and monitor the Generally, in the case of large forestry investments that the company has made to protect a piece volume of water flow, its variability over time, and patrimonies (belonging to either large of land that serves an important environmental service of the control of its quality. corporations or timberland investment • Sediment Reduction – damage prevention to national interest: the preservation of the Panama Canal reservoirs and waterways by sediments, helping management organizations – TIMO’s), a good basin necessary for a normal flow of large boats. to preserve its uses (generation of hydroelectric mix of plantations and natural forests exists; power, irrigation, recreation, fishing and water where the natural forests can be either just In many cases, with the inclusion of the sale of a single supply). protected; or else managed sustainably. environmental service like the sale of carbon credits • Disaster prevention - flood and landslide retention. generated by the plantations and/or the natural forests, it is • Conservation of biodiversity In many of these cases, the forest plantations possible to increase the internal rate of return of such a • Carbon sequestration and shared the advantages of the PES´s of the project. As other environmental services provided by • Ecotourism potential natural forests, but plantation owners have natural rainforests are increasingly being accounted for the There are various efforts by both governmental usually not yet tapped into these markets or at same way as the sale of carbon credits (including and non-governmental entities towards the least their interest for these markets has been deforestation avoidance based credits), there is no doubt development of policies and programs on incipient; maybe with the exception of the carbon that the rates of deforestation and degradation of natural domestic and international levels, to quantify sequestration services. forests will decline; as institutional investors will move in these benefits in economic terms. This is known with considerable capital commitments to capture the as payments for environmental services (PES), Costa Rica is a country at the forefront of the economic value behind environmental benefits, on top of which in a nutshell, is a voluntary and conditional development and implementation of PES-related the returns generated by the timber operations on the base agreement between at least a "seller" and a policies that take advantage of forest plantations of more traditional forestry concepts.

PORTFOLIO COMPANY NEWS

Panama Forest, as a proof of its commitment with Silvotecnia obtained its ISO 9001:2008 certifications Interforest S.A. in Guatemala has been more and sustainable development has created a harmonious after a process which involved all levels of the more expanding its development of activities to relationship with several rural communities close to company. This Certification covers the activities of offer its services to third parties, as Forestry which Panaforest operates. PFS is buying seedlings Production of Vegetative Material, Establishment and Services Company, which is providing forestry from local communities and supporting them in the Maintenance of plantations, wood production from services such as: planning, harvesting, mapping, development of own green houses and nurseries to thinning and harvesting, and Forestry and forest inventory, plantation establishment, prepare different tree species to be planted in Environmental Consulting Services. The Certifier environmental services and silviculture among several projects such as: Parque Nacional de was SGS, one of the world’s leading certifying other forest activities and business developments Cruces, Parque Ncional Soberania and Burunga, companies, who emphasized the high quality of to different land and forest owners in Guatemala. which are committed into a contract with ACP. Silvotecnias’s Management System and its Quality The Interforest Services Company is aiming to be Panama Forest has already established 690 Assurance Policy. According to SGS, those policies one of the leading forestry services companies, hectares in those forestry projects duly approved by are set up and working at all the levels of the operating in a sustainable and responsible manner, ACP. By this way Panaforest is getting a very strong organization with a “bottom up” instead of a “top in the region. position as a socially and environmentally down” approach.

responsible forestry services company in Panama.

More info: [email protected] CLEAN TECHNOLOGY Salvador Escobedo – Investment Manager Combining solar with “old school” tech nology By Salvador Escobedo As implied through several past editions of the Ecos Both PV and CSP can be combined with traditional Emirates (UAE) and Algeria. All these countries have News clean-tech section, it is our belief that the energy generation plants in hybrid outfits with great all taken advantage of the sun to save valuable fossil sector has an enormous growth benefits. The solar power is used side by side with fuels for future generations. In fact, the Masdar potential in Latin America. The ECOS portfolio other thermal feedstocks such as natural gas, coal project in the UAE is building the largest CSP plant in companies are certainly great living examples of or diesel – or better yet, biomass-based solutions the world, combining it with back-up power such a hypothesis. Nonetheless, we also such as sustainable , biogas or dry biomass. capacity in the first CSP project to be registered understand and recognize the main limitation that These hybrid installations generate fewer emissions under the UN Clean Development Mechanism the technology has to be deployed massively and and lower reliance on increasingly expensive and making it eligible for carbon credits. become an integral part of a country’s electric grid: volatile fossil fuels. In addition they solve the intermittency . challenge of integrating solar power into the grid Another great advantage of the hybrid CSP solution without compromising the reliability of power supply. is that it can be retrofitted to existing fossil fuel power

Photovoltaic (PV) installations can only supply stations making them cleaner. daylight energy demand (unless storage capacity is There are a few examples of both are installed in parallel, typically making the installation already operating at large scale around the word: In Latin America, GDF Suez is working with a un-economic for areas where the grid is accessible). PV: In Australia, a 1 gigawatt-hour/year solar PV German solar developer to commission a 5MW CSP The upside: PV panels can be installed on any plant currently supplies 60% of daylight electric plant to feed into a 150MW coal-powered plant in surface exposed to sunlight. power in the town of Marble Rock. The rest is Northern Chile. Ecos has watched closely. supplied with fossil fuels in a hybrid installation. This Concentrated Solar Power (CSP) partially solves example has already been emulated in other parts the intermittency problem by storing heat (usually in of the country and promises to continue growing and the form of melt salt) that can be used to power most likely copied in other parts of the world. Latin turbines well after the sun has set. The downside: America has taken notice. Installations are highly site-specific as they mainly operate with direct sunlight (rather than converting CSP: Hybrid systems using CSP have gained more chemical energy to electrical energy like PV cells, traction internationally than PV, mainly in the sunny CSP converts thermal energy to electrical energy) areas of the and North . Israel, and they also require large amounts of water. Egypt, Morocco, Algeria and the United Arab

PORTFOLIO COMPANY NEWS

Entelin is about to initiate the installation of a large Green has continued to grow rapidly as sales have Hybrytec has started four new industrial-scale solar project in the Amazonian region of jumped considerably and new personnel additions thermal projects in Colombia with important industrial Peru, supplying power to 12 indigenous have been made to the team recently. Furthermore, players. This represents the achievement of an communities deep in the Amazon. Green has moved to a brand new office and has important milestone for the company. In addition; the Currently, the company is installing the first large started talks with an important player in the sector for company will be opening a new office in Colombia´s scale solar grid tied system in Peru. future sales. capital, Bogota. www.entelin.com www.greenergyze.com www.hybrytec.com

NEW DEAL FLOW:

• Wind energy in Brazil, Colombia, Mexico and Endriven continues expanding its operations with the Solarcentury is sailing along smoothly with strong Dominican Republic opening of an office in Colombia. The company has sales and positive margins. Recently the company • Mini Hydro in Colombia, Mexico, Peru, Chile had a record-breaking year and continues to was recognized as “UK´s fastest growing private and Brazil. consolidate its leadership position in the promising energy company” by Ethical Consumer magazine. • Argentinean markets. Solar energy in Brazil and Chile Channel demands from all countries have • Energy efficiency in Mexico increased significantly. • Many others…. www.solarcentury.com www.endriven.com More info: [email protected] ECOGEO

Recovering Energy From Farming The attractiveness of generating energy in Using Biolatina’s plants, streams generated in the the “backyard” is coupled with a very fields can be turned into biofuels and biogas producing a competitive cost of $2,000 Reais per Kilowatt low-cost renewable energy resource without harming the of installed capacity. The smallest plants environment. generate 250 Kilowatts and they can be scaled up to 6 Megawatts. “The distributed generation of bio-energy and the production of biofuels in remote locations is already a The plant yield varies with the raw materials reality in Brazil where Biolatina has penetrated the employed. As an example, in the case of market strongly with affordable technology” – said biogas, each tonne of bovine waste Ernesto Moeri, Chairman of the EcoGeo holding. generates 35 m3 of substance which when processed, can be turned into 19 cubic Supported by a large and highly talented engineering meters of natural gas, definitely enough to team working on sustainability solutions, in 2006 the supply the fleet of a typical mid-sized group created Biolatina, a company dedicated to turn farm in Brazil", exemplifies Pisciottano; “the waste generated by agriculture into a readily available remaining bi-products can be turned to renewable energy source. "Bovine manure, fruit organic fertilizer and generate carbon credits" remnants, and even animal tallow; these are all important he concludes. feedstocks that we can efficiently transform, or even recycle, into a clean and reliable source of energy”, said To get an idea of the economics that can be Moeri. developed with Biolatina’s solutions, a small biogas plant measuring 15 meters in diameter by 5 feet tall installed in a slaughterhouse with a capacity of between

800 and 1,000 head per day, generates approximately 0.5 megawatt per hour of Biolatina projects have penetrated the market fast operation, enough to supply about 500 and three plants are already operating. In residences. "If we add 10% of a special addition, the team is preparing to inaugurate the first glycerine mix from residues generated in the biogas plant at the end of 2010. production of biodiesel, the energy production capacity doubles," explains The initial results of installed plants begin to be Pisciottano. harvested: "in addition to the zero cost of the raw material, spending in maintenance has been Moeri comments that integrating plants to reduced. At the same time, ene rgy generation has optimize production is also possible. "Such a increased together with financial returns. Biolatina works in the design and construction of plants mix can produce biodiesel, electricity and dedicated to the production of biogas and biodiesel, fertilizer along with carbon credits". capable of generating up to 80% of the energy needed to keep a property or industry, depending on capacity After the plant is installed, it takes 30 days for utilization. "Every activity bound to the field generates the first fermentation residue to start residues that are poorly exploited. Why not turn them into generating energy or fuel. profit? ", asks Wagner Pisciottano, Executive Director of the company. "It is more costly to not take advantage of "Turning waste into raw material is the smarter and these residues, wasting energy potential and more sustainable way to generate energy”. The EcoGeo group should be closing 2010 with a degrading the environment," ponders José turnover of $ 60 million Reais. Manoel Cabral, head of and Press Information: business of Embrapa Agroenergy. Dinheiro Rural / 070 Agosto 2010 . Juliana Ribeiro

More info: [email protected]

NEWS AND EVENTS

Ecos Net Dealflow Analysis Web Report 1st May 2008 – 30 st September 2010

The www.grupoecos.com website has been visited 15,250 times since 1st of May 2008 until 30 st of September 2010, what makes an average of 17, 94 visits per day.

Since its inception in May 2008 visits were distributed as follows: Panama (34.89%) visits, United States (12.89%), Brazil (5.58%) and Colombia with (5.02%).

Fair access to energy

As part of our internal CSR program, on December 2010 the ECOS team

will install an off-grid solar system in an elementary school located inside one of EcoForests' teak plantations in the "Las Pavas" vicinity. This activity will be made possible with the products and technical help of engineers from Hybrytec and the desire of the ECOS team to improve education and knowledge of kids in local related communit ies.

EVENTS Energy Forestry Environment NOV 16,2010 NOV 15 -20, 2010 NOV 01, 2010. Hanover, Concepción, Chile Amsterdam, Holland Bio Energy Decentral V Encuentro Internacional Forestal Aquatech Amsterdam www.bioenergy-decentral.com www.cormabiobio.cl www.amsterdam.aquatechtrade.com

DIC 8,2010 NOV 16 -17, 201 0 NOV 05,2010 Montpellier, France Buenos Aires, Argentina DF, México Energaia Foro de Inversión y Financiamiento Forestal Expo en Verde Ser www.enrgaia-expo.com [email protected] www.expoenverdeser.com.mx

DIC 8 -11, 2010. NOV 21 -23, 2010. NOV 17,2010 Montpellier, France Sao Paulo, Brasil Milano, Milan International Renewable Energies Exhibition V Conferencia sobre la celulosa en América Latina Hydrogen Show www.energaia-expo.com www.risi.com/laconf www.hydogenshow.com

DIC 9 -12, 2010 ABRIL 13 -15, 2011 NOV 24,2010 Istambul, Turkey Sao Paulo, Brasil Amsterdam, Holland Renex 2010 Expoforest 2011 Emart Energy www.renex-expo.com www.expoforest.com.br www.emart-energy.com

More info: Ciudad del Saber, Clayton, Gonzalo Crance, #176, P.O. Box 0843 -02577 Balboa, Ancón Tel. (507) 317 -3400 / Fax. (507)317 -3422 www.grupoecos.com